Company merger creates new Australian gold company

Pantoro and Tulla Resources have entered into a binding merger implementation deed for an all scrip merger of Tulla and Pantoro via scheme of arrangement under the Companies Act 2006, through which Pantoro will acquire Tulla and consolidate 100 per cent ownership and control of the Norseman Gold battery and base metals mineral rights. 

The Merger and Placement are expected to deliver the following significant benefits: 

• Logical consolidation of 100 per cent ownership and control of the Norseman Gold Project, creating a simplified structure expected to unlock efficiencies
• Enhanced liquidity and scale with a strong balance sheet and an intention to reduce debt to $55 million post implementation of Merger, well positioned for growth
• Large high-grade Mineral Resource, 46.4Mt at 3.2g/t for 4.79Moz, with strong exploration growth potential
• Domestically significant and competitive mid-tier gold producer with a large, high-grade operating targeting 110koz pa production
• Focused, experienced and aligned board and management team
• Pathway to realise value from non-gold assets

The Merger will create a new mid-cap ASX-listed gold company with target production of 110,000oz/per annum, a Mineral Resource of 4.79Moz and an Ore Reserve of 0.98Moz and, given the scale of the Norseman project, significant potential to grow the resource base and production profile through greenfields and brownfields exploration. 

The Merger, before the impact of the Pantoro capital raising, will result in Pantoro’s shareholders owning in aggregate 51.5 per cent and Tulla’s shareholders owning in aggregate 48.5 per cent of Pantoro’s ordinary shares. The Merger is subject to the satisfaction or waiver of the conditions detailed in this announcement. 

As part of the Merger, Tulla shareholders will retain beneficial ownership of all Industrial Minerals.

Under the Merger, Tulla shareholders would receive: 

• 4.96 Pantoro ordinary shares for each Tulla share they hold, which implies a 24.7 per cent premium to the last closing price of Tulla shares or, 14.1 per cent – when accounting for the impact of the Placement
• A proportionate number of shares in an unlisted Australian proprietary company that will hold the Industrial Minerals assets

The Merger is unanimously recommended by the boards of Tulla and Pantoro, in the absence of a superior proposal, as well as by Tulla’s majority 54.9 per cent shareholder, Tulla Resources, who has provided irrevocable voting support for the Merger, in the absence of a superior proposal. Each director of Tulla will vote, or procure the voting of, any Tulla shares they control in favour of the Merger, in each case in the absence of a superior proposal. 

In support of the Merger, Pantoro is launching a two-tranche institutional placement of new fully paid ordinary shares in the company to sophisticated and professional investors to raise $75 million, before costs. Placement Shares will be issued at a price of $0.06 per share. 

Proceeds from the Placement, together with existing cash, will be applied to support the final stages of ramp-up of the Norseman Gold Project, invest in exploration and Ore Reserve growth, provide appropriate ongoing liquidity and working capital, for debt management and to pay transaction costs. 

Pantoro Managing Director, Paul Cmrlec, said consolidating the Norseman Gold Project is a logical step for all parties to maximise value as the project ramps up to reach its full potential as a premier gold asset in Western Australia.

“While Norseman has experienced delays and challenges in its ramp-up, key operational and management changes made late in 2022 are now yielding positive results, with productivity and throughput increasing month on month and process plant ramp-up now virtually complete to nameplate capacity,” Mr Cmrlec said.

“The equity raising ensures that the combined group is well funded through the initial phases of production and enables the reduction of the consolidated debt position of the company during this critical phase.

“We look forward to working with our proposed new board members and thank our proposed outgoing directors for the dedicated service and guidance to management of the company through the very challenging environment of the past three years in particular.”

Tulla Executive Director, Mark Maloney, said, “Consolidating ownership of the Norseman gold asset and battery metals will deliver significant value for the shareholders of both companies, providing a simplified structure and delivering operational and corporate efficiencies.

“Tulla shareholders will realise the upside of their investment in a significant mid-tier Australian gold producer, with a large, high-grade operation of very substantial value while maintaining 100 per cent ownership of the industrial mineral rights at Norseman,” Mr Maloney said.

“I look forward to serving on the new Board and working with our former joint venture partner to maximise future value for all shareholders.“ 

Pantoro and Tulla believe that there is strong strategic logic in the consolidation of Norseman. 

The Norseman battery and base metals mineral rights includes the valuable lithium and nickel mineralisation in the Norseman project, which are planned to be combined into a separate Battery Metals business. Currently, the Norseman lithium mineral rights are subject to a farm-in arrangement with Mineral Resources. The new Pantoro Board intends to investigate, and if appropriate, progress the spin-out of the Battery Metals business at the appropriate time. 

Following implementation of the Merger, Pantoro will establish a new board: 

• Comprising seven directors following the appointment of a new independent chair, with three directors appointed by each of Tulla and Pantoro, combining the skills and experience of both companies for the benefit of all shareholders 
• Wayne Zekulich will act as interim independent chairperson with a commitment to appoint a new independent chairperson after which Mr Zekulich will be an independent non-executive director 
• Paul Cmrlec will continue as Managing Director 
• Fiona Van Maanen will continue as Independent Non-Executive Director 
• Tulla Executive Chairman, Kevin Maloney, and Executive Director, Mark Maloney will be non-executive directors
• Tulla Mining consultant Colin McIntyre will be an independent non-executive director 
• Kyle Edwards and Scott Huffadine will retire from Pantoro’s board
• Scott Huffadine will continue as COO of the merged group with all other duties and responsibilities of his current role retained
• Pantoro’s experienced senior management team will continue following the Merger

Based on the closing price of Tulla and Pantoro shares on 10 February 2023 – being $0.35 and $0.088 respectively – and a capital raising size of $75 million, ten Financiers have consented to and granted all required waivers under their respective facilities to permit Pantoro and Tulla to commence the Merger process including demerger of the Industrial Mineral assets. Pantoro has undertaken to obtain refinance. Should Pantoro not refinance existing financier consents will be required.