Ramelius Resources Ltd. said Sept. 10 that it intends to make an off-market takeover bid for Explaurum Ltd., offering 1 Ramelius share for every 4 Explaurum shares held, valuing the offer at 12.3 Australian cents apiece.
Explaurum is focused on advancing the Tampia Hill gold project in Western Australia, while Ramelius owns the Edna May gold mine, which was acquired from Evolution Mining Ltd. in 2017.
The offer represented a 66.2% premium to the last closing price of 7.4 cents per Explaurum share on Sept. 7 and a 50.0% premium to Explaurum's 30-day volume weighted average price of 8.2 cents per share.
Ramelius outlined that the all-share offer will reduce risks, including the uncertainty over access to debt funding for the Tampia Hill project and a possible significant shareholder dilution via a project level equity raising.
In addition, the proximity of the Edna May mine to the Tampia Hill project may potentially realize significant capital cost savings and operational synergies.
In response to the offer, Explaurum advised its shareholders to take no action until it has released the formal recommendation of the company's directors.
Explaurum's board, however, already outlined concerns over the Ramelius offer, saying it is surprised and disappointed that Ramelius proceeded with its takeover announcement before completing any meaningful engagement with Explaurum.
The board also said that the proposed offer is inadequate and undervalues Explaurum's underlying assets and prospects, with the timing of the offer opportunistic as the Australian gold explorer is in the process of completing a bankable feasibility study for the Tampia Hill project.
Further, the proposed all-share offer does not provide the same certainty of value or risk profile as a cash bid, Explaurum said.
A feasibility study for the Tampia gold project in Western Australia pegged a pretax net present value, discounted at 8%, of A$125 million, an internal rate of return of 47% and a 1.5-year payback period.