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Mining
Gold miners Northern Star Resources (ASX:NST), Perseus Mining (ASX:PRU) and Genesis Minerals (ASX:GMD) have deodorised the stench of a reporting season headlined by putrid numbers from battery metals companies.
It’s also recovered some glamour for the sector, which suffered a selldown as Evolution Mining (ASX:EVN), Australia’s second biggest gold producer after Northern Star hacked down its guidance last week.
December numbers from some of the ASX’s closest watched gold stocks came with bullion prices steady overnight at $2030/oz, upwards of $3050/oz Australian.
Northern Star maintained its second half weighted guidance of 1.6-1.75Moz at all in sustaining costs of $1730-1790/oz after producing 412,000oz at $1824/oz in the three months to 31 December.
That translated to all in costs of $2558/oz and free cash flow of $102m with works beginning on a major mill expansion intended to double the Super Pit and Mt Charlotte mines in Kalgoorlie to 900,000ozpa by the end of the decade.
The gold producer’s cash earnings for the first half of FY24 came in at $685-715m compared to $467m in the first half of FY23, with early access to a high grade portion of the Super Pit known as Golden Pike North coming early after the base of that cutback was cut off by a wall slip several years ago among the highlights.
Northern Star boss Stuart Tonkin, who has long spoken of the inflationary pressures of the WA labour market, said the company had reached out to nickel companies facing cutbacks and mine closures to assist workers.
“One of the first things we’ve done is reached out across those businesses we understood were going into care and maintenance or reducing staffing,” he said on a conference call this morning.
“We have vacancies across a group we can fill so we’ve put that offer out there to get them in.
“I don’t see it fundamentally as a cost saving it’s around keeping those jobs in the regions and keeping them employed and filling gaps and as we’re growing it’ll certainly aid delivery of our business and quality of skilled people reemployed.”
The enthusiasm of investors for gold buying was also revealed in additions to Northern Star’s hedgebook, which included adding 285,000oz of forward sales at up to $3450/oz.
Its hedgebook now sits at 1.8Moz at $3028/oz.
“As we deliver into those hedges, opportunistically adding to that book, using that contango to get the price up our average book price is above 3000 bucks an ounce,” Tonkin said.
(Contango refers to periods where futures contract prices rise above spot prices. The opposite of contango is known as backwardation. No, really.)
Two years of aggressive M&A may be behind Genesis Minerals (ASX:GMD) if its latest quarterly is to be believed, with the Raleigh Finlayson led miner saying its growth focus has pivoted from inorganic to organic.
The most noteworthy of those deals were its mop up of the Gwalia and Mt Morgans projects from St Barbara and the takeover of Dacian Gold, respectively, which were completed last year.
But it also secured 610,000oz of oxide gold in a deal announced in December and expected to complete by March in the Bruno Lewis and Raeside deposits, bought from Kin Mining (ASX:KIN) for $15m cash and ~22 million shares as potentially cheap feed for to help restart the sidelined 2.9Mtpa mill at Mt Morgans — now known as the Laverton Mill.
Genesis’ cash and bullion on hand built from $186m to $192.3m in the December quarter after producing 35,296oz at $2141/oz.
For its first half year as the owner of the previously stuttering Gwalia mine, Genesis delivered 69,361oz at $2114/oz.
It had previously produced in the range of 120,000-130,000ozpa for St Barbs, with AISC coming in at $2521/oz in FY23.
A five year outlook for the $1.76 billion miner, which Finlayson wants to have producing over 300,000ozpa in echoes of his ascension previously as the boss of Saracen Mineral Holdings before its merger with Northern Star that combined the Super Pit under one owner for the first time.
“We continue to build momentum in our strategy to establish a 300,000ozpa gold producer characterised by strong margins and cashflow with long mine lives in the tier-one jurisdiction of WA,” Finalyson said.
“There is a clear vacancy on the ASX in this space, despite the strong demand among investors for gold producers of this nature, and our strategy is designed to ensure we capitalise on this substantial opportunity.
“We are meeting our current targets at Gwalia, with the benefits of the work done by our outstanding team resulting in improved production and costs. We expect this trend to continue as we implement our operational changes.”
Coincidentally, Genesis’ results came out the same day Perth high-flyer Cameron Waugh pled guilty to one of six insider trading counts levelled by the Australian Securities and Investments Commission in the Stirling Gardens Magistrates Court. The other five charges were discontinued.
“ASIC alleged that over a seven day period from 14 – 21 September 2021, Mr Waugh applied to acquire, and did subsequently acquire, 747,626 shares in Genesis while in possession of inside information,” ASIC said in a statement.
“It is alleged that through his role at Omnia Company Pty Ltd, at the time of his share applications, Mr Waugh was aware of a funding proposal that included a multi-million-dollar placement of Genesis shares and a restructure of the Gensis board that would see Raleigh Finlayson and Neville Power join the board.
“On 22 September 2021, this information became public when Genesis published an ASX announcement titled ‘Raleigh Finlayson to Cornerstone Strategic Funding Package’ which subsequently saw the Genesis share price rise 187%.”
There has been no suggestion anyone else, or anyone connected with the company was involved, with sentencing to take place on March 26 in the WA Supreme Court.
Fresh off its $258 million, 55c per share bid for hostile takeover target OreCorp (ASX:ORR), Perseus continued to boost its cash pile in the December quarter, increasing its cash and bullion on hand by 8% to US$642m.
It makes the West African gold producer one of the most cashed up players in the gold space, as producers look to jump on weak valuations for developers and juniors to snag a deal.
PRU produced 128,773oz in the December quarter at all in site costs of US$1023/oz, down 3% and up US$86/oz respectively.
Its cash margin fell 5.9% but at US$940/oz remained healthy, delivering notional cash flow of US$122m against US$132m in the September quarter.
It means PRU produced some 528,486oz across its Sissingue, Edikan and Yaoure gold mines in 2023 at US$984/oz.
It expects to produce 226,000-254,000oz at US$1180-1340/oz in the June year to hit FY24 output of 491,000-517,000oz at US$1000-1100/oz.
PRU, which also has $300m of undrawn debt, launched the OreCorp deal in a bid to snare its proposed 234,000ozpa Nyanzaga project in Tanzania after interjecting in a deal supported by OreCorp’s board to sell the miner for cash and shares to TSX-listed Silvercorp Metals.
“We believe we’re paying a full and fair price and furthermore it’s fairly clear that Perseus is the right party to be the steward of Tanzania’s Nyanzaga project going forward,” PRU MD Jeff Quartermaine said today.
“We’re a little bit surprised that the board of OreCorp hasn’t recognised the superiority of our bid but nevertheless it’s the shareholders who make that decision and we believe that they will make the right decision in the fullness of time.”
The gold sub-index rose 2.67% today, with a recovery in battery metals stocks on the back of Chinese stimulus rumours helping the materials sector to a 1.38% gain.
OreCorp told shareholders this week it had reviewed the Perseus proposal, presented like Silvercorp’s new deal as an off-market takeover offer, and continued to view Silvercorp’s offer of 19c cash and 0.0967 shares for each ORR share as superior.
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