Aurumin gives nod to Brightstar merger for Sandstone gold consolidation

A compelling link-up between Aurumin Limited and Brightstar Resources will see the consolidation of their respective Sandstone gold assets into a major gold resource, about 520 kilometres northeast of Perth in Western Australia’s Goldfields region.

Both companies announced today that they have entered a scheme implementation deed, under which Aurumin will propose a scheme of arrangement between the company and its shareholders.

The scheme will pave the way for a scrip-based deal enabling Brightstar to acquire Aurumin via one Brightstar share for every four Aurumin shares.

The scheme consideration implies a value of 12 cents per Aurumin share, based on a 48c price per Brightstar share. The 48c share price is based on binding commitments Brightstar has received to raise $50 million before costs from a placement priced at the 48c level to fast-track the company’s growth plans across its impressive gold portfolio.

Notably, the placement is not conditional on completion of the share scheme. 

A value of 12c per Aurumin share represents a 21 per cent premium to its 9.9c closing price last Friday, July 17, and a 20 per cent premium to the company’s share price of 10c on June 27, when the initial joint announcement revealed merger discussions between the two firms.

Additionally, the 12c share price is a 27 per cent jump above Aurumin’s 30-day volume-weighted average price of 9.4c.

The scheme consideration also implies an equity value of $60 million for Aurumin and an enterprise value of $62 per gold ounce, based on the company’s mineral resource of 950,000 ounces grading 1.5 grams per tonne (g/t) gold. 

Aurumin’s board hold 16 per cent of Aurumin’s issued shares and has unanimously recommended the share scheme. All the company directors intend to vote in favour of the scheme, in the absence of a superior proposal and subject to an independent expert concluding the share scheme is in the best interest of Aurumin shareholders.

Aurumin Limited managing director Daniel Raihani said: “The transaction announced today is an exciting development as we believe that combining Brightstar and Aurumin will underpin the mining future of this important Sandstone region. Given our adjacent mineral resources, this transaction makes good commercial sense for us, and it’s fantastic that we have now been able to agree on terms to make this consolidation a reality.”

Brightstar Resources managing director Alex Rovira said: “This is a compelling transaction for all stakeholders, and we believe that combining Aurumin and Brightstar represents a unique opportunity to build a Western Australian gold business of genuine scale with demonstrable upside that also de-risks future development activities and operations at Sandstone.”

Bringing the two companies’ adjacent tenement portfolios under one roof would eliminate the ownership fragmentation that has long frustrated development in the Sandstone district. 

The result would provide for a single gold development opportunity on granted mining leases with scale, grade and location, enabling the project to fast-track into production.

Brightstar would deliver gold-rich assets such as its Lord Nelson and Lord Henry deposits, and the Vanguard and Indomitable Camps, to the merger. The company’s global resource sits within 13 deposits and totals 1.553 million ounces running at 1.5g/t gold.

Aurumin would contribute its Two Mile Hill underground resource and its 570,000 ounces, in addition to a suite of shallow open pit opportunities, including Shillington and Plum Pudding. 

Aurumin also holds an important asset with its dormant 500,000 tonne-per-annum carbon-in-leach plant. While it hasn’t been fired up for a few years, the facility is fully licensed and has permitted tailings storage, a water bore field and an on-site camp. 

Even better, it sits on freehold land, 12km from the Sandstone township.

Notably, nearly all the resources from both companies sit on granted mining leases, providing a solid foundation for mine planning and permitting.

If the scheme proceeds to completion, Brightstar will move up the ranks of WA’s current crop of developers and producers. It will hold an impressive, combined mineral resource of 2.4M ounces of gold at 1.5g/t from the combined Sandstone assets and a hefty mineral resource of 3.9M gold ounces across its Sandstone, Laverton and Menzies projects.

Upon receiving the placement proceeds of $50 million, Brightstar will be sitting on a $63 million mountain of cash. It will control a strategic 1600 square kilometre patch of ground in Sandstone, enabling the company to establish a district-scale open pit development opportunity. It plans to unveil a preliminary feasibility study on the consolidated asset base in the first half of next year.

After completion of the scheme, Brightstar shareholders will comprise about 82 per cent of the merged entity, with Aurumin shareholders accounting for the remaining 18 per cent.

Aurumin shareholders are expected to benefit from more exposure to Brightstar’s WA gold projects, share ownership in a larger WA-based gold company that may offer enhanced trading liquidity and a possible positive market re-rating, along with a potentially shorter timeframe to develop its Central Sandstone project.

The Sandstone region has always been considered highly prospective for a major gold mining operation - this time that expectation might be realised.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au