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Monsters of Rock: St Barbara shareholders vote up Genesis bid in Leonora ménage à trois

Mining

11 minutes ago | Josh Chiat

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St Barbara (ASX:SBM) shareholders have voted to swiftly move on from a torrid recent history at the Gwalia gold mine, voting to sell the historic project to Raleigh Finlayson’s Genesis Minerals (ASX:GMD) despite interest from a larger suitor in Silver Lake Resources (ASX:SLR).

St Barbs routinely refused to engage with Silver Lake, which made a string of attempts to muscle in on the action over the past year.

Most recently it tabled a number of non-binding indicative proposals the SBM board ignored in favour of the agreed transaction with Genesis.

A range of excuses were delivered despite the SLR bid coming in at a higher nominal value than the Genesis offers, which finished with a combination of $370 million cash, 152,826,087 shares and 52,173,913 performance rights to be vested if the transaction is approved before June 30.

SBM said SLR’s proposed premium over the Genesis offer was counteracted by the break fee payable to Genesis and increased time to complete the bid. That could have seen it violate debt covenants with its financiers, SBM had argued.

SLR’s final bid came in at $370m in cash and 327.1m Silver Lake shares valued at $348m as of the timing of its last bid on May 31.

Since that date GMD stock has risen 10.5%, while Silver Lake’s has been stagnant, lifting just 1c.

Rejection by SBM’s board had tapped the support of major shareholders L1 Capital and Baker Street Capital Managers to force SBM to engage.

But only an affirmative vote on the deal by Genesis shareholders needs to happen to give the sale the tick of approval, with almost 78% of SBM’s shareholders’ votes in favour of the transaction. Only a simple majority was needed to give the thumbs up.

What is Genesis getting?

Genesis was due to hold its vote at 2pm today, and has previously stated it has the support of its top 20 shareholders, representing 49% of the shares on issue.

SBM’s parlous financial state prompted a rethink on an earlier deal to merge the two companies and hive off two unloved assets – the Simberi mine in PNG and Atlantic Gold Operations in Canada – into a separate entity called Phoenician Metals.

Gwalia would have been funnelled into a business called Hoover House, paying tribute to the 31st US President Herbert Hoover, who ran the mine as a young engineer when it opened in the late 1890s, as well as the Bed and Breakfast and former mine manager’s cottage that overlooks the open pit.

Alongside it would be Genesis’ high grade Ulysses underground and Dacian Gold’s (ASXCN) Mt Morgans mine and processing plant, which Genesis holds a more than 80% in through a takeover partially completed last year.

The buzzword is regional consolidation, something Silver Lake certainly wouldn’t have offered. While it is, unlike Genesis, an active gold producer selling over 250,000ozpa, none of its operations – Deflector in the Mid West, Mt Monger near Kalgoorlie and Sugar Zone in Canada – offer obvious geographical synergies with Gwalia.

But Gwalia, one of Australia’s cheapest, highest grade and biggest gold mines only five years ago, has seen better days.

It delivered just 30,942oz at $2809/oz and a mined grade of 4.6g/t in the March quarter. Once a more than 300,000ozpa producer, St Barbara’s Leonora project is expected to turn out just 130,000-135,000oz this financial year at AISC of $2650-2750/oz.

After delivering operating cash flows of $177 million in FY22, it has contributed just $16m across the first nine months of FY23.

The question will be whether Raleigh Finlayson, who turned small cap Saracen Mineral Holdings into one of Australia’s largest gold companies before its $16 billion merger with Super Pit co-owned Northern Star Resources (ASX:NST), can galvanise the troops and find yet another life for the mine once run by his uncles Chris and Peter Lalor at Sons of Gwalia.