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Westgold lobs takeover offer to neighbour Musgrave

Updated: May 2

Westgold Resources says its proposed all-scrip bid for Musgrave Minerals is a “sensible and logical” consolidation of the two companies’ interests. Credit: File

Western Australian gold miner Westgold Resources has launched a takeover bid for neighbouring gold explorer Musgrave Minerals in a $177 million all-scrip off-market move.

Under the terms of the offer, Musgrave shareholders would receive one fully-paid Westgold ordinary share for every 5.37 Musgrave shares. Westgold says the “highly attractive” offer equates to 30 cents per share and implies an undiluted equity value for Musgrave of $177.3 million.

It added that the offer represents a “sensible and logical” consolidation of the two companies for both sets of shareholders. Already a long-term shareholder of Musgrave, Westgold estimates it currently holds 2.4 per cent of its capital.

“The Offer provides Musgrave shareholders the opportunity to see their gold assets developed by a well-funded, debt-free and experienced gold miner in a timely and capital-efficient manner,” Westgold said in a statement.

The company is owner-operator of its mines and says its takeover bid for Musgrave offers the opportunity to build a larger-scale and more profitable WA gold producer that is dominant in the Murchison region.

Westgold currently produces between 240,000 and 260,000 ounces of gold per year from its Murchison and Bryah operations in WA. Its 1.4 million tonnes per annum Tuckabianna mill and 1.8 million tonnes a year Bluebird mill are situated to the north of Musgrave’s Cue gold project – by just 40km and 120km respectively.

In April, Musgrave delivered a prefeasibility (PFS) study for the first stage of its Cue project. Westgold says the PFS assumes pre-production capital costs of $121 million for open-pit pre-stripping and construction of a 500,000 tonnes per annum plant, camp and other infrastructure.

But it says its offer to buy Musgrave side-steps the high risk, dilutive and arduous process of getting a small, stand-alone gold processing facility off the ground “in a region already well serviced with processing infrastructure”, in addition to providing an immediate and attractive premium.

Westgold’s view is that Musgrave’s plan to construct a new, small processing plant within close trucking distance of two established larger processing plants is ambitious. There is a faster and lower risk solution available to Musgrave shareholders to see their Cue gold assets developed in a timely manner. Westgold Resources managing director Wayne Bramwell

Westgold has a current market capitalisation of $686 million and as of March 31 it had cash and liquid assets of $168 million and no debt.

Musgrave says its board of directors will carefully consider the offer and make a recommendation to its shareholders.

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