Under the offer, Echo shareholders will receive $0.33 for every share held – representing almost a 40% premium to the company’s last trading price of $0.237 on 19 August.
The offer is also an 80.3% premium to Echo’s 60-day volume weighted average price of $0.183.
“The board of Echo is pleased to recommend the offer to Echo shareholders in the absence of a superior proposal and we look forward to working with Northern Start to implement the transaction,” Echo managing director and chief executive officer Victor Rajasooriar said.
As Echo’s largest shareholder, Northern Star owns 21.7% of the company and will pay $193 million for the shares it doesn’t already own – giving Echo a total equity value of $242.6 million.
Yandal gold project
Echo owns the Yandal gold project, which encompasses 1,600 square kilometres in Western Australia’s Yandal greenstone belt about 400km north of Kalgoorlie.
In late June, Echo released an updated resource for the project with global resources for Yandal totalling 28.6 million tonnes at 2 grams per tonne gold for 1.8 million ounces.
A bankable feasibility study was unveiled in April revealing pre-production capital expenditure of $42 million to build an initial four-year operation producing 95,000oz gold a year for pre-tax project free cashflow of $225 million.
This was based on an average gold price of A$1,800/oz. With the gold price hovering around $2,200/oz for several weeks now, the project would generate substantially more cashflow at current prices.
The tenements host the historic Bronzewing mine and associated infrastructure including the 1.8 million tonne per annum processing plant.
Northern Star’s strategy behind the takeover is to consolidate the Yandal gold project and secure the processing plant.
“The offer reflects the strategic nature of Echo’s Yandal gold project, which has a unique combination of mineralisation, untested exploration upside, established processing infrastructure at Bronzewing and a detailed feasibility study,” Mr Rajasooriar said.
Northern Star’s Jundee mine is also located in the Yandal greenstone belt and combined with Pogo and its Kalgoorlie operations, the company expects to produce up to 900,000oz in 2020.
Hammer Metals next door
Nearby explorer Hammer Metals (ASX: HMX) is poised to begin its maiden drilling program at its recently acquired Bronzewing South project, which is only 20km from Echo’s Yandal project plant and infrastructure.
At Bronzewing South, Hammer is hoping to have similar success to Echo’s exploration across Yandal.