Golden West Resources | Takeover Bid

Frequently Asked Questions

Background information to the REJECT Recommendation for the Offer made by Fairstar Resources to shareholders in Golden West Resources.

On September 4 2007, explorer Fairstar Resources announced it intended to offer five FAS shares for each share in GWR.
The offer was to be conditional on FAS gaining 50% acceptances.
On December 11 2007, Fairstar varied the offer to seven FAS shares for each share in GWR, and made the offer unconditional.

The Board of Golden West urge you to REJECT the current inadequate, opportunistic offer from Fairstar which they believe materially undervalues your Company and delivers no material benefits to either the company or shareholders.
The Company has issued a Target's Statement formally outlining the reasons for its recommendation.
PricewaterhouseCoopers, the Independent Expert, has concluded the offer is NEITHER FAIR NOR REASONABLE, and supports the arguments outlined by the Independent Directors of GWR.
The varied offer addresses none of the key concerns surrounding the bid, and the board continues to recommend you REJECT the offer.

Very little. The company possesses only very early stage exploration assets in WA and Victoria that it considers are prospective for gold, uranium and oil.
None of these projects present near term production opportunities or are of potential world scale.
Its board lacks any substantial expertise in developing large-scale resources projects such as GWR's Wiluna West Iron project.
It lacks any notable institutional investor base.
The company has limited cash reserves.
Costs associated with its takeover, estimated at up to $48.5 million, will have to be funded by equity raisings and will divert funds away from more constructive activities such as exploration and development.
Rather than add scale or liquidity, combining the two companies will merely dilute GWR's focus and its exposure to the Wiluna West Iron project.
PricewaterhouseCoopers, the Independent Expert, concluded that "we consider that there are limited prospects of a market re-rating of GWR shareholders interests as a consequence of accepting the Offer, and there are potential adverse implications of remaining a minority shareholder in GWR if Fairstar acquires more than 50.1% of GWR."

GWR is confident the majority of shareholders will support its recommendation to REJECT the FAS offer.
GWR and FAS do share some common shareholders, while non-executive director Alan Rudd sits on both boards and GWR director Mick Wilson is a FAS shareholder.
Neither Mr Rudd nor Mr Wilson have been involved in the Board's consideration of the FAS offer.
Mr. Mick Wilson, Exploration Director of GWR, has indicated in the Target Statement that he will REJECT the FAS offer.

GWR is confident the majority of its shareholders will support its recommendation to REJECT the FAS offer.
Your Board has assessed the FAS offer on the basis of what is in the best interests of ALL SHAREHOLDERS, not just those with shares in both companies.
Your Board has serious concerns about the FAS offer and the potential impact it would have on the company, its ability to advance the Wiluna West Iron Project and your exposure to a potential world class Iron project.
At least one shareholder has now WITHDRAWN their pre bid acceptance.

Fairstar is a small WA exploration company which listed on the ASX in October last year. The company has a market cap of approx $40.5m at its current price of 39¢, compared to GWR's market capitalization of $201m.
Its share price has been extremely volatile, and is now trading at an 80 per cent or greater discount to its $1.97 peak in December. That volatility makes it extremely difficult to value its offer for GWR.

You will receive seven FAS shares of uncertain value in return for each GWR share you own.
GWR investors' ownership of the flagship Wiluna West Iron project will be diluted from the current 100% to approximately 76% or lower depending on the price of new FAS shares issued to fund takeover costs).
If you have been a GWR shareholder for some time you may face a substantial capital gains tax bill given that FAS is unlikely to obtain the 80% acceptances necessary for CGT rollover relief.
The combined company will have to pay up to $48.5 million in fees and costs triggered by the transaction, most likely funded by new share issues that will further dilute your exposure to Wiluna West.
Those costs will consume funds that could be better spent on advancing Wiluna West.
GWR's focus and funding will be diverted from its potentially major Wiluna West Iron Project to other less advanced gold, oil and uranium assets, potentially slowing progress at Wiluna, and therefore the flow of any benefits to shareholders.

No, all that will happen is that attention will be diverted away from a potentially major iron ore project at Wiluna West to other far less advanced projects of uncertain potential.
The addition of greenfields gold, oil and uranium assets is unlikely to make the company any more attractive to institutional and overseas investors whose support will be important as GWR seeks to develop its major Wiluna West Project.
Major investors see GWR as a means of gaining direct exposure to the iron ore market. GWR is one of the world's few independent "pure play" iron ore developers.
The combined entity will have to raise substantial new equity just to pay takeover-related costs that will not improve its ability to advance Wiluna West, making it less likely to be able to raise additional funds for some time afterward.

The GWR website contains the most up-to-date information regarding the Fairstar takeover bid. It is located at: www.goldenwestresources.com