I had a GOLD conditional order trigger yesterday (didn’t even remember I had it set its that long ago).

It was for some COVID GOLD purchased around Nov 2020 (i.e. when the zombie apocalypse happens and the ice cream runs out). Pretty underwhelming return … Sharesight says 4.78% annualized vs 8.82% for STW. At the risk of fanning the flames or exciting @Strawman Bitcoin return over the same period was 29.86% p.a. (Probably more lost sleep due to its volatility though)

Definitely the time for Gold-bugs to shine right now with the geopolitical unrest (probably only being outshone by weapons manufacturers at the moment). However, I’ve decided that if I’m genuinely buying it to satisfy my “inner prepper” then I need physical bullion in small denominations not some BS IOU for something that is allegedly kept in a vault somewhere.

DISC: Still got some GOLD IRL but not in Strawman (I’ll have to go and check the other conditional orders)

Pfft, analogue gold is sooo last century @RhinoInvestor ;)

Manic day with STK at nosebleed valuation. Don't think it was my half-baked straw .

I would have expected something like this from AD8, MP1 or some Lithium stock rather than a boring Gold explorer.

As usual, only put in what you can afford to lose especially when this sort of thing happens.

I would not buy here when deeper drilling is still to be confirmed

Friday 27th October: Just a bit more on the Genesis (GMD) roll-up of gold projects and mills in the Leonora (WA) region, I came across this today:

That's from this "Money of Mine" podcast video: https://youtu.be/T_Lr8aVJq6U?t=3029

That entire podcast video (recorded on October 17th, so 10 days ago) can be viewed here:

Liontown in Limbo as Albemarle Walks Away, What Next? - YouTube

If you want to skip to a particular section, here's some shortcuts:

0:00 Preview

0:50 Intro

3:20 Albemarle Walks from Liontown Bid, Now What?

30:38 Genesis to Fully Acquire Dacian

50:19 Kin a future consolidation option?

53:04 Red 5 valuation and regional significance

54:56 Would Saturn’s low-grade deposit fit in the mix?

58:12 Other: AZS, POL, A1M, SPR, LM8

1:01:16 SBM Performance Rights Clarification

It starts off talking about whether Gina is a bagholder or a very smart (and strategic) cookie in relation to her stake in Liontown (LTR) being the main reason why Albemarle walked away from their takeover attempt of LTR, but then moves on to Raleigh Finlayson of Genesis (GMD) paying up to get the full 100% of Dacian Gold (DCN) and what that might mean for Red 5 (RED), Kin Mining (KIN) and others. The map is from a KIN presso, and does highlight that KIN are certainly in the frame for regional consolidation in that area.

KIN are interesting - they took a strategic stake in Dacian, and benefitted from that when they announced on the 17th of this month that they were accepting Genesis' latest offer for their DCN shares - see here: Kin-accepts-Genesis-Offer-for-Dacian-Shares.PDF

The KIN management and Board are clearly switched on and very aware of Genesis' intentions in the area. KIN paid 12 cps for 7.34% of Dacian and KIN's largest shareholder, Deutsche Balaton Group, bought a further 3.22% of Dacian, so between the two of them they owned 10.56% of Dacian, which prevented Genesis from proceeding to compulsory acquisition of the Dacian shares they didn't already own. They needed 90% for that, and couldn't get there due to that 10.56% owned by KIN and Deutsche Balaton.

Here's a short excerpt from that KIN announcement (link above): "The Offer for Kin’s 89,275,480 Dacian shares represents a profit of $13,286,547 from the acquisition and holding of these shares for approximately 12 months. Kin’s purchase price was $10,710,435 (plus $107,398 in brokerage) or $0.12/share."

The Genesis offer is Genesis shares for Dacian shares, and implies a value of $0.235 per Dacian Share and a total equity valuation for Dacian of A$286 million, however if during or at the end of the Offer Period Genesis acquires a relevant interest in at least 95.1% of Dacian Shares on issue, the Offer Consideration will be increased to 0.1935 Genesis Shares for every 1 Dacian Share held, implying a value of $0.27 per Dacian Share. As of Yesterday (Thursday 26th October 2023), GMD owned 94.75% of Dacian, so they are going to reach that 95.1% you would think, during the offer period, like, today probably.

Dacian isn't worth $286m or more, but Genesis aren't paying that much. They bought over 80% of Dacian at substantially lower prices, and they're paying a decent premium to mop up the last little bit, which is where a smart operator like Kin Mining make their millions (over $13m profit in this case).

