A have started to think about how Gold Road Resources could parlay its De Grey Mining pre-bid stake into a fully formed bid.Gold Road has kept shtum about its intentions since racing to the 19.99 per cent mark last month, but investors know that listed companies don’t usually go shopping for rivals’ stock unless they have MConsensus among fund managers is Gold Road should show up with a scrip-only bid, and keep its precious cash for exploration spending.
As it stands, the size difference means Gold Road would have to convince its shareholders that De Grey’s assets are worth more than its own. On the other hand, De Grey is likely to think its reserve is juicier and reject any push for a merger of equals - gold sector’s favourite deal structure.While the boards and their bankers can bicker on structures, fund managers see merit in a deal.
Gold Road would also be thinking about whether it wants to tie in an equity raising with a bid. Investors seem split on whether the suitor should stock up for exploration spending, or hold the cash call while it ran a pre-feasibility study of its own and fended off other potential suitors.A-starved listed gold investors dreaming about bid premiums. But on Monday evening, there were throwbacks to ASX-listed African gold play Cardinal Resources.
Both sides’ advisers would be reading up on the Cardinal battle compulsively - Gold Road so it doesn’t pay too much and De Grey for pointers on how to squeeze out value for investors.