Musgrave says yes to Ramelius

The directors of Musgrave Minerals have unanimously recommended that shareholders accept the Ramelius Resources takeover offer, barring a superior proposal, while announcing they have entered into a Bid Implementation Agreement (BIA) with the company.

The announcement comes just a week after Musgrave Minerals’ (ASX:MGV) recommended its shareholders reject the Westgold Resources (ASX: WGX) offer.

Ramelius Resources Limited (ASX:RMS) has offered to buy all the issued ordinary shares of Musgrave through a cash and scrip off-market takeover offer.

Under this offer Musgrave Shareholders will receive one Ramelius share for every 4.21 Musgrave shares held and 4 cents in cash for every Musgrave Share held.

This offer values each Musgrave share at 34 cents and is based on the 1-day volume weighted average price (VWAP) of Ramelius shares, at 30 June 2023, of $1.263.

It implies a total undiluted equity value for Musgrave of approximately $201 million and Musgrave shareholders will own approximately 12.4% of the combined company.

This will give MGV shareholders the chance to become a shareholder in a company that has a history of cash generation and dividend payments, while reducing the possible risks related to the development of the Cue Gold Project.

The announcement of the recommended offer follows constructive talks between the companies and each member of the Musgrave Board has now entered into pre-bid acceptance agreements for all their Musgrave shares.

The offer represents significant premiums to the usual trading prices of Musgrave shares and a premium to the Westgold Offer.

Ramelius will acquire 12.13% interest in Musgrave via pre-bid acceptance agreements with the Musgrave board and the largest shareholder, Westminex Pty Ltd, which will provide greater certainty for the offer’s success.

Golden opportunity

It’s no surprise MGV has been a takeover target given drilling at the flagship Cue project has been delivering a string of high-grade gold results, making it one of the highest grade undeveloped gold projects in Australia.

It’s also fast approaching its 1 million ounces target for the project, with the current combined resource at 927,000oz and an update slated for release before the end of the calendar year.

The stage one PFS delivered in April, 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.

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.