Monsters of Rock: Can Genesis turn Gwalia into gold's Garden of Eden?

Genesis bolsters cash balance by $14 million in solid start to life as the operator of the Gwalia gold mine
Could more consolidation be on the cards in the Leonora goldfields?
Miners fall but Liontown shares strong after Rinehart buying spree continues

In its later days with St Barbara (ASX:SBM) at the helm, the Gwalia gold mine delivered little joy for its long-time owner, which eventually had to offload the flagship asset to Raleigh Finlayson’s Genesis Minerals (ASX:GMD) in a bid to stave off its lenders.

Once one of the cheapest and highest grade gold mines in Australia, the near 2km deep trucking mine has become costly to operate as a standalone mine as miners have travelled closer to the centre of the Earth.

The Genesis deal brings the promise of consolidating regional assets so the 125 year old Gwalia mine, located 230km north of Kalgoorlie in WA’s Leonora goldfields, meaning it doesn’t have to go it alone.

In its final year of operations under St Barbara the mine delivered 138,050oz at all-in sustaining costs of $2521/oz, a margin of barely over $150/oz against SBM’s average realised gold price.

The June quarter was a stronger one, delivering $32 million of the project’s $48m in operating cashflow for FY2023.

The first quarter under Genesis ownership in September has followed that pattern.

According to Genesis, its cash balance was bolstered by $14m to $170m across the quarter to September 30 on quarterly gold production of 34,066oz.

That came as Finlayson’s gold upstart spent $8-10m on development works at the Admiral open pit and Ulysses underground around 30km south of the Gwalia mill.

It’s a scale play, accessing ore closer to surface to supplement the deep material from the Gwalia mine.

“Our team has made outstanding early progress towards re-setting Gwalia mine production, adding Admiral ore to fill the Leonora mill and reducing costs,” Finlayson said. “These are all key ingredients in our long-term low-cost growth strategy at Leonora.”

More consolidation on the cards?

At the same time, Genesis’ ~80% owned Dacian Gold (ASX:DCN) has received access and right to mine from the Department of Defence and WA Mines Department for its Redcliffe project, a satellite for the mothballed Mt Morgans mill.

Acquired in a previous merger with NTM Gold, Redcliffe contains 12.7Mt of resources at 1.6g/t for 673,000oz of gold, including 1.7Mt at 3.1g/t for 168,000oz at the recently approved Hub deposit.

Redcliffe contains 1.6Mt at 2.7g/t in reserves for 141,000oz including 580,000t at 3.4g/t for 64,000oz at Hub.

Mt Morgans already contains around 3.3Moz in resources on top of the 15Moz controlled at Leonora by Genesis.

Genesis is planning to deliver a five year outlook in March next year, demonstrating plans to expand to more than 300,000ozpa.

It remains to see whether they’ll attempt to add more assets in the region to the play.

The King of the Hills mine owned by Red 5 (ASX:RED) is a logical option, given RED was in talks last year with St Barbara about a potential deal.

But the most recent action there saw Silver Lake Resources (ASX:SLR), scuppered in a late move to try snare Gwalia from under Genesis’ nose, pick up an 11% stake in Red 5.

Intrigue abounds.

Leonora consolidation share prices today

And on the markets

The materials sector copped a 0.27% loss as markets went heavily into the red again on Wednesday. The sector representing the major mining stocks is now up just 6.24% over the past year with commodity prices losing their heat.

Northern Star (ASX:NST), Rio Tinto (ASX:RIO) and Liontown Resources (ASX:LTR) were on the winners’ list, the latter after Gina Rinehart pushed her stake to almost 15%, challenging chairman Tim Goyder’s position as the largest holder of the lithium developer’s stock.

The move could well give her enough capital to scupper an Albemarle bid for the company and its $951 million Kathleen Valley lithium mine.

Should less than 75% of the stock be voted in favour of the proposed scheme in the event of a binding offer it would not go through.

While recently hot commodities like iron ore and uranium have paused this week, one sector which keeps running up is coking coal.

Futures surged more than 5% to US$350/t yesterday, though how long coking coal and iron ore can stay strong is up in the air as steel producers struggle with margin pressure in China.