win-win for dioro and avoca: williams

Win-win for Dioro and Avoca: Williams

Kate Haycock -- MINING NEWS --
Tuesday, 14 April 2009

AVOCA Mining’s proposed takeover bid for fellow Western Australian gold miner Dioro Exploration is the best for both companies, according to Avoca’s managing director.

Avoca is offering one share for every 2.82 Dioro shares, valuing its takeover target at roughly $A49 million.

Avoca managing director Rohan Williams told reporters today his management team would be able to apply the skills learned during the successful start-up of the company’s flagship Higginsville project to Dioro’s operations.

“Avoca has transformed itself from a junior explorer to a producer listed on the ASX-200, and it has taken less than two years to do that,” Williams said.

“We have proven our ability to rapidly and competently extract value from our projects.”

While Williams was not directly critical of Dioro’s management, he did suggest Avoca’s board and management would be able to better unlock the value of the company’s assets.

“Avoca has the credentials to become Australia’s pre-eminent mid-tier gold producer, and we believe a successful bid [for Dioro] would be win-win for employees and shareholders of both companies,” he said.

Dioro, for now, is telling its shareholders to take no action while it looks over the bid.

Dioro director David McArthur told MiningNews.net today the company would be carefully looking into the bid and the relative value of the deal, and would not be rushing into a judgement of the play before it received Avoca’s bidder’s statement.

The deal, if it goes ahead, will combine not only the two companies’ productive assets at the Higginsville underground mine, Frog’s Leg and the South Kalgoorlie pit, but also provide two gold plant – Jubilee north of Kambalda and Trident south of Kambalda – and the capacity for ore to be trucked from anywhere on the combined tenements to one of the two plant.

If the bid goes ahead, Avoca will become the largest tenement holder in the region, with all tenements within trucking distance of the two plant.

Avoca does require Foreign Investment Review Board approval for the deal, because its largest shareholder is a foreign entity, UK-based Pala Asset Investment Holdings.

Avoca already has a 14.95% stake in Dioro, picked up from major shareholders Harmony Gold and Baker Steel Capital Managers.

Harmony agreed to sell Avoca its entire 12.48% stake in Dioro, but for now Baker will be holding on to its remaining 8% of Dioro shares. Williams said at this stage Avoca had no further deals with Baker over that additional stake.

Another complication for the proposed takeover could be Dioro’s joint venture at Frog’s Leg with Canadian miner La Mancha, which also operates the underground asset.

Williams said Avoca had not been in discussions with La Mancha over the takeover bid for Dioro.

La Mancha has priority rights over the Frog’s Leg mine if it goes up for sale.

Williams said Avoca was not overly concerned with two pit wall failures at Dioro’s open pit operations, although Avoca would do a thorough review of Dioro’s assets.

If the takeover goes ahead, it will give the combined group three operating assets – Avoca’s Higginsville and Dioro’s Frog’s Leg and South Kalgoorlie – which would produce around 250,000 ounces of gold each year.

The deal would leave Avoca shareholders with 88.3% of the company, while Dioro shareholders would be left with 11.7% of the combined group.

The takeover bid is conditional on Avoca gaining at least 90% acceptances from Dioro shareholders.

Dioro shares last traded at 49.5c, up 10c or 25% this morning on the news of the takeover bid. Shares in Avoca were last trading at $1.52, up 2.5c.