Consensus community valuation
09-Feb-2024: I reckon they're close to fair value at current levels (closed today at $1.56 today, and at $1.61 yesterday). People say there is a management premium built in already - as there should be - because it's been earned. However, give this company about three years and they should be a top 7 Australian gold producer in terms of ounces produced p.a. (at over 300 koz per annum) and I have no doubt that unless things really turned pear-shaped for Raleigh, GMD will STILL be one of the top 5 Aussie gold producers in terms of market capitalisation. And my price target at that point would be a minimum of $2.35/share, so that's what I'm going with today, with a three year time frame, so by February 2027.
They could easily overshoot that target, but that's a reasonable target I think.
The following three slides are all taken from the recent joint presentation by Red 5 (RED) and Silver Lake Resources (SLR) [Presentation - Red 5 and Silver Lake Resources to Merge 05-Feb-2024] highlighting the benefits of merging the two companies together. I am using slides 7, 10 & 15 from that Presso because they show where all of the main ASX-listed (and Aussie HQ'd) gold producers sit in relation to each other on various metrics.
I have highlighted Genesis Minerals (GMD) in green. In the first slide that shows Gold Production for FY2024), I have shown where they expect to be within the next 3 years (at the left end of that green line) - at over 300 koz Au p.a. (300,000 ounces of gold per annum) [Source: Corporate-Presentation---Ready-set-grow---Assets-and-people-in-place-for-+300koz-p-a-27Nov2023.PDF]
Since they put that presentation together in November, Genesis have bought more gold: GMD-to-acquire-the-Bruno-Lewis-and-Raeside-gold-projects-14-Dec-2023.PDF plus Kin-Completes-Sale-of-WA-Gold-Deposits-for-Cash-and-Shares-09-Feb-2024.PDF
And here is slide 15 (below) from GMD's November 2023 Corporate Presentation that I talked about above.
So what Raleigh Finlayson did with Saracen Minerals was he acquired a number of quality gold projects, got them all or at least most of them into production, which dragged Saracen up to #4 in terms of Aussie Gold producers, with only Newcrest (now owned by US-based Newmont), Northern Star (NST) and Evolution Mining (EVN) producing more gold per year than Saracen did (in terms of Aussie-based and ASX-listed gold producers), and then Raleigh and NST's Bill Beament orchestrated a merger of the two companies which was achieved via NST acquiring Saracen.
So Saracen is now part of NST, and with Newcrest having been taken out by NYSE-listed Newmont Corp last year, NST is now Australia's largest ASX-listed and Australian-based gold producer.
Not long after the merger, Raleigh left NST on agreeable terms, and set up Genesis Minerals with plenty of financial backing - he is highly respected and has an excellent track record of value creation so he has plenty of people, particularly insto's and HNWI's, with money who are happy to back his latest venture. Then Bill Beament left NST himself and went to run Venturex, now known as Develop Global (which I also hold shares in).
So, back to Genesis. Can Raleigh do it again? Well, so far, so good.
Only two Aussie goldies (NST & EVN) have a greater Mineral Resource than Genesis' 15 Moz (15 million ounces); That's a LOT of gold. Genesis are only currently producing from one mill (Gwalia at Leonora) which is not being fully utilised (running well below capacity), however they have a second, larger mill at Laverton that they are going to fire up soon (the gold mill/plant formerly known as Dacian Gold's Mt Morgans Mill) and they have a lot of gold in various projects that is still in the ground or in ore stockpiles awaiting processing. And they have plans to fill both mills to capacity (see their presentation - link above - between the last two slides).
In terms of Gold Ore Reserves, the GMD Presso (first slide up from here, put together in November) suggests that they are in 5th position behind NST, EVN, PRU (Perseus Mining) and RSG (Resolute Mining), but the more recent RED/SLR slide suggests that GMD are one spot higher than that with only NST, EVN and WAF (West African Resources) ahead of them with greater Reserves, because the latest Reserve numbers from PRU and RSG are lower, probably due to either depletion through mining, or asset sales, or a combination of both.
