Musgrave Minerals believes Westgold Resources’ all scrip takeover bid is “opportunistic” and doesn’t recognise the exploration and development potential of the company and its Cue gold project, which continues to deliver extremely high-grade results.

Musgrave Minerals’ (ASX:MGV) said today that after careful consideration of Westgold’s (ASX:WGX) bidder’s statement and the offer, directors unanimously recommended shareholders reject the offer by taking no action.

The offer is for 1 Westgold share for every 5.37 Musgrave shares held.

But since the offer was announced, Musgrave says the Westgold implied offer price has traded below the Musgrave share price.

“We note that as at 23 June 2023, the last practicable day prior to the release of this letter, the Musgrave share price closed at $0.295 compared to the current Westgold implied offer price of $0.250,” Musgrave said in a letter to shareholders.

Musgrave said the offer was opportunistic given the company’s potential, would deliver immediate growth to Westgold, was highly conditional and uncertain, and shareholders might face adverse tax consequences if they accepted the offer.

“The recently released stage one prefeasibility study for the Cue gold project illustrates a technically and financially robust project,” Musgrave said.

“The value of Musgrave to Westgold has clearly been articulated in recent announcements, media coverage and analyst commentary post the announced intention to make an offer.

“Your directors believe that Westgold recognises the inherent value of Musgrave’s Cue gold project and the 310sq.km of tenure in the Cue area of the Murchison Region held by Musgrave.”

The stage one PFS showed the Cue project would be a very high margin, low-cost operation running for an initial five years and delivering a pre-tax net present value of $235m and pre-tax internal rate of return of 95%, with a quick nine-month payback.

Musgrave also pointed out that the offer consideration was not cash, and its true value was dependent on the value that could be attributed to a Westgold share.

Every Musgrave director intends to reject the current offer with respect to the shares they own or control. Collectively they have about a 2.43% stake.

Musgrave emphasised that its objective was to progress the Cue gold project towards production and extend the mine life through continued growth of the existing resource base and discovery of additional high-grade gold deposits.

Just recently the company announced more high-grade hits above the current resource grade of 10.2 grams per tonne (g/t) at the Break of Day deposit, including a bonanza intersection of 1m at 845.1g/t from 24m from within a broader 15m at 60.3g/t from just 14m.

Musgrave is working to increase Cue’s combined 927,000oz resource further, with an update slated for release in the second half of this year.

The company said it had established an exploration pipeline to sustain production at the Cue project, with further exploration planned, along with recent acquisitions of neighbouring, under explored, tenement packages in Mainland and Mount Magnet South.

 

 

 

This article was developed in collaboration with Musgrave Minerals, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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