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- Regis Resources (RRL) has agreed to acquire IGO’s (IGO) 30 per cent interest in the Tropicana Gold Project for $903 million
- The project is one of the largest gold mines in Australia, operated by its majority owner AngloGold Ashanti (AGG)
- Regis Resources will fund the acquisition through a $650 million capital raise and $300 million loan facility
- Regis Resources is currently in a trading halt, and last traded at $3.17 per share
- IGO is up 1.95 per cent and trading at $6.79 per share
Regis Resources (RRL) has agreed to acquire IGO’s (IGO) 30 per cent interest in the Tropicana Gold Project for $903 million.
Tropicana is an open-pit and underground gold mine, located in the Albany-Fraser Orogeny in Western Australia. It is one of the largest gold mines in the country, producing 463,000 ounces of gold in the 2020 financial year.
Tropicana is operated by its majority owner, AngloGold Ashanti (AGG), which will become Regis Resources’ joint venture partner if the acquisition goes ahead.
Regis Resources’ Managing Director and CEO, Jim Beyer, predicted the acquisition would create substantial value for the company.
“This is a genuinely transformational transaction for Regis and one that delivers on our strategic objectives to grow as a safe, responsible, reliable, long-life, low-cost gold producer, generating strong financial returns,” he said.
“Diversifying the company’s robust portfolio through the acquisition of a 30 per cent interest in the Tropicana operation will deliver significant improvements in the company’s resources, reserves, and annual production, along with providing additional immediate cashflows, all of which adds to the strength of our platform for undertaking further organic and inorganic growth activities,” he added.
Regis Resources will fund its $903 million acquisition of the Tropicana stake through a $650 million capital raise and a new $300 million loan facility. The company’s capital raise will consist of an institutional placement and an accelerated pro-rata non-renounceable entitlement offer.
The institutional placement will offer up to 74 million new fully paid ordinary shares in Regis, to raise approximately $200 million. The one-for-3.08 entitlement offer will offer up to 167 million new shares to raise the remaining $450 million.
All shares offered through the capital raise will be issued at $2.70 per share, and should commence normal trading on the ASX in late April.
Regis Resources has entered a credit-approved term sheet with the Bank of America’s N.A Australia Branch, which will provide the $300 million loan facility. The secured syndicated term loan facility will have a maturity date three years from completion.
While Regis Resources has signed a conditional binding asset sale agreement for the interest acquisition, there is a chance that the transaction may not occur. Under the joint venture agreement between AngloGold Ashanti and IGO, AngloGold has pre-emption rights over the Tropicana Project as its majority owner and operator.
If AngloGold exercises those pre-emption rights, Regis Resources’ acquisition will not go forward and IGO will dispose the 30 per cent interest in Tropicana to AngloGold. If this should occur, Regis’ $300 million loan facility will not become available and the company may withdraw its placement.
However, Regis will allow the entitlement offer to proceed and will consider alternative uses for its proceeds. These uses might include balance sheet management, working capital, alternative investment opportunities, or simply returning it to shareholders.
Regis Resources may also be entitled to a break-off fee from IGO if the acquisition does not proceed due to AngloGold’s pre-emptive rights. The break-off fee will be either $25 million or $40 million, depending on whether the pre-emptive right exercise occurs before or after the settlement of Regis’ capital raise.
Regis Resources is currently in a trading halt, and last traded at $3.17 per share.
IGO is up 1.95 per cent, trading at $6.79 per share at 12:05 pm AEST.