GMD's table doesn't have WAF in it for some reason. Possibly because their latest numbers weren't available at the time? WAF first produced gold at Sanbrado, in Burkina Faso (West Africa) in March 2020, so they've been producing for a few years now, so it's not as though they've just started producing.
That's something worth pointing out, I tend to avoid West African gold miners, even when they are Australian managed, Australian headquartered, and ASX-listed, because I think the risks associated with mining in West Africa do not justify the potential upside - for me. Those West African miners include WAF, PRU and RSG - so if you take those three out of it, there's just NST and EVN ahead of GMD in terms of Reserves and Resources, and if the RED/SLR merger goes through then RED might move up to challenge GMD for third best gold ore Reserves.
I already hold NST, and I've recently sold out of EVN due to their increased reliance on copper production out of both Ernest Henry and Northparkes which they use to make their gold AISC look reasonable. Without those copper byproduct credits they are NOT low cost gold producers, which is what they market themselves as, and I don't like that, and I think they're due for a big downward re-rate, so I'm out of EVN.
So Genesis (GMD) is the next logical goldie for me to own, and I do.
If you look at the fourth chart on the second last slide above, the one titled, "EV / Resource (A$/oz Au Eq)", you'll see Genesis is 4th from the bottom, with their current share price and market cap valuing their Gold Resource at just A$112/ounce, while the current spot price is over A$3,100/ounce. And Genesis have Zero Hedging; yep, they're completely unhedged and totally exposed to a rising spot price.
So, what does that mean? I would suggest that means that they are actually still quite cheap - there are only three goldies that are even lower than $112/oz, and one of those is Westgold (WGX) who look cheap across most metrics actually - and I am looking to get some exposure to Westgold in my SMSF shortly as it happens - plus there's also two of those three West African goldies (WAF and RSG) who trade with a risk-discount in their share price which always makes them look cheaper than many of their peers - but they are also riskier than most of their peers because of where their mines are located.
In summary, while GMD can look expensive based on their current production, they are about to ramp up production significantly, like more than double it, and they do NOT look expensive based on the gold that they own that is still in the ground.
And it's not low grade stuff either - have a look at this:
Tower Hill is just one of GMD's development projects and it's got higher grades than the world-class Tropicana open pit gold mine (30% owned by Regis, 70% owned and operated by AngloGold Ashanti) - and Tropicana is very profitable. Note - those mines in that chart are single open pit deposits only, so no underground mines or projects. And open pit gold is a lot easier and cheaper to truck out than gold is from underground mines.
So where is Tower Hill? Somewhere remote? A long way from Infrastructure? Yeah, Nah! It's just 2 km north of Gwalia:
Here's another look at a peer comparison based on gold reserves and resources from a September 2023 North American Investor Presentation by GMD:
In that slide the two ASX100 goldies (NST & EVN) have been removed and so have all of the West African and other goldies that do not have gold mines here in Australia - so they (GMD) are saying their "peer group" is small to mid-tier ASX-listed gold producers who have mines here in Australia.
Have a look at who is backing Genesis:
Below is that "Ownership Geographic" blown up so it's easier to read:
Insto ownership accounts for 70% of their shares on issue, split as follows: 52% owned by Australian Institutions, 10% North American insto's, 7% UK insto's, and 1% owned by European insto's (ex-UK). 29% Free Float (Retail) but it looks like the 2.4% owned by the Genesis Board and Management may be included in that 29%, so that leaves 26.6%. Not too bad, but it underlines how much institutional backing this company has because of what Raleigh Finlayson (GMD's founder and MD) managed to achieve with Saracen Minerals previously.
And it looks like he's on his way to doing something similar with Genesis.
