The Explaurum board continues to recommend that its shareholders approve the Alkane strategic investment at the general meeting on December 21, 2018.
Importantly, the investment will provide funding to accelerate exploration and finalise the bankable feasibility study for the Tampia Gold Project.
The Explaurum board also recommended unanimously that shareholders reject the off-market takeover offer from Ramelius Resources Limited (ASX:RMS) by taking no action.
Explaurum noted an independent expert report in relation to the Ramelius offer which concluded that the offer is not fair and reasonable.
On top of the value inadequacy highlighted by the independent expert report, there are several other key reasons why the Explaurum board has strong reservations in relation to the Ramelius offer:
• Ramelius’ plan for the future development and operation of the Tampia Project remains highly uncertain. Ramelius has not explained to Explaurum shareholders how it will be able to consolidate the Edna May and Tampia Projects in a way that will ‘realise significant cost savings or operational synergies’.
• Explaurum remains highly sceptical as to the practical ability, and commercial logic, of trucking Tampia ore to the Edna May processing facility. Explaurum’s study work has consistently shown that the value of the Tampia Project is maximised on a standalone development basis.
• Explaurum shareholders are being asked to heavily dilute their exposure to the Tampia Project – a high-grade, open pit development project with forecast low operating costs and significant potential resource upside. In exchange, Explaurum shareholders are being asked to accept predominant exposure to a more mature portfolio of assets with a higher cost production profile and a shorter reserve life.
It should also be noted that the independent expert value assessment of Explaurum did not take into account potential value enhancements from:
• the Mace Discovery; or
• other operating and capital cost optimisations currently being undertaken as part of the bankable feasibility study on the Tampia Project.
These dynamics have the potential to deliver significant further upside to the value assessment of Explaurum.
Further information regarding the Mace Discovery is expected to be revealed later this week.
Coming after Alkane’s $3.7 million transaction with Calidus Resources Ltd (ASX:CAI) in October 2018, the Explaurum investment is part of Alkane’s strategy of investing in junior gold companies with projects that have passed due diligence review and Alkane’s investment criteria.