Middle Island raises doubts on Alto takeover

Middle Island Resources says a defeating condition of a takeover offer made for fellow Western Australian gold junior Alto Metals has been triggered, after alleging shortfall shares were issued contrary to the terms of a prospectus.

On May 16, Alto announced it raised $2.05 million via a shortfall placement, which was completed in relation to the shortfall of a $2.38 million rights issue announced on January 25.

On the same day, Alto’s board recommended shareholders reject Middle Island’s $9.4 million takeover offer.

In a statement, Middle Island said some of the shortfall shares were issued contrary to the terms of a prospectus, in that some appear to have been issue to eligible parties, as defined in the prospectus.

“If so, the defeating condition of the offer set out in Section 9.10(h) of MDI’s bidder's statement has been triggered and MDI reserves its right to rely on the trigger of this defeating condition to allow the offer to either lapse or to apply for ASIC consent to withdraw the offer,” it said.

“If the offer does lapse or ASIC consents, on application by MDI, to the withdrawal of the offer, no MDI Shares will be issued to any AME shareholder under the offer and, accordingly, all AME shareholders will retain their AME shares.”

In March, Middle Island Resources made a $9.4 million all-scrip takeover offer for Alto Metals.

Under the off-market proposal, Middle Island is offered five of its shares for every one Alto share, which represented a 34 per cent premium to Alto's 10-day volume-weighted average price prior to the offer of 3.35 cents per share.

Both companies have their primary operations near the town of Sandstone, located 400 kilometres north-west of Kalgoorlie in the East Murchison Mineral Field.

Middle Island owns the Sandstone project, which includes a 600,000 tonne per annum processing facility.

Middle Island bought the processing plant after Black Oak Minerals was liquidated in 2016.

The plant has not been operational since 2010, but Middle Island plans to recommission it.

Shares in Middle Island were down 16.7 per cent to trade at 0.5 cents each at 11am AEST.