Gold developer Capricorn Metals (ASX: CMM) has rejected an unsolicited takeover offer from a consortium comprising Emerald Resources (ASX: EMR) and Capricorn major shareholder Hawke’s Point Holdings LP.
The Perth-based company – which operates the Karlawinda gold project in Western Australia’s Pilbara region – received a non-binding and incomplete letter of intent from the bidding partners outlining a proposal to acquire 100% of Capricorn’s issued share capital at $0.11 per share ($0.055 in cash and $0.055 in Emerald scrip).
After discussions with its advisors and following consultation with some of its largest shareholders (excluding Hawke’s Point), Capricorn has rejected the bid on the basis that it undervalues the company and its assets.
The company has advised the consortium it is open to considering an alternative proposal.
Virtual data room
In the meantime, Capricorn’s board of directors have committed to introducing a formal process to seek expressions of interest from other potential buyers of the company and its project, or parties wishing to form a joint venture to develop Karlawinda under its current structure.
Confidential corporate information will be made available through an existing virtual data room, which will be re-activated once a pathway has been established.
“The board is focusing on getting the company’s finances in order before running a proper process in the coming months to revisit past failed transactions and to seek other potential suitors,” the company said.
Acquired by Capricorn in 2016 from Independence Group (ASX: IGO), Karlawinda is an advanced gold project which includes the Bibra deposit and numerous prospective targets.
The company said exploration which kicked off during the March 2019 quarter at the wholly-owned project will focus on extending the mineral resource past the current 1.52 million ounces of contained gold.
Activities will also aim to generate the next round of drilling targets at Bibra; complete 240 square kilometres of aeromagnetic work; and test multiple geochemical anomalies over the wider project area.
In August, Capricorn secured a 306-room accommodation village and related mining infrastructure for the Karlawinda development from Fortescue Metals Group (ASX: FMG) for $1.5 million and will fund an additional $2.1 million to relocate the facilities from Fortescue’s BCI mine site at nearby Nullagine.
Hawke’s hefty investment
In 2017, Hawke’s Point completed a hefty investment in Capricorn, providing much-needed capital to develop Karlawinda and conduct further exploration activities within its Pilbara tenement package.
The mining-focused asset management firm entered into a binding heads of agreement with Capricorn, whereby it would undertake a $10 million placement of ordinary Capricorn shares at $0.117 cents per share.
The investment secured 14.9% of Capricorn’s issued capital and positioned Hawke’s as the company’s largest shareholder.
At the time, Capricorn managing director Peter Thompson said the support of Hawke’s represented a strong vote of confidence in the company’s strategy to become a substantial new mid-tier gold producer through the successful development of Karlawinda.
At mid-afternoon, shares in Capricorn were up 14.08% to $0.081 and Emerald down 2.44% to $0.04.