Failed Acquisition Forces Alvo to Slash Capital Raise and Reassess Strategy
Alvo Minerals has terminated its planned acquisition of the Lavra Velha Gold Project after due diligence concerns, leading to the cancellation of a $2.93 million entitlement offer and the launch of a new discounted $1.6 million rights issue to fund ongoing exploration.
- Termination of Lavra Velha Gold Project acquisition due to unsatisfactory due diligence
- Cancellation of $2.93 million entitlement offer with full refunds to applicants
- Launch of new accelerated entitlement offer at 60% discount to raise $1.6 million
- Focus remains on existing Brazilian projects including copper, gold, and rare earth elements
- Directors participating in the new entitlement offer to support capital raising
Acquisition Falls Through Amid Due Diligence Concerns
Alvo Minerals Limited (ASX: ALV) has officially terminated its non-binding letter of intent to acquire the Lavra Velha Gold Project in Bahia State, Brazil, from Pan American Silver Corp. The decision follows an inability to complete due diligence to the company's satisfaction within the exclusivity period, with no extension agreed upon. Confidentiality restrictions prevent further disclosure of the reasons behind the termination, but importantly, no break fees are payable by either party.
Impact on Capital Raising Plans
In light of the failed acquisition, Alvo has cancelled its previously announced pro-rata non-renounceable entitlement offer intended to raise approximately $2.93 million. This offer, which included new shares priced at $0.05 each and free attaching options, will not proceed, and all application monies received will be refunded in full without interest. The cancellation reflects the board's view that proceeding with the entitlement offer is no longer in shareholders' best interests given the changed circumstances.
New Discounted Entitlement Offer Launched
To maintain momentum on its exploration programs and working capital needs, Alvo has launched a new accelerated non-renounceable entitlement offer to raise up to $1.6 million. This offer is priced at a significant 60% discount to the recent closing share price, at $0.02 per new share, with an offer ratio of one new share for every 1.5 existing shares held. The discounted pricing aims to encourage shareholder participation and strengthen the company's balance sheet amid ongoing exploration activities.
Strategic Focus on Existing Projects
Despite the setback with Lavra Velha, Alvo remains committed to advancing its portfolio of projects in Brazil. These include the Palma Copper Zinc Project, which boasts a substantial mineral resource estimate, and two rare earth element projects, Bluebush and Ipora. The company intends to continue aggressive exploration efforts targeting base and precious metals, as well as critical minerals, leveraging its established presence and expertise in the region.
Leadership Support and Next Steps
Notably, key directors including Graeme Slattery, Beau Nicholls, and Managing Director Rob Smakman have confirmed their participation in the new entitlement offer, signaling confidence in the company's strategic direction. The entitlement offer timetable is set to commence immediately, with retail shareholders invited to participate from May 30 through June 11, 2025. Alvo remains in voluntary suspension during this period as it finalizes the capital raising.
Bottom Line?
Alvo pivots from a stalled acquisition to a discounted capital raise, underscoring resilience but raising questions about near-term growth catalysts.
Questions in the middle?
- What specific due diligence issues led to the termination of the Lavra Velha acquisition?
- How will the discounted entitlement offer affect shareholder dilution and market sentiment?
- What are the timelines and prospects for advancing Alvo’s existing copper and rare earth projects?
