Aurum Resources is on the cusp of becoming a bigger shark in the West African gold pond after circling fellow ASX-listed Mako Gold with an all-scrip takeover bid at a whopping 112 per cent above the market price.
Mako’s share price surged nearly 80 per cent on the back of the news that would see the creation of a major West African gold explorer, with cash reserves of AU$20 million to spend on key projects in Cote D’Ivoire.
Under the agreement, Mako shareholders will receive one Aurum share for every 25.1 Mako shares. It equates to an offer price of 1.8c per Mako share, based on the average price in the previous 30 days.
When the dust settles, Mako shareholders will hold 20.5 per cent of the merged group, while Aurum shareholders will keep 79.5 per cent. Mako directors have unanimously agreed to Aurum’s offer and have recommended all of the company’s shareholders and option holders accept the deal, barring any higher bids from a third party.
In particular, the combined entity will benefit from increased market scale and is already planning to buy two additional rigs – taking the fleet to eight and boosting capacity by 30 per cent. It will enable it to push forward with expanding the existing resource at Mako’s Napié prospect and delivering a maiden resource at Aurum’s flagship nearby Boundiali project in Côte d'Ivoire.
Aurum Resources managing director Dr Caigen Wang said: “The Aurum team is excited to apply our skills to the Napié Project, which we consider has great potential to quickly evolve into a multi-million-ounce project. Between driving growth at Napié and being well on the path to delivery of a maiden resource at our own Boundiali Project later this year, we see strong potential for Aurum to become a strong emerging gold developer in Côte d’Ivoire, with two assets with long-life potential in close proximity to each other.”
Mako managing director Peter Ledwidge acknowledged the strong track record of Aurum’s team to be able to rapidly deliver projects at a low cost, using an owner-operated multi-rig drilling set up.
Ledwidge also said part of the appeal of the merger is that Mako shareholders will remain an important part of the share register and therefore share in the continued upside to the growth of both Napié and the rapidly-expanding Boundiali project.
According to Aurum, Mako’s 90 per cent-owned Napié project, which hosts 868,000 ounces of gold at 1.2 grams per tonne, bears strong similarities to the Abujar mine previously discovered by current Aurum staff when they were working with Tietto Minerals. Tietto was bought out earlier this year for $768 million.
Sitting in the same belt as Abujar, the Napié deposit is a shallow, open-pittable, high-grade resource going to 195m at its deepest point and it sits close to infrastructure. The company believes deeper and extensional drilling has the potential to rapidly add multi-million ounces of gold.
As part of the deal, Aurum will also pick up a sizeable manganese project controlled by Mako – the 100 per cent-owned Korhogo prospect that sits just 20km north-west of Napié. It is regarded as a globally-significant deposit, with a combined strike length of more than 14km and with an especially heightened appeal because of its low phosphorous content – an element harmful in the end production of most types of steel and steelmaking.
Aurum’s own Boundiali gold project is in a prime location, 50km south of gold mines such as Resolute Mining’s 11.5 million-ounce Syama and Perseus Mining’s 1.4 million-ounce Sissingue. Covering four exploration areas, the company has now drilled out more than 40,000m in the past year using its own diamond drill rigs, with a maiden resource estimate expected by the end of the year.
The merger is subject to several conditions, including Aurum grabbing at least 50.1 per cent of Mako’s shares. However, that scenario seems likely after the company locked in pre-bid deals with key Mako shareholders and directors, representing 19.35 per cent of the company's issued shares. Unless extended, Aurum’s bidder’s statement will drop prior to the end of the month, with the offer set to close towards the end of November.
With gold prices running rampant – up more than 30 per cent since the beginning of the year and today trading at an all-time high of AU$3990 per ounce – the deal by Aurum to pay $20.44 per gold ounce for Mako’s 868,000-ounce resource appears a genuine bargain and immediately adds heft to the plans to develop up a multi-million-ounce operation in West Africa.
It means eagle-eyed goldbugs are almost certain to be watching developments resulting from the merger with interest in the coming months.
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By James Pearson
