Joint announcements today by Norton Gold Fields (ASX: NGF) and Bellamel Mining (ASX: BMM) declared that the two companies plan a merger through an off-market takeover offer by Norton for Bellamel.
The attraction for Norton which has the big Paddington gold plant north of Kalgoorlie - one of the first built in Western Australia's 1980s gold boom and has been a hungry beast for most of the past two decades - is Bellamel's increasing potential for reserve growth at Binduli (West Kalgoorlie) which is only 40 kilometres from the 3 million tonnes per annum Paddington plant.
The Fort William prospect at Binduli is seen as having potential to add an incremental 25,000 ounces per annum to Paddington's production. There was also scope to develop heap leach operations at Binduli that could realise between 40-50,000 oz per annum.
Norton's chairman Anthony McLellan said: The merger of Norton and Bellamel will add substantially to the value of our Paddington operation and enhance the project pipeline of near-term and longer term deposits to be processed.
The new projects have considerable potential for a heap leach operation that would drive annual gold production at Norton's Kalgoorlie operations towards 300,000 oz annually.
The consideration will be four Norton shares for every five Bellamel shares held.
Norton said today that based on the closing prices on Tuesday of A33 cents for Norton and A22.5¢ for Bellamel, the offer valued Bellamel shares at 26.4¢, a premium of 28.8% on the May 27 market closing price.
Norton is seeking a minimum acceptance of 90% of Bellamel shares, a target under Australian trading conditions that would trigger a compulsory takeover of the 10% balance.
The offer is also subject to Bellamel and its subsidiaries not declaring, distributing or resolving to pay or provide dividend, bonus or other share of its profits or assets. Bellamel has about $A7 million ($US6.72 M) in cash.
It acquired the Binduli leases that were in virtual mothballs from the troubled Croesus Mining on a deal where the essential cost was the takeover of all environmental and mine closure commitments to the WA government. There was a substantial resource left in several deposits at Binduli but two to three years ago their development was sterilised by a flat and undulating gold price.
Recent drilling has seen the total resource at Binduli lifted to about 1.68 M oz.
Norton is now ranked as Australia's fourth largest ASX-listed gold producer, though there are relative minnows behind the dominant domestically-owned Newcrest Mining Ltd.
Paddington has resources of 4.8 M oz and Norton says the mill is capable of producing 150,000 oz pa.
With the planned addition of underground operations in financial year 2010 production is expected to lift to 250,000 oz per year, the company said.
Early this year Mineweb reported the views of leading market observers on what lay ahead on the Australian bourse in 2008, and a strong renewal of the trend for mergers and acquisitions and of takeovers was projected. Perth's St Georges Terrace and the mining hub of West Perth are awash with rumours of some of the potential marriages.
Some companies, notably the now downgraded uranium juniors and grass roots base metals explorers are now running down their cash reserves and one observer, Allan Eggers of private fund Manhattan Resources said many of these juniors wanting fresh capital may have to accept prices below their existing share price.