Resolute Boss gets stuck into Juniors

Resolute Mining boss John Welborn has taken a swipe at the junior gold sector after announcing the $US274 million ($397 million) acquisition of West African miner Toro Gold.The addition of the privately owned group increases Resolute’s African focus and immediately boosts its production this calendar year from 270,000 to 400,000 ounces.Toro’s flagship asset is the low-cost Mako mine in Senegal, which last year produced 157,000oz at $US655/oz, and has a seven-year minelife.Mr Welborn said the transaction delivered on the company’s ambitions of being a multi-mine, low-cost, gold producer with a strong African focus.“We’re seeking to join some of our Australian peers ... as a strongly dividend-paying, strongly cashflow-generating company that rewards our shareholders — and this helps us get there,” he said.Queried on recent M&A activity in the gold sector, Mr Welborn lashed out at smaller miners that resisted value-creating consolidation opportunities.“It’s an irony to me that at the top end of the gold space, where the salaries are in the tens of millions and the egos are bigger, you’re actually having positive shareholder value-creative M&A,” he said.“But in the mid-cap and junior space, you have boards and management teams that are welded onto their salaries like a baby to a teet, and a complete lack of entrepreneurial vision in terms of consolidation.“There are wonderful opportunities to consolidate and build this industry but a lot of people are sitting on ounces that they don’t know how to manage properly.”He said beneath Northern Star, Evolution, Saracen and Regis, there was a “wasteland” of companies that hadn’t rewarded shareholders and were proving Mark Twain correct about miners being liars standing next to holes in the ground.Resolute has already secured approval from 94 per cent of Toro’s shareholders, including QG Africa Mining, Tembo Capital and Resource Capital Funds, who will emerge with a 15.8 per cent stake in the company.The company will fund the $US130 million cash component of the deal via debt and use its surging share price to pay for the balance with scrip. Resolute shares have jumped from $1 in June to $1.775 yesterday on the back of a strong gold price and broker upgrades.Mr Welborn rejected suggestions Resolute could be buying at the top of the market, saying Mako did not rely on a high gold price to make money.“Effectively we’re adding 50 per cent of our portfolio’s production for about 15 per cent of our register,” he said.He said Senegal was mining friendly jurisdiction and did not believe the increased African focus would incur a discount among its Australian peers.“We’re unashamedly of the view that there are huge opportunities to build high-quality, low-cost gold mines in Africa,” he said.