In terms of Genesis attempting to takeover Kin Mining to get control of their Cardinia Gold Project and those tenements shown on the map above, it would not be a walk in the park, because KIN already have very switched-on management clearly, and they (KIN) are 41.2% owned by the German company Deutsche Balaton Group (a.k.a. Delphi Unternehmensberatung Aktiengesellschaft) and St Barbara (SBM) also own 13.4% of KIN, and SBM got totally screwed by Genesis when Genesis underpaid for Gwalia and all of SBM's other Leonora assets - which included a number of gold projects at various stages of development that were previously acquired by Genesis when they bought Bardoc Gold in April 2022.

SBM escaped going broke (avoided Administration) by getting that deal with Genesis settled by June 30, when they were due to breach at least one banking covenant without an immediate significant injection of cash - which they got from Genesis in return for all of their best assets, but SBM are now left with just two sub-par gold projects that both need a lot of money spent on them and they're both overseas - Simberi in PNG where they have run out of oxide ore and need to spend millions to upgrade the mill to efficiently process their sulphide ore, and Atlantic Gold in Novia Scotia, Canada, where their Touquoy mine has run out of gold - and their TSF (tailings dam) is full - and significant capital has to be spent to develop their next couple of gold projects along Moose River there, at the same time as they (SBM) - and the Nova Scotia government - face increased pressure from individuals and organised groups who are rightfully demanding much greater environmental protection measures and safeguards be implemented before any further mine development can proceed. The Moose River area where the Atlantic Gold assets are situated (in Nova Scotia) is mostly wilderness - forests, rivers, lakes, etc., so the locals obviously do not want to see the place destroyed by mining.

SBM also own some small stakes in other gold companies - like their 13.4% of KIN. On the one hand, they could use the cash, but on the other hand they are currently cashed up after the Genesis transaction and don't need the additional cash just yet, and their Board and Management, if they have more than a single brain cell between them, would be demanding a significant premium for that 13.4% of KIN that they own, ESPECIALLY if Genesis were the buyers!

So Kin might be in the "Too Hard!" basket for Genesis. I would not be surprised to see strategic stakes being bought by companies in some of the other smaller project developers, like Saturn Metals (STN), Mt Malcolm Mines (M2M), and Strickland Metals (STK).

Already we have 19.99% of STN (Saturn Metals) owned by Toronto-based Dundee Corporation (see here: Dundee Corporation - Home)

And L11 Capital, an entity associated with and controlled by Strickland Metals' (STK's) CEO, Andrew Bray, owns 10.57% of STK, providing a handy blocking stake against a hostile takeover. Interestingly, Bray's L11 Capital is also the 4th largest shareholder of Gateway Mining (GML) who are developing their Montague Gold Project, located halfway between Mt Magnet and Wiluna, so possibly of interest to Westgold (WGX), Ramelius (RMS) and/or Bellevue (BGL) who are all active in that area, north of Leonora. There is some further crossover between STK and GML, other than those stakes in both companies that are held by STK's CEO (Andrew Bray); there's also Mark Cossum, the MD of GML, who is also a NED (non-executive director) of STK, and Trent Franklin, who is a NED of both companies.

Gateway Mining's (GML's) largest shareholder is WA Mining Legend Kerry Harmanis with 10.57%, so nobody is taking over Gateway Mining without having Kerry on board. Kerry is probably best known for building up nickel play Jubilee Mines from scratch and selling it to the giant Swiss miner and commodities trader Xstrata in 2007 (at peak nickel prices) for over A$3 Billion (see here for the ABC News coverage of that). Kerry has remained involved in the WA mining industry ever since and regularly pops up on the registers of some of some smaller base and precious metals explorers and developers - like GML (10.57%) and Talisman Mining (TLM, 18.6%) where Kerry is also their Board Chairman.

These days KH is also a philanthropist and the founder of not-for-profit Mindful Meditation Australia. See here for more on Kerry: Rich List 2022: How meditation helped Kerry Harmanis decide to sell $3.1b mining company Jubilee Mines at the peak of the cycle (afr.com)

I made some money holding Jubilee Mines back in the day, and later from holding Talisman Mining (TLM) when they owned tenements that contained the Monty copper-gold project, just 10km from Sandfire's DeGrussa copper-gold mine in WA. SFR paid TLM $72m in mid-2018 to get hold of Monty and TLM passed more than half of that ($40.9m) through to their shareholders (including me) via a December 2018 special dividend and a March 2019 capital return which together totalled 22 cents per share. It's amazing how shareholders get looked after when management have serious skin in the game in terms of owning a decent chunk of the company themselves. By the way, Kerry had signed a JV with Sandfire (SFR) before the Monty discovery that saw SFR spend all of the money on the drilling (the exploration and evaluation) on Talisman's tenements in exchange for a percentage of whatever they found. So zero risk (and zero cost) for Kerry's TLM, and of course when Sandfire found Monty, so close to DeGrussa, they wanted 100% of it, hence the tenement sale for $72 million.

