Tin producer Metals X and gold miner Westgold have announced a merger plan to create a $330 million diversified resources group.
The companies announced today that Metals X had entered agreement to acquire all of Westgold's shares it does not yet already own by way of scheme of arrangement, offering shareholders 11 Metals X shares for every Westgold share.
Based on Metals X's closing price on May 9, the merger implies an offer price of 22 cents per Westgold share.
The combined entity would have cash and listed investments in excess of $100 million, and a market capitalisation of $330 million.
It would have a diversified portfolio, including the producing Renison tin project in Tasmania (which Metals X holds a 50 per cent share of), the Wingella nickel and Central Murchison gold projects in Western Australia and the Rover 1 copper-gold project in the Northern Territory.
Metals X has been Westgold's largest shareholder since 2007, and currently holds a 26.9 per cent stake in the miner.
A research note released by Foster Stockbroking today recommended investors buy Westgold shares up to a value of 19.5 cents, to take advantage of the arbitrage opportunity that exists between the two stocks.
Foster senior resources analyst Craig Brown said the merger plan effectively de-risked Westgold's funding requirements needed to progress its Central Murchison and Rover 1 projects into development and production.
Westgold's board of directors, sans Peter Cook and Warren Hallem, who sit on the boards of both companies, have recommended shareholders accept the offer.
“This is an attractive proposal from Metals X, which brings the financial strength to rapidly progress these assets and expose Westgold shareholders to a diversified range of commodities as part of a larger, well-funded mining house,” Westgold chairman Michael Atkins said in a statement.
Westgold stocks had jumped by 12:00pm, WST, trading up 23.3 per cent at 18.5 cents. Metals X stocks were down 8 per cent, at 17 cents.
