Monsters of Rock: Miners hold gains as Red 5 murmurs something about St Barbara merger

Way to bury the lede.

Leonora gold miner Red 5 (ASX:RED) has hit up the market for some $60 million in fresh equity at 16c, a 15.8% discount to its last traded price of 19c per share in a hunt for working capital and cash to expand and drill at its new King of the Hills mine in the Goldfields.

Buried halfway down a 45 page presentation to explain the discounted cash call, Red 5 did a Herschel Shmoikel Pinchas Yerucham Krustofski and said the quiet part out loud, divulging it was in discussions with Gwalia gold mine owner St Barbara (ASX:SBM) about “potential operational synergies”.

Ergo it’s been talking about a merger, which would combine 4.9Moz of reserves at Gwalia and King of the Hills into a single entity.

It follows months of now cold discussions about a potential tie-up between St Barbs and Raleigh Finlayson’s Genesis Minerals (ASX:GMD).

The release by Red 5 received quickfire response from St Barbs, which like Red 5 described the discussions as “very preliminary in nature”.

How interesting.

In a harsh reminder that the evils of inflation, Covid and labour pressures will be hard for miners to exorcise, Red 5’s return to equity markets to top up its kitty came amid a slower than expected ramp up in production.

Red 5 (ASX:RED), has spent the bulk of the pandemic building its 176,000ozpa King of the Hills operation in Leonora.

Effectively picking up where one time owner Sons of Gwalia left it back in the early 2000s, the idea is to turn the operation back into the bulk open pit it once was when it was within the Lalor brothers’ empire.

Having poured its first gold in June, the $226 million redevelopment has encountered some issues, with Red 5 divulging its ramp up schedule was delayed between May and July, impacting tonnes and grade in the September Quarter.

More crews have been brought in since August to get back on track and hit FY23 targets, with commercial production now slated for the December quarter after expected output of 26,000-27,000oz in the three months to September 30.

Leonora consolidators share prices today:

Miners close strong as British bond buy drives metals higher

Gold hit US$1660/oz overnight, up over 2% as metals rallied hard on a falling US dollar in response to British fiscal intervention from the Bank of England.

The moves triggered a buying spree for Aussie mining stocks, with the ASX materials index up 2.17% and energy stocks gaining 2.78% against a broader 1.44% rally in the ASX 200.

Gold, battery metals and coal were among the prime movers, with Whitehaven Coal (ASX:WHC), Lynas (ASX:LYC), Northern Star (ASX:NST), Yancoal (ASX:YAL) and MinRes (ASX:MIN) all up more than 3%.

Coronado (ASX:CRN), De Grey (ASX:DEG), Sayona (ASX:SYA), New Hope (ASX:NHC) and Syrah (ASX:SYR) were among the stronger mid-cap performers.

The Syrah rally came just three days after it announced the temporary closure of its Balama mine in Mozambique, the world’s largest graphite mine, which was interrupted by “illegal industrial action”.