Westgold Resources (ASX:WGX) has ticked another vital box in its bid to merge with Canadian-listed Karora Resources (TSX:KRR) after confirming it has secured approval for the move from the Foreign Investment Review Board (FIRB).
The company now awaits approval by Karora shareholders at a special meeting tomorrow and a final court order before completing the transaction on July 31. The FIRB approval follows the merger’s recent backing by two leading proxy advisors that both recommended Karora’s shareholders vote in favour of the plans, after similarly-unanimous backing by Karora’s board of directors.
The FIRB approval comes just a little over a week after Australia’s Takeovers Panel said it had found no grounds for a declaration of “unacceptable circumstances” for the transaction following protests from Murchison gold competitor Ramelius Resources.
Ramelius had previously courted both Karora and Westgold. However, in the midst of a consistent flow of support in favour of the proposed Westgold-Karora merger, the $2.32 billion market-capped company confirmed it had now stepped back from any involvement with either firm.
The two proxy advisors highlighted cost savings, diversification and economies of scale as reasons why its institutional clients should get behind the high-profile $2.2 billion merger. Two-thirds of Karora shareholders will be required to vote in favour of the merger at tomorrow’s meeting in Toronto for the plan to go ahead.
The entirely unhedged gold producers are aiming to pump out 400,000 ounces annually and the merger could propel the combined entity into becoming one of Australia’s top-five gold producers. The exclusively Western Australian-merged entity would operate across two goldfields that include four production centres and financial resources of close to $160 million.
Westgold says the company would be an unhedged mid-tier producer with a compelling list of growth and exploration targets on more than 3200 square kilometres of prospective ground.
The new-look company has laid out plans to execute the merger swiftly so it can get to work on managing its enlarged production profile and push out multiple rigs in expanded exploration programs made possible by what it says will be substantial costs savings from the merger. The savings are expected to come from trimming its corporate overheads to the tune of $281 million, in addition to $209 million in operating costs in the next decade.
Becoming an unhedged significant mid-tier producer is no mean feat. A bad hedge book was recently the undoing of WA gold producer Calidus Resources, despite the gold price surging and touching new all-time highs this week.
By any means, Westgold and Karora look set to become WA’s newest gold major on the block sooner rather than later. All eyes will now be on the decision of Karora shareholders in just a few hours.
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