Slides sourced from: INTRODUCING GENESIS - A growing Australian gold house - CORPORATE PRESENTATION - NORTH AMERICA - September 2023 and Corporate-Presentation---Ready-set-grow---Assets-and-people-in-place-for-+300koz-p-a-27Nov2023.PDF
See also: GMD-Quarterly-Activities-Report---December-2023.PDF
So, I see GMD as a no-brainer in terms of me choosing to have exposure to them at this point. There's plenty of upside from here.
And for those people with a higher risk tolerance, have a gander at the three projects within that 50km radius of GMD's Gwalia mill at Leonora (within the smallest circle) there that are named in Brown instead of Blue - meaning they are NOT already owned by Genesis - there's KIN's Cardinia project, Saturn Metals (STN's) Apollo Hill project, and Red 5's (RED's) KOTH (King of the Hills) mine and mill.
KOTH is already in play with the proposed SLR/RED merger, so I hope Raleigh doesn't come over the top with an even higher offer for RED than what SLR have proposed with their reverse takeover (RED acquiring SLR). Raleigh just doesn't need KOTH that badly - he wants it, but he doesn't need it, and if he clearly overpays for that asset, it could shake the market's confidence in both him and his company. It might not, but it might. But he doesn't need to do it - it would cost over $1 billion and it's really not a good acquisition at the price in my view.
And since that map was put together in September, GMD have bought part of KIN's Cardinia project, the Bruno-Lewis gold project and the Raeside high-grade gold project - see here: GMD-to-acquire-the-Bruno-Lewis-and-Raeside-gold-projects-14-Dec-2023.PDF
Here's the updated map (below) that GMD included in that mid-December announcement:
Now there's just RED's KOTH and STN's Apollo Hill left inside that 50km radius circle - that isn't already owned by GMD. If I was a betting man, I might take a small bite of STN - whose shares are trading at around 16 to 17 cents/share and whose market cap is only $30 million. RED's market cap is $1.14 Billion. GMD's is $1.76 Billion.
Of course RED has a working gold mine and working gold mill and STN just have a gold project that they are trying to develop, so it's like comparing an apple to a truckload of oranges. But I'd have thought that taking over STN or just buying Apollo Hill from STN would make a lot more sense than trying to trump SLR once again to attempt to takeover RED.
Acquiring Apollo Hill would also mean that Genesis would own every decent gold deposit between Leonora and Laverton, as that last map (above) shows.
There would still be Focus Minerals's (FML's) Laverton mill just north of Laverton, but Focus is now a 63% owned subsidiary of Shanghai-listed Shandong Gold International Mining Corporation, and I doubt they would sell to an Australian company unless it was at a very high price, and I doubt Raleigh would be interested in any of FML's assets anyway. He already has plenty of mill capacity at Laverton.
And his focus is really on Leonora - as the maps clearly show. Anyway, time to catch some Zzzz's. That'll do Donkey. That'll do.
Bill and Raleigh when the NST-Saracen merger was announced in early October 2020.
Raleigh Finlayson in March 2020 in the Saracen office (before the merger).
Same again below.
Shortly after the merger with NST.
Raleigh last year. Now running Genesis.
At the Genesis Minerals Office.
Raleigh and sister Marnie Finlayson, who is an executive at Rio Tinto and is also on the NST Board.
Marnie and Raleigh Finlayson: Rio’s lithium star and her Genesis CEO brother (afr.com)
(24) Raleigh Finlayson | LinkedIn
Genesis Minerals Limited | Perth WA | Facebook
https://genesisminerals.com.au/
11-Aug-2024: Update: This one was marked as stale, and the company is no worse now than they were when I last updated this - in fact they're looking better - and remain disciplined in terms of M&A, with a lot of opportunities around them for smaller bolt-ons, which they have so far resisted, and I'm also happy that Ral did NOT get involved in the SLR/RED merger where SLR have effectively taken over control of Red 5 without paying a management premium by way of a reverse takeover (so officially RED acquired SLR but the SLR management team are now running RED) - because the way that was structured, GMD buying into RED (who owned KOTH, the mine and mill near Leonora that would fit nicely into Ral's empire at GMD) wouldn't have made any difference because he would have needed a blocking stake in SLR to have scuttled that deal, and there's no way GMD want to own any SLR shares with all of their assets (prior to the SLR/RED merger) a fair way north west of Leonora.
