Aussie gold sector crying out for a new champion: Liam Twigger
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Long gone are the days when Bill Beament and Jake Klein duked it out for the title of the leading voice in the Australian gold sector as the heads of emerging miners Northern Star Resources (ASX:NST) and Evolution Mining (ASX:EVN).
Both rose to prominence as heroes of the space seven or eight years ago when a downturn prompted a fire sale and retreat from Australia by global super majors Barrick and Newmont.
Assets like Cowal, Kanowna Belle and Jundee were sold on the cheap and milked for profits by NST and EVN, turning them into the second and third largest gold producers on the ASX behind Newcrest Mining (ASX:NCM).
While both are still around in some way, shape or form — the measured and authoritative Klein is still exec chair at Evolution while the flamboyant Beament has set his sights on the critical minerals copper and zinc with his new company Develop Global (ASX:DVP) — there may be space now for a new young gold champion to emerge.
Valuations in the sector have receded substantially since the price of the safe haven metal hit record highs of US$2067/oz two years ago.
That has created a yawning gap between the top three gold miners and the mid-tier.
That gulf presents a perfect opportunity for consolidation in the gold sector, Argonaut deputy chairman and executive director Liam Twigger says.
“There’s a combination of things that you need – you need to have the capital, you need to have the project opportunities, and then you need the leadership,” Twigger said.
“And Bill Beament and Jake Klein have been the two standout leaders. But the next generation may well be coming through.
“I’m not writing off Jake Klein or Bill Beament, but there will be young people that the market will get behind that have the vision and the leadership and can really take advantage of the Australian gold sector, where we’ve got a bunch of mid-caps that should be consolidated.”
With interest rates and inflation on the rise, investors are fleeing to cash and chasing safer investments.
That means the capital that has flowed into early stage explorers and IPOs in recent years could well return to larger companies with the scale and capital to ride out tough times.
In times like these, the adage goes, bigger is better.
Twigger says the supply-demand outlook for individual commodities like nickel, lithium and copper is looking very good for companies with resources and a pathway to production on their books.
“To be a junior explorer, I think is going to be hard, I think the risk appetite for exploration has gone off,” he said. “But anyone that’s got a decent resource could find themselves in the crosshairs.
“I see consolidation in the sector. At the big end of town for gold, we need some majors emerging from the Australian market.
“And I think the market is ripe for consolidation in the nickel sector.”
Twigger thinks a ‘filtering process’ will take place after the recent IPO boom, which saw the ASX trump Canada to become the premium market for exploration listings.
“So the ASX is really well positioned and I think M & A is possible now,” he said.
“We’ve had a massive number, probably the highest number of (resources) IPOs we’ve ever had in the history of the ASX, now there’ll be a natural filtering.
“Those that have turned that capital into coming up with resources will survive, but those who are looking for further exploration money it might be tough.
“On the M & A side, I see an M & A cycle coming through.”
It is impossible to say who will emerge as this cycle’s gold impresario but there are a few likely candidates.
Finlayson already has priors in the M & A field, having built Saracen Mineral Holdings into one of Australia’s biggest mid-tier gold miners before its $16 billion merger last year with Northern Star.
The mail has been that Finlayson is looking at a merger with Gwalia gold mine owner St Barbara (ASX:SBM).
At a $950 million market cap SBM is trading well off its 2018 highs and is in the same neighbourhood as GMD, but is carrying a significant amount of baggage at its Simberi operations in PNG and Atlantic Gold in Canada.
Recent exploration success stories are also going to be closely watched by the market.
Bellevue Gold (ASX:BGL), which has former Northern Star executive Darren Stralow at the helm as CEO, is expected to hit commercial production at its Bellevue gold mine near Leinster in the second half of 2023.
That operation should produce 200,000oz of gold a year over the first five years of its 10-year mine life, with its carbon intensity of 0.15-0.2t of CO2 per ounce of gold produced also projected to be the lowest on the ASX.
Gold Road Resources (ASX:GOR), owner of half of the Gruyere gold mine alongside South Africa’s Gold Fields, has also made no secret of its growth ambitions, losing out in a bidding war with Ramelius Resources (ASX:RMS) last year over junior Apollo Consolidated before getting the support of DGO Gold’s (ASX:DGO) board of directors for a $308 million scrip takeover this year.
Duncan Gibbs-led Gold Road made the 2.25 for 1 share offer unconditional last week after crossing the 80% ownership threshold, and controlled 85.85% of DGO’s voting shares at last count.
While DGO has a few exploration assets in its own right, the real prize would appear to be its 14.4% stake in De Grey Mining (ASX:DEG), owner of the world class Hemi deposit in WA’s Pilbara.
Since its discovery in 2020, Hemi has grown to 8.5Moz, making it one of WA’s best gold finds this century.