Gold explorer Alto Metals (ASX: AME) is aiming to raise up to $5.1 million through a newly launched entitlement offer to fund an extensive drilling campaign focused on the Lord Nelson gold deposit in Western Australia.
The company today entered a trading halt as it announced the launch of a one-for-four accelerated pro-rata, non-renounceable entitlement offer at an issue price of $0.07 per new share.
Proceeds raised from the offer are intended to fund drilling and exploration at Alto’s Sandstone gold project in WA with a priority focus on infill and step-out drilling at Lord Nelson.
The capital raise comes as Alto directors have called for shareholders to reject a takeover bid by privately-owned gold investor Habrok.
Alto’s entitlement offer price of $0.07 per new share represents a 6.67% discount to the Friday closing price of $0.075 and is a 6.06% premium to Habrok’s takeover offer of $0.066 per share.
The company’s shares are expected to remain in trading halt until Wednesday, pending an announcement about the outcome of the institutional component of the entitlement offer.
On Monday, Alto said its major shareholder Windsong Valley intends to subscribe for full entitlement, representing about $1 million.
Alto also has a loan facility agreement with Windsong which it said it has now varied up from $500,000 to $1 million. The facility is for working capital purposes as required to ensure the start of planned exploration at Lord Nelson.
Sandstone exploration program
Alto has planned an extensive 10,000m-plus exploration program at its Sandstone gold project, including an initial 2,000m infill and step-out drilling campaign that has already begun at Lord Nelson.
The program will target strike extensions of shallow gold mineralisation 200m south of the Lord Nelson pit and a new zone of high-grade primary mineralisation below the pit.
The extensive campaign follows successful exploration results announced in April, including the intersection of high-grade mineralisation outside the current Lord Nelson resource.
Notable intercepts included: 17m grading at 3.5 grams per tonne of gold from 200m, including 4m at 11.6g/t gold and 1m at 25.5g/t gold; and 16m at 5.2g/t gold including 3m at 13.5g/t gold.
In May, Alto also updated the total indicated and inferred mineral resource for Lord Nelson to 6.2 million tonnes at 1.7g/t gold for 331,000 ounces of gold. This included an increased inferred resource of 1.8Mt at 1.9g/t gold for 109,000oz gold.
Directors recommend shareholders reject Habrok offer
Habrok’s bid marks the third time Alto has received an unsolicited takeover offer in the last 15 months.
First announced in May and formalised in a bidder’s statement last Friday, Habrok has proposed an unconditional offer of $0.066 cash per Alto share, valuing the company at about $19.3 million.
In a letter to shareholders on Monday, Alto directors urged them to take no action in order to reject Habrok’s offer.
“It is the directors’ very strong view that the unsolicited offers are opportunistic and undervalue your shares and options, and shareholders and option holders should reject the offers,” the company stated.
“It is a clear endorsement from this persistent interest in the company’s Sandstone gold project, that third parties can see the long-term value potential associated with the project and extensive 800sq km-plus ground position, especially in the current global gold price environment.,” it added.
As well as “failing to recognise Alto’s unrealised potential”, the company said the offer didn’t represent a premium to the recent trading price of Alto shares, being a 12% discount to Friday’s closing price of $0.075 and 5.7% less than the company’s just-announced entitlement offer.
Earlier this year, an Australian subsidiary of Chinese-owned Shandong Goldsea Group, Goldsea Australia Mining, had bid $0.065 per share to acquire Alto – a deal worth about $20.7 million at the time. However, its offer lapsed on 8 July.
Alto was also previously targeted by Middle Island Resources in March 2019, although its offer closed last November.
Chief executive and managing director appointment
Alto also announced non-executive director Matthew Bowles has now been appointed by the board to the position of managing director and chief executive officer.
The appointment follows an announcement made in March acknowledging the “additional duties” Mr Bowles had assumed and the board’s intention to transition him into an executive position.