So no movement from Ral to try to slow down or stop that one going through, unlike SLR/RED's Luke Tonkin's behaviour when he made multiple attempts to either halt or delay the GMD acquisition of Gwalia and the other Leonora assets from St Barbara in the first half of last year. There's no love lost between Raleigh Finlayson and Luke Tonkin, but Ral remains the superior human being, with the better business, and better business sense.
So Genesis (GMD) continues to deliver to plan, and they are the big growth story in the Aussie Gold sector and should remain so as they bring more projects online and fill up their Leonora (Gwalia) and Laverton (Mt Morgans) mills. There is a management and growth premium in the SP now, but it is well deserved. However, I can understand why Ord Minnett (OM) recently moved GMD from "Accumulate" to "Hold" based on their share price appreciation rather than any change in the outlook for the company.
I'd like to see Ral buy MAU (Magnetic Resources) for GMD (Genesis), because it makes strategic sense for their Laverton mill, but there's no rush as MAU already has a significant market cap for a gold project developer, so they wouldn't be buying them super-cheap here. There is a good chance he won't do that however, because Ral has made it very clear that consolidation of gold assets around Leonora remains his number one priority, and right now his main focus is developing what GMD already own.
Other companies on his radar would include Kin Mining (KIN, soon to be known as Patronus, it's a Harry Potter reference apparently, to do with magical transformation or the conjuring up or personification of a strong positive emotion - and comes after the acquisition of PNX Metals (PNX) so PNX will probably become KIN's new ticker after they officially become known as Patronus), and to a lesser extent Mt Malcolm Mines (M2M) - which is worth almost pocket change to Ral at this point and may well go into VA and become available for even less, and Saturn Metals (STN) whose Apollo Hill project is likely going to become a large scale heap leach project rather than a traditional gold mill.
I think Saturn (STN) is the LEAST likely to be an M&A target for GMD because Apollo Hill would not provide feed for Gwalia (GMD's Leonora mill) and while it's within the 100 km radius of Leonora that Ral is targeting, it's down to the south east of that circle and further away from Gwalia/Leonora than the other projects are - so it makes far less strategic sense than all of his other options (MAU, KIN/PNX, M2M).
But, as I said, I don't think M&A is still a high priority for Ral at this point - I think he has plenty to keep him busy for now - the only reason he would do further acquisitions in the near term would be (a) because he sees a good strategic opportunity that he does not want falling into somebody else's hands, and/or (b) he sees a cheap opportunity that is likely to become significantly more expensive if he waits and buys it later. I think under either or both of those scenarios he has the firepower and the will to make a move, but I don't think he needs to now - he's got plenty of projects to develop and two good mills already - one at each end of that area that Genesis own most of (Leonora across to Laverton) - or most of the gold deposits in that area (rather than most of the land in the area) - but, plenty to be going on with for now.
For context, Ral would have liked to have bought RED to get KOTH (King Of The Hills), but that chance has passed now, and he can only get KOTH now by buying the "new" RED which post-SLR-merger is now worth $2.3 Billion. On 21-May-24 RED closed at 49 cents/share (cps), they are now 35.5 cps with a sh!tload more shares on issue post the merger with SLR, but on 20-Feb-23 (18 months ago) they closed at 13 cps with far less shares on issue.
At 13 to 16 cps earlier last year - maybe even up to 20 cps - RED, with all of their assets relatively close to Leonora, made plenty of sense, but Ral had his hands full with trying to first merge with SBM and spin out their non-Leonora assets into a newco (which was going to be called Phoenician Metals) and then instead Plan B (after Ral realised just how dire SBM's own situation had become which allowed him to re-jig the deal in a major way to Genesis' benefit and St Barbara's detriment) was to buy the Leonora assets from SBM and leave SBM with everything else - which is what eventuated after a number of delays caused by Luke Tonkin's SLR lobbing in inferior bids. Then in September last year Luke Tonkin's Silver Lake Resources (SLR) bought 11% of RED as a "strategic" (blocking) stake and then moved to acquire the remainder of RED this year via the reverse acquisition I mentioned a few paragraphs up.
