THE BOURSE WHISPERER: To quote The Eagles, “It seems like a dream now, it was so long ago”, but it was only in March this year the Middle Island Resources (ASX: MDI) provided Alto Metals (ASX: AME) shareholders something to ponder by announcing its intention of an all scrip off‐market take‐over offer for all the issued ordinary shares of Alto Metals.
Back then, Middle Island Resources said it had formed the view that the combination of the assets of the two companies would create, among other material benefits to the shareholders, a company with near-term cash flow potential and considerable production and exploration upside.
The company said the all scrip off-market takeover offer would give Alto shareholders five Middle Island ordinary shares for each Alto ordinary share, which the hunter said valued its prey at approximately $9.4 million representing a 61 per cent premium over Alto’s last closing price at the time.
According to Middle Island this upside would include access to its processing plant, even though it is currently on care and maintenance, saying this would provide Alto shareholders with an immediate, proximal and cost-effective processing solution for their company’s gold resources that is not otherwise available.
Middle Island is keen to restart its Sandstone gold processing plant and clearly the Alto deposits would provide initial mill feed and critical mass to support its early recommissioning in conjunction with the former’s Two Mile Hill deposits.
Middle Island declared it has received indicative broker support with respect to the takeover for an equity capital raising of approximately $5 million in additional funds to advance the feasibility and recommissioning of the Sandstone plant. Claiming the combination of Middle Island and Alto will consolidate the entire Sandstone greenstone belt and dataset under a single entity.
“Middle Island’s offer is compelling for Alto shareholders, who will receive a significant premium based on the last closing price for their shares and will benefit in the future growth potential of the proposed Combined Group,” Middle Island Resources managing director Rick Yeates said in the company’s announcement to the Australian Securities Exchange.
“Middle Island will integrate Alto’s assets with Middle Island’s Sandstone gold project, and immediately embark on an updated feasibility study, incorporating Alto’s Mineral Resources, to determine the economics of recommissioning the Sandstone gold processing plant.
“The collective Middle Island‐Alto gold assets offer a substantial growth opportunity for current and future shareholders of the Combined Group, via low capital intensity and a near-term production profile.
“The further potential is to significantly extend this production profile via Middle Island’s Two Mile Hill underground deposits, consolidate further proximal deposits within a 100 kilometre radius, and amalgamate an entire greenstone belt offering significant resource and exploration upside.
“In the view of the Middle Island directors, the premium offered, the funding support, Middle Island’s technical and management expertise, and participation in the combined Middle Island‐Alto upside, makes the bid a compelling proposal.”
The Resources Roadhouse spoke to Rick Yeats when both attended the RIU Resources Roadshow in Melbourne.
The deal, howver, failed to gain traction and Middle Island this week announced its off-market takeover bid for fully paid ordinary shares Alto Metals has lapsed.
The reason being that Middle Island’s 50 per cent minimum acceptance condition, to which the Offer was subject, had not been met as of close of the Offer period at 5.00pm (Perth time), Friday, 29 November 2019.
Middle Island thanked those Alto shareholders who had taken up the offer, acknowledging that as the offer had lapsed, they would have their Alto shares returned.
Undeterred, Middle Island said it strongly believes that combining Middle Island and Alto’s gold assets offers a substantial growth opportunity for current and future shareholders of a combined entity.
The company declared the combined entity would have low start-up costs and near-term gold production, utilising Middle Island’s existing Sandstone gold processing plant and infrastructure, along with the consolidation of healthy gold resource upside and exploration potential within the combined entity’s highly complementary tenure.
Middle Island made note that over the past two years, it has unsuccessfully endeavoured to engage the Alto Board on what it considers is a clear, compelling and commercially logical strategy that is widely endorsed by all stakeholders.
Middle Island indicated it intends to continue to pursue meaningful dialogue with the Alto Board of Directors as it seeks to add value for both Alto and MDI shareholders.