While there may be synergies with BGL, with the mine being only 150kms north of the KOTH mill the board should stay away from any more acquisitions in my view for the following reasons:
1) BGL has an EV of around $1.5 billion for 1.5 million ounces of reserves or $1,000 an ounce while VAU has an EV of around $2 billion for around 4 million ounces of reserves or $500 an ounce. This is despite VAU having the stronger balance sheet and less risk in terms of operational performance. An offer from VAU would require an even higher price for BGL, which would require both equity, debt and probably cash. This would dilute existing VAU share value whilst increasing both balance sheet and mine risk. SLR shareholders have seen their value diluted significantly over the last five years due to acquisitions. Long story short the share price is too low for the board to be making any script acquisitions at the moment.
2) VAU have yet to bed down Sugar Zone and KOTH. Sugar Zone has burnt hundreds of millions in cash and SLR shareholders are yet to see a return on this investment of almost four years. The Board need to get Sugar Zone back up and running and more importantly generating cash. KOTH at least has been kept running but the board has decided to sink circa $160 million in a mill expansion. That's enough risk for the time being. The Board should stay focused on improving productively at all of their mine sites which have plenty of organic growth opportunities.
3) Dividends - VAU is less than 12 months away from using up all of its Australian tax losses, which combined with a reduction in capex and hedge closure will enable the company to start paying handsome dividends. This should lift the share price considerably (in theory at least). Long suffering shareholders deserve a share of the spoils for a change rather than watching share value transferred to other companies. Dividends will also lead to a higher share price will facilitate more value accretive acquisitions. Long story short the Board should put the horse before the cart.
I also seem to recall a few years ago that the word on the street was that Daisy was about to run out of ounces which has been proven wrong. The same line is now being sprouted about Deflector. Recent company announcements seem to suggest that Deflector has life left in it yet. Lets not forget about Rothsay either which rarely gets mentioned but also has potential. The company should get busy drilling up more of its prospects and releasing results so that these rumours don't get a head of steam.
Given the company hasn't refuted the data room claims, and the heavy turnover suggests something could be on the cards. There was heavy turnover last week against the gold share trend which I thought was significant. It's a sad reflection on the ASX market that insiders can get away with trading on insider knowledge of a potential capital raising.
GLTA/IMHO
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