GNG
GNG
GNG Deep Dive Part 2
Pinned straw:
Contracts Review
Continuing with notes from my GNG Deep Dive.
Similar to the approach taken for SXE, I compiled the attached list of GNG Contract Awards since 2023 from all formal ASX announcements. It is an impressive list, for sure.
I then sent this to my buddy Chat, and asked for the same insights as SXE. Through this process, I feel I now have very good clarity on the GNG business.
Summary
- GNG is not just winning contracts — it is embedding itself into mining operations over time. That is the difference between a long-term engineering partner and a “contractor”
- The stock behaves like a leveraged play on mining capital expenditure with high ROE, strong balance sheet, niche engineering expertise.
- GNG is transitioning from a cycle-driven EPC contractor → into a repeat-work, installed-base engineering business with cyclical upside
- That combination is why many investors view GNG as a high-quality cyclical.
- GNG is worth buying when contract wins are accelerating, not when earnings are peaking - contract wins → earnings (12–24 months later) and earnings → share price
This exercise plus @Bear77's 2 posts have significantly increased my conviction on GNG - am absolutely in!
Next up is the financial trend charts, and a Valuation, to wrap up the Deep Dive.
Chart Review, Game Plan
I have been actively looking to add to my initial entry point at 3.96 but only got one more bite at 3.76 before the price took off and moved above the long-term green uptrend line to resume the uptrend. With the volatility around the Iran war appearing to taper off, am resigned to having to average up instead.
- The 200 SMA and uptrend line are pretty much in the same zone, so I expect the ~4.10-ish level to be very well supported.
- A correction after the recent runup appears likely in the next week.
- I am planning to top up around ~4.10. Anything below ~4.10 would be bonus.
- If it approaches ~3.71, I will be backing up the bus and loading up!
Still love your work @jcmleng. Some feedback. I know that the table on page 9 of your Deep Dive #1 doc was only supposed to include examples rather than being a comprehensive list, however I note the following:
- Lycopodium (LYL) were involved in Talison Lithium's Greenbushes project including the EPCM contract for Chemical Grade Plant #3 (CGP3) with Lycopodium doing the EPCM and MND (Mono's) doing the construction. Lycopodium also have a 50/50 JV with MND called Mondium which was also involved in Greenbushes Lithium including the EPC for the Tailings Retreatment Project.
- While GNG did the paste plant for Kathleen Valley (lithium) as you have noted, it was LYL who did the EPCM for the main processing plant at Kathleen Valley (see here) after doing the PFS, DFS & FEED. I mention these two (Kathleen Valley and Talison/Greenbushes) because you have nothing under LYL in Lithium in that table (page 9 of doc #1) and are suggesting that lithium is an emerging opportunity for GNG. I do not disagree with you on that, but it pays to note that GNG's rival / peer LYL also have runs on the board in winning lithium sector work. Doesn't make me any less bullish on GNG, but it's one of the reasons that I hold both companies in my income portfolio rather than just GNG.
- In gold (same table), while Sedgman were involved in Agnew, Lycopodium have been doing the Agnew Expansions and Upgrades - see here: https://www.lycopodium.com/case-studies/agnew-plant-expansion-stage-1/ That is one example of where one contractor starts off with a project (Sedgman) and another contractor ends up with it (Lycopodium). I agree with you that building these plants gives these companies a "soft moat" because of the reasons you have given, but only if the clients are happy with the services they receive. When GNG and LYL do the EPC or EPCM (build), they usually "keep" the project because they are such good contractors and rarely end up in any disputes. LYL almost never, GNG only when a project goes sideways or pear-shaped because of something outside of their control - like the Hemmerdon Tungsten and Tin Project in the UK - client was Wolf Minerals - that dispute was finally settled on April 20, 2018, with Wolf Minerals having previously claimed that the plant was too noisy and not fit for purpose because of the noise levels which caused complaints from locals. That was one of two disputes that GNG were involved in at that time that actually caused them to suspend their August 2017 dividend - just for one half. GNG did a number of repairs and rectifications to the Hemmerdon plant - I think the main issues were the noise levels of one or more of the conveyors - but then GNG said, enough, we built exactly what you asked for, to the exact specs that you gave us, and it's not our fault if you didn't look into what acceptable noise levels in that area during production would be. The issue was that Wolf were refusing to pay for the plant, or the balance owing on the plant, which was a considerable sum of money, hence GNG suspended one dividend as a conservative move in case they lost that case, as they wanted to remain in a net cash (zero debt) position (which they did achieve). They didn't lose the case - it was settled out of court as I understand it. The biggest problem with Hemmerdon was actually something that you have accurately identified @jcmleng which is that these plants often get built after the peak of a cycle and can enter production when the commodity is falling in price rather than rising. That was exactly the problem with Hemmerdon. GNG completed the plant and it was commissioned in August 2015. Have a look at the tin price and then the tungsten price in August 2015.