It should be noted however that while both SLR and GMD had no net debt and a big pile of cash, so both seemed to be well run gold producers, GMD have a history of only buying assets at good prices where the acquisitions made strategic sense, and SLR have a history of overpaying for assets that they could have bought much cheaper earlier (i.e. RED) and where analysts struggle to understand any strategic sense or how any synergies might be realised. So Luke Tonkin is an empire builder with not a lot of strategy - or at least his strategy is hard to fathom, whereas Ral has done this all before with Saracen Minerals (which merged with Northern Star Resources - NST - a few years ago) and is able to communicate his strategy clearly and get plenty of backers onboard and more than happy to throw money at him and anything he turns his hand to because he has such a great history of producing superior TSRs for his shareholders.
That's why I hold GMD shares (and currently also MAU, KIN/PNX and some STN for further drilling result upside - I intend to sell out of STN on their next decent spike up) but not RED (and I wasn't an SLR shareholder either).
In terms of gold producers, my current exposures, in weighting order are NST, RMS, GMD, EMR and PRU. My project developer exposure is significantly smaller because of the elevated risk of owning pre-revenue companies - so MAU, KIN and STN are smaller positions held for shorter-term gains.
I have raised my GMD valuation a little today based on the higher gold price and my outlook for an even higher gold price being reasonably bullish, and GMD being so well positioned within Australia's larger gold producers - and with multiple growth projects.
05-Aug-2024: GMD D&D Presso: https://gmd.live.irmau.com/pdf/8f1e27d6-e139-474d-ae74-3aecd578eec1/Corporate-Presentation-Accelerate-Diggers-and-Dealers.pdf
Also, back on 19th July: Gold explorer Ordell Minerals debuts on ASX after raising $6m.PDF
GMD own 8% of ORD (Ordell Minerals) with another 8% of ORD owned by ORD's CEO and Managing Director, Michael Fowler, who was also the CEO and MD of Genesis Minerals (GMD) up until 23-Feb-2022, the day that Raleigh Finlayson took over those positions at GMD. So Genesis and Mick Fowler are the two equal largest shareholders in ORD.
ORD might be another one to keep an eye on - I don't think Genesis will want to take them over, because ORD's main asset - their Barimaia JV Project - is up near Mt Magnet, not down near Leonora or Laverton, but what about Ramelius Resources (RMS) - who are already all over that Mt Magnet area.
Ramelius have already taken a 17.94% strategic stake in Spartan (SPR) who own the Dalgaranga Mill there - to the NW of RMS' Mt Magnet mill. Barimaia is right next to RMS' Mt Magnet Mill (immediately SE of it).
About the Barimaia JV:
- Strategic location in the Murchison Gold District of WA
- Immediately SE of Ramelius’ Mt Magnet Gold Mine
- Opportunity to assess a drill ready ground package in close proximity to several producing gold mines
- Extensive gold system defined with limited drill testing
- Ordell has acquired Genesis Minerals Limited’s (ASX: GMD) 80.2% interest in the Barimaia Project by acquisition of 100% of Metallo Minerals Pty Ltd
- Genesis commenced the JV in 2017 following the acquisition of Metallo
- Exploration by Genesis during time of Barimaia JV was limited as a result of the focus on the Ulysses Project near Leonora
- Ordell’s objective is to define significant shallow (<100m) gold resources
- Extensive gold system defined associated with felsic intrusion host rocks within mafic-ultramafic stratigraphy
- East-west orientation of the stratigraphy confirmed by Genesis drilling and interpretation in 2018
- No modern exploration until post 2010
- The McNabs Prospects are under up to 10m of transported cover
- 2021 AC drilling extended the ENE trending Au anomalous corridor a further ~900m to the east
- 2024 drill testing over 3.5km of strike
Source: https://www.ordellminerals.com.au/barimaia
So, this is a non-core asset of GMD that they have spun out effectively, but retain an 8% stake in, and the natural owners are definitely Ramelius (RMS).
