THE BOURSE WHISPERER: Polymetals Mining (ASX: PLY) and Southern Cross Goldfields (ASX: SXG) have agreed to combine the two companies to create a new Australian gold company.
The merged entity will result in a gold company with a combined Mineral Resource inventory of 1.69 million ounces, as well as encouraging exploration upside and an experienced and proven management team.
The companies have labelled the merger as a “merger of equals” by way of a scheme of arrangement, under which Southern Cross will offer 11 of its shares for every single Polymetlas share on issue.
Southern Cross shareholders will collectively hold approximately 47 per cent of the shares in the merged company, while Polymetals shareholders will collectively hold approximately 53 per cent.
The merged entity will own a diversified gold and base metal portfolio in Western Australia, South Australia and New South Wales, including a pipeline of production assets at Marda in Western Australia (SXG) and Mt Boppy in NSW (PLY).
Polymetals shareholders are expected to vote on the proposed merger around 24 July 2013.
“This represents a tremendous opportunity for two emerging gold companies to be proactive in the current environment and therefore to remain in control of their own destiny,” Polymetals Mining chairman David Sproule said announcing the deal.
“This merger provides a truly complementary blend of assets, cash and skill-sets that will create a new Australian gold company with genuine investor relevance
“The merger creates a clear pathway for shareholders in each company to realise value from an accelerated development timetable for the Marda and Mt Boppy assets.
“I believe that both companies share a similar culture of executing projects quickly and efficiently, and Polymetals has a proven track record in doing this. I strongly believe that this combination will create an excellent platform for growth.”
Sproule, along with fellow Polymetals directors Jon Parker and Frank Terranova will join the Board of the merged entity, while Southern Cross chairman Samantha Tough will take up the same position with the merged entity.
Southern Cross directors John Rowe and Graham Brock will also join the Board to be joined by Glenn Jardine as chief executive officer.
The company headquarters will remain in Perth, Western Australia.
The merged entity is expected to have 867.45 million shares on issue, with combined cash reserves as at 31 March of $13 million and debt of $7 million.
“This is a compelling transaction for shareholders in both companies, creating a platform to bring two significant Australian gold assets in Marda and Mt Boppy into production within the next two years, together with a strong longer term pipeline of development and exploration opportunities in some of Australia’s most prospective mineral provinces,” Southern Cross Goldfields chairman Samantha Tough said.
“Southern Cross shareholders will benefit from exposure to Polymetals’ near-production assets on the East Coast of Australia, as well as the skills and expertise of their management team in developing efficient gold operations.
“The combined group will have a strong balance sheet and the ability to fast-track development of its key assets while also funding aggressive exploration programs.”