Barry FitzGerald: Two gold juniors that fit well within Raleigh Finlayson’s Leonora gold empire
Genesis Minerals (ASX:GMD) boss Raleigh Finlayson of ex-Saracen fame has started the ball rolling on the consolidation of the Leonora gold district in Western Australia with a friendly $111 million scrip bid for Dacian (ASX:DCN).
The bid brings together Genesis’ undeveloped Ulysses project with Dacian’s troubled Mt Morgans operation some 95km way, the idea being to feed the hungry treatment plant at Mt Morgans with ore from Ulysses while taking some time to grow the reserves at Mt Morgans itself.
It is the type of sensible consolidation long overdue in the Leonora region.
And because of Finlayson’s bustling track record of growing Saracen over seven years from a $50m company to the $6 billion merger partner of Northern Star (ASX:NST) in 2021, it won’t be the last of Genesis’ consolidation moves.
To that end, Genesis has also resumed consolidation talks with long-time Leonora resident St Barbara, owner of the historic Gwalia mine which once counted former US President Herbert Hoover as mine manager in the 1890s.
A consolidation of their Leonora interests makes a lot of sense. The Gwalia mine is still a great one but it is ultra-deep and is accessed by a decline meaning it takes forever to get down to the workings, let alone the time it takes to bring the ore to the surface. It’s cut lunch stuff.
By bring in new ore sources, the pressure can be taken off the underground operation and the existing 1.4 million tonne-a-year treatment plant could be expanded in a big way to boost gold production.
St Barbara has been working on that itself but has been too slow, allowing Genesis to take the whip hand in the region’s consolidation.
Whether something comes of the Genesis/St Barbara consolidation talks remains to be seen.
What is more certain is that the market is now switched on to the Leonora consolidation story and what that could mean for other players in the region. In Garimpeiro’s playground of the juniors, that means Kin Mining (ASX:KIN) and Saturn Metals (ASX:STN).
There has been a little upwards kick in the share prices of both since the Genesis move on Dacian, and its resumed talks with St Barbara.
The idea is that Finlayson won’t stop at Dacian, or St Barbara’s Gwalia operation.
He has got a stated target to build Genesis from nothing to a 300,000 ounce a year producer. Garimpeiro reckons he won’t be stopping there.
Because of limitations on taking output at the ageing Gwalia much higher, he will need more ounces elsewhere, in addition to Mt Morgans.
That’s where Kin and Saturn come in. They own projects on either side of the road that heads out from Leonora towards Mt Morgans on the way to Laverton.
Their projects have steadily been adding ounces to the point where they are just shy of the critical mass needed to become stand-alone operations, or toll treatment sources for one of the four treatment plans within a 100km or so, including Mt Morgans and Gwalia.
Unlike the rest of the gold sector, their share prices have held up relatively well in the broad market sell-off. They are however well below their levels of earlier this year.
So they currently stand as a source of cheap ounces that could be wrapped up into a wholesale consolidation of the Leonora district – at the right (higher) price of course.
Kin Mining (ASX:KIN): Trading at 7.9c for a $68m market cap. The resource at its Cardinia project stands at 1.28 million ounces and it is well funded to continue to add more ounces. A new resource estimate is in the works and something around 1.5 million ounces would not surprise.
St Barbara actually had a crack at Kin in October last but the indicative 16c a share offer did not see the light of day because it was clear Kin’s main shareholder, the German family company Delphi with 30%, would not support an offer at that price.
St Barbara continues to hold an 18% stake in Kin as a legacy of the tilt.
So it can be assumed Kin will feature in the consolidation plans of St Barbara and Genesis, either as a combination or separately.
Having said that, Kin is not far off getting to the 2 million ounce resource base where it could get cracking on becoming a 80,000-100,000 ounce-a-year producer in its own right, either through a standalone development, or through a toll treatment deal with one of the region’s hungry mils.
Saturn Metals (ASX:STN): Trading at 31.5c for a market cap of $41m. It was a 38.5c stock before the general market downturn got going with gusto at the start of June.
The resource at its Apollo Hill project was increased to 1.47 million ounces at 0.6g/t gold in May and it too is well funded to keep adding ounces.
The grade is not the highest around but Apollo Hill is a bulk tonnage/low cost proposition from a heap leach operation not unlike some of the world’s most profitable gold mines in the US. Heap leach gold operations are a bit of a novelty in the Australian scene but actually provide 46% of the world’s annual output from an average grade of 0.7g/t gold.
Saturn is progressing the project to the preliminary feasibility study stage with a potential 10 million tonne-a-year operation probably good for annual output of 100,000 ounces. Apollo Hill is an interesting one that has broader implications for both the Leonora district, and WA’s goldfields generally.
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