- Contract Award: GNG was awarded the £75 million Hemmerdon Tin & Tungsten project EPC contract on March 6, 2013. Location: Near Plymouth in Devon, England.
- Completion: The plant was commissioned, and production commenced in August 2015.
- So that's the biggest risk with taking on clients that are developers trying to transition to producers. They need to be able to (and be willing to) pay their bills even if the commodity price(s) moves against them during construction.
- The other dispute that GNG had at the same time was with Eastern Goldfields (run by Michael Fotios at that time) over unpaid bills for their Davyhurst Gold project. That was a gold mill upgrade and restart originally worth just under $10m to GNG but Fotios wasn't paying anyone apparently and Eastern Goldfields went broke. GRES (GNG) launched Supreme Court action in July 2017 claiming $9.9 million in unpaid bills for cost blowouts, which brought the total amount owing to $18.5 million, Eastern Goldfields counter-sued, allegeing breaches of contract and defective work, and Eastern Goldfields was subsequently forced into liquidation in 2018.
- BTW, after facing severe financial distress and entering administration in late 2018, Eastern Goldfields Limited was rescued through a $75 million recapitalisation plan backed by Hawke’s Point, which included a debt-for-equity swap for creditors. The company subsequently rebadged as Ora Banda Mining, with new management launching a "back to basics" strategy to revive the Davyhurst gold project. Since then Ora Banda Mining (OBM) have been quite succesful and have become a mid-tier Australian gold producer, and OBM are still operating that Davyhurst gold mill.
- GNG have learned a heap about contract structures since then, and we don't see these sort of disputes these days. I do not remember ever hearing of Lycopodium having a similar problem, but Lycopodium deal with larger companies; they don't build a company's very first processing facility unless that company has plenty of money, including for unexpected contingencies, and LYL's clients usually pay as the plant gets designed and built (milestone payments) - and LYL do EPCM contracts rather than EPC contracts usually, so the risk is always lower with those - although LYL are mixing up their contract types a little more these days - I still note the market caps of LYL's clients are never as low as some of GNG's first-timers. GNG don't ONLY build for small companies - they have Australia's second largest gold miner, EVN, as a repeat client, and just won a large EPC contract with Genesis (GMD), a top 5 Australian Gold Producer, but in prior years GNG were the go-to company for Australian minerals/metals project developers (especially in gold) who were making that transition to producer through a mill (processing plant) build.
- But my point was... about companies "keeping" the plant, in terms of being the ones who get called back to do expansion work, additions, upgrades, etc., years after first production is achieved. And that not always being the case, such as if there is a dispute between the client and the contractor, or the contractor gets a bad name in the industry because of diputes they are having or have had with other clients. My understanding is that this was the case with Sedgman, and you don't have to look any further than what happened at Woodlawn under Heron Resources (who went broke, Woodlawn is now owned and operated by Bill Beament's DVP) to understand how litigious Sedgman could be. If you know much about CIMIC group that's probably all you need to know about Sedgman. Sedgman is a wholly owned subsidiary of CIMIC Group who acquired Sedgman in March 2016. CIMIC itself is wholly owned by HOCHTIEF, a German-based construction company, which in turn is controlled by the Spanish-headquartered infrastructure group ACS. Those of us who have been around for a few decades might remember some colourful stories about CIMIC back when they were called Leighton Contractors, but that's a whole 'nother rabbit hole.
I've got dinner now - I'll finish this off with another post later. But yeah, love the detail that you have included @jcmleng in your deep dive into GNG, and I'm not trying to pick faults with it - I'm just adding some more colour, especially around the "who built what" table on Page 9 of your first deep dive document.
