The companies have entered a Bid Implementation Deed (BID) with which will see Silver Lake acquire all the issued and outstanding ordinary shares of EganStreet.
Each EganStreet shareholder will receive 0.27 Silver Lake shares for every EganStreet share held.
24.2% premium to 5-day VWAP
This offer values EganStreet at 40 cents per share which represents a premium of 28.9% to the close price of 31 cents, which was the price of shares on ASX at the close of trading on July 29, 2019.
It also represents a premium of 24.2% to the 5-day volume weighted average price (VWAP) of 32.2 cents up to and including July 29 and 43.4% to the 30-day VWAP of 27.9 cents up to and including July 29.
Shares surged around 27% in early trade to as much as 39.5 cents while Silver Lake is trading at $1.47.
EganStreet’s key asset is the 100%-owned Rothsay Gold Project, a high-grade, underground project about 85 kilometres southeast of Silver Lake’s Deflector mine and processing hub.
Rothsay has JORC resources of 1.5 million tonnes at 9.2 g/t for 454,000 ounces and JORC reserves of 1.4 million tonnes at 4.4 g/t for 200,000 ounces.
EganStreet’s Board of Directors unanimously recommends that shareholders accept the offer and have indicated that they will accept the offer in respect of all shares they own or control, in both instances in the absence of a superior proposal.
The company’s managing director Marc Ducler said: “After taking into consideration a range of factors including challenges in securing development funding for new projects in the junior gold sector and the risk profile involved with taking an asset into production, the board has resolved that the opportunity to combine with a substantial multi-asset gold producer with a strong operational track record in Silver Lake represents an attractive outcome.”
“Exposure to successful producer”
"This transaction will reward our shareholders for the progress achieved at Rothsay to date while giving 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,” he 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.”
In addition, EganStreet’s largest shareholder, Lion Selection Group Ltd (ASX:LSX), 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% holding.
READ: EganStreet Resources receives approval for mining proposal and mine closure plan for Rothsay Gold Project
Under EganStreet’s stewardship, Rothsay has progressed through the exploration and study phase, with the release of an updated definitive feasibility study confirming the technical viability of the project in February 2019.
The Rothsay Mining Proposal was approved by the Western Australian Department of Mines, Industry Regulation and Safety in June 2019.
Ducler added: “Since listing on the ASX through an IPO at 20 cents two-and-a-half years ago, EganStreet’s strategy has been to create value for shareholders through the standalone development of the high-grade Rothsay project.
"We have made excellent progress in this regard, doubling the resource, advancing the project rapidly from scoping-level through PFS to a comprehensive definitive feasibility study and securing most of the permits required to commence development.”
Near-term development opportunity
The acquisition will provide a near-term development opportunity to introduce a new high-grade ore source to an upgraded Deflector processing facility.
A combination of Silver Lake’s established processing infrastructure, free cash flow generation and strong balance sheet makes the acquisition consistent with Silver Lake’s strategy.
Silver Lake’s managing director Luke Tonkin said: “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.
“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.”