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LONDON (Alliance News) - Miner SolGold PLC on Thursday announced plans to make an all-share offer for Cornerstone Capital Resources Inc.
Cornerstone is a Canadian firm which has a 15% interest in SolGold's Cascabel, with SolGold having the rest.
SolGold is to offer 0.55 of its own shares per Cornerstone share, which it says will give Cornerstone's shareholders participation in the Cascabel project.
"We are pleased to have reached the point where we feel an offer to combine SolGold and Cornerstone makes sense for Cornerstone shareholders," said SolGold Chief Executive Nick Mather.
"The combined entity will have tremendous economic upside, further de-risk the ownership structure and present a simplified and highly attractive value proposition for investors," he continued.
"We encourage Cornerstone shareholders to closely consider these factors and we are confident once they do, they will recognize the potential this proposal holds and tender to our offer."
SolGold believes consolidating the ownership of Cascabel into a single entity makes "eminent" sense, and it said it has attempted to do this with Cornerstone in both 2017 and 2018.
However, Cornerstone would not do so unless it got half the board positions of the combined company and the chair of SolGold was replaced, something SolGold said would be "highly unrealistic".
"In SolGold's view, management of Cornerstone has been disingenuous over a period of several years in its messaging to Cornerstone shareholders concerning the long-term upside and strategic value of its interest in Cascabel," commented SolGold.
"Cornerstone's communications frequently refer to the carried nature of its 15% interest ambiguously, leaving shareholders and the investing public to assume the interest is 'free-carried' through to the completion of a feasibility study on the Cascabel project. This is not the case."
Cornerstone has a debt-carried interest through to feasibility, SolGold said, and this would in future "severely" constrain Cornerstone's ability to finance its commitment once cash flow is achieved.
"If the offer is not successful however, and Cornerstone and SolGold do not combine, Cornerstone shareholders face a significant risk the value of Cornerstone's 15% interest, which is its only material asset, may be diminished in the hands of Cornerstone under the current structure over a relatively short period of time as the Cascabel projects development accelerates," continued SolGold.
"SolGold does not expect Cornerstone's other assets to improve its prospects or mitigate any of the issues described, as SolGold suspects Cornerstone's recent failed spin-out of those assets is a strong indication of the lack of willingness of the capital markets to place significant value on those assets."
SolGold shares were 0.2% lower on Thursday at a price of 36.762 pence each.