The Silver Lake Resources Ltd (ASX: SLR) share price could fall lower this morning after the company announced a $52 million bid for Egan Street Resources Ltd (ASX: EGA) and strong quarterly production results.
What were the highlights from Silver Lake's announcement?
In the release, Silver Lake and Egan Street announced they have entered into a Bid Implementation Deed, pursuant to which Silver Lake will acquire all of the issued and outstanding ordinary shares of Egan Street.
Under the terms of the Bid, each Egan Street shareholder will receive 0.270 Silver Lake shares for every Egan Street share held (the "Offer Consideration").
The Offer Consideration values Egan Street at $0.4001 per share, which implies a $522million total transaction enterprise value and represents a premium of:
- 28.9% to the Last Close Price of $0.310, being the price of Egan Street's shares on ASX at the close of trading on 29 July 2019
- 24.2% to Egan Street's 5-day volume-weighted average price (VWAP) of $0.322 up to and including 29 July 2019
- 43.4% to Egan Street's 30-day VWAP of $0.279 up to and including 29 July 2019.
The Egan Street Board of Directors have unanimously recommended that Egan Street shareholders accept the offer and have indicated that they will accept the offer in respect of all Egan Street shares they own or control, in both instances in the absence of a superior proposal.
In addition, Egan Street's largest shareholder, Lion Selection, has entered into a Pre-Bid acceptance Deed with Silver Lake, under which it has agreed to accept the offer in respect of its 16.2% holding.
Why is Silver Lake making the EganStreet acquisition?
According to the release, the acquisition of Egan Street will allow Silver Lake to consolidate an additional JORC Resource of 454,000 ounces and JORC Reserve of 200,000 ounces at Egan Street's Rothsay Gold Project and provide a near-term development opportunity to introduce a new high-grade ore source to an upgraded deflector processing facility.
The combination of Silver Lake's established processing infrastructure at Deflectorm, free cash flow generation and strong balance sheet makes the acquisition of Rothsay consistent with Silver Lake's strategy to maximise the value of its established operations.
What else did Silver Lake announce this morning?
In Silver Lake's quarterly results this morning, the company announced a significant increase in Group sales with 60,841 ounces of gold and 590 tonnes of copper for the quarter.
This production level was up 85% over the March 2019 quarter, which reflected the inclusion of Deflector production from 5 April 2019, while the average realised price came in at $1,790 per ounce and all-in sustaining cost (AISC) of $1,216 per ounce.
