Alkane Resources (ASX: ALK) intends to take a substantial slice of advanced gold explorer Explaurum (ASX: EXU) with the duo agreeing to a “strategic alliance” that will progress Explaurum’s Tampia gold project in Western Australia.
The news follows Ramelius Resources’ (ASX: RMS) unsolicited takeover bid in early September, which bypassed Explaurum’s board and went straight to shareholders with its offer that valued Explaurum at $0.109 per share.
At the time, Explaurum’s board stated the takeover was “inadequate” and “undervalued” its assets and future prospects.
However, under today’s proposed “strategic alliance” with Alkane, Explaurum chairman Chris Baker said he “warmly welcomed” Alkane to its register and that Explaurum’s board had “unanimously recommended” shareholders vote in favour of the alliance.
Under the proposed alliance, Alkane will invest $8 million at $0.12 per share in Explaurum, giving it a 12.2% stake.
The issue price is a 9.1% premium to Explaurum’s previous trading price, which was $0.11 on 25 October.
“If approved by Explaurum shareholders, this strategic investment will deliver Explaurum the opportunity it has sought for the better part of the last year,” Mr Baker said.
“That is the chance to go after the potential exploration upside that the Tampia district offer.
“Alkane’s belief in this potential and their willingness to express it through this significant investment in Explaurum is a strong validation for our shareholder base as to the potential significance of the opportunity that lies in front us with the Tampia asset,” Mr Baker added.
In addition to the 12% stake in Explaurum, Alkane will also receive 53.4 million options, which are exercisable in two tranches of 18.69 million at $0.13 per share and 34.714 million at $0.14 per share.
If all options are exercised by 1 November 2019, Alkane’s holding in Explaurum will increase to 19.96%. Alkane will also have the right to nominate a director to Explaurum’s board once it’s holding exceeds 12%.
Shareholders will be given the chance to vote for either the Alkane offer or the Ramelius bid at a general meeting in early December.
Tampia gold project
Explaurum’s Tampia gold project is about 250 kilometres east of Perth in WA’s central Wheatbelt.
The company has proved up a resource at the project of 675,000 ounces of contained gold with an average grade of 1.79 grams per tonne.
If Alkane’s investment is given the green light, Alkane and Explaurum will form a technical steering committee to fast-track the project’s feasibility studies and development.
Alkane is expected to bring its “extensive experience” in project approvals, feasibility studies, commercial arrangements, commissioning and operating a gold project.
Meanwhile, Explaurum plans to use Alkane’s investment funds to accelerate drilling at Tampia as well as testing extensions to known mineralisation.
“The Alkane investment is a highly attractive transaction for Explaurum shareholders. It will provide your company with the very real opportunity to progress the Tampia project to a final investment decision in the first quarter of next year, as well as seek to drive value aggressively through the drill-bit in coming months,” Mr Baker said.
“It is also struck at a premium to the implied Ramelius takeover offer price and is without any opportunistic change of control implications,” he added.
Shares in Explaurum lifted more than 6% in early morning trade to reach $0.117, while Alkane’s share price dipped more than 4% to $0.225.