Gascoyne taps bank to fend off takeovers

Gascoyne is among a wide field of developers and producers seen as potential merger targets for cashed-up producers.

• PAUL GARVEY

  RESOURCES REPORTER

  @PDGarvey

  
• 12:00AM JANUARY 14, 2019
• NO COMMENTS

Embattled gold producer Gascoyne Resources has quietly appointed Macquarie as adviser amid increased scrutiny of the company from would-be suitors.

It is understood that Macquarie recently won the defence mandate given concerns the company could be snapped up below its true value following recent issues at its flagship Dalgaranga goldmine and instability on its board.

Gascoyne is among a wide field of developers and producers seen as potential merger targets for cashed-up producers enjoying record-high Australian dollar gold prices.

Shares in the company have gone backwards over the past year, falling from a high of 60.5c in May to as low as 8.2c a share in November.

It has since recovered to 15.5c at the close of trade on Friday, giving it a market capitalisation of just under $80 million.

Gascoyne’s key asset is the 1.3 million ounce Dalgaranga gold project in WA’s Murchison region. The mine poured its first gold in May 2018, but has since run into a series of levels both at the mine face and in its boardroom.

The mine’s ramp-up has suffered from lower than forecast gold grades from its Gilbeys and Golden Winds pits and temporary setbacks with the processing plant.

The teething troubles were followed soon after by the sudden resignations of managing director Mike Dunbar and former Gold Road chief executive Ian Murray. Mr Murray’s resignation at the end of October was particularly damaging, given it came just two weeks after he was appointed chairman. Gascoyne shares more than halved on the back of that news.

Gascoyne chairwoman Sally-Anne Layman — herself a former Macquarie banker — told Gascoyne’s annual meeting in November it had been a “challenging” period for the company but said she was optimistic of a “significant” improvement in Dalgaranga’s operational and financial performance.

On Christmas Eve, Gascoyne said Dalgaranga was expected to produce between 92,000 and 102,000 ounces of gold in calendar 2019 at an all-in sustaining cost of between $1220 and $1320 an ounce.

The corporate interest in Gascoyne comes amid a ripe backdrop for deals in the Australian gold sector.

Several of the industry’s largest miners are debt-free, flush with cash and generating record margins from their operations.

Smaller players, meanwhile, are eager to add scale. Recent deals include the merger of smaller miners Silver Lake Resources and Doray Minerals, the Ramelius Resources takeover of Explaurum and Spitfire Materials’ acquisitions of Aphrodite Gold and Excelsior Gold.

Northern Star Resources has also made a $150m offer to buy out its partners in the East Kundana gold mine, Tribune Resources and Rand Mining.