Gold: More than 4 million oz says Pantoro could be running with the big boys very soon
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It’s all about the mergers and acquisition right now. At the bigger end of town, $1.75 billion market cap St Barbara (ASX:SBM) will shell out about $3.11 a share for TSX-listed producer Atlantic Gold.
This $773m all-cash transaction is a 38.75 per cent premium to Atlanta Gold’s closing price on Tuesday.
But we aren’t focussing on that this morning. Smaller, but no less transformational, is Pantoro’s (ASX:PNR) acquisition of 50 per cent of the 4.4 million ounce Central Norseman Gold project (CNGP), 186km south of Kalgoorlie in WA.
Pantoro aims to intially produce 100,000oz per annum, expanding to 200,000oz per annum over the next two to four years.
With Pantoro’s Halls Creek operations ramping up to 80,000oz a year goal by mid 2019, this deal could propel Pantoro into the next production tier. Check this out:
Potential new production neighbours Ramelius (ASX:RMS) and Silver Lake (ASX:SLR) have market caps of about $560m and $670m, respectively.
For those who haven’t heard of the CNGP, it produced rivers of gold for eight decades straight before going into care and maintenance in 2014. It is amongst Australia’s highest-grade goldfields, producing more than 5.5 million ounces since discovery in 1894. That would be worth $10.3 billion at today’s prices.
That’s not all, though, because there’s a ton of exploration upside.
That 4.4m oz is contained in a 35 separate resources, the majority of which are open. This means they haven’t found where the gold ends.
Pantoro says independent expert HGS has reported an exploration target of up to 25m oz. Let that sink in for a second.
CNGP has been on the market for a few years, and there was even speculation in 2017 that the vendors could be looking for between $300 million and $400 million.
If that’s the case, Pantoro is getting a bargain for its 50 per cent share — $10m cash, $20m in shares, and deferred $25m cash payments plus a smelter royalty.
The miner – which is debt free and has about $21m in the bank — will also sole fund the first $50 million of project expenditure to get it up and running again.
Pantoro will fund the acquisition via existing cash reserves, ongoing cash-flow from its Halls Creek operations, and a $43 million fully underwritten placement.
Pantoro has already shown they can redevelop, restart, and successfully operate high-grade, vein hosted underground gold mines.
In 2014, the company shelled out $2.8m in cash and shares for 49 per cent and management rights of the Halls Creek Project.
Like Norseman, it had existing infrastructure , a decent gold resource, and exploration upside. This made redevelopment a quick process, and first gold was poured in September the following year.
Pantoro has increased production every quarter (sans one) since then, as development of its second mine—the high grade, 74,000oz Wagtail – continues.
This is a similar setup, Pantoro boss Paul Cmrlec says.
“There are many synergies with Pantoro’s acquisition and development of the Halls Creek Project approximately 5 years ago,” he says.
“Both projects have outstanding mineral resources which are amongst the highest grade in Australia, and mineralisation styles are very similar.
CNGP is “infrastructure rich” which will ultimately reduce the development cost considerably — just as it did in the development of Halls Creek, Cmrlec says.
“Our team will immediately focus work on defining, developing and operating a large scale gold production hub within the next 12 to 18 months.”