30/07/2009 - 15:43

Ramelius launches $92m bid for Dioro

30/07/2009 - 15:43


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Avoca Resources' recommended takeover offer for Dioro Exploration has been trumped by Adelaide-based Ramelius Resources, which today launched a superior $92 million all-scrip offer for the gold miner.

Avoca Resources' recommended takeover offer for Dioro Exploration has been trumped by Adelaide-based Ramelius Resources, which today launched a superior $92 million all-scrip offer for the gold miner.

Ramelius announced after close of trade today that it will offer two of its shares for every Dioro share, which is a premium of 40 per cent to Avoca's current all-scrip offer.

Yesterday, Dioro yielded to Avoca's improved 2.3-for-one scrip offer after talks with Canada's Northgate Minerals Corporation over the 49 per cent acquisition of a key Kalgoorlie gold asset collapsed.

Avoca's takeover offer is valued at around $68 million. The gold miner has a 21.16 stake in Dioro and its offer is scheduled to close next Tuesday.

Ramelius today said the merger will bring together two of Australia's "most promising gold developers" into a single entity with assets in the eastern Goldfields.

Ramelius operates the Wattle Dam gold mine.

If Ramelius were to succeed in its takeover bid, Dioro shareholders would hold 45 per cent of the combined entity.

This afternoon's developments follow comments made by Avoca managing director Rohan Williams yesterday about consolidation in the mid-tier gold sector in the Goldfields.

Ramelius' offer is subject to conditions including a 50.1 per cent minimum acceptance level.



The announcement is below:


- Ramelius to make a 2-for-1 scrip offer for a merger with Dioro, valuing Dioro at one dollar (A$1.00) per share (total equity value of circa A$92 million).

- The offer represents premiums of 40% to the implied value of the current Avoca offer; 48% to the 3 month Dioro VWAP; and 153% to the last traded price before the Avoca offer.

- Dioro shareholders have the opportunity to merge with a like-sized peer and share in a far higher degree of upside as part of a very profitable, high-grade WA based gold miner on superior terms to the Avoca offer.

- Substantial combined FY10 gold production with low operating costs and significant synergies relating to mining, processing and corporate costs.

Ramelius Resources Limited today announced a A$92 million conditional offer (the "Offer") to merge with Dioro Exploration NL ("Dioro" ASX:DIO).

The Offer is an all share offer in which Ramelius will offer Dioro shareholders two Ramelius shares for every one Dioro share held (2-for-1). As at market close on 29 July 2009, the superior Ramelius merger ratio values Dioro at A$1.00 per share and represents a:

- 40% premium to the A$0.715 implied value of the Avoca bid ;
- 41% premium to Dioro's closing price of A$0.71 on 29 July 2009;
- 48% premium to Dioro's A$0.67 three month volume weighted average price (VWAP); and
- 153% premium to the last traded price of A$0.395 before the Avoca bid .

Rationale for the merger

If Ramelius acquires 100% of Dioro's shares on the basis of a 2-for-1 merger ratio, Dioro shareholders will hold approximately 45% of the merged entity, with Ramelius shareholders holding the balance.

The proposed merger will:
- Bring together two of Australia's most promising gold developers into a single entity that will have exceptional mining assets and strong cash flows, making it one of the highest-grade miners in the Eastern goldfields of WA;
- Result in a merged entity with substantial FY10 gold production with low cash costs and significant scope for further cost reduction;
- Provide an opportunity for Dioro shareholders to retain a far greater proportion of the upside in their company's assets, with Ramelius' financial strength and near term cash flows allowing flexibility in managing working capital requirements and the discharge of Dioro's current debt obligations;
- Lead to significant future synergies in rationalising mining, milling and corporate overheads;
- Entrust the Dioro assets to a very reputable management team with an exceptional track record of adding value for shareholders; and
- Result in the merged entity being a powerful force for consolidation and growth within the WA gold sector.

The map below shows the very close proximity between Wattle Dam (100% Ramelius), Burbanks (100% Ramelius) and Frog's Leg (49% Dioro) and Jubilee (100% Dioro), illustrating the potential operating synergies between the groups.

Why Dioro Shareholders should accept the Ramelius offer:

Dioro shareholders will gain access to the benefits of:
- A substantially higher premium than the current Avoca bid ;
- Exposure to the strong cash flow generation of the Ramelius' Wattle Dam gold mine, Australia's highest grade underground mining development;
- Significantly greater exposure to upside from mining operations, future consolidation and development opportunities than would be the case as a minority position within Avoca;
- Ramelius' strong balance sheet - Ramelius has a strong cash balance, is debt free and is the 100% owner of a strong cash flow generating asset; and
- An investment in a company with a strong track record of delivering shareholder value.

Conditions of the Offer

The offer is subject to certain conditions including a 50.1% minimum acceptance condition. The principal conditions are summarised in the Annexure. More detailed information about the offer will be contained in the bidder's statement and offer document to be lodged with ASIC in respect of the offer.

Ramelius has engaged Adelaide Equity Partners Limited as corporate and financial advisor and DMAW Lawyers as legal advisor to the transaction.


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