Azumah board says “sell” after pushing price up

The board of Azumah Resources’ has successfully held out for more money as Ibaera Capital’s increased takeover offer of 3.3 cents per share finally gets the nod from Directors.

The new offer represents a 136% premium to the company’s closing price before the original takeover offer was made in September and an 18% premium to the 2.8c per share offer made by private equity firm Ibaera at that time.

All Azumah directors are now unanimously recommending that its shareholders accept Ibaera’s increased 3.3 cents offer a share, in the absence of a superior proposal.

If accepted by shareholders, Azumah’s 57.5% share of the Wa gold project in Africa will effectively transfer to Ibaera Capital, who already owns the remaining share of the project.

Ibaera has agreed to shorten the payment terms of the offer to 10 business days, which is now scheduled to close on the 3rd of December 2019, unless extended.

Under the terms of the deal accepted by the Azumah board, if Ibaera acquires a relevant interest in at least 30% of Azumah’s shares, Azumah has agreed to appoint an Ibaera nominee to the board, with one existing non-executive Azumah director to step down.

At a 40% relevant interest, Azumah has agreed to appoint an additional independent non-executive director, nominated by Ibaera, to the board.

If Ibaera reaches 50% take-up, it will have the right to appoint an additional nominee to the board, at which point, Azumah’s long-standing Managing Director and prime mover, Stephen Stone, will retire from the board.

Azumah Chairman Michael Atkins said: “The increased offer was a good result for shareholders, given the significant premium offered to the Azumah share price immediately prior to the offer being announced, as well as being a premium to the implied value per Azumah share represented by the recent minority 4% interest earn-in transaction entered into with Ibaera in respect to the Wa gold project.”

“The increased offer price and consequent premium paid to Azumah shareholders is one we believe to be a fair recognition of both Azumah and Ibaera’s respective control over the development of the Wa gold project through the existing joint venture arrangements, particularly where key decisions over future progress require the unanimous agreement of both parties.”

The Wa gold project is located in northern Ghana and hosts 2.77 million ounces of gold in mineral resources and an ore reserve of 1.03 million ounces.

An updated feasibility study for the project – which will take full account of the 23% elevation in the gold price over the last 12 months – is scheduled for completion in early 2020 and likely to improve the project’s already robust economics, management previously stated.

Azumah currently controls about 2,400 square kilometres of underexplored tenements covering the prospective Birimian greenstone terrane in West Africa, with numerous untested gold targets.

The company recently said that a maiden ore reserve for high-grade depth extensions to gold mineralisation at the Bepkong deposit is also pending and with the recent discovery of high-grade depth extensions to the large Kunche deposit, there is potential to further enhance the project’s metrics.

Ibaera’s off-market, all-cash takeover offer of 3.3 cents per share, is for all of the shares in Azumah that Ibaera does not already own, effectively delivering Ibaera control of the Wa gold project.

The deal comes gift-wrapped for Ibaera too, as it will also acquire Azumah’s approximately $3m in cash and share investments if it is ultimately successful in its takeover bid for the ASX-listed company.

Small capped ASX-listed exploration companies often have to agonise over decisions to sell or develop and finding a partner with deep enough pockets to take a project all the way is often difficult.

The lure of private equity money can and probably should be overwhelming for these companies that are desperately seeking to protect their capital structures as they attempt to develop what they know to be a stellar opportunity.

In the end though, private equity companies will do what private equity companies do – make money - and lots of it - and it seems that Ibaera will most likely do well out of the Wa gold project that is estimated to spit out around $60m a year in free cash over an initial mine life of at least 11 years.

If the age-old adage that the market never gets it wrong, however, is true, then Azumah and Stone have done well to squeeze 3.3 cents a share out their private equity partner when the pre-bid share price of Azumah was just 1.4c.

And they were always going to be up against it when Ibaera was effectively holding all the cards in addition to the cheque book and a growing share in both the project and Azumah itself.

It remains to be seen, however, just how many times Ibaera will be able to run this play in the market now as it seeks to invest the balance of its $100m fund.

Azumah was its first investment.


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