Another extract from today's Collins Stewart note relating to the aggressive forward drill programme and the bid for AZX:
"Offer for JV partner already achieving results
A major concern for GGG Resources was the limited support from the JV partner, Auzex, for plans to aggressively expand the drilling programme. However, both Auzex and GGG resources have today announced that an expanded programme of work has been submitted to the WA Department of Mines lifting the planned drilling to 194,000m over the coming year. This represents an eight-fold increase on the JV?s current 24,000m programme."
The implication is that this action has been the catalyst to persuade AZX to come to the party and buy into an aggressive drill programme.
The result is a good one since we have already drilled almost 7,000m over and above the original and infill drill programme. As mentioned earlier, at somewhere between 8-9,000m/month moving forward with the two rig programme, we will be covering the equivalent of this original programme every quarter and at a greater pace if we increase the rig count to meet the commitment to drill 194,000m over the next twelve months.
It's all very exciting indeed!
Just one "However"......
Drilling to date has cost something of the order of A$120/m. It appears that the forward programme is deeper and for prudence therefore it might be worth forward estimating future drilling at A$130/m.
The programme announced by both of the JV partners today is to drill 194,000m. At A$130/m, this has an estimated cost of A$25.2m. Each partner will pick up just short of $A$13m each. That is not a problem for GGG, but it is for AZX and it will need to fundraise to meet its commitment.
At December end, AZX had something of the order of A$7m in hand. It has since committed to A$0.5m on its NZ prospect and has an ongoing monthly overhead to service.
That will present quite a dilemma for AZX since alongside a takeover defence, it will have to come to market to raise funds. Iirc, the piece posted by sbh071 recently on takeover rules notes that AZX are prevented from doing this whilst the offer remains open although I need to research this further.
Regardless, they are now in a position of weakness. They will need to fundraise from somewhere or else backtrack on today's market declaration.
AZX Price at posting:
64.7¢ Sentiment: None Disclosure: Not Held
