Genesis Minerals Ltd (ASX: GMD) has struck a deal with Magnetic Resources Ltd (ASX: MAU) to take over the smaller company in a deal worth about $639 million.
Magnetic Resources shareholders will receive $1.40 in cash and 0.0873 Genesis Minerals shares for each of the shares they own, with the bid having an implied value of $2 per share.
Magnetic shareholders would also have the option to receive their payment entirely in cash or scrip.
Magnetic Resources shares last traded at $1.60 before the offer, which is being endorsed by the company's board, was announced.
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Complementary assets
In an announcement to the ASX on Monday morning, Genesis said that Magnetic's Lady Julie gold project, which has a mineral resource of about 2.2 million ounce of gold at a grade of 1.8 grams per tonne, offered a clear pathway "to supply incremental open pit and underground ore to Genesis' operating three million tonne per annum Laverton mill about 20km away''.
The company added:
Lady Julie's northern boundary borders the land acquired by Genesis via its recent acquisition of Focus Mineral's Laverton Gold Project, meaning there is scope for substantial synergies and cost savings by allowing Lady Julie to integrate into a much larger open pit operation.
The company said there was also the opportunity to derisk the development of Lady Julie by applying Genesis' existing processing infrastructure and proven mining expertise.
Genesis added that there was "compelling exploration upside" along strike and down dip at Lady Julie.
Long-term plan in the wings
The company also said it would release an updated, multi-year strategic plan following the completion of the takeover.
Genesis Chair Raleigh Finlayson said the deal made sense for shareholders of both companies.
This transaction creates substantial value for both groups of shareholders, delivering genuine synergies while combining the right assets with the right people". "Magnetic's Lady Julie Gold Project will add more than 2Moz at an attractive high grade to Genesis' Laverton inventory, further bolstering the mine life and production outlook". "Shareholders of both companies will benefit by leveraging Genesis' existing infrastructure, including the 3Mtpa Laverton mill, and through the savings which would flow from a single open pit development.
Magnetic Managing Director George Sakalidis said the deal's announcement followed a strategic review which the board and its advisers had been working on for several years, "to explore potential options to collaborate with other operators which have the existing skill set or combination synergies to develop Magnetic's discoveries and unlock value for our shareholders''.
He added:
This proposal provides an opportunity for shareholders to realise an attractive premium, with the flexibility to accept cash or shares in Genesis. Exchanging Magnetic shares for Genesis shares will enable Magnetic shareholders to retain exposure to Lady Julie with the benefit of Genesis' best-in-class project development team, diversified operating cash flow and robust balance sheet.
Shaw and Partners recently put a price target of $4 per share on Magnetic Resources.
Genesis Minerals was valued at $8.22 billion at the close of trade on Friday.
