Geopacific makes a play for Kula

PERTH (miningweekly.com) – Gold hopeful Geopacific Resources has announced its intention to launch an off market takeover offer for fellow-listed Kula Gold.

Geopacific will offer one of its own shares for every 1.4723 Kula shares held.

The offer valued Kula shares at 2.8c each, compared with the company’s closing price of 2c a share on April 4, representing a 25% premium to Kula’s share price on a five-day volume weighted average price, and a 77.5% premium to the current Kula rights issue price of 1.5c a share.

ASX-listed Geopacific is earning an 80% interest in the Woodlark gold project, in Papua New Guinea, which is owned by Kula Gold.

Geopacific said on Wednesday that the takeover offer would allow Kula shareholders to continue their economic participation in the successful development of the Woodlark project, by exchanging shares in Kula for Geopacific shares.

The company argued that there was “compelling commercial logic” in bringing the ownership of the Woodlark project under a single management structure, and that the current dual ownership structure caused inefficiencies for both sets of shareholders by prohibiting both sets of shareholders from having an unimpeded ownership interest in the project.

Geopacific said this diminished the investment value to current and potential investors.

The dual structure also duplicated governance, management and reporting structures, causing excess leakage of funds from development activities.

“Geopacific and Kula exist for the same ultimate objective of advancing the Woodlark gold project to development,” said MD Ron Heeks on Wednesday.

“However, the current dual ownership structure is inefficient, expensive and a combined single entity is likely to be significantly more attractive for investors and financiers. Simplifying this structure is the next logical step in advancing the project for the benefit of the shareholders of both companies.”

Geopacific on Wednesday said that Franklin Advisers, on behalf of certain funds and accounts, has entered into a pre-bid acceptance agreement, agreeing to sell a near 17% interest in Kula under the offer.

The takeover offer was subject to a 90% minimum acceptance condition.