The Western Australian target, which has the Sandstone Gold Project in WA as its flagship project, is chaired by shareholder and minerals chemist, entrepreneur Terry Wheeler.
Alto recently raised $2.6 million to fast-track its key asset in WA northeast of Perth.
Middle Island offered shareholders five shares in its company for every one Alto share held.
Alto chairman Wheeler outlined reasons for the directors’ unanimous rejection of the bid in a letter to the company’s shareholders published yesterday.
Wheeler said the board believed the offer was “highly conditional and uncertain” and “likely to be Middle Island’s first move”, highlighting “there may be tax implications” for offer acceptance.
Among the directors’ reasons for recommending a no-thanks to the offer was their belief: “the offer fails to recognise Alto’s unrealised potential” and “Middle Island needs Alto, however Middle Island’s proposal offers little benefit to Alto shareholders”.
The chairman flagged the company’s three largest shareholders do not plan to accept the offer.
In January 2019, Wheeler was the company’s biggest investor.
Wheeler wrote to shareholders: “Your directors believe that the offer is fundamentally opportunistic and timed to suit MDI’s best interests without reference to the inherent value of Alto or to the Sandstone Gold Project and the 818 square kilometres of the historic Archaean sandstone goldfield controlled by Alto.
“MDI’s offer is designed to secure early control of these assets and capture value that we believe would otherwise flow to you.
“Your directors believe that the offer does not reflect the short, medium and long-term unrealised potential that Alto offers you.
“Your directors urge you not to dilute your exposure to that value by prematurely passing control of Alto to MDI at a price that does not adequately reflect Alto’s unrealised potential.”
The directors recommended shareholders take no action.