Marriage, WA gold mining style, was on display on the ASX yesterday with two weak members of the herd targeted by an aggressive smaller predator in what could end up as a three-way merger with a total value of more than $1 billion.
The possible merger is linked to problems at Dacian Gold (ASX:DCN) and St Barbara Mining (ASX:SBM).
Dacian Gold and St Barbara along with Evolution (ASX:EVN) and Ramelius Resources (ASX:RMS) have already revealed some of the damage from the growing pressure on gold mining industry production, margins and costs from the recent surge in inflation, bad weather, supply chain obstacles and Covid.
There have been other bids in the gold sector recently – Gold Road (ASX:GOR) last week wrapped up its takeover of DGO and its 14% stake in De Grey Mining (ASX:DEG) and its highly prospective Mallina discoveries in the Pilbara area of WA.
Now Genesis (ASX:GES) and new CEO Raleigh Finlayson (ex-Northern Star and Saracen) have the ambitious idea of herding Dacian and possibly St Barbara towards a marriage that would increase the scope for considerable cost and other cuts and changes in the Leonora district of WA gold fields.
Genesis Minerals has in effect pulled the trigger on consolidation in the Leonora district in WA’s northern goldfields, starting with Dacian Gold and potentially moving on to St Barbara Mining.
While talks between St Barbara and Genesis ended last month, with Genesis saying that it had abandoned talks with St Barbara, there seems to be new impetus for a three way.
Genesis and St Barbara both said on Monday that their talks were now back on, and were regarding a ‘potential business combination aimed at consolidation of the Leonora Province and the unlocking of operating and development synergies in the region”.
Genesis has gone into a trading halt, pending an announcement of a ‘material corporate transaction and a capital raise”.
St Barbara said the talks with Genesis were unrelated to the company’s decision to go into a trading halt.
Market rumours suggest it could be around $100 million – or around 33% of Genesis market value of $304 million. Enough to start the process.
That raising seems to be linked to a bid for Dacian Gold (which is in a lot of trouble, having decided to close a mine in WA and lost its CEO last month.
Other report say Genesis is looking at a $110 million paper offer for Dacian with its shareholders being offered 0.0843 Genesis shares for their shareholding in the takeover target.
Genesis said in its statement to the ASX asking for a trading halt was “pending an announcement by the Company in relation to a proposed material corporate transaction and capital raising.”
Dacian, which also went into a trading halt on Monday, owns the Mt Morgans gold project where it recently announced plans to suspend open pit mining operations at the Jupiter deposit, because difficult conditions had resulted in significant inflationary cost pressures, which in turn resulted in an increase in costs.
Dacian said underground operations will continue at Mt Morgans until the previously developed stopes have been mined by the first quarter of 2023.
St Barbara revealed in June potentially significant concerns with its gold mining operations in Nova Scotia in eastern Canada that could see mining halted if the problems with tailings disposal and regulatory pressures to improve the situation, cannot be resolved quickly.
St Barbara also revealed that it had paused its expansion at its Simberi mine in PNG after cost rises and receiving third party interest. St Barbara said it was conducting a review of all its operations as to capital costs and would also restructure operations by closing one of its two Australian offices and laying off staff.
In April, St Barbara completed the takeover of Bardoc Gold, adding to its portfolio the Aphrodite and Zoroastrian underground deposits, which are near the rail line that runs to the Leonora processing plant.