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. Last Updated: 07/27/2016

Delta Calls for Consolidation Of Gold Sector, Launches Bid

SYDNEY, Australia -- Delta Gold NL launched a scrip takeover bid for rival Acacia Resources Ltd. on Thursday in the hope of becoming Australia's second largest gold mining company, with annual production nearing 1 million ounces.

Acacia's board immediately rejected the offer of one former dividend Delta share for each one of its own, valuing the company at 570 million Australian dollars ($365 million), saying it represented only an 11 percent premium over Wednesday's closing price.

Shares Acacia ended 19 Australian cents (12 cents) higher at 2.14 Australian dollars, while Delta fell 6 Australian cents to 2.20 Australian dollars.

"Delta's takeover offer is both patently inadequate and inherently risky for Acacia shareholders," Acacia managing director Michael Folie said.

"It represents a premium that falls short of a fair price for control," he said.

Delta managing director Terry Burgess said he was "disappointed" that Acacia was quick to label the offer inadequate, saying strong synergies existed between the two miners in the gold fields of Western Australia. Consolidation was required in the Australian gold mining sector to combat depressed bullion prices and rising exploration costs, Burgess said.

"There has been consolidation in the aluminum industry ... in the copper industry and now it is time for the gold sector to consolidate," Burgess said.

Gold prices appeared to have reached the bottom of the cycle but he admitted he "didn't have a clue" where prices were going.

The merged entity would be underpinned by three long-life, world class mines - Granny Smith, Kanowna Belle and Sunrise Dam, Burgess said, adding that total operating costs of 258 Australian dollars per ounce on average would be among the lowest in Australia.

A combined company would have a market capitalization of close to 1 billion Australian dollars, making it one of Australia's top 100 companies by market capitalization.