News: WGX Westgold Resources Says To Make Takeover Bid For Gascoyne Resources, page-13

Hi Spec,

I certainly know what you mean about being torn regarding this scenario. I have a significant holding in both GCY and WGX.

With the costs of labor and materials to build a processing plant sky high, it really does add leverage to GCY over the likes of AME...


I do think this first offer has been handled poorly by WGX.
The GCY down ramping by Wayne Bramwell will not do them no favors.
They should be using a more consolatory manner towards Richard Hay and team. The team have performed admirably in trying conditions.
The top 3 shareholders have a lot of skin in this game. They have shown a propensity to back the GCY executive team, especially during the FFR merger process.

NRW (14.7%) will not likely back this deal if the their mining contract is dissolved.
SPARTA AG (22.1%) who have purchased 7.44% of FFR could really stubbornly dig their heels in here as well.
FIRST SENTIER (10%) who have increased their holdings from 7.3% are a little harder to read.

What would it take to get this deal done??

Personally I think 1 : 4 scrip offer with a 25 million cash payment sweetener would get this over the line. This would equate to an extra 10c special dividend per share on top of their current offer. This is pretty much inline with the 50c price you estimated Spec.

What really interests me in this entire equation is how it will impact the WGX SP. One would think that this would be viewed favorably by the market at least in the medium to long term. Investors could logically expect a rerating of WGX as it becomes a much larger producer. The shorter term gold equity markets view towards this acquisition is a bit harder to gauge. If gold price continues to trend down this could be viewed as adding more short term risk to WGX.

Interesting and exciting times ahead. This could absolutely be the M&A tip of the iceberg for the gold equities market. Cashed up producers, high margins and depressed market caps could finally put a fire cracker under this market!