Transcription of The Stock Network Interview with Far East Gold (ASX:FEG), Managing Director & CEO Shane Menere
Lel Smits: Far East Gold has reaffirmed its recommendation that shareholders reject Shengye Gold’s takeover offer following the release of its supplementary target statement and second review by Independent Expert. I’m joined today by Far East Gold Managing Director and CEO Shane Mennery to discuss the latest developments in the takeover process, respond to Shengye’s criticisms and outline why the board believes shareholders should retain exposure to the company’s growth strategy. Shane, welcome back to the Stock Network.
Shane Menere: Thanks, Lel. So good to be here.
Lel Smits: Yes, now Far East Gold has just released its supplementary target statement and the Independent Expert has now reviewed Shengye’s offer for a second time. What’s the key message here that you really want shareholders to take away?
Shane Menere: The message is actually very simple and very straightforward. So the Independent Expert, Lonergan Edwards and Associates, has now had two separate opportunities to assess Shengye’s proposal. They received the original bidder statement and then they reviewed both the supplementary bidder statement, including Shengye’s revised conditional offer.
Now, after considering everything Shengye put forward, their conclusion has not changed, but their valuation remains exactly the same. And it was at $0.325 to $0.445 roughly, with the midpoint of $0.385. And they continue to conclude that the offer is neither fair nor reasonable, to use their words. So I think that’s an incredibly important outcome, because it isn’t just Far East Gold saying that.
It’s not management. It’s not the board. It’s an internationally respected independent valuation firm that’s now examined this transaction twice and reached exactly the same conclusion both times.
And that’s why the Independent Board Committee that I sit on has unanimously maintained its recommendation to reject the offer and take no action.
Lel Smits: Yes. Now, Shengye has been very critical, though, of Far East Gold and its projects throughout this process. What’s your response to those criticisms?
Shane Menere: So again, I think it’s important to separate opinion from that independent analysis. So one of the things I’m most pleased about in the supplementary independent experts’ reports that LEA specifically considered Shengye’s criticisms across our portfolio, they looked at Wanagiri, Woiler, Trangelic, Bluehill Creek. And having done all of that, they concluded that there was no reason whatsoever to change their valuation.
So importantly, they’ve observed that Shengye has not produced its own independent valuation or independent technical analysis to support those criticisms. So that should give shareholders confidence that these issues have now been independently examined. More broadly, I think it’s important to look at what Far East Gold has actually achieved over the last 12 months.
So just to remind the market, when we acquired Idenberg, it was essentially an exploration project. And today we’ve proven that it contains approximately 780,000 ounces of JORC compliant Gold resources. We’ve substantially completed that scoping study on our way to a Feasibility Study, Indonesian Feasibility Study.
We’re advancing those environmental approvals. We’re progressing permitting. We’ve significantly de-risked that project technically.
And so those are exactly the milestones shareholders expect management to deliver. So when we describe the timing of this offer as opportunistic, we’re simply recognising that it has arrived immediately before a number of these major value catalysts are expected to be realised.
Lel Smits: And Shane, looking beyond the takeover itself, where do you see Far East Gold today? You’ve given us a brief summary there, but looking ahead, where do you think shareholders should be watching over the coming months?
Shane Menere: Yeah, well, look, I think we’re entering one of the most exciting periods for the company’s history.
And that hasn’t changed as we’ve developed that transition point into project development. And ultimately, it’s a very good candidate through to production. So our flagship Idenberg is the one I’m referring to.
That continues to mature from that exploration story into that truly genuine development project. Completion of the scoping study, as I mentioned, progressing through that Indonesian Feasibility Study is another. So upon completion of all of that work, Far East Gold has the ability to increase that ownership from the 51% to the 80%.
Another significant value catalyst for shareholders. So at the same time, we’re continuing to advance the rest of our portfolio. So our focus hasn’t changed.
Our job is to continue creating value. And the market will ultimately determine what that value is. But our responsibility is to keep building a better company every month.
Lel Smits: Yes. And so in terms of the takeover, are you actually opposed to Xinyi acquiring Far East Gold? Or is this more really a question of ensuring shareholders are receiving fair value?
Shane Menere: It’s a really important distinction. And look, even with the hostile bid, let’s call it, you know, being thrust upon us, look, we’re not opposed to corporate activity.
We’re not opposed to Xinyi. Our responsibility is very straightforward. It’s to ensure shareholders receive fair value if control of the company changes.
And if Xinyi were to put forward a proposal that appropriately recognised the value of Far East Gold, of course the board would consider it. So look, exactly the same applies to any other party. Our obligation is to not favour one bidder over another.
Our obligation truly is to maximise value for shareholders. And as we’ve disclosed, multiple parties continue to engage with Far East Gold under confidentiality agreements and continue progressing that due diligence. Obviously, we can’t comment on those discussions, but what I can say is this, Far East Gold is attracting significant strategic interest.
And I don’t think that’s surprising. You know, we spent the last couple of years building a much stronger company and those results, you know, with the strategic interest from those multiple parties, that’s exactly what shareholders should want because, you know, competitive interest generally produces better commercial outcomes. Yes.
Lel Smits: In terms of Xinyi’s broader corporate strategy, though, they have made a number of public statements about its own broader corporate strategy and you’ve certainly encouraged shareholders to read those disclosures. Why exactly is that?
Shane Menere: Because shareholders should always make informed decisions. And there’s a great deal of publicly available information, not just about Far East Gold, but also about Xinyi.
They’ve made their own public statements regarding their strategy and future plans. And I’d simply encourage shareholders to do a little bit of searching, read those disclosures for themselves, do your own research, read what Xinyi’s publicly said, nothing sinister, but you can see that they’ve got a real reason to want the Far East Gold portfolio. So read our target statement, read the independent expert report, look at the progress we’ve made and ask yourself a very simple question, I guess, why would an international mining company launch a takeover at precisely the point where Far East Gold is substantially re-risked, sorry, de-risked, I should say, its flagship asset and is approaching some of the most significant development milestones.
So I think shareholders are perfectly capable of drawing their own conclusions.
Lel Smits: And finally, Shane, as this process continues, what’s really your message to Far East Gold shareholders?
Shane Menere: Firstly, I’d like to thank our shareholders for that continued support throughout this process. The board understands that takeover situations create uncertainty, and that’s exactly why Australian law requires some independent experts.
And in this case, that independent expert has now reviewed the proposal twice, and they’ve reached exactly the same conclusion, that the offer is neither fair nor reasonable. So that independent opinion gives shareholders an objective benchmark against which to assess Xinyi’s proposal, I guess. Secondly, I’d remind shareholders that Far East Gold today is a very different company from the one it was 12 months ago.
We’ve grown our resource base, we’ve advanced Idenberg toward development, completed major technical work, substantially de-risked the project. And importantly, there remains ongoing strategic interest in the company. So our responsibility is to ensure that if control of Far East Gold changes hands, it happens at the price that properly reflects the value we’ve created and the value we believe still lies ahead.
So the door remains open. If Xinyi wishes to improve its proposal to a level that properly recognises that value, we’ll consider it. If another party represents a superior proposal, we’ll consider that too.
But until that happens, our recommendation remains exactly the same. Reject the offer and take no action.
Lel Smits: Shane, thank you for the update from Far East Gold.
Thank you, Lel. Thanks for the opportunity.
Ends