Takeover talk circling Dacian, says Financial Review

Takeover talk circling Dacian, says Financial Review


Dacian Gold (ASX: DCN) found itself at the centre of more takeover speculation this week as The Financial Review’s influential Street Talk column raised the issue of a possible bid from neighbour Gold Fields.

Gold Fields’ Granny Smith mine borders Dacian’s Mt Morgans project, where Dacian is set to start production early next year.

Street Talk noted that Dacian secured $150 million in debt funding late last year to help fund its $220 million project but the column pondered whether a bid from Gold Fields would lob before construction started.

“Gold play Dacian Gold has won the hearts of financiers Westpac, ANZ and BNP Paribas, but you have to wonder whether it will ever get to spend the three big banks' money,” Street Talk reported.

“The company announced late last year that the three banks were tipping in $150 million debt to partially fund Mt Morgans' $220 million construction costs, and Dacian is doing its part to come up with the remaining $70 million.

“However, it's understood Dacian has caught the attention of at least one of its neighbours in WA's north-eastern goldfields.

“The most logical tie-up would be a deal with South African heavyweight Gold Fields Ltd, which has owned the nearby Granny Smith gold mine since taking it off the hands of Canada's Barrick in 2013.”

Street Talk noted that Gold Fields had been “happy to spruik Granny Smith's turnaround to investors in recent times”, saying it was now one of the miner's high-grade, high-margin core portfolio asset.

“Gold Fields is seeking to increase the Granny Smith resource and mine life, and as part of the exercise would surely have been tempted to take a look over the back fence at Mt Morgans.

“If Gold Fields was to pounce, it would make sense to jump before Dacian built the plant at Mt Morgans which has a targeted production date of March 2018.

“It is understood Deutsche Bank's resources team in Sydney and PCF Capital Group managing director Liam Twigger would be Gold Fields' first port of call should it turn acquisitive.”

The takeover speculation came as Macquarie Securities published a fresh research report with a price target of $3 (currently ~$2.50).

The report followed Dacian’s announcement of outstanding new exploration results from its Cameron Well prospect at Mt Morgans.

Dacian said the results further highlighted the potential of Cameron Well as a major gold target.

“These results tick every box when it comes to establishing a high-priority gold exploration target,” Mr Williams said. “We believe Cameron Well has all the hallmarks of another major mineralised system at Mt Morgans.

“Together with our recently announced success at the Jupiter Regional Prospect – where we have delineated two +1km long gold trends immediately adjacent to the planned open pit – Dacian Gold now has two outstanding exploration targets with strong potential to grow Mt Morgans’ Mineral Resource base this year.”

Macquarie analyst Ben Crowley said Dacian’s latest round of drilling results from Cameron Well continued to expand the prospect.

“We believe Cameron Well has the potential to become the second open-pit ore source at Mt Morgans,” Crowley said.

“The size of the Cameron Well target continues to grow and on completion of an infill drilling program we expect Dacian to launch an RC drilling program that should enable an initial resource to be calculated at Cameron Well.

“Recent exploration results at Jupiter have also been encouraging, with the East Heffernans and South Cornwall deposits demonstrating open pit potential.”

Crowley forecasts Dacian to make a $13 million profit next financial year.

“Dacian is set to commence project construction at Mt Morgans in the short-term, keeping the company on track to commence gold production in early 2018,” he said.

“The feasibility study released late last year has outlined a robust development scenario for Mt Morgans, however we believe upside to our base case exists with additional open pit ore sources likely at Cameron Well and near Jupiter in the medium term.”