Gold Road Resources’ offer for DGO puts De Grey Mining in spotlight

In the offer that was announced on Monday, DGO shareholders will receive 2.16 Gold Road shares for every DGO share.

Gold Road Resources’ $308m takeover bid for DGO Gold has many in investment banking turning their attention to De Grey Mining, with some wondering whether the latest deal puts it in play.

DGO owns a portfolio of prospective exploration and mining assets, but one of its attractive assets is its 14.4 per cent shareholding in the $1.7bn listed De Grey Mining, which owns the 9 million-ounce Mallina Gold Project in Western Australia.

De Grey is close to advisory firm Azure Capital, which some suspect will now be in overdrive, worried that another party comes forward with a proposal for De Grey to prevent any future takeover of the business by Gold Road.

But participants in gold mining say there are other deals in the offing likely to unfold first.

There is talk in the market of bolt-on acquisitions in the works.

Under the spotlight are gold miners Ramelius Resources and Regis Resources.

Ramelius has been keen to execute on a transformational acquisition, according to some, while one view is that Regis is under pressure to participate in corporate activity as it battles with its McPhillamys Gold Project 250km west of Sydney.

Yet others rule this out based on the $900m Regis paid for the 30 per cent stake in Tropicana gold mine last year.

A market expert told DataRoom that Gold Road was one of the obvious parts of the puzzle, but there was still more to do out there.

Former Saracen Minerals boss Raleigh Finlayson has been on the hunt for acquisition opportunities through his recently formed company Genesis Minerals, as has former Northern Star boss Bill Beament and former Fortescue Metals head Nev Power through their Metals Acquisition Corp special purpose acquisition company.

While goldmining chief executives have resisted mergers and acquisitions until now despite investor pressure to embark on such activity, their problem is that if they do no launch buyout proposals, they themselves will be bid for.

DGO is working with MST Marquee and Greenhill, while Gold Road Resources is working with RBC Capital Markets and law firm Corrs Chambers Westgarth.

In the offer that was announced on Monday, DGO shareholders will receive 2.16 Gold Road shares for every DGO share, implying an offer price of $3.55 a share and an equity value of about $308m for DGO. DGO’s shares closed at $3.46 on Monday.

The takeover bid has been recommended by DGO’s directors and comes with an 80 per cent minimum acceptance condition.

DGO also owns a 6.8 per cent shareholding in the listed Dacian Gold, which owns the Mt Morgans gold mine.

In addition to this, it has a 20.1 per cent holding in the listed Yandal Resources, an exploration company focused on the Yandal Greenstone belt, and it owns a portfolio of exploration tenements in the Pilbara, Yilgarn, Bryah and Stuart Shelf Provinces.