Back to Leonora: The MD of M2M (Mt Malcolm Mines), Trevor Dixon, holds 28.6% of M2M.

And Silver Lake Resources (SLR) own 11.08% of RED (Red 5). Another 11.5% of RED is owned by Victor Smorgan Partners.

So there are blocking stakes everywhere, which doesn't make takeovers impossible, just a little more difficult, as we have seen with Dacian Gold (DCN) where GMD had to pay a higher premium to secure the last bit.

In Liontown's case (LTR), moving away from Gold for a second, and across to lithium, Gina Rinehart may have done the opposite, i.e. paid up (a decent premium) for the first 20% (19.99%), but happy to play the waiting game and perhaps pick up the rest of LTR for a lot less when everybody else stops sniffing around.

Poor old Tim Goyder, the cousin of Qantas chairman Richard Goyder, was the largest LTR shareholder with ~15% before Gina moved in, but he has other interests and of course Gina Rinehart does too. Goyder owns 17.5% of (and Chairs) uranium developer DevEx Resources (DEV), who just raised another $21 million to progress their 100%-owned Nabarlek Uranium Project in the Northern Territory (located close to ERA’s uranium mines, Jabiluka and Ranger) as well as the Kennedy Rare Earth Element (REE) Project in Queensland. DevEx (DEV) have just sold their NSW Copper-Gold assets to Lachlan Star (LSA) and DEV now own 36.46% of LSA. Tim Goyder is also Chalice Mining’s largest shareholder, owning 10.43% of CHN.

Azure Minerals (AZS) is another company that seems to be in play. Mark Creasy's Yandal Investments owns 13.2%, Deutsche Balaton (the largest shareholder in KIN) own 10.8% of AZS, however the largest shareholder of Azure is/was Chile's SQM and Azure announced on Thursday (Oct 26th) that SQM were acquiring Azure Minerals (AZS) for $3.52/share (Binding-Transaction-Implementation-Deed-with-SQM.PDF) sending the share price up by about +43%. Today AZS released an announcement that entities associated with and controlled by Gina Rinehart now owned 18.3% of AZS - see here: Becoming-a-substantial-holder-for-AZS.PDF so SQM might be in for a similar bunfight to what Albemarle just lost (concerning their aborted takeover of Liontown).

And ordinary retail shareholders may get smashed with AZS (if SQM walk away) just as LTR shareholders have been recently (with Albemarle walking away).

You might think that Gina is on a one-woman quest to stop overseas companies taking over control of Western Australian (or even Australian) mining assets without paying much higher premiums, but I think it's far more simple than that - I think as Australia's richest woman, Gina Rinehart has the money and the sharp mind - and the patience - to play these games and become even richer in the process. Not all of her plays will work out - some might turn pear-shaped, however we shouldn't judge the outcome of a play like Liontown just yet, there's more water to flow under that bridge. She is playing the long game clearly. There might be some occasional shorter term wins in it for her, but she's happy for these things to play out over years rather than months if that's what it takes. For that reason, following her into companies and paying what she is paying may not always work out wonderfully for ordinary investors like us - because she's probably happy to see a share price collapse to a point where she can launch a takeover herself at much lower levels.

But back to Leonora - the MoM boys are suggesting that RED (Red 5) is not as important to Genesis (GMD) now as it might have been previously - as they (GMD) now have full control of the Gwalia Mill and will soon have 100% control of Dacian's Mt Morgans Mill as well, and that's enough to be going on with for now. It doesn't mean that Raleigh's Genesis will stop rolling up gold projects around Leonora, just that paying over $1 billion for RED is now not such a high priority. Yep, Red 5 now has a market cap of over $1 B, much higher than they had a year ago when they probably DID look like a decent M&A target for Genesis. And that makes them look expensive, even as a strategic acquisition, and especially when Genesis don't need that KOTH Mill as badly as they once did.

Gotta go now, dinner plans, more later...

Further Reading: Gina Rinehart one of WA billionaires in race for lithium, known as white gold (smh.com.au) [October 27, 2023, 12.00pm]

Plain Text: https://www.smh.com.au/business/companies/red-dirt-billionaires-in-race-for-white-gold-20230926-p5e7ln.html

Source: https://thewest.com.au/business/public-companies/strickland-primed-for-yandal-gold-drilling-push-c-3591845 [4th August 2021]