And RMS have half a billion in cash and liquid shares (in other goldies), plus are producing gold from multiple locations at low costs and high margins.
Further Reading: Maiden drill program underway at the Barimaia Gold Project, WA 2,600m: Phase 1 RC drill program to target Eridanus-style discoveries.PDF (31-July-2024)
Disc: I hold GMD and RMS shares, but not any ORD directly. ORD's entire market cap is only about $13m according to the ASX website, so they would be a small bolt-on acquisition for RMS, however RMS may elect to wait and see if ORD find anything decent with their drilling before having a sniff. RMS' and GMD's m/caps are both over $2 Billion.
21-Mar-2024: Five-year Strategic Plan plus Growth strategy underpinned by robust Reserves
Below are a selection of slides from that 68 page/slide presso [the "Reserves" one was 370 pages long - links above] which was released after the market had already closed this arvo, so we'll see the market's reaction tomorrow morning.
Some of the areas covered:
And here are some of the maps that they included:
Below is how they anticipate those assets feeding their Leonora Mill (shown in Blue) and their Laverton Mill (shown in grey):
Below is a wider view that shows where their Aphrodite and Zoroastrian projects sit in relation to that lot above:
And here's that map a little larger:
That map is of their main exploration targets where they hope or expect to find more gold, below is the Bardoc Gold Project back when Bardoc Gold was a listed company in March 2020. It was from their PFS:
Aphrodite is at the top, and would be just below the Chameleon Trend target in the Genesis map. St Barbara acquired Bardoc Gold in April 2022 after announcing the acquisition back in December 2021, and Genesis acquired all of St Barbara's WA Goldfields (Leonora) assets (including the Bardoc Gold assets) in the middle of calendar 2023. There are over 3 million ounces of gold there already that they know about - mostly in Aphrodite and Zoroastrian - however Genesis don't even talk about that, as they much more focused on their assets between Leonora and Laverton, those assets within that 100km radius of Leonora, but we shouldn't forget about the Bardoc Gold assets, which are around 150km south of Leonora. They are also significant!
There's a lot going on at Genesis Minerals.
Yep, I hold GMD shares.
05-Feb-2024:
Red5 Dangles the Carrot for Genesis in $2.2Bn Merger with Silver Lake | Daily Mining Show - YouTube [Money of Mine podcast, 05-Feb-2024]
Chapters:
0:00:00 Preview
0:00:00 Introduction
0:01:08 Silver Lake's alternative marketing strategies
0:07:02 Red 5 MERGING with Silver Lake Resources
0:43:00 Potential Lynas and MP Materials merger
0:44:29 Centaurus get Environmental approvals
0:45:09 Silvercorp/Orecorp update
0:45:36 New Copper producer on the ASX
The short version:
The best thing about SLR is their large cash balance. The worst thing about RED is their debt and lack of cash, and to a lesser extent their out-of-the-money hedgebook. Putting the two companies together certainly makes sense for RED, as they need SLR's cash, and SLR will have better prospects to spend their cash on than they appear to have currently - in terms of exploration spending in highly prospective areas. And it will frustrate the hell out of Raleigh Finlayson at Genesis (GMD) who wants Leonora all to himself (or within his company, Genesis Minerals). Luke Tonkin might not have stopped the Gwalia sale from going through (from SBM to GMD), but he might just end up with RED, unless this deal gets trumped by Raleigh/GMD with a better deal.
The best thing about RED is their KOTH gold mill which is close to one of GMD's big gold deposits that they intend to develop. But does Raleigh Finlayson think Genesis Minerals (GMD) needs KOTH yet, or ever? The MoM boys have a long and detailed discussion about these and many other questions in today's poddy - links above - and for my thoughts see here.
