Genesis of grand gold merger unveiled

Genesis Minerals (ASX:GMD) has won the hand of struggling Dacian Gold (ASX:DCN) in an all-share takeover worth $111 million, expanding its footprint in the Leonora area of WA’s goldfields.

Now for St Barbara (ASX:SBM)? That will be a much bigger bite than Dacian – well over $600 million – so that deal will take time.

St Barbara shares jumped more than 8% yesterday to 89.5 cents in the wake of the confirmation of the Genesis-Dacian marriage. Dacian shares rose 3.2% to 9.5 cents yesterday and Genesis shares ended at $1.22, up 1.2%.

Dacian directors are expected to unanimously recommend its shareholders accept the offer, in the absence of any superior proposal.

As part of the latest offer, Dacian shareholders will receive 0.0843 Genesis shares for each Dacian share they hold. Based on Genesis’ last closing price of $1.205 on July 1, the implied value of the offer is 10.2 cents a Dacian share. That compares to 31 cents a share in April.

As part of the deal Genesis will subscribe for approximately 123.9 million fully paid ordinary shares in Dacian under a conditional placement for cash consideration of $12.6 million “with the proceeds to fund Dacian’s Jupiter extension drilling, exploration activities, and general working capital.”

This placement (if completed), together with the pre-bid acceptance agreement, will give Genesis a ~16.6% interest in Dacian. Genesis also has a commitment from Dacian’s biggest shareholder, perennial over its 7% stake.

These two deals will give Genesis a secure foothold on Dacian in case a disruptor appears.

Genesis said the Dacian acquisition would achieve appropriate regional consolidation by combining its organic growth and high-grade resources with Dacian’s large-scale strategic milling infrastructure at Mt Morgans in Western Australia.

The combined group will have around 4.5 million ounces of resources in the Leonora district, with a focus on growth through exploration and a pathway to production through the existing milling solution.

Dacian Gold problems were exposed in late June when it was forced to suspend operations at the Jupiter mine at Mount Morgans after seeing a sharp rise in costs.

The company said it had experienced a 68% increase in contractor load and haul rates (excluding fuel) since the end of the 2020–21 financial year, with a further 17% increase forecast for the 2023 financial year.

Dacian said rising costs had been compounded by supply-chain challenges and approval delays.

Genesis said the enlarged company would have the financial capacity and operational experience to bring Mt Morgans and its Leonora gold project back into production.

The gold miner acquired the Ulysses deposit (located within its Leonora project) in 2015 and completed two open-pit mining campaigns at the Ulysses west pit in 2016 and 2017.

Genesis has also launched a $100 million capital raise to support the transaction, which it said has received firm commitments from the market including the likes of Australian Capital Equity (Kerry Stokes private company) and Northern Star Resources.

St Barbara has re-engaged with Genesis after talks ended suddenly last month.

The talks are about a potential consolidation of its Leonora assets and unrelated to the Dacian offer.

There’s no certainty a deal will be done with St Barbara but it is looking bruised and battered with cost cutting going on in its Australian business, a halt called to the long-tipped expansion of its Simberi gold mine in PNG and problems with tailings disposal and regulatory concerns at its Nova Scotia gold mine in eastern Canada.