Kin/Leonora:
The much-vaunted consolidation of the Leonora gold district has not exactly gone off with a bang. But it is coming. Raleigh Finlayson’s Genesis Minerals (GMD) is grinding away with its friendly $111 million scrip bid for Dacian (DCN) which marries up Genesis’ undeveloped Ulysses project with Dacian’s troubled Mt Morgans operation some 95km way. And as far as we know, the consolidation talks between Genesis and Gwalia mine owner St Barbara are continuing, although St Barbara has finally got busy with its own consolidation moves and expansion plans. The prospects for a nil-premium merger between Genesis and St Barbara, with the ex-Saracen guru Finlayson taking the leadership role, could well prove to be a bridge too far, which is a shame because Leonora has been crying out for consolidation for years. But there is lots of stranded gold in the region and an excess of treatment plant capacity, even before St Barbara gets cracking on a planned mill expansion at Gwalia. So even if the big-bang merger between St Barbara and Genesis does not happen, Leonora is still going to see plenty of action. Just under 1.3 million ounces of that stranded gold is held by Kin Mining, which is today’s interest. It is trading at 7.8c after pulling in $9.7m cash from a share placement at 7.5c a share, which is to be followed up with a $10.7m non-entitlement offer at the same price. The fund raising is dilutional for sure, but a smart move given Kin is very much part of the Leonora consolidation story. It presents as a bolt-on acquisition for one of the owners of the three treatment plants within comfortable trucking distance of Kin’s Cardinia project – St Barbara/Gwalia, Genesis/Dacian at Mt Morgans, and Red 5/King of the Hills. A toll treatment arrangement with one of those is likely for Kin at some point and it is best in such discussions to be well-funded. And while the wait for a toll treatment deal continues, continuing to drive Cardinia up the value chain by adding more ounces at a finding cost of about $40 an ounce makes sense if toll treatment talks become takeover talks. As it is, Kin is expected to update its resource estimate in September, with a figure around 1.5m ounces the market’s expectations. The new funding will fund exploration for more ounces, with a push to 2Moz a reasonable expectation over two to three years. St Barbara’s Gwalia mill is the closest to Cardinia, which explains why it had a crack at Kin last October with a takeover offer that did not progress. But it left St Barbara holding an 18% pre-bid stake. It is understood St Barbara did not take up shares in the placement, reducing its stake to about 16% ahead of the entitlement issue. The German family Delphi took up most of the placement, increasing its stake from 29.5% to 32%.It was Delphi that led the rejection of St Barbara’s bid last October. Now that it has also stumped up more cash to increase its Kin stake suggests that it for one reckons there is upside from both the failed St Barbara offer (13c indicative), and this week’s placement price.
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