Is this cracking $66mn ASX deal the catalyst for an all in junior metals M&A shoot out?
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At the crest of a new wave of mergers and takeovers washing over the small end of the Australian gold sector, the head of an emerging miner joining the fray says more consolidation is inevitable.
Just weeks after former Saracen and Northern Star (ASX:NST) boss Raleigh Finlayson secured his dream deal to capture St Barbara (ASX:SBM) and its Gwalia gold mine via Genesis Minerals (ASX:GMD), Catalyst Metals (ASX:CYL) has signalled its intentions to break out of the pack by launching a corporate strategy to consolidate WA’s historic Plutonic gold field.
Catalyst, which already operates the Henty gold mine in Tasmania and boasts an exploration JV with Gina Rinehart’s Hancock Prospecting in Victoria, took the first step today after securing the approval of Vango Mining’s (ASX:VAN) board for a $66 million all-scrip merger.
That alone will give Catalyst 1Moz at 3.3g/t in WA’s Marymia-Plutonic Belt along with 40km of ‘under-explored’ exploration strike. But the next step will be grander, with CYL saying it is in discussions with Toronto-based Superior Gold over its adjacent Plutonic gold mine.
If successful at snaring the 65,000ozpa mine once owned by Barrick Gold and Northern Star, which includes 6Moz of resources, 600,000oz of ore reserves and an operating 3Mtpa processing plant, it would give Catalyst two operations on opposite ends of the country, with its potential WA holdings including a 7Moz resource base and control over an historic 15Moz gold field.
It comes at a precipitous time. Gold miners including Catalyst, down ~40% over the past 12 months, were bruised by inflation, cost pressures and interest rate rises across the western world, notably from the US Fed.
But bullion has had a positive start to 2023, rising more than US$50/oz to over US$1870/oz (+$2700/oz Aussie) as investors bank on the severity and pace of rate rises slowing this year.
Catalyst managing director James Champion de Crespigny said more consolidation will take place, as shareholders signal their demands for growth among the junior and mid-tier gold sector, which has been cut adrift in recent times from the big three of Newcrest (ASX:NCM), Northern Star and Evolution Mining (ASX:EVN).
“With respect to the industry more generally and consolidation opportunities that are there, I think that’s what investors have been clear about for some time,” he told Stockhead.
“They don’t want to see one project companies, they just carry too much risk. They’ve been burned too many times.
“They want to see consolidation and they want to see that happening with synergies and obviously here, if that opportunity does arise to do such a consolidation, then we think there’s a price in there for everyone and that will be (to) the benefit of all shareholders.”
The Vango tie-up looks to be relatively secure, with CYL announcing it had support from the Vango board and shareholders controlling 73% of the voting stock in the target.
Those supporters including major shareholders and directors Hunter Guo and Carol Zhang, who have entered binding pre-bid acceptance agreements over their collective 19.99% stake in Vango.
Priced at 5.2c, CYL has deemed the 5 for 115 share offer, which will give Vango holders 35.7% of the combined entity, a 19.1% premium to Vango’s January 6 trading price of 4.4c and 33.5% premium to the 30-day VWAP of 3.9c.
Aside from the Catalyst-Vango tie-up there is plenty of other corporate action swirling around the junior space.
But Anova Metals’ (ASX:AWV) deal last year to acquire the private DC Mines and its Golden Dragon and Fields Find project, which will see it rebadge as 1.95Moz explorer Lustre Metals, was another example of the growth ambitions on show across the space.
Champion de Crespigny says more will come.
“I think smaller parties themselves are always trying to be bigger,” he said.
“And I think they’re facing increasing pressure from shareholders to consolidate, and so those that don’t want to move in that direction may be forced to and others I think would probably like to.”
He says Catalyst, which produced 5923oz at Henty at all in sustaining costs of $2658/oz in the September quarter and is aiming to ramp up to 35,000ozpa by the end of FY23, sees a rerating opportunity through the Vango acquisition and potential Plutonic consolidation.
Champion de Crespigny is complementary of the work Vango executive chair Bruce McInnes and his team had done in building the million ounce Marymia portfolio.
But he noted the marriage will also will set a team led by CYL’s technical director and top geo Bruce Kay, a former head of worldwide exploration for Newmont Mining, loose on Vango’s Marymia tenements, even if the deal to acquire the operating Plutonic mine doesn’t come to fruition.
“If we have a competitive advantage, you need to say that’s got to be in the form of our geological and exploration department under the guidance of Bruce Kay and the team of geologists that we have there that have worked with Bruce for any number of years,” Champion de Crespigny said.
“Really we’re backing them to work this piece of ground that perhaps has been left hidden for quite a number of years.”
It is not the first time WA has seen the arrival of the Champion de Crespigny name.
James’ father Robert Champion de Crespigny was the co-founder and CEO of Normandy Mining, whose own dealmaking turned the junior into a major force in Australian gold.
Eventually folded into the world’s biggest gold miner Newmont after a takeover battle with AngloGold, Normandy boasted a multi-faceted gold empire headlined by the stake in Kalgoorlie’s Golden Mile it acquired off Alan Bond’s crumbling Bond International Gold in 1989.
Like his father, James was an accountant by background, but he does not spend much time entertaining questions about comparisons.
With the Vango deal accepted by its board, he says the Plutonic discussions are “reasonably advanced” but cautioned it needed to be something mutually beneficial for Catalyst, Superior and Vango shareholders.
Having moved from a non-executive director role to the MD’s chair in October, he said Catalyst’s aim is to focus on controlling gold belts and grow its resource base through both acquisitions and exploration.
“The last two years have been re-investment into Henty and that was needed in order to get it to the position that we want to get that to, we feel we’re starting to get that onto a more level platform,” he said.
“And so the timing of this acquisition is sound as to taking that next step in the progression of our portfolio of assets.”
At Stockhead, we tell it like it is. While Anova Metals is a Stockhead advertiser, it did not sponsor this article.