Westgold Managing Director and CEO Wayne Bramwell commented: 'The prize here is Beta Hunt's gold potential.
Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt and drilling is expected to further unlock value at this mine. This merger brings Beta Hunt together with Big Bell, the emerging Bluebird and the iconic Great Fingall mine under one Australian management team. These assets combined create the foundations of a new Australian gold mining powerhouse that is focused on free cash generation, is internationally relevant and investable and can stand head and shoulders alongside the biggest names in the Australian gold sector. The Westgold and Karora teams have independently been structuring our businesses for growth for several years and now is the time to bring these two businesses together. Overprint an experienced and expanded team with similar corporate journeys, strong safety and cultural alignment and a shared commitment to developing its people and we have a new business dominant across two historic, yet under-explored goldfields. The expanded business will have several large mines, be well funded, fully leveraged to the gold price and have optionality over an enviable selection of growth opportunities. Importantly, the business will have expanded human and physical resources to extend mine lives and production scale rapidly. Westgold welcomes the Karora team, shareholders and stakeholders to the Westgold family and looks forward to creating value across two of Western Australia's most iconic goldfields.'
Karora Chairman and CEO, Paul Huet commented: 'For the last two years, Karora has watched Mr. Bramwell and the team consistently unlock material value for shareholders at Westgold. One of the more unique aspects of this transaction is a very strong cultural fit between both companies which will serve shareholders of the enlarged company well for a very long time. The mergeris estimated to unlock approximately A$490 million of operational, G&A and capex synergies while shareholders will become proud owners of the largest unhedged gold producer in Australia at completion of the Transaction - certainly a compelling opportunity in the current gold price environment. The team at Karora have worked diligently to execute on our strategy to build the next +200 kozpa Australian gold producer11 . We have delivered value to shareholders through a disciplined growth approach by investing in our cornerstone asset in Beta Hunt, which will be fully ramped up to 2 Mtpa12 later this year, our pipeline of projects at Higginsville and through strategic asset acquisitions such as the Lakewood Mill and Spargos Gold Mine to establish the next emerging junior gold producer in the Western Australia gold fields.
With the combination of Westgold and Karora, we are taking the next step by combining two highly complementary, free cash flow generating asset bases in one of the world's finest mining jurisdictions to create a premier Western Australian mid-tier gold producer. Karora shareholders will benefit from having very meaningful ownership in a larger, more diversified gold producer with a highly experienced management team located entirely in Western Australia. The prospects for the combined company are tremendous, with over 13Moz13 in Gold Resources fuelling production of circa +400 kozpa14 , 3,200km2 of combined exploration tenements in Australia's most prospective gold mining regions coupled with a significantly enhanced balance sheet poised and ready to deploy into a highly compelling combined growth and exploration strategy. The combination provides Karora shareholders with significant exposure to one of the largest Australian gold producers with significant potential for an eventual share price re-rate as the operational synergies and enhanced scale of the combined portfolio are realized.'
Transaction Details
Westgold and Karora have entered into a definitive arrangement agreement dated 8 April 2024 (the 'Agreement'), pursuant to which Westgold will acquire all of the Karora Shares by way of a statutory plan of arrangement under the CBCA. The Transaction will create a diversified Western Australian focused ASX, TSX and OTCQX-listed gold company with a robust portfolio of exploration, development and production assets. Enlarged Westgold will have a strong pipeline of growth opportunities.
Under the terms of the Agreement, each Karora share outstanding at the effective time of the Arrangement will be exchanged for the Offer Consideration comprising of: 2.524 new Westgold Shares, representing A$5.755 (C$5.1452) per Karora share held based Westgold's last closing share price on the ASX of A$2.28 on 5 April 2024; A$0.680 (C$0.6082) in cash and 0.30 of a SpinCo share, with an implied value of A$0.164.
