Ground Breakers: Will a new mid-tier gold miner emerge? And Lynas falls on Malaysian radiation problems

Gold merger fever continues with Pantoro and Tulla announcing deal to combine Norseman gold JV in one company
Lynas shares hit as local media report Malaysia will knock back cracking and leaching deadline extension
Coal stocks lift on stronger thermal prices

The merger fever taking over the gold sector has continued with the announcement of a “domestically significant and competitive mid-tier gold producer”.

Hot on the heels of St Barbara (ASX:SBM) and Genesis Minerals’ (ASX:GMD) announcement of their merger as Hoover House, Brightstar Resources (ASX:BTR) and Kingswest’s (ASX:KWR) lower profile Laverton gold combination and Newmont’s decidedly high profile $24.5b approach to link with Newcrest (ASX:NCM), Pantoro (ASX:PNR) and Tulla Resources (ASX:TUL) have shaken hands on a deal to merge the Norseman gold mine owners.

The deal, coupled with a $75 million capital raising at 6c a pop will give the JV partners a platform of a 110,000ozpa operation backed by a 4.79Moz mineral resource and 980,000oz ore reserve.

The deal will see Pantoro acquire Tulla via a UK scheme of arrangement, issuing 4.96 PNR shares for each Tulla chess depositary interest, a 24.2% premium dropping to 14.1% after the placement backed by the Maloney family in the form of their company TRG, the 54.9% major shareholder of Tulla.

Keven Maloney and Mark Maloney will remain on the Pantoro board as non-executive directors, with PNR’s Paul Cmrlec to continue as managing director and Wayne Zekulich to act as interim chair until a permanent independent chairperson can be found.

If the placement is successful PNR shareholders will hold a 37.8% stake in the combined entity, with Tulla investors’ stake at 35.6%, while the merged company will have $55 million in debt and a pro-forma $59.6m cash position.

The company is aiming to turn the Norseman gold region, which delivered 5.5Moz historically and was the nation’s longest running gold mine between 1935 and 2014, back into a major producer.

“Consolidating the Norseman Gold Project into a single entity is a logical step for all parties to maximise value as the project ramps up to reach its full potential as a premier gold asset in Western Australia,” Pantoro MD Cmrlec said.

“While Norseman has experienced delays and challenges in its ramp-up, key operational and management changes made late in 2022 are now yielding positive results, with productivity and throughput increasing month on month and process plant ramp-up now virtually complete to nameplate capacity.

“The equity raising ensures that the combined group is well funded through the initial phases of production and enables the reduction of the consolidated debt position of the company during this critical phase.

“We look forward to working with our proposed new board members and thank our proposed outgoing directors for the dedicated service and guidance to management of the company through the very challenging environment of the past three years in particular.”

Pantoro (ASX:PNR) and Tulla Resources (ASX:TUL) share price today:

Lynas shares knocked by local media report

A report from the Straits Times which suggests Lynas (ASX:LYC) will be unsuccessful in getting a deadline for the cessation for a key processing step at its Malaysian downstream plant extended.

Lynas insists it has been a solid and safe operator in Malaysia over the past decade, but it has been beset by criticism and community opposition for several years.

Malaysian authorities set a July 1 deadline to end cracking and leaching at its Kuantan processing plant, the biggest rare earth oxide producer outside China in its licence renewal three years ago.

The decision precipitated a call to build a processing plant in Kalgoorlie, near the site of its Laverton-based Mt Weld mine, but it is unclear whether the more than $500 million facility will be ready to go by the middle of this year.

The project has suffered a cost blowout along with accommodation and labour shortages common to WA’s mining and construction sectors.

At the same time it has been trying to change the conditions of its Malaysian licence to extend its cracking and leaching approval to avoid a potential production gap.

The issue is the low levels of radioactive waste that must be stored from the crucial step in the production of rare earths oxides like neodymium and praseodymium, which go into the production of the permanent magnets used in electric vehicles and wind turbines.

While Lynas responded by saying no decision had been made on the outcome of its licence renewal application, The Straits Times claimed it had already been informed of the decision “informally”.

“Managing director Amanda Lacaze said her firm was in talks with Malaysian atomic energy regulators on lifting the conditions as it had proven that its operations were not a health hazard,” they said.

“But ST has learnt that the Atomic Energy Licensing Board had already informally informed Lynas of the government’s decision this week.

“The company will have 30 days to appeal to Science, Technology and Innovation Minister Chang Lih Kang after being notified officially.

“A potential closure of the S$1 billion facility would not just be a huge blow to Lynas – which has yet to fire up other production plants – but will also impact the geopolitically sensitive supply of rare earths crucial to high-technology applications such as mobile phones, rechargeable batteries and military assets.”

Lynas Rare Earths (ASX:LYC) share price today:

What’s going on in the market?

Coal miners bounced after a reversal in thermal coal futures, lifting back above US$200/t on Friday.

Whitehaven Coal (ASX:WHC) lifted 3.04%, with Yancoal (ASX:YAL), Stanmore (ASX:SMR) and Coronado (ASX:CRN) all up.

De Grey (ASX:DEG) and Silver Lake (ASX:SLR) performed well in the gold space after prices consolidated late last week at US$1865/oz.

De Grey posted strong exploration results suggesting a new gold zone had been discovered at Withnell South, part of its 10.6Moz Malline gold project in WA’s Pilbara.

Iron ore stocks were mixed, with materials down 0.18%.