Brightstar to Drive Consolidation of Sandstone District

Brightstar Resources Ltd (ASX: BTR) (Brightstar) and Alto Metals Limited (ASX: AME) (Alto) are pleased to announce that they have entered into a binding Scheme Implementation Deed under which Alto agrees to propose a scheme of arrangement between Alto and its shareholders under Part 5.1 of the Corporations Act 2001 (Cth) (Scheme).

Highlights:

• Brightstar Resources Limited (Brightstar) and Alto Metals Limited (Alto) have entered into a Scheme Implementation Deed (SID) under which Alto agrees to propose a Scheme of Arrangement (Scheme) for the acquisition of 100% of Alto
• Concurrently, Brightstar has entered into a Tenement Sale Agreement with Gateway Mining Limited (Gateway) under which Brightstar has agreed to acquire 100% of the Montague East Gold Project (with Gateway to retain all non-precious metal rights) for consideration of $14.0m comprising cash, scrip and contingent payments (Montague Acquisition)
• Under the Scheme, Alto shareholders will receive 4 Brightstar shares for each Alto share held on the Record Date (Scheme Consideration)
• The Scheme Consideration has an implied value of approximately 6 cents1 per Alto share, representing a significant premium of:
  • ~82% to the closing Alto share price of 3.3 cents per share on 30 July 2024; and
  • ~81% to Alto’s 30-day VWAP of 3.3 cents per share up to and including 30 July 2024
• The Scheme Consideration implies a fully diluted equity value for Alto of $44.4m
• The Alto Board unanimously recommends the Scheme, and the Alto Directors intend to vote all Alto shares in which they have a relevant interest in favour of the Scheme, in each case in the absence of a superior proposal and subject to the Independent Expert concluding (and continuing to conclude) that the Scheme is in the best interests of Alto shareholders2
• Alto’s largest shareholder, Windsong Valley Pty Ltd representing ~15% of the Alto shares on issue, has confirmed to Alto that it intends to vote such of those shares that it holds at the time of the Scheme vote in favour of the Scheme, in the absence of a superior proposal and subject to the independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of Alto shareholders
• Brightstar to raise up to $24m (before costs) at 1.5 cents per share via a two-tranche placement (Placement), which represents a nil discount to the last traded price
• The Scheme is conditional on completion of the Placement, however neither the Placement nor the Montague Acquisition are conditional on completion of the Scheme
• Following completion of the Placement, the Scheme, the Montague Acquisition and the issue of Topdrill Shares and Genesis Shares (refer below), the pro forma Brightstar Group (Combined Group) will have:
  • Pro-forma 3.0Moz Au of JORC (2012) Mineral Resources3
  • Pro-forma cash position of $31m with potential debt finance facilities totalling $36m
  • Strategic ~1,100km2 landholding in the Sandstone region provides a third production hub (Sandstone Hub) to complement existing Brightstar production, development and exploration asset portfolio
  • Existing shareholders of Brightstar (including Placement participants), Alto and Gateway holding approximately 66%, 29% and 5% of the Combined Group4
• Brightstar has separately executed a Non-Binding Indicative Offer (NBIO) with a South Korean strategic investor for a multi-tranche investment of $40m, including an upfront $4m equity investment (unconditional and included in the Placement) and a $36m gold offtake financing arrangement

Under the terms of the Scheme, Brightstar will acquire 100% of the shares in Alto and each Alto shareholder will receive 4 new Brightstar shares for each Alto share held on the record date for the Scheme5 .

In addition to the Scheme, Brightstar, via a newly incorporated wholly owned SPV ‘Montague Gold Project Pty Ltd’ (MGP), has entered into a Tenement Sale Agreement with Gateway Mining Limited (ASX:GML) (Gateway), and its wholly owned subsidiary Gateway Projects Pty Ltd (GPWA), under which MGP proposes to acquire Gateway and GPWA’s interests held in certain mining tenure in respect of Gateway’s Montague East Gold Project, with MGP obtaining 100% of the gold mineral rights and Gateway retaining all other mineral rights (Montague Acquisition).

The Montague Acquisition is not conditional on the Scheme completing and, subject to the satisfaction of the relevant conditions precedent (see description further below), will proceed independently of the Scheme.

On implementation of the Scheme and completion of the Montague Acquisition, Brightstar will become a significant junior West Australian gold explorer, developer and producer with a material exploration and development platform. The Scheme and Montague Acquisition will consolidate highly prospective exploration ground in the Sandstone region which will complement Brightstar’s existing production, development and exploration asset portfolio, for the benefit of both Brightstar, Alto and Gateway shareholders.

In order to provide additional financial flexibility and balance sheet strength, Brightstar has launched an equity raising by way of a two-tranche placement to professional and sophisticated investors to raise up to $24m (before costs) (Placement). The Placement will be conducted at 1.5 cents per share, representing a:

• nil discount to the last close price as at 30 July 2024;
• 2.1% discount to the 5-day VWAP up to and including 30 July 2024; and
• 5.7% discount to the 10-day VWAP up to and including 30 July 2024.

Following completion of the Scheme, the Montague Acquisition, Placement and issue of the Topdrill Shares and Genesis Shares (refer below), existing shareholders of Brightstar (including Placement participants), Alto and Gateway will hold approximately 66%, 29% and 5%6 respectively of the Combined Group.

Additionally, Brightstar has executed a non-binding indicative offer (NBIO) with a South Korean strategic investor, AustKor Mineral Co., Ltd (Korean entity) (AustKor) for a multi-tranche investment of $40.0m, including a $4.0m unconditional equity investment in the Placement and a $36.0m gold offtake financing arrangement (Offtake Facility). Subject to binding documentation, the completion of the DFS and Brightstar declaring final investment decision, the Offtake Facility funds are to be directly applied to the refurbishment of the Brightstar processing plant in Laverton to fund the development capital required for Brightstar to emerge as an owner-operator with its wholly owned Laverton processing infrastructure.

Separately Brightstar has executed a drill-for-equity agreement with Topdrill Pty Ltd (Topdrill), whereby Topdrill will convert $1.0m of drilling expenses into fully paid ordinary shares in Brightstar, to be issued on the same terms and conditions as the Placement.

Brightstar’s Managing Director, Alex Rovira, said:

“This is a compelling transaction for all stakeholders, as the sensible consolidation of the Sandstone and Montague East Gold Projects delivers an asset base with the critical mass to be advanced towards meaningful production. The Sandstone Hub has the mineral endowment and exploration upside to be a significant development opportunity in Western Australia in the coming years and presents as an asset with potential to support Brightstar’s aggressive growth ambitions to become a multi asset mid-tier WA gold producer.

Brightstar has the team and experience to fast-track the exploration and development of the Sandstone assets in parallel with the development of the Menzies and Laverton Gold Projects, to underpin Brightstar’s ambitions of becoming a multi-asset producer in WA.

With the DFS for the Menzies and Laverton Gold Projects due in 1H 2025, Brightstar remains well placed to make FID on the restart of several mining opportunities within our current portfolio which, when in production, we expect will assist to organically fund further investment in the Sandstone and Montague East Gold Projects in the near future.

It is fantastic to see the strong support of specialist natural resource institutional investors and strategic mining participants in the raise, which demonstrates support for Brightstar’s growth as we intend to deliver value to our shareholders as we de-risk the projects towards sustainable mining operations.”

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This article includes content from Brightstar Resources, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.

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