The offer for five Middle Island shares for every one Alto share is based on Middle Island’s closing price of 0.9 cents on February 28, 2019, valuing Alto at about $9.4 million.
This represents premiums of 61% to Alto’s last closing price of 2.8 cents, 61% to Alto’s five-day volume weighted average price (VWAP) of 2.8 cents and 34% to Alto’s ten-day VWAP of 3.35 cents.
Alto's board is considering its response and shareholders have been advisded to take no action in respect to the offer until a formal recommendation is made.
Middle Island managing director Rick Yeates said the offer was compelling for Alto shareholders.
Yeates said: “[Alto shareholders] will receive a significant premium based on the last closing price for their shares and will benefit in the future growth potential of the proposed combined group.”
The directors of Middle Island believe that combining the assets of the two companies will create near-term cashflow potential and considerable production and exploration upside.
Middle Island has also received indicative broker support regarding the combined group for an equity capital raising of about $5 million to advance feasibility and recommissioning.
Middle Island owns the Sandstone Project in Western Australia which includes a 600,000 tonne per annum processing facility currently on care and maintenance.
The plant will provide Alto with an immediate, nearby and cost-effective processing solution for Alto’s gold resources.
Alto’s deposits are anticipated to provide initial mill feed and critical mass to support an early recommissioning of the Sandstone plant, while Middle Island’s Two Mile Hill deposits offer considerable scale and project longevity.
Alto's exploration and development pipeline for Sandstone
Yeates continued: “Middle Island will integrate Alto’s assets with Middle Island’s Sandstone Gold Project and immediately embark on an updated feasibility study, incorporating Alto’s mineral resources, to determine the economics of recommissioning the Sandstone gold processing plant.
“The collective Middle Island-Alto gold assets offer a substantial growth opportunity for current and future shareholders of the combined group, via a low capital intensity and a near-term production profile.
“The further potential is to significantly extend this production profile via Middle Island’s Two Mile Hill underground deposits, consolidate further proximal deposits within a 100-kilometre radius, and amalgamate an entire greenstone belt offering significant resource and exploration upside.
“In the view of the Middle Island directors, the premium offered, the funding support, Middle Island’s technical and management expertise, and participation in the combined Middle Island-Alto upside, make this bid a compelling proposal.”
Middle Island is advancing its wholly-owned Sandstone Project in WA with the aim of extending and enhancing the proposed gold production profile in order to recommission the on-site plant.
Production focus has been on the Two Mile Hill tonalite deeps and banded iron formation deposits.
Two Mile Hill now comprises a substantial exploration target which has been further defined through resource definition diamond drilling, ore-sorting trials and geotechnical studies.
Drilling, resource estimation and optimisation studies have resulted in Middle Island doubling the contained gold at its Wirraminna deposit.
This was supplemented by the discovery of four coincident gold-arsenic anomalies beneath transported cover at the Davis prospect, all within 1 kilometre of the processing plant.
Alto's gold resources at Sandstone
Alto’s principal asset is the Sandstone Gold Project which covers about 80% or 800 square kilometres of the Archaean Sandstone greenstone belt.
The project surrounds and lies immediately adjacent to Middle Island’s tenure and is centred around the township of Sandstone, 600 kilometres northeast of Perth and 400 kilometres northwest of Kalgoorlie.
Alto’s global mineral resource estimate across the Indomitable, Vanguard, Lord Nelson and Lord Henry deposits comprises an indicated 1.2 million tonnes at 1.9 g/t gold for 65,000 ounces and an inferred 3.67 million tonnes at 1.66 g/t containing 196,000 ounces.