Hammer Metals Receives $0.087 Per Share Indicative Offer from Austral

Austral Resources Enters the Ring with Higher Valuation

Hammer Metals Limited (ASX:HMX) has been handed a fresh challenge to its agreed takeover by Larvotto Resources (ASX:LRV), with Austral Resources Australia Ltd (ASX:AR1) submitting an unsolicited, indicative proposal valuing Hammer at approximately $80.7 million or 8.7 cents per share. This offer notably exceeds Larvotto’s earlier $55 million bid, which priced Hammer shares at 6.7 cents, representing a significant uplift in implied value for shareholders.

Complex Deal Structure with Asset Demerger

The Austral Proposal is structured as a scheme of arrangement to acquire 100% of Hammer’s issued capital, but with a twist: Hammer’s Western Australian gold assets, held through Carnegie Exploration, would be demerged into a new unlisted public company (SpinCo) and distributed in-specie to Hammer shareholders. Shareholders would receive Austral shares valued at 8 cents per Hammer share plus an implied 0.7 cents per share in SpinCo shares, making up the total consideration.

This dual transaction approach aims to preserve shareholder exposure to the WA gold assets separately while transferring the remainder of Hammer’s portfolio to Austral. The proposal also includes a working capital facility of up to $5 million, which is pitched on terms equal to or better than the $4 million facility Hammer currently has with Larvotto.

Conditions and Board Response

The Austral Proposal remains non-binding and contingent on several conditions, including confirmatory due diligence, execution of transaction documents with customary protections, and regulatory and shareholder approvals. The Hammer Board, after legal and financial advice, has recognised Austral’s offer as a bona fide competing proposal under the existing Scheme Implementation Deed with Larvotto.

Importantly, the Board has invoked the fiduciary exception clause within the Larvotto agreement, allowing it to engage with Austral despite prior 'no talk' restrictions, citing its duty to consider a potentially superior proposal. Hammer intends to facilitate mutual due diligence with Austral, subject to confidentiality arrangements, while continuing to recommend the Larvotto Scheme unless a superior offer materialises.

Implications for Shareholders and Next Steps

Hammer shareholders are currently advised to take no action and await further updates. The Board’s stance reflects a balancing act between honouring the existing agreement with Larvotto and fulfilling its fiduciary responsibilities to consider a higher-value competing offer. The outcome hinges on Austral’s ability to satisfy conditions and negotiate definitive agreements.

This development adds a new layer of complexity to Hammer’s corporate trajectory, which recently saw Larvotto’s bid supported unanimously by the Board and key shareholders. The competing proposal raises questions about the potential for a bidding contest or renegotiation, and how the demerger of the WA gold assets will be valued and managed if Austral’s offer proceeds.