The one-for-four offer will also provide funds to cover expenses incurred in connection with the Habrok takeover offer, which directors have recommended rejecting, and for general working capital.
Eligible shareholders are being offered the opportunity to acquire new shares through an accelerated pro-rata non-renounceable entitlement issue of one new share for every four existing shares held by eligible shareholders on July 15, 2020 (for retail investors), at an issue price of 7 cents per new share.
The issue price represents a discount of 6.67% to the closing price of 7.5 cents on July 10, 2020, and a premium of 6.06% to the offer price for Alto shares under the takeover bid from Habrok Mining Pty Limited.
Raising capital has been limited
The company has been limited in its ability to undertake capital raising activities since Goldsea Australia Mining Pty Ltd, a wholly-owned subsidiary of Shandong Goldsea Group Co Ltd, announced its intention to make a takeover bid for the company on February 21, 2020, as this would have triggered a defeating condition of the bid.
Although Goldsea agreed to provide Alto with a loan facility of up to $1 million, the conditions to this loan facility ultimately were not satisfied, as Goldsea failed to receive acceptances of under its takeover bid of over 50%, and the offer lapsed on July 8, 2020.
“Well-funded for foreseeable future”
Managing director Matthew Bowles said: “For well over 12 months, the company has been hampered with multiple, opportunistic, unsolicited approaches, rather than being able to focus on exploration to realise value at the Sandstone Gold Project.
“This capital raising will see the company well-funded to continue exploration well into the foreseeable future.
“We thank all our shareholders, including our major shareholder Windsong Valley for their support and look forward to the future exploration success across the entire 800 square kilometres Sandstone Gold Project.”
Windsong Valley intends to subscribe for full entitlement, representing around $1 million and Alto has also entered into a variation agreement to increase the unsecured amount available under the loan facility announced on March 13 from $500,000 to $1,000,000.
The facility provides Alto with the flexibility to drawdown for working capital as required to ensure the start of planned exploration at the Lord Nelson prospect of Sandstone.
Lord Nelson drilling
Alto has started an initial 2,000 metres infill and step-out program at Lord Nelson, which is part of an extensive 10,000-metre exploration program planned for the Sandstone Gold Project.
On May 27, 2020, the company updated the JORC 2012 inferred mineral resource to 1.8 million tonnes at 1.9 g/t gold for 109,000 ounces, increasing total indicated and inferred mineral resources to 6.2 million tonnes at 1.7 g/t for 331,000 ounces.
Bowles said: “We are excited to have recommenced drilling at Lord Nelson to follow up on our latest results, which demonstrated the continuity of high-grade mineralisation.
“Lord Nelson is a priority focus for us and we expect further drilling will lead to additional resource growth from the known mineralisation that remains open down plunge and along strike to the south of the pit.”
Board recommends rejecting offer
The unsolicited takeover offer from Habrok (Alto) Pty Limited is offering 6.6 cents cash per Alto share, Alto options for cash consideration based on a Black-Scholes valuation as set out in the bidder’s statement.
Alto's board has recommended shareholders and option holders reject the offers based on the following:
- The continued interest in Alto and the Sandstone Gold Project with three separate unsolicitied takeover offers in the last 15 months from Middle Island Resources Ltd (ASX:MDI), Goldsea Australia Mining Pty Ltd and Habrok which is a clear endorsement of the long-term value potential associated with the project and extensive 800 square kilometres ground position, especially in the current global gold price environment;
- The share offer of 6.6 cents cash consideration being offered by Habrok does not represent a premium to the recent trading price of Alto shares on July 10, 2020, of 7.5 cents; and
- The offer fails to recognise the company’s unrealised potential – with the success of Alto’s existing exploration program and subsequent exploration across its 100%-owned tenements (where a range of additional prospects have been identified) is expected to provide a significant uplift in Alto’s resource position.