Genesis consolidate Leonora gold

Western Australian gold producer St Barabara has decided to sell its underperforming Gwalia Gold Mine to Raleigh Finlayson-led Genesis Minerals.

Despite a gold price sitting over the landmark US$2000 per ounce point, Gwalia’s low production, $112 million in debt, and a string of other bottom-line-breaking considerations had put the time-honoured company in a precarious position of placing its overseas Atlantic operations into care and maintenance.

The decision comes following weeks of tussling as the weight of St Barbara’s hefty debt put strain on a proposed pact to spin out St Barbara’s holdings in North America and Papua New Guinea into a new company.

The new deal now stands at $600 million and will consolidate Genesis assets surrounding Chief Executive Raleigh Finlayson’s childhood home.

With AustralianSuper’s $210m in the kitty, Genesis will seek to pass the hat around to raise the balance from investors, thought to include Seven West Chairman Kerry Stokes.

St Barbara will now hold onto its Simberi mine in Papua New Guinea and the Atlantic Gold business in Canada, which, much like Gwalia, will require a hefty sum of cash to get production to the total capacity.

Moving forward debt-free, St Barbara Chair Tim Netscher said the board believed the deal was fair value for shareholders and could now advance its international assets.

“The company has a clear strategy in place to maximise the value going forward,” Mr Netcher said.

And as for Genesis, the company’s belief is now firm in its standing as an industry leader, holding a dominant position in a world-class district.

“Investors are demanding sensible regional consolidation, and this deal hits the spot, targeting long-life production growth to 300,000 ounces per annum exclusively from Leonora,” Chief Executive Raleigh Finlayson said.

“We look forward to integrating the assets and unlocking the significant synergies available in Leonora. For example, Genesis’ nearby Ulysses mine will deliver unique value at Gwalia, providing Gwalia with a new lease of life by enabling a focused ‘margin over ounces’ business plan.

“Shareholders will ultimately reap the long-term benefits of more production at lower cost and lower risk from this prolific mining district.”

The price point ultimately moved in the opposite direction of another major gold deal.

US industry titan Newcrest has upped its offer for Newmont by a hefty 16 per cent – making it an eye-popping $29.4 billion acquisition bid for the Australian miner as industry figures continue to predict not only record prices – but a shattered ceiling.