Echo Resources Ltd. and Metaliko Resources Ltd. have agreed to merge in a A$38.9 million deal, the two ASX-listed explorers revealed Sept. 29.
Under the agreement, Echo will acquire all of the issued shares of Metaliko by way of an off-market takeover offer of one new Echo share for every 2.5 Metaliko shares held.
The offer, which values Metaliko shares at 8.8 Australian cents each, represents a premium of 24% to the Sept. 27 closing price of shares and 38% to the 20-day volume weighted average market price of shares on the ASX.
Metaliko directors, who own 31.42% of the company, and shareholders with a collective 28.94% stake, have already agreed to accept Echo’s offer.
The key motivation for the deal is that it provides a pathway to production for Echo’s Julius gold deposit, part of the Yandal gold project in Western Australia, by utilizing Metaliko’s 2-million-tonne-per-annum Bronzewing processing facility.
The combination of the two companies potentially allows the Julius deposit to be brought into production as soon as mid-2017.
Utilizing the Bronzewing mill could increase the EBITDA generated by the Julius project, which was estimated to be about A$47 million at a base case gold price of A$1,600 an ounce in a previous scoping study.
On completion of the merger, Echo will expand its board to five members.
Barry Bolitho, who is the current chairman of Echo, will remain in the same role in the enlarged company.
Simon Coxhell will stay on as director and CEO, Anthony McIntosh will remain as nonexecutive director and Metaliko will appoint Robin Dean and Mark Hanlon as nonexecutive directors.