Westgold challenges Gascoyne’s new mine plan

Westgold Resources has thrown new shade over its takeover target, calling Gascoyne Resources' recently announced business plan "speculative" and "high risk".

This week, the board of Gascoyne formally rejected an earlier takeover proposal from Westgold, which valued the target at more than $100 million.

Gascoyne labelled the deal “inadequate” and claimed a merger with explorer Firefly Resources was a superior offer for shareholders.

Westgold doesn’t share this view and has sought orders from the Takeovers Panel, including that the scheme implementation deed between Gascoyne and Firefly be amended to contain a termination right and that a scheme meeting scheduled for October 21 be postponed so the target’s shareholders can consider the offer from Westgold.

The submission came after Gascoyne detailed a new mine plan for its Dalgaranga operation in the Mid West, which included deferring a planned extension at the Gilbey prospect.

This afternoon, Westgold claimed the target “had no ability to fund the stage three Gilbey’s cut-back for some time” and that Gascoyne’s new mine plan was “incapable of being delivered or relied upon”.

Executive director Wayne Bramwell said the execution risk of the new mine plan was very high.

“It is very reminiscent of the board strategy that previously resulted in Gascoyne being put into voluntary administration and is a disingenuous representation depicting a deferral of critical operating capital at Dalgaranga as a cost saving,” he said.

Mr Bramwell accused the Gascoyne board of hurriedly adopting another new business plan for Dalgaranga less than a year after the company exited from voluntary administration.

He said Gascoyne had not disclosed the $150 million required for the stage three extension at Gilbey until earlier this week, comparing it with a previous $60 million estimate.

Westgold continues to encourage shareholders to review and consider its takeover proposal.

The company is offering one of its shares for every four shares in Gascoyne which, based on the bidder’s closing price on October 14, represents a 58 per cent premium to Gascoyne’s closing price.

Westgold warned shareholders of “further value destruction” of about $51 million – or 20 cents per Gascoyne share – if the Firefly scheme was implemented.

But Gascoyne continues to endorse the Firefly deal and has claimed Westgold “is only acting in the interests of its own shareholders”. It said it would provide more information in its target's statement, which will be sent to shareholders once Gascoyne receives a bidder's statement from Westgold.

The Gascoyne board has recommended shareholders reject the offer by taking no action toward correspondence from Westgold.

Gascoyne's shares closed up 1.3 per cent on Friday to trade at 39 cents.

Westgold closed up 1 per cent to trade at $1.98.