Westgold Resources Limited unveiled an all-scrip off-market takeover offer for all of Musgrave Minerals Limited’s issued and existing shares.
Musgrave shareholders will receive 1 fully paid Westgold ordinary share for every 5.37 Musgrave shares owned (Offer Consideration) under the terms of the Offer. Musgrave’s undiluted equity value under the Offer Consideration is $177.3 million, or $0.30 per share.
According to Westgold, the Offer gives Musgrave shareholders a chance to see their gold assets developed in a timely and capital-efficient way by a well-funded, debt-free, and experienced gold miner. Westgold stated that it delivers an immediate and appealing premium by avoiding the high-risk, dilutive, and time-consuming process of approving, financing, building, and launching a small, stand-alone processing plant in a location already well-served by processing infrastructure.
Westgold said the merger of the two parties is a logical and cost-effective solution that combines both organisations’ regional assets into a bigger scale, more lucrative, and more investable Western Australian gold miner. This combined entity would be supported by Westgold’s technological capabilities, staff, and solid financial position, which includes about $180 million in cash and liquid assets and no debt.
Westgold made its initial contact with Musgrave on Thursday, 1 June, seeking constructive interaction in relation to a prospective acquisition proposal.
On Friday, 2 June, a non-binding offer letter (with the same terms as indicated in this Offer) and a related process deed (Proposal) was formally offered to Musgrave for consideration during a meeting with respective senior executives. The Musgrave Board has informed Westgold that the Proposal is still being considered.
Unfortunately, Westgold believes that the confidentiality of the Proposal has now been compromised, as evidenced by yesterday’s Musgrave share trading volumes, which were approximately 6.6 times higher than the average 12-month daily share turnover3 and resulted in a 6.25% share price increase, despite Musgrave making no ASX announcement, the gold price being lower, and Western Australia having a public holiday. Westgold looks forward to discussing the Offer with Musgrave and its advisers as soon as possible.
Westgold Managing Director Wayne Bramwell stated that Musgrave’s plan to build a new, small processing plant within close trucking distance of two existing larger processing facilities, according to Westgold, is ambitious.
“Their proposed development path costing $121 million in startup capital at a PFS level of certainty materially escalates risk to Musgrave shareholders, as it exposes them to all the uncertainties, challenges and dilution associated with project development. It is a high risk and inefficient use of their shareholder’s capital at a time when securing capital for small scale, single asset companies is becoming more difficult and costly,” Bramwell said.
According to Bramwell, approvals, funding, building, competition for limited labour, and the plethora of schedule and capital cost blowouts seen in many recent Western Australian resource project start-ups will be among the hazards. Musgrave shareholders have a speedier and lower-risk option for seeing their Cue gold assets developed promptly.
“Westgold is an established, well-funded owner and operator of two processing hubs in the Murchison region. The combination of Musgrave’s assets with our regional infrastructure and operating teams will fast track and de-risk the development of Musgrave’s Cue Gold Project and provides Musgrave shareholders immediate exposure to a much larger, established Western Australian gold producer,” Bramwell said.
“The Westgold offer provides a logical, capital efficient and fast track solution that delivers immediate value to both Musgrave and Westgold shareholders and can rapidly enhance production scale and profitability of the combined Group,” he added.
