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LambDownUnder

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15/07/24

22:13

Post #: 74764863
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Originally posted by swimmingtoad: ↑

The Australian mining industry’s rumour mill remains in overdrive surrounding the potential for a tie-up between Gold Road Resources and Regis Resources.

Adding fuel to the theory that something could be afoot is the recent rally in the Regis Resources and Gold Road Resources share prices since the start of this month.

Executives at Gold Road Resources are incentivised to either keep drilling to find more gold or grow by acquisition so a purchase could make sense from that perspective.

Making a deal more pressing for Gold Road could be the fact that the road out to the Gruyere gold mine, 400km north east of Kalgoorlie, remains problematic, and should it create operational challenges it’s not good news for Gold Road, given it is its most valuable asset producing cash.

DataRoom reported on June 18 that Regis (now worth $1.46bn) had pinned its growth hopes on its McPhillamys Project in NSW but, as it has transpired, developing the project will come at a significant cost, creating questions around whether it is better placed to carry out a merger or acquisition deal instead.

Gold Road Resources is not officially for sale, but with investors not keen for it to carry out expensive acquisitions overseas, and few buying opportunities in the local market, perhaps a deal with another group is one of its few options.Most around the market see a tie up between the two groups as highly logical.

Both have non-operating stakes in assets – Regis has 30 per cent of the Tropicana gold mine whereas Gold Road has a half share of Gruyere.The Gruyere gold mine stake in Western Australia, while not an operating one, is still a top-quality asset.And a merged Regis and Gold Road would have more firepower to buy gold miner De Grey Mining if that was on the agenda.

Gold Road has a 17 per cent stake in De Grey Mining.

McPhillamys – one of Australia’s largest undeveloped open-pit gold deposits – has a final investment decision slated for late in the 2025 financial year, with two years taken to build.

Gold mining M&A activity has been hot in recent years due to the soaring commodity price, with one of the latest deals being WestGold embarking on a $2.2bn merger with Canada’s Karora.

Working for Gold Road Resources is advisory firm Gresham, and should there be a deal, the timing could coincide with the Diggers & Dealers event in Kalgoorlie in August, capping off the long run of M&A in the Australian gold mining sector.

Gold Road’s market value is now over $1.9bn.Neither company would comment about the speculation when approached by DataRoom on Monday.

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If a merger means you can sack half the management of both companies and make some synergies and genuine value accretion for both it wouldn't be a horrible idea.

As with anything though, the devil would be in the detail, whether an outright buy out and what combination of scrip/cash.

Given the size of the companies I would think a merger makes more sense than an acquisition by either party.

GOR Price at posting: $1.81 Sentiment: Buy Disclosure: Held
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$2 dollar club, page-414

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$2 dollar club, page-414

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