Ground Breakers: Westgold locks in $100 million placement in race to 400,000ozpa and nickel madness stalls $1.1bn takeover
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Westgold Resources’ (ASX:WGX) was too little, too late with its bid to takeover Dalgaranga gold project owner Gascoyne Resources (ASX:GCY), a curious corporate stoush that saw under-the-radar junior gold explorer Firefly Resources emerge as the winner.
Westgold walked away from a deal that would have given it a pathway to produce 500,000ozpa in a few years after it proved impossible to unwind the Gascoyne-Firefly tie-up.
Now the Peter Cook-chaired company is back in action with a plan to hit a 400,000ozpa production rate by 2024 after raising $100 million from instos and sophisticated investors at $2.10, a 13.9% discount to its last traded price of $2.44 a share on March 9.
That prompted a similarly sized sell-off in Westgold stock, but it has presented its rationale for the offer, saying it will fund organic growth of the next couple years.
Also on the cards is more M&A activity after the failed Gascoyne bid, with Westgold saying it is “maintaining or extending optionality over stranded regional gold assets”.
In other words, it’s having a sniff in the neighbourhood around its various Mid-West gold mines and processing plants.
On the organic end, Westgold says it wants to increase annual production at its flagship Bluebird underground mine by 50,000oz (a 50% increase) and is accelerating the Fender underground development, targeting 300,000-420,000t at 2.8g/t for 26,000-36,000ozpa.
More strategic development assets exist around the Tuckabianna development project and the Day Dawn development project, encompassing the historic and high grade Great Fingall and Golden Crown mines where Westgold holds a mineral resource of 1.9Mt at 8.5g/t for 500,000oz.
With the Dalgaranga mill out of the picture, the increase of Westgold’s processing capacity to beyond 4Mtpa is on the cards through expansions of its Tuckabianna and Fortnum mills.
“Westgold will systematically deploy these funds to expand gold production in FY23 and FY24 from Bluebird, Fender and the Tuckabianna trend, underpinning the expansion of our processing hubs,” Westgold executive director Wayne Bramwell said.
“Concurrently, and with a view to FY24 onwards we will rapidly advance the strategic and iconic high-grade Great Fingall and Golden Crown mines.
“This placement heralds a new phase of corporate development at Westgold. Operationally we are sharply focussed on cost management and profitability of the business at its current scale and can now launch the next stage of growth for our shareholders from a position of increasing strength.”
The historic bull run in LME traded nickel prices last week has caused some seriously strange flow-on effects.
Not everyone is happy about the way the LME went about things after it not only paused trade when a short squeeze sent prices over US$100,000/t last week and exposed the world’s largest nickel player Tsingshan to potentially huge trading losses on short positions and hedges.
The issue is less so the pause itself, but rather the LME’s decision to cancel almost 5000 trades that triggered the doubling of already near record nickel prices in just hours on Tuesday.
At the same time, some folks will be happy to see a little steam come out of the market, which remains suspended.
$9 billion ASX-listed battery metals miner IGO (ASX:IGO) is facing a two month delay to its $1.1bn all cash purchase of Western Areas (ASX:WSA), which said it was talking to its independent expert KPMG about the medium and long-term implications for nickel prices from the recent volatility.
That will at the least delay the closure of the takeover from April to June this year, news which sent IGO and WSA’s shares in opposite directions.
Experts remain uncertain about that outcome, with many thinking it will return to its normal trajectory once the market reopens.
Prices had already been elevated to 11 year highs on the back of Russia’s invasion of Ukraine because of Russia’s status as a major producer of class 1 nickel sulphides.
Chris Ellison’s Mineral Resources (ASX:MIN) will take a 5% stake in fast rising lithium explorer Global Lithium Resources (ASX:GL1) after joining a ~$30 million capital in the junior as a cornerstone investor.
Iron ore and lithium miner MinRes operates the Wodgina and Mt Marion JVs in the Pilbara and Goldfields, respectively, not far from GL1’s Marble Bar and Manna projects.
MinRes will top $13.6m into the placement for GL1, which is up over 500% since listing last year.
Another $11.3m of shares will be issued to institutional investors with a $4.3m placement going to Suzhou to maintain its 9.9% share in the explorer.