The Offer Consideration represents an approximately A$6.60 (C$5.902) per Karora share and a fully diluted equity value of A$1,233 million (C$1,103 million2) based on Westgold's closing share price on the ASX of A$2.28 on 5 April 2024. The Offer Consideration represents a 10.1% premium to Karora's closing share price on the TSX of A$5.995 (C$5.3602) of 5 April 2024 and a 18.9% premium to Karora's 20-day VWAP on the TSX of A$5.552 (C$4.9642) up to and including 5 April 2024
The Enlarged Westgold board will comprise of the current directors of Westgold and two (2) directors from Karora. The Hon. Cheryl Edwardes AM will be the Chair of Enlarged Westgold and Wayne Bramwell will be Managing Director and Chief Executive Officer. Leigh Junk and Shirley In't Veld will represent Karora shareholders on the Enlarged Westgold board. Paul Huet, Chairman & CEO of Karora, will continue with Enlarged Westgold in a special advisory role for six (6) months post-completion of the Transaction. In connection with closing of the Transaction, Karora will de-merge certain assets to former Karora shareholders, being its shareholding in Kali, a 1% lithium royalty on certain mining interests held by Kali, the right to receive future payments related to the sale of the Dumont asset and cash of A$6 million (C$5 million2 ) to a newly formed SpinCo. Under the Transaction, Karora shareholders will receive 0.30 of a SpinCo share for each Karora share held
Transaction and the Plan of Arrangement
The Transaction will be effected by way of a court-approved plan of arrangement under the CBCA, requiring the approval of 66 % of the votes cast by Karora shareholders at the annual and special meeting of shareholders of Karora ('Shareholder Meeting'), and if required under Canadian law, a simple majority of the votes cast by Karora shareholders excluding for this purpose the votes held by any person required under Multilateral Instrument 61-101. Karora expects to call a Shareholder Meeting to be held in July 2024 to seek approval for the Transaction. Closing of the Transaction is currently expected to occur in late July 2024. In addition to shareholder and court approvals, the Transaction is subject to applicable regulatory approvals, including those of FIRB, TSX and ASX, and the satisfaction of certain other closing conditions customary for a transaction of this nature, including, among others receipt of key third party consents, no material breaches of the representations, warranties and covenants of the parties, no material adverse effects being suffered by the parties and no more than 5% of Karora shareholders having exercised dissent rights provided for under the CBCA. The Agreement also includes customary reciprocal deal protections, including fiduciary-out provisions, non-solicitation covenants, and a right to match any superior proposals. A mutual reciprocal break fee of A$45 million (C$40 million2 ) is payable in certain circumstances and a reciprocal expense reimbursement fee of A$2.2 million (C$2 million2 ), each of which are standard for a public market transaction of this nature. The Agreement may be terminated in certain circumstances including (but not limited to) by either party if the Transaction is not approved by shareholders or if certain third party consents and key approvals are not obtained, if the Transaction is not completed by 30 September 2024 (unless extended by the parties), if a party breaches its representations and warranties or fails to perform any covenants or there has occurred a material adverse effect to the other party that is not capable of being cured by 30 September 2024, or if either party enters into a superior proposal.
The directors and members of senior management of Karora holding 1.2% of the issued and outstanding Karora Shares have entered into VSAs pursuant to which they agreed to vote their Karora Shares in favour of the Transaction at the Shareholder Meeting. Under the Agreement, all incentive securities of Karora shall be conditionally accelerated and redeemed or exercised immediately prior to closing of the Arrangement so that such holders may participate in the Transaction as Karora shareholders. In connection with closing of the Transaction, Karora will spin-out certain assets to Karora shareholders, being its shareholding in Kali, a 1% lithium royalty on certain mining interests held by Kali, the right to receive future payments related to the sale of the Dumont asset and cash of A$6 million (C$5 million2 ) to a newly formed SpinCo. Under the Arrangement, Karora shareholders will receive 0.30 of a SpinCo share for each Karora share held. Full details of the Transaction will be included in the meeting materials which are expected to be mailed to Karora shareholders in June 2024. The Agreement will be published by Karora on or before 18 April 2024 and will be available to access via SEDAR+ at www.sedarplus.com under Karora's profile.
About Westgold
Westgold Resources Limited (ASX: WGX, OTCQX: WGXRF) is an innovative Western Australian gold miner producing circa 220-230koz per year.23 With more than 1,300km2 of highly prospective tenure, Westgold is the dominant gold miner in the Murchison and Bryah regions of Western Australia and uniquely an owner-operator of its five underground mines. With proven team, a history of cash flow generation, new cash flow-based dividend policy, increasing operational delivery, no debt, unhedged gold sales and a strong balance sheet consisting of A$247 million in cash and bullion at 31 March 202424, Westgold is structuring for continued profitability and shareholder returns in FY24.
About Karora
Karora is focused on increasing gold production at its integrated Beta Hunt Gold Mine with beneficial nickel by-product production and Higginsville Gold Operations in Western Australia. Ore is processed at two centralised plants: the 1.6 Mtpa Higginsville mill and the 1.2 Mtpa Lakewood mill, both located near its mining operations. Karora is continuing to build off its strong history of delivering consistent gold production and cash flow with 2024 gold production guidance at 170-185koz25 and AISC cost guidance at US$1,250-US$1,375 per ounce sold. Beta Hunt hosts a robust gold Mineral Resource and Reserve in multiple gold shears, with gold intersections along a 5 km strike length remaining open in multiple directions. Higginsville has a substantial Mineral gold Resource and Reserve and highly prospective land package totalling approximately 1,900 square kilometres. Karora's Shares trade on the TSX under the symbol KRR and on the OTCQX market under the symbol KRRGF.
WESTGOLD RESOURCES LIMITED 
