PERTH (miningweekly.com) – ASX-listed Marmota Energy has started a bidding war for gold miner Kingsgate Consolidated’s Challenger mine, in South Australia.

At the end of last week, Kingsgate announced that it had executed an option agreement with fellow-listed WPG Resources and its joint venture partner Diversified Minerals to divest of the Challenger mine for A$1-million, as well as a A$25/oz royalty on the Challenger south south west zone, which would take effect after the first 30 000 oz of production.

Marmota on Wednesday offered Kingsgate A$2-million to buy the Challenger mine, with all other terms remaining identical to the WPG offer.

Marmota pointed out that WPG’s royalty payment was not guaranteed, and would only apply if the south south west zone was ever developed and only after 30 000 oz of gold had been produced from the site.

By contrast, Marmota said its own offer allowed Kingsgate shareholders to share in the potential of both the Challenger mine and Marmota’s own Westpoint Hill discovery.

“While Marmota is happy to make a pure cash deal, it is also willing to make a combination cash and bonus equity offering to Kingsgate shareholders, so that Kingsgate shareholders can join in and benefit from any uplift from a successful rejuvenation of Challenger and also prosper from the potential of the exceptional anomalism at Westpoint Hill,” the company said.

In response to Marmota’s claims that Kingsgate had entered into an exclusive option agreement with WPG despite an offer from Marmota being tabled ahead of the announcement, Kingsgate on Wednesday said it had “correctly assessed” the Challenger sale options and the risks of the potential offers.

“Kingsgate has concluded and remains of the view that the agreement with WPG represents the best potential outcome for all stakeholders with significantly less risk,” the gold miner said.

The miner also noted that Marmota had failed to demonstrate that it had the financial capability to fund the offer, nor had Kingsgate received a written offer or proposal ahead of Marmota’s announcement to the ASX on Wednesday.

Kingsgate also pointed out that Marmota’s Westpoint Hill prospect was an undrilled gold anomaly.

Kingsgate was expected to divest of its Challenger mine at the completion of the current life-of-mine plan and the exhaustion of reserves in February 2016, after which the mine would be placed on care and maintenance.