Ann: Receipt of Unsolicited Takeover Offer, page-42

http://www.sharechat.co.nz/article/94489291/phoenix-gold-pxg.html

Phoenix Gold (PXG)

Fat Prophets

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Sharechat Hot Stock – Phoenix Gold (PXG)


What’s new?
Evolution Mining (Evolution) swooped on the Australian assets of La Mancha Australia and in doing so became Phoenix Gold’s new neighbour in both the Zuleika and Kunanalling Shears near Kalgoorlie in WA. Evolution did not stop at being just a new neighbour, it simultaneously took a placement of 44 million shares in Phoenix Gold at 7.5 cents per share to provide that company with $3 million in funding. The share placement gave Evolution Mining a 9.4% interest in Phoenix Gold.
The share deal Evolution made with Phoenix Gold did not go unnoticed by an existing major shareholder in Norton Gold Fields (Norton), which held an 8.91% interest in Phoenix Gold.  Nortons’ parent, Chinese gold producer ZiJin Mining Group (ZiJin) is offering to acquire the minority shareholdings in Norton to take the company over, and on completion will hold the full 8.91% interest in Phoenix Gold.
ZiJin did not stop at mopping up the Norton minority shareholders; it simultaneously unlocked a major parcel of shares in Phoenix Gold to lift its interest to 17.9%. From this base, ZiJin has now made an unsolicited offer to acquire all the shares in Phoenix Gold that it does not already own for 10 cents per share. The offer valued Phoenix Gold at some $47 million dollars.
The prize for ZiJin is the 588,380 ounces of gold that Phoenix Gold has defined as a mining reserve at its Castle Hill Stage 1 project. The attraction to ZiJin in the mining reserve is its capability to be mined in a very short period of time. With the Paddington mill (a ZiJin asset) not far from Castle Hill; the ore feed to the mill would be a very valuable asset. Add the extensive ground coverage of both the Zuleika and Kunanalling Shears held by Phoenix Gold, and the attraction is complete.   
Standing in the same arena is Evolution, the new arrival. With its recently acquired Mungari Mill, which is not far from Castle Hill; the attraction of the 588,380 ounces to Evolution would likely be the same as that of ZiJin. Although, Evolution would have to overcome a right held by Norton to mine at Castle Hill Stage 1. Evolution now also owns extensive ground coverage across both the Zuleika and Kunanalling Shears that dovetail in with the Phoenix Gold tenements.  Phoenix Gold’s attraction to Evolution would also seem complete.
Outlook
Going forward, Phoenix Gold has an established asset base that offers some very attractive benefits to the two companies that now hold substantial interests in the company. Making M&A activity a potential central theme for this company in the weeks ahead, as new valuations are possibly worked up.  Barring M&A activity, Phoenix Gold holds a valuable gold reserve with a capability to be expanded.  While an extensive land bank could deliver further exploration successes, development opportunities and drive Phoenix Gold’s future gold production aspirations.
Price
While Phoenix Gold has recently recovered from its multi-year low, the company’s share price remains at an historically low level, with this due largely to the fall in the Australian dollar gold price. While operational issues in its mining of smaller open pit mines did not deliver the expected value, this may have also contributed to the fall.
Worth buying?
With tenements in the pedigree gold region of Australia and a readily mineable reserve at Castle Hill, Phoenix Gold is still moving positively toward becoming an emerging gold producer. In combination with recent exploration and development success, this in our view has provided a major de-risking point.  While the potential for M&A activity could be a near-term price driver.

David Lennox is the Resource Analyst at Fat Prophets share market research. To receive a recent Fat Prophets Report, call 0800 438 328 or Click here.