Monsters of Rock: Raleigh topples first domino in Leonora gold power play and Moody's gets down on mining outlook

Genesis has secured majority control of Dacian Gold, with a major board reshuffle to follow at the end of this month at the newly enlarged gold junior
Ratings agency Moody’s sees EBITDA for major mining companies falling over the coming year

Chatter about Genesis Minerals (ASX:GMD) and its ongoing talks with St Barbara (ASX:SBM) has gone suspiciously quiet of late, possibly down to the fact St Barbara’s shareholders have been less than enthused about the prospect of giving up control of the Gwalia gold mine in any ‘merger of equals’.

But GMD boss Raleigh Finlayson has parlayed his status and heft in the gold sector into one notable win, declaring success in the emerging junior’s takeover of struggling Leonora-Laverton gold miner Dacian Gold (ASX:DCN).

Dacian entered the field of M & A play when it decided to wind down mining at its Jupiter pit earlier this year due to cost pressures.

In short, it wasn’t making enough cash to keep its mining and milling operations at the Mount Morgans gold mine going.

Genesis, which crossed the 50% ownership threshold to declare the deal unconditional today, plans to add the 2.4Moz Leonora gold projects, headlined by the high grade Ulysses underground, to Dacian’s resources to improve the consistency and grade of feed for the Mt Morgans mill, a facility that would cost well over $200 million to replicate in today’s construction market.

The takeover, which will see Dacian shareholders receive 0.0843 GMD shares for every DCN share they hold, will give them the opportunity to finally realise value from the once billion dollar goldie after years of heartbreak and production issues.

Genesis now holds 57.73% of the voting power in Dacian, installing a string of friendly faces to the target’s board.

Sue-Ann Higgins is the only Dacian director who will remain, with Craig McGown to become the independent non-executive chair.

New Genesis chairman Tony Kiernan, best known for his roles in the success of Saracen Mineral Holdings and Pilbara Minerals (ASX:PLS), will join the board along with Genesis CFO Morgan Ball and Lee Stephens as non-exec directors.

Power out

With Kiernan stepping up to the top role on Genesis’ board from October 1 and former Dacian chair Mick Wilkes of OceanaGold fame becoming a non-executive director at GMD, non-executive directors Tommy McKeith and Nev Power will part ways.

Power’s year or so at Genesis was plenty eventful, not necessarily for his work behind the scenes at the gold explorer.

The former FMG CEO and his son Nick tried to hop, skip and jump WA’s border patrol in a helicopter back when that was a thing last year, copping a suspended sentence for their troubles.

He still holds the bulk of his board roles, which include NED positions at APM Human Services(ASX:APM) and Strike Energy (ASX:STX).

Power initially stayed on with GMD but will now step aside, as flagged when the Dacian deal was announced in July.

“As Genesis Chair since 2018, Tommy has guided the Company through a period of outstanding growth, ensuring a solid foundation for the long term,” Finlayson said.

“Over the past 12 months, Nev has significantly contributed to Genesis’ arrival as a central player in the tier 1 gold mining district of Leonora.

“On behalf of the Board and Management, I thank Tommy and Nev and wish them the best for future endeavours.”

Genesis Minerals (ASX:GMD) and Dacian Gold (ASX:DCN) share prices today:

Mining stocks heading into negative territory: Moody’s

Enough sweating the little stuff, what’s happening in the bigger picture?

Ratings agency Moody’s thinks mining stocks worldwide are going to cop some earnings hits, saying lower coal and iron ore prices and production issues for copper, nickel, zinc and aluminium producers mean EBITDA from the world’s largest mining companies will contract over the next 12 months.

“EBITDA and prices are decreasing as business and macroeconomic conditions weaken. They will remain higher than in pre-pandemic years but below the record-high levels seen in early 2022,” Moody’s senior vice president Barbara Mattos said.

“In addition, energy and raw materials costs remain high, particularly in Europe, which will also reduce producers’ margins and earnings of producer(s) of base metals, for example.”

Supply challenges in places like Peru and Chile and lower prices are expected to weigh on copper stocks, although it’s worth noting the mood around copper plays is that the long term fundamentals for demand from the energy transition mean there is plenty of silver lining for the sector.

Moody’s also sees gold and silver declining on higher interest rates and a rising US dollar.

Maybe the most controversial call is that coal miners will fall back, given the resilience of the commodity against the backdrop of an energy crisis in Europe, stirred on by Russia’s invasion of Ukraine.

Miners have grown more bullish that prices will remain elevated into 2023, with New Hope Corp (ASX:NHC) declaring as much this week and Whitehaven Coal (ASX:WHC) seeking shareholder approval at its upcoming AGM to extend what has so far been a $500 million plus share buyback program to 25% of shares, indicating the $8.78 billion coal miner expects earnings to be robust going forward.

Despite a dour day on the local market with the ASX 200 down 1.87%, materials stocks 0.49% lower and energy companies falling 2.07%, coal miners and the iron ore majors were popular, with New Hope up 2.76% to $6.33, Whitehaven closing at a new all time high of $9.19 and BHP, Rio, FMG and OZ Minerals (ASX:OZL) all in the green.