17
Just to add to my earlier post this evening @jcmleng -
- Under gold on page 9 of deep dive doc #1, and under LYL, you can add Telfer, which is a VERY large mill: Two process trains, each with a capacity of 9 Mtpa. Notable Features: (1) Extreme climatic conditions and remoteness of the site reflected in the design and implementation approach - my brother has done multiple shuts (shut down work) at Telfer, in the Great Sandy Desert, 470 km east-south-east of Port Hedland, and it's his LEAST favourite minesite in Australia - for a variety of reasons, and (2) Telfer was undertaken as a joint venture (JV) between Minproc, Hatch and Lycopodium, for Newcrest Mining who were acquired in 2023 by the world's largest gold mining company Newmont who sold Telfer last year to Greatland Gold plc, now known as Greatland Resources (GGP). (see here)
- Under Iron Ore, you can add Marandoo (Phase 2, for RIO) to LYL - see here: https://www.lycopodium.com/case-studies/marandoo/ alongside the Nammuldi Below Water Table (NBWT) Project (also for RIO, see here) - you currently have nothing in the iron ore box for LYL.
- Back to gold, still in that "who did/does what" table on page 9 of Doc #1, I note that you have three Australian gold projects (Tropicana, Bellevue and KoTH) listed under LYL (you have called them LYC instead of LYL at the top of the table, that's a mistake I also often make and in fact did in my earlier post tonight; now corrected), but you haven't mentioned any of their overseas gold projects, for which they are better known, such as Karma, Natougou, Bissa, Wahgnion, Otjikoto, Mako, Fekola, Sissingué, Houndé, Bouly, Boto, Navachab, Lafigué, Kiaka, Sabodala-Massawa, Bomboré, Séguéla, Ahafo, Akyem, Yaouré and Sanbrado - see here: https://www.lycopodium.com/case-studies/filter/?value=au&location=africa§or=resources#filter Those are just the African ones by the way - and there's over 20 of them. They (LYL) have done others in other countries as well. I just think it balances the ledger up somewhat to add some more to LYL because it looks like GNG have done a lot more than what LYL have, and that's not actually the case. GNG have done a lot more gold projects in Australia, but not a lot more gold projects overall (than LYL).
- Probably doesn't matter, but I would place BHP's West Musgrave under "Copper & Base Metals" rather than under "Rare Earths" for GNG, as West Musgrave was a large nickel/copper mine development that BHP shelved when they closed down (mothballed) all of their WA nickel assets in July 2024 due to low nickel prices.
- LYL don't appear to have any REO projects under their belt but they have a couple of mineral sands projects - see here: https://www.lycopodium.com/case-studies/filter/?value=mineral-sands§or=resources#filter
- Having nothing under Copper for LYL is a bit of an oversight, as they are big in copper, and have done some large copper projects including the 3.2 Mtpa copper concentrate treatment plant and associated non-process infrastructure for Sandfire’s (SFR's) Motheo Copper Mine (completed in 2023). Motheo is located in Botswana’s Kalahari Copper Belt and is centred on the development of the huge T3 copper deposit, and there's plenty more where that came from - see here: https://www.lycopodium.com/case-studies/filter/?value=copper§or=resources#filter.
