Avoca Resources has slammed the rejection of its scrip offer for Dioro Exploration, attacking its board and labelling a $1.88 price valuation on the company as "out of touch with reality".

Responding to Dioro's target statement which suggested Avoca's bid undervalued the company, Avoca suggested the board needed a "reality check".

Avoca has offered Dioro shareholders one new Avoca share for every 2.82 shares they hold in the company.

"As of Thursday, Avoca's implied offer price was 59 cents for each of your Dioro shares," Avoca told Dioro shareholders in a statement.

However an independent report from Dioro's auditor and tax advisor KPMG has put a valuation of $1.88 on the company's shares.

Avoca said the valuation represented a 376 per cent premium to Dioro's share price before the announcement was made and was "out of touch with reality".

It said the valuation attributed significant and unrealistic value to the company's South Kalgoorlie assets, the majority of which it said had significant uncertainty attached and were unlikely to be mined economically.

Avoca predicted Dioro's 2009 and 2010 financial position would be impaired by lower production and revenues.

It accused Dioro directors of having eroded significant shareholder value over the past 18 months and having no other alternatives despite their claims of discussions with "other parties".

"If Avoca's offer lapses, in the absence of any other offer, Dioro shareholders should be aware of the very real possibility that the Dioro share price will fall, possibly to pre-offer levels," Avoca said.

"In contrast to Dioro's poor performance... Avoca has gone from strength to strength where in the month of May it achieved a new production record from the Trident gold mine at Higginsville..."

By taking control of Dioro, Avoca aims to bring together several gold mining operations in close proximity south of Kalgoorlie.

"The primary projects for the two companies are in close proximity and we believe there are potentially significant cost savings that may be realised from operational synergies," Avoca managing director Rohan Williams has said.

Dioro's shares slipped 3.5 cents, or 5.15 per cent, to 64.5 cents at 10.50am while Avoca shares were up half a cent to $1.65.

STUART McKINNON