GGG Resources (LON:GGG) pulled no punches in its response to Auzex Resources (ASX:AZX) plans to raise £25 million and list on the AIM market - which triggered 'defeating conditions' of its hostile bid for the Australian firm.
The London based firm embarked on a A$98 million bid to buy-out its 50:50 joint venture partner back in March. The Auzex management team rejected the offer, but GGG decided to press ahead with a hostile bid.
The two firms are jointly developing the 1.98 million ounce Bullabulling gold project in western Australia. However the partners reached an impasse in terms of strategy, which prompted GGG’s move to take control of the project.
Last Thursday GGG confirmed that its delayed application to join the ASX was approved. The next day, Friday 6 May, Auzex announced its plan to raise £25 million and list on the AIM market.
This morning GGG claimed the plan appears to be a reaction to its offer rather than a well thought out strategy.
“The Auzex proposal as it stands, is not only costly but also time consuming and importantly does not address the consolidation of Bullabulling under one corporate entity,” GGG said in a stock exchange statement.
“If successfully implemented the Auzex proposal would create two separate companies, both dual listed on AIM and ASX and both owning 50 percent of Bullabulling.
“This we consider unnecessary, harmful to overall shareholder value through duplication of costs and a defence tactic by Auzex directors to frustrate the offer to Auzex shareholders.”
GGG also highlighted that the Auzex plans trigger a number of defeating conditions to the takeover bid, which allow GGG to withdraw the offer.
However the AIM-listed firm said it will not automatically withdraw the offer, but reserves its right to do so.
And it said that doing so it would only disadvantage Auzex shareholders, who would not be given the opportunity to accept the offer or participate in the benefits of the merged entity.
In the statement GGG goes on to raise further questions over its partners plan to join the AIM market and it stressed that the Auzex proposal will need the backing of its shareholders.
It claimed that there was a lack of information in the Auzex announcement and it said that the capital raise would represent about a 28 percent dilution to current Auzex shareholders.
Meanwhile GGG said that further dilution to the ‘enlarged group’ would be unnecessary because it has sufficient cash to pursue an aggressive drill programme on Bullabulling.
Separately relating to more operational matters GGG said that plans for a 194,000 metre drill programme, which Auzex has lodged with the Western Australia Mines Department, was not considered by the joint venture committee and therefore GGG said it considers the action is in breach of the Bullabulling joint venture agreement.
“On such a matter Auzex has no formal authority to act for, or to create or assume any responsibility on behalf of GGG or the Joint Venture Committee,” the company said.
“We also note that in several announcements and in its 2010 Annual Report, Auzex has represented itself as the Manager of the Bullabulling Joint Venture. GGG highlights that there is no formal agreement appointing Auzex as the Manager of Bullabulling.”
GGG claimed that it has previously put forward plans to set up a Perth-based entity to independently manage and develop Bullabulling but it said that Auzex is not willing to discuss these plans.
It emphasised that the joint venture agreement requires that a manager is appointed as soon as reasonably practical after the commencement of the joint venture, and it said that this appointment has not been made. The company added: “GGG considers any statement by Auzex that it is the Manager of the Bullabulling Joint Venture to be misleading."