Kerry Stokes looks likely to tighten his grip on the consolidation of gold mining in the Laverton area of the WA goldfields after Genesis Minerals moved to add St Barbara (ASX:SBM) to its previous purchase of Dacian Gold to form a new company Called Hoover House that could be worth a billion dollars.
Earlier this year, Stokes and rival miner Northern Star supported the $100 million raising that Genesis made to finance the takeover of struggling Dacian Gold.
Now, with Dacian all but tucked away, the next move in the planned rationalisation – mopping up St Barbara via a reverse takeover and spinoff of unwanted gold assets will be supported by an even bigger raising – $275 million.
Cornerstone placements in the raising will be made to the AustralianSuper and Resources Capital Fund, and institutional placements to Paradice Investment Management, Kerry Stokes’ Australian Capital Equity and Eley Griffiths Group.
The $275 million raising is a key part of the whole deal and it will be used fund the merged companies, conditional on the scheme arrangement with St Barbara happening and subsequent spinoff of the unwanted gold assets of St Barbara becoming effective.
This three-way arrangement has been a long time coming since Genesis revealed its ambitions in September with a bid for Dacian in September and an understanding that grabbing struggling St Barbara would follow.
Monday’s deal will see St Barbara acquire 100% of the shares in Genesis via a Scheme of Arrangement and will be re-named Hoover House Limited.
The company’s name. Hoover House, marks the memory of the former US president Herbert Hoover (in the Depression) who spent much of 1920’s in the WA goldfields as a mining engineer.
Genesis shareholders are to receive 2.0338 new fully paid ordinary shares in St Barbara for each Genesis share held at the Scheme record date, representing a nil premium to the 30-day volume weighted average price
St Barbara will undertake a demerger of its Atlantic (Canada), Simberi (PNG) and other assets (including St Barbara’s shares in various ASX-listed entities) to St Barbara shareholders in conjunction with the Scheme. They will be held in a company to be known as Phoenician Metals Limited, which intends to apply to list on the ASX.
Genesis expects to retain a 20% stake in Phoenician Metals.
Genesis naturally says the Scheme is “unanimously recommended by the Genesis Board subject to no superior proposal emerging and the Scheme Independent Expert concluding (and continuing to conclude) that it is in the best interests of Genesis shareholders.”
The St Barbara Board also intends to unanimously recommend the Demerger.
Yesterday’s announcement said the merged company would have been based in Perth and have a production target of around 300,000 ounces of gold a year, compared to St Barbara’s 2023 guidance of 140,000 to 160,000 ounces and year to date production of just 56,000 ounces.
Justifying the deal in Monday’s release, Genesis said the merger “is expected to unlock substantial, near-term synergies for both sets of shareholders. The resetting of the combined entity’s corporate support model, a write up of Genesis’ depreciable tax cost base, and deferment of capital in relation to the Gwalia mill is expected to result in synergies with a net present value of approximately A$200 million.
“Overall, the merger will either defer or eliminate ~A$400 million of capital expenditure, reducing near-term execution risk and funding requirements.
The merged company, Genesis says, will have Long-life gold production, supported by 3.2 million ounces of gold in Ore Reserves and 14.7 Moz in Mineral Resources, a pathway to 300,000 plus ounces of production a year in an “organic growth trajectory in Leonora with low capital intensity” and a proforma $187 million in cash.
The merged company will be owned 41% by Genesis shareholders, 38% by St Barbara shareholders and 22% by those shareholders in the $275 million raising. The latter figure will depend on how many existing holders in both companies participate in the raising.
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