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Will Gold Road Resources get its foot in the door at De Grey’s Hemi discovery with $308m DGO Gold takeover?
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- DGO Gold directors endorse Gold Road’s $308 million bid for all scrip takeover
- Deal prices DGO shares at a 28% premium of $3.55, sends stock soaring in early trade
- Real prize is DGO’s 14.4% stake in De Grey Mining, owner of the world class Hemi gold discovery in WA’s Pilbara
Gold Road Resources (ASX:GOR) will offer $308 million in its shares to take out Ed Eshuys’ gold exploration and investment vehicle DGO Gold (ASX:DGO) in a deal that gives the Gruyere gold mine owner an intriguing position in De Grey Mining’s (ASX:DEG) world class Hemi discovery.
DGO, whose board has recommended the GOR bid, holds a number of exploration tenements in the Pilbara, Yilgarn, Bryah and Stuart Shelf provinces, but the real prize is its 14.4% holding in De Grey.
“The acquisition of DGO aligns with Gold Road’s strategy to invest in high quality gold projects in tier one jurisdictions,” Gold Road MD Duncan Gibbs said.
“In particular, Gold Road views the substantial shareholding in the owner of the high quality Hemi Gold Discovery, combined with our 50% ownership of the Gruyere Gold mine, as an exciting opportunity to participate in two of the most significant gold discoveries in Western Australia this century.”
It is unsurprising to see corporate activity emerge around Hemi, one of the best Australian gold discoveries of the 21st century and the third globally significant deposit to be discovered since the year 2000 after AngloGold and IGO’s Tropicana find (2005) and Gold Road’s own Gruyere discovery (2013).
Located in a new gold district in WA’s Pilbara region, it contains 6.8Moz of the precious metal, with a further 2.2Moz outside Hemi in the broader Mallina gold project, which will deliver large scale production of up to 473,000ozpa according to a scoping study last year.
DGO also has a 20.1% stake in WA gold explorer Yandal Resources (ASX:YRL) and a 6.8% share of Mount Morgans gold mine owner Dacian Gold (ASX:DCN).
Gold Road will offer 2.16 shares for every DGO share, an implied offer price of $3.55 and 28% premium to DGO’s 28-day VWAP of $2.77.
DGO shares were trading for $3 this morning pre-open, while $1.4 billion capped Gold Road was going for $1.595 a share. DGO soared 14.33% on the open to $3.43, with Gold Road, De Grey, Yandal and Dacian also up.
“I am proud of the high-quality portfolio of assets DGO Gold has accumulated. DGO has consistently traded at a discount to the value of its assets, and this offer not only recognises and unlocks that value, but provides DGO shareholders with ongoing exposure to these assets and the Gold Road portfolio, as part of a more liquid investment in a cash flow generating ASX200 gold producer,” DGO executive chairman Ed Eshuys said.
Gold Road has been building a war chest for M & A activity since opening the Gruyere gold mine three years ago. It has $131.8 million in the bank with no debt and plans to produce 150,000–170,000oz in 2022 at an AISC of $1270-$1470/oz from its half-share of the 300,000ozpa operations, half-owned by South African gold giant Gold Fields.
It’s been looking outwardly for growth for some time, having come up as the loser in a brief bidding war for Kalgoorlie gold explorer Apollo Consolidated against Ramelius Resources (ASX:RMS) last year.
Gold Road (ASX:GOR), DGO Gold (ASX:DGO) and De Grey Mining (ASX:DEG) share prices today:
At Stockhead, we tell it like it is. While De Grey Mining is a Stockhead advertiser, it did not sponsor this article.
