Predictive Discovery backs cut-price Robex merger as rival bid backers cry foul

Predictive Discovery’s Bankan gold project in Guinea holds 5.5m ounces of gold, the largest gold discovery in West Africa in a decade. Picture: AFP

Predictive Discovery’s decision to endorse the latest $1.6bn scrip merger offer from Canada’s Robex Resources has proved to be a contentious decision.

Some are questioning how the target could endorse an offer that is trading lower than its own share price (shares closed on Thursday at 62.5c) and lower than the recent $2bn scrip buyout proposal from Perseus.

But others keen on the move argue that the combination offered better prospects than a deal with Perseus did, with the two groups together delivering a business producing 400,000 ounces of gold by 2029.

On Thursday, the Toronto-listed Robex, which mines gold in West Africa where Predictive Discovery operates, increased the terms of an earlier scrip merger proposal in October.

Robex will now receive 7.862 shares for each Predictive Discovery share, where Predictive will own 53.5 per cent of the combined company and Robex the remainder.

Earlier, the merger of equals involved Robex shareholders receiving 8.667 shares in Predictive for each Robex share, where Predictive would own 51 per cent and Robex 49 per cent.

Robex is actively exploring gold in West Africa and owns two assets – the Nampala gold mine in Mali, and the Kiniero gold project in Guinea which is yet to enter production.

Market observers suggest that a number of shareholders have backed the offer because they are also shareholders in Robex, so they are indifferent to the price.

Only Robex shareholders will vote on the transaction, not Predictive Discovery shareholders, which has also raised eyebrows.

Based on the Wednesday closing price of the Robex CDIs trading on the ASX, the offer was 60c per share.

But Robex shares have fallen from $5.60 when the Perseus deal was announced.

If they were trading at that level, the latest offer would be 71c per share, valuing the business at $1.9bn rather than $1.6bn.

Among Predictive Discovery’s shareholders are Chinese mining powerhouse Zijin, holding 3.5 per cent, and Lundin Mining, which owns 6.5 per cent and controls gold mining operations globally.

Predictive Discovery’s main development is the Bankan gold project in Guinea that has a mineral resource of 5.5 million ounces of gold, the largest gold discovery in West Africa in a decade.

Predictive Discovery has been considered an obvious target for the Australian-listed Perseus for years.

Perseus already owns 17.8 per cent of Predictive and had offered Predictive Discovery 0.1360 Perseus shares for every Predictive Discovery share, based on a $5.72 per share closing price.

The offer was a 24.5 per cent premium to the last close and came as the gold price this year hits record highs at over $US4000 an ounce.

The production pipeline of Perseus is in decline – its Sissingue mine in Cote d’Ivoire drops off after 2030, and its Edikan mine production in Ghana falls off not long after that.

Last year it bought OreCorp, which has the Nyanzaga gold project under development in Tanzania.