Gandel to privatise Octagonal

The major shareholder in Octagonal Resources is planning to privatise the company after concluding there is no value in its ASX listing, and has proposed a capital reduction that ties in Andrew Forrest-backed A1 Consolidated Gold.

Octagonal sold its major asset, the Maldon gold operations in Victoria, to A1 in June, and since then has been looking for new investments outside the resources sector, but with no success.

Its major shareholder, Melbourne-based Gandel Metals, has concluded the company’s current structure is unsustainable in the current circumstances.

“In particular, the costs of reporting and compliance required by Octagonal as a listed company will necessitate either the gradual sell-off of liquid assets, being the shares held in A1 Gold, or increasing calls on shareholders to provide additional equity or loan capital,” Gandel said in a statement.

“This ongoing burden far outweighs the advantages of Octagonal retaining its listing in the current capital markets.

"It is also exacerbated by the approaching deadline for the repayment of the large part of the loan made by Gandel Markets to Octagonal.”

As part of its evaluating process, Octagonal said it had prepared an 18-month budget based on available funding of $1.5 million.

After making significant cuts to its corporate costs, it found that less than 40 per cent of the budgeted expenditure was contributed to in-ground exploration.

It concluded this was unacceptable for a public-listed exploration company.

The proposed capital reduction involves the cancellation of shares held by non-Gandel shareholders, which equates to 59 per cent of shares on issue.

In return, shareholders will get a cash payment of 0.55 cents per Octagonal share and two A1 shares for every 5 Octagonal share.

This values the deal at 2.11 cents per share, a 53 per cent premium to Octagonal's 30-day average price.

The deal will require 75 per cent shareholder approval.

The Octagonal announcement follows the delisting of Balamara Resources in May, for similar reasons.

Balamara managing director Michael Ralston said the decision to de-list (and re-list at a later date) was due to a range of factors including illiquid stock, inability to access new capital on the ASX, and high administrative costs associated with being listed.

Balamara has achieved considerable progress since the delisting, with completion of a pre-feasibility study for its Sawin coal project in Poland and agreement by its major shareholder, Singapore-based Ample Skill, to invest a further $7 million.

In contrast to Octagonal and Balamara, many other junior explorers have moved into new industry sectors, most commonly by morphing into a tech business through a backdoor listing.

Over the past two years, more than 70 Perth-based exploration companies have completed or announced plans for a backdoor listing, according to data compiled by Business News.