Avoca ups Dioro stake, says this will deter rival takeover bids
PERTH, July 17 AAP July 17 2009, 12:47AM Avoca Resources Ltd has marginally increased its stake in its takeover target Dioro Exploration NL and warned that the interest was likely to deter rival offers.
Avoca said on Friday that it had increased its stake in the fellow Kalgoorlie, Western Australia-based gold miner to 17.13 per cent, from 14.95 per cent.
Avoca did not say who it had acquired the additional 2.18 per cent stake from, but said it was apparent that an increasing number of acceptances were emerging as the closing date of the unconditional offer, July 21, draws near.
Avoca has talked down Dioro's repeated claims that it is fielding potential competing bids and indicated that it would use its slowly-growing interest to scupper other attempts to take full ownership of Dioro.
Avoca also has pointed to "possible cash liquidity issues" that Dioro may be facing.
"Avoca's offer is the only offer on the table," Avoca said on Friday.
"In the three months since Avoca launched its bid for Dioro, there has been no other bidder materialise and no other offer made.
"Avoca believes that its significant and increasing shareholding is likely to deter any rival offer."
In rebuffing Avoca's revised, hostile bid on Wednesday, Dioro insisted it was in "meaningful discussions with third-parties" about either a full takeover or selling some of its assets.
Dioro claimed in late May, three days after Avoca's bid opened, that it had been in talks with other potential suitors, both domestic and international, for the previous 12 months.
It reiterated on Wednesday its comment in May that there was no guarantee that the discussions would result in a counter-offer.
Avoca said this week it would "take an active interest" in Dioro if it failed to gain effective control of the target, suggesting it would use its stake to block a competing bid.
In this case, Avoca also is expected to push for a board seat with Dioro.
Avoca's improved offer is one of its shares for every 2.4 Dioro shares, valuing the target at about $68.5 million, based on Avoca's share price at the time the bid was made.
Dioro has rejected the bid as "opportunistic" and not in shareholders' best interests because it substantially undervalued the target's assets, which include mines and a mill.
Dioro also said a merged entity would be weighed down by a substantial debt burden.
Avoca's debt facilities stood at $66 million at the end of March, while Dioro had drawn $9 million from a $10 million facility at the end of May.
Dioro said on Friday that it had a working capital deficiency of $1.16 million at the end of May, down from a $28.8 million shortfall at the end of December.
Also on Friday, Avoca said that Dioro had "possible going concern issues if various forecasts are not met".
But it noted Dioro's forecast of net cash flow surplus sufficient to cover the carrying value of its assets and settlement of its liabilities in the normal course of business.
Both companies, benefiting from a strong gold price, were being sought for comment.
Avoca's near 15 per cent interest in Dioro was acquired through pre-bid acceptances by the target's major shareholders, South Africa's Harmony Gold and UK-based gold fund Baker Steel Capital Managers.
Shares in Avoca were down one cent at $1.705 at 1238 AEST while Dioro's shares had retreated four cents to 68 cents.
