Monsters of Rock: Finlayson's new Leonora gold empire takes shape as Dacian falls

Raleigh Finlayson is garnering strong support in his bid to consolidate the Leonora gold district
All-scrip $111 million offer for Dacian Gold will combine the Mt Morgans mill with Genesis’ high grade ore feed
High-flyers among the backers of Genesis’ concurrent $100 million equity raising

The hard details are in for Genesis Minerals’ (ASX:GMD) plan to go from minnow to shark in the WA gold space.

It is a sphere of the mining industry that, for the first time since the mid 2010s, looks like it could be shot to atoms and reconfigured by new masters as underperformers are torched by the market and juniors emerge in their stead.

Think the way Mike Teevee gets vaporised and rearranged in one of the many slyly terrifying scenes in Willy Wonka and the Chocolate Factory and you get a sense of what is going on.

In Dacian’s case what was once a billion dollar mine builder four years ago has faltered in operation, turning it into a $100 million target gleefully snapped up by Raleigh Finlayson — one of the last Aussie gold wave’s success stories at the helm of Saracen Mineral Holdings.

His move into Genesis after leaving Northern Star Resources last year has proven to be a canny one for the time being.

Genesis at the time had a handy 1.6Moz resource, some of it very high grade. It was also based in Leonora, an historic gold field with plenty of processing infrastructure and some legacy operators struggling with things like labour and costs.

Add Finlayson’s track record and pull in capital markets — the company has just completed a $100 million raising in a tough market — and it has been the perfect launch pad so far.

“The first step”

The title of the presentation delivered by Finlayson to investors and analysts today – the first step – gives you a sense of the role of the Dacian deal as a mere stepping stone.

Finlayson has similar aims to when he was in charge of Saracen of building a portfolio with the capability of producing 300,000ozpa over multiple years.

It looks like he is keen to get there a lot quicker though.

The nitty gritty of the Dacian deal is this. Shareholders of Dacian, which recently suspended open pit mining at its Mount Morgans project, will get 0.0843 shares in $300 million capped Genesis for every DCN share they hold, a 33% premium to its 5 day VWAP.

Genesis has already announced a placement and garnered a pre-bid acceptance from DCN shareholder Perrenial, which will give it a 16.6% interest in its target.

It only needs to hit a minimum acceptance of 50.1%.

The $100m raising will also ring in the changes in Genesis’ own register and leadership. Former Saracen chair Tony Kiernan will step into the same role (under fire former Fortescue boss Nev Power will quietly step off the Genesis board as well), while Finlayson’s former backer Kerry Stokes (Australian Capital Equity) and employer Northern Star Resources will tip some cash in for Genesis shares.

The Dacian deal seems to have support from the market, but there looks to be more to come.

Genesis’ presentation included a slide capturing all of the resources in the 65Moz Leonora district, a potential hint at the scale of his ambitions, with merger talks already in train with Gwalia gold mine owner St Barbara (ASX:SBM).

That asset is the district’s jewel in the crown and probably a key acquisition for any true regional consolidation play.

Other companies in the vicinity include Red 5 (ASX:RED), which reported today that the ramp up of its 176,000ozpa King of the Hills mine remains on track, Kin Mining (ASX:KIN), Magnetic Resources (ASX:MAU), South African major Gold Fields, Nexus Minerals (ASX:NXM) and Northern Star’s Carosue Dam operations.

Fixing up Mount Morgans

So can Genesis succeed where Dacian have, if not failed, then definitely struggled.

A strategic review into the way forward at Mount Morgans is expected to take place across the second half of 2022.

The aim is to preserve a long life 150,000ozpa base case with a bulk open pit and high grade sweeteners.

The Ulysses mine, and underground deposit that serves as the furthest advanced of Genesis’ 2Moz resource base and has a high grade core of 363,000oz at 6.4g/t, could be a key.

“(The review) provides the opportunity to reset the strategy without immediate mining pressure in a challenging cost environment and will preserve our long life 150,000oz per annum base case, combining the bulk open pit with a high grade sweetener,” Finlayson said.

“There is further upside and time to grow our resource and reserve base and optimise our life of mine plan and build … stockpiles ahead of a restart and (we have) the potential to expand the mill subject to drilling success over the course of the next 18 months.”

Finlayson said the pairing of the Mt Morgans mill with Genesis’ assets was a natural one.

“It’s worth noting the $172 million Australian of capital infrastructure invested in this assets over the period 2016 to 2018,” he said.

“It’s also worth noting that the ore hardness of the adjacent Jupiter ore is nearly twice that of many of the ore sources that will be added from the Genesis ore bodies.

“So we expect to be able to see enhanced throughputs as we introduce this blending agent, and there’s also scope to potentially add a secondary crushing circuit that has the potential to further expand milling if required with success from the drill bit.”