- Back to lithium, you can add Goulamina in Mali to LYL under lithium, that project was originally owned by Leo Lithium, but LLL (Leo Lithium) was spun out of Firefinch Limited (was ASX:FFX, now delisted) who demerged Leo Lithium Limited (ASX:LLL) in June 2022. The Australian gold miner and lithium developer spun out its Goulamina Lithium Project in Mali into the new entity which listed on the ASX on June 23, 2022, "allowing Firefinch to focus on its gold assets". Yeah, well Firefinch (FFX) was removed from the official list of the ASX on July 1, 2024, following a two-year suspension due to a failed operational ramp-up at the Morila Gold Mine in Mali and financial troubles. Firefinch is now an unlisted entity that is apparently "focusing on distributing remaining asset value to shareholders". Yeah, I've heard that before. Meanwhile the Mali ruling junta could see what FFX did there with LLL so they got their pound of flesh out of LLL after FFX skipped the country and denied any responsibility for the Morila Gold Mine, including any rehabilitation or other financial liabilities. As a result of that, LLL is no longer listed on the ASX either, and Goulamina is now run by and 65% owned by Chinese firm Ganfeng Lithium Group who have taken full control following their acquisition of Leo Lithium’s remaining stake in early 2024 (for a lot less than it was worth, due to the involvement of the Malian Gov/Junta). The Malian government (ruling military junta) took a free-caried 35% stake in the project. But that's just the history of the project ownership. LYL completed the original DFS for Goulamina in 2019, provided a DFS Update in December 2021, followed by FEED work throughout 2022, then were awarded the Engineering and Procurement (EP) and associated Project Management (PM) services (EP&PM contract) for Stage 1 of the project in November 2022. I'm not entirely sure whether the new ownership structure of Goulamina in 2022, 2023 and early 2024 had any impact on that contract, but Goulamina appeared in the "Onsite delivery - progressing" section of LYL's "Resources - Major Project Status" slide in Feb 2024 (with their H1 of FY24 results) - see below:
- And in the corresponding slide 6 months later - in November 2024 (with their Full Year FY2024 results) Goulamina had moved into the "Delivered" section, so it would appear that all parties (including the two new project owners) were happy for Lycopodium to complete the build.
- For reference, here's LYL's corresponding "Resources - Major Project Status" slide 12 months later in November 2025:
- I've highlighted there how gold projects dominate, but noticeably less so in the early stage projects at the top, suggesting that LYL are managing to successfully transition into other commodities. But note they are currently active in Copper (Winu, Taca Taca & Yanqul), Mineral Sands (Toliara), Iron Ore (RIO's CLAHDO) and Lithium (Highbury, Talison's CGP3 & CGP4), and you have all of those spots (Copper, Mineral Sands, Iron Ore and Lithium) empty under LYL on page 9 of doc #1.
- Just a note on Rare Earths and Hastings Tech Metals from the table on page 10: Hastings Technology Metals (ASX: HAS) got into some financial difficulty and their flagship Yangibana REO project has been very much on again - off again as a result. HAS heavily restructured to focus on Yangibana, selling off their other assets (including gold assets), however following cost blowouts, the company entered a joint venture selling a 60% stake in Yangibana to Andrew "Twiggy" Forrest's private mining company, Wyloo Metals, who was HAS' largest creditor at the time coincidentally, so HAS (Hastings Technology Metals) are now minority JV partners in the Yangibana Joint Venture, located in the Gascoyne region of WA. I have no doubt that Yangibana does get built at some stage; the deposit has an NdPr to Total Rare Earth Oxide (NdPr/TREO) ratio of up to 52% in certain sections of the orebody. Why does that matter? Well, basically, not all REO (rare earth oxides) deposits are created equal. NdPr (Neodymium-Praseodymium) rare earths are critical because they are the primary, irreplaceable components in high-performance permanent magnets used in electric vehicle (EV) motors, wind turbines, and advanced electronics. They are considered essential for the global green energy transition, national defense systems, and high-tech manufacturing due to their superior magnetic, light, and heat resistance properties. Basically NdPr means magnet-rare-earths, and Yangibana has a lot of NdPr compared to other REO components of the deposit, which is a GOOD thing for the project. Yes, I reckon GNG are still in pole position to do that project, for all of the reasons you have outlined, but it's worth noting that the project is now owned by a 60/40 JV comprising Wyloo and HAS, with Twiggy's Wyloo (a private company) now being the manager and operator of the project, not HAS. The 60/40 JV was formalized in 2025 and covers both Stage 1 of the Yangibana Rare Earths and Niobium Project and the Stage 2 Hydrometallurgical Plant.
- Same table, page 10, I would love it if GNG win the EPC or EPCM contract for Hemi (was owned by De Grey Mining, now owned by NST after NST aquired De Grey last year), but that is going to be a truly huge project, and would certainly be worth substantially more than GNG's average EPC contract values, and would trigger your risk matrix on page 7 of doc #2 where you have listed "EPC contract values rise above $300m" as a risk to watch out for. It would just be one project, not projects (with an "s"), but the risks you have highlighted (increased complexity and hence, project risk) would apply in that scenario.
That's all I got for now, still loving the very comprehensive coverage of one of my favourite companies. Thank you @jcmleng!!
15