14-Dec-2023: Genesis (GMD.asx) has just agreed to buy a couple more gold projects, this time from Kin Mining (KIN.asx).
GMD-to-acquire-the-Bruno-Lewis-and-Raeside-gold-projects.PDF
GMD-Reporting-on-select-Kin-Mining-gold-projects.PDF
Kin-Receives-$535m-from-Sale-of-Gold-Deposits-to-Genesis.PDF
That's $53.5m, not $535m as the KIN announcement file name suggests - can't have dots in the middle of file names - I wish companies would stop doing that, as it can give an entirely wrong impression until people open the announcement and read it properly.
Below is the first Page of GMD's first announcement, with some notes from me on the right:
Map from page 2 of that same announcement:
As I write this, GMD's SP is up +8% at $1.80 (closed at $1.665 yesterday), however they spiked up to as high as $1.90 this morning which was +14.1% above yesterday's close. They got down to below $1/share in mid March, so they're up over +80% from there.
KIN is up +10%, but were up +16.7% earlier at 7 cps (closed at 6 cps yesterday, currently trading at 6.6 cps).
The rise in the GMD share price today might seem a bit overdone for such a small acquisition, but it's more about the fact that the market may be coming around to my way of thinking in terms of Raleigh being less likely to be bidding for RED (Red 5) now. My argument is that RED has now become too expensive, and their mill is no longer needed by GMD now or in the near term, AND that SLR have a blocking stake in RED that they would almost certainly use to frustrate any takeover of RED that GMD might attempt. It would be a negative if Raleigh tried to go after RED at current levels because he would almost certainly be overpaying, however with every small acquisition like this the likelihood of GMD making a near-term bid for RED reduces in the eyes of the market.
In short - the roll-up (growth via acquisition) model remains intact without Genesis clearly overpaying for any assets that they are acquiring - so all good, thesis remains on track. The market is liking the progress to date.
Sidenote: Saturn Metals' (STN's) Apollo Hill gold project is absolutely in the firing line for Genesis Minerals. Apollo Hill is around 40km south east of the Gwalia (Leonora) Mill. RED's KOTH (King of the Hills) mine and mill are around the same distance north west of Gwalia/Leonora (see map above). RED's market cap is $1.17 Billion. STN's m/cap is less than $40 million - currently $33.46m according to the ASX website. Genesis could buy all of Saturn (STN) for less than $100m, or just Apollo Hill, although the price difference wouldn't be much considering Apollo Hill is STN's main asset. They bought it off Peel Mining (PEX) in mid-2017.
That's from the Saturn Metals website: https://saturnmetals.com.au/projects/apollo-hill/
...which needs to be updated - as it shows Gwalia as still being owned by SBM and Mt Morgans still being owned by Dacian (which is now 100% owned by Genesis) - plus it shows Apollo Hill as having 1.47 Moz (million ounces of gold) in the ground (see below) but the up-to-date map from today's GMD announcement (scroll up for that - towards the top of this straw) shows Apollo Hill as having 1.8Moz. Not particularly high grade, but close to Leonora. Raleigh would have an eye on that one for sure.
Disclosure: I hold GMD shares, and I have STN on a watchlist now.
That's a better buy than RED is at current levels - for sure. The major differences are that RED are in production, have WAY more gold, at higher grades, and a very decent mill as well, but they're priced for all that at over $1 billion. So STN is high risk for sure, and RED is expensive but de-risked. If I was to invest in STN, it would be an appropriately small punt rather than an investment, because they don't make any money, and they could go broke if they're not taken over by somebody like Genesis. High risk means I would put way less money at risk, but I'm not pulling the trigger on them yet - just on a watchlist for now.
07-Dec-2023: Genesis-now-owns-100-per-cent-of-Dacian.PDF
Dacian Gold (DCN) has now been removed from the ASX list. As I have said elsewhere (here), with full control of the Mt Morgans Mill (that DCN owned), as well as full control of the Gwalia Mill (that Genesis bought from SBM at the end of June), Genesis now have sufficient ore processing capacity in the Leonora (WA) area to satisfy their immediate and near-term requirements, so there is no pressing need for Raleigh Finlayson to go after Red 5 (RED) and their KOTH (King of the Hills) Mill, which has been widely expected by the market, and is one of the reasons why the RED share price has been on a tear over recent months.
I'm fairly certain that Raleigh won't make any moves on RED in the next few months, certainly not while their share price is so high, and with SLR (Silver Lake Resources) owning 11.08% of RED (a blocking stake) and SLR's Luke Tonkin having form for going out of his way to frustrate Raleigh when he was purchasing SBM's Leonora assets for Genesis (GMD) earlier this year. I hold GMD shares by the way, and I'm very happy with their progress so far.
And I'm also very happy to be OUT of SBM.
27-Nov-2023: Just noting (1) that GMD hit a new 12 month high closing price of $1.76 today and also reached an intra-day high of $1.785, another record, and (2) that despite holding them both here and IRL, I haven't posted any straws on the company.
That ends now!
Firstly, the company is in a sector with some tailwinds - gold was one of only two sectors in the green today (see below) and secondly, it's a growth story via both organic and acquisitive growth - in fact Raleigh Finlayson has been very upfront about his intentions to roll up all of the good gold around Leonora into Genesis Minerals (GMD), and he's already bought all of SBM's Leonora gold and gold producing assets, including Gwalia, Australia's deepest operating gold mine, the 1.4 Mtpa Gwalia Mill, and some advanced gold projects around the same area (Tower Hill open pit, Zoroastrian high grade underground mine, and others) to add to the ones GMD already had, plus Dacian Gold is also now 100% owned by GMD, which comes with their Mt Morgans 2.9 Mtpa Mill, with more than twice the current annual ore processing capacity of the Gwalia Mill.
If a picture is worth 1,000 words, the following should be worth around 20,000 words...
Above: Gwalia Gold Mine, circa 1921. Below: Gwalia today (or recently).
And Below - the Mt Morgans Gold Mill:
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Zenith Energy's BOO (Build-Own-Operate) Power Plant at Mt Morgans (above) and Mt Morgans Mill by night (below) during commissioning by GR Engineering (GNG).
They are also the 4th most shorted company on the ASX according to Shortman.com today. They were the third most shorted company last week:
But Core Lithium have leapfrogged them since I took that screenshot, so GMD are now the 4th most shorted.
The GMD shorting may have peaked however, and we may have seen a little short squeeze today (GMD +6.5 cps or +3.83% to $1.76).
The screenshot below is from this evening:
Source: https://www.shortman.com.au/stock?q=GMD
That data does not include today as there is 4 day lag, as explained above.
In terms of WHY people are shorting Genesis, the prevailing theory seems to be all about Red 5 (RED) and that either (a) that Raleigh's Leonora Consolidation Plan is going to turn pear-shaped now that Silver Lake Resources (SLR) own 11.08% of RED (bought as a "strategic investment" according to SLR's MD, Luke Tonkin) and have proven to be adversarial towards Raleigh and Genesis by putting in multiple rival bids to try to prevent Genesis from acquiring St Barbara's Leonora assets earlier this year despite SLR having zero assets in the Leonora area themselves (so zero obvious synergies for SLR), or (b) that Raleigh is going to end up overpaying for all of RED - based on Genesis paying over-the-odds to mop up the final 20-odd-per-cent of DCN - and that will cause a negative re-rate of Genesis by the market at that time.
In reality, Genesis don't actually need RED and their KOTH (King of the Hills) gold mill now that they (Genesis) have full control of both the 1.4 Mtpa Gwalia mill and the 2.9 Mtpa Mt Morgans mill. I'm sure Raleigh is still interested in acquