Silver Lake Resources plans to acquire EganStreet Resources in a bid worth $52 million to capitalise on the Rothsay gold project in Western Australia.
The Rothsay operation lies 85 kilometres south-east of Silver Lake’s Deflector mine and processing hub, creating the opportunity to “introduce a new high-grade ore source to an upgraded Deflector processing facility.”
Rothsay, with resources of 454,000 ounces and reserves of 200,000 ounces, has progressed through the exploration and study phase under EganStreet.
Silver Lake managing director Luke Tonkin said the combination of the company’s established processing infrastructure at Deflector, free cash flow generation and strong balance sheet made the acquisition consistent with the company’s strategy.
“The acquisition of EganStreet and its Rothsay Gold Project is consistent with Silver Lake’s strategy of creating new opportunities to compete for capital and maximising the value of the existing asset base,” Tonkin said.
“Silver Lake’s nearby infrastructure at Deflector can unlock additional value at Rothsay and this is reflected in the share price premium offered to EganStreet shareholders.”
EganStreet managing director Marc Ducler said the transaction would reward shareholders for the progress achieved at Rothsay.
“(It gives) them exposure to a successful ASX-300 gold producer with a strong balance sheet, diversified production profile, mine development expertise, established systems and practices and installed infrastructure,” Ducler said.
“This will significantly mitigate the development risk at Rothsay and provide exposure to a much larger and highly liquid Australian gold producer with the ability to attract an investment premium in the current strong Australian dollar gold market.”
Under the terms of transaction, EganStreet shareholders will receive 0.27 Silver Lake shares for every EganStreet share held.
The offer values EganStreet at 40 cents per share, implying a $52 million transaction value and a premium of 28.9 per cent to the last close price of 31 cents, the price of EganStreet’s shares on July 29.
EganStreet’s board of directors has unanimously recommended that shareholders accept the offer and have indicated they will accept the offer.
Additionally, EganStreet’s largest shareholder, Lion Selection, has entered into a pre-bid acceptance deed with Silver Lake under which it has agreed to accept the offer in respect of its 16.2 per cent holding.