Silver Lake launches takeover bid for Integra

DIGGERS AND DEALERS 2012: Before Diggers & Dealers officially kicked off, The Roadhouse visited the Kalgoorlie-based operations of gold producer Silver Lake Resources.

We were treated a quick tour around the company’s Lakewood processing facility.

What we weren’t treated to, however, was any insight or inclination into what the company was set to announce at the opening morning of the conference.

 

Gold dore bare poured at the Lakewood facility.

While we stood in a small, ammonia riddled, room watch the company’s latest gold pour its managing director Les Davis was hunkered down in  small Kalgoorlie house with his counterpart from Integra Mining Chris Cairns.

The two men emerged with a deal that will result in Silver Lake swallowing up the assets of Integra to create a gold company of substantial size with multiple Australian operating mines and mills.

The reaction to the combination around the Diggers marquee was one of assignation rather than surprise with most delegates saying they thought it to be a reasonable deal and one that has probably been on the cards for some time.

“Putting Silver Lake and Integra together, apart from the clear transparent synergies, we are creating a 400,000 ounce gold producing entity in 2014,” Silver Lake managing director Les Davis told a gathered throng of journalists.

“More importantly, combined we have 6.6 million ounces of gold in the Resource base, inclusive of 1.8 million ounces of Reserves.

“Our milling capacity, within a 60 kilometre radius of here (kalgoorlie), now totals 2.2 million tonne per annum.

“This will bring a lot of operational flexibility, shared infrastructure – roads, power, people, transport.

“This is an iconic deal and one of those rare opportunities where two managing directors can sit side by side and say that this deal is a one where one plus one equals three.

“And all of that will flow to shareholder returns for years to come.”

 

Les Davis and Chris Cairns front the media pack at Diggers.

Integra managing director Chris Cairns said the thinking behind the deal was the opportunity it offered to genuinely create value by bringing together two sets of skills.

The first possessed by Silver Lake, which has proven itself as a successful underground miner in the Mt Monger area that has recently introduced open pit production.

Integra brings to the deal a strong exploration emphasis with the discovery of three deposits in its trophy cabinet over the last five years.

“We have created value for our shareholders by developing those discoveries,” Cairns said.

“We are neighbours next door, we have complimentary skill sets, there is obvious, synergistic value to be created between the two companies.

“Unlike other mergers in the resources space, we’re not adding two assets that are in disparate geographic locations. We are adding two assets that are right side by side.

“The value that creates for both sets of shareholders is very, very compelling.

“The company, now, will be a very, very profitable gold producer. It will be one of the biggest gold producers in Australia. The revenue base and the financial base we are working from and the flexibility and optionality that the combination provides is second to none.

“So the Board of Integra, very enthusiastically, support the deal. We think it makes sense and we think it creates value for shareholders.”

The transaction will be implemented via an Integra Scheme of Arrangement and has been unanimously recommended by the Boards of both companies.

Under the Scheme, Integra shareholders will be offered one new Silver Lake share for every 6.28 Integra shares they hold.

The Silver Lake offer values Integra at $426 million1 (45.2 cents per share) and represents a premium of 43.6 per cent to Integra’s last closing price of 31.5 cents on the ASX last Friday.

It also offers a 40.3 per cent premium to Integra’s 20‐day volume weighted average price (VWAP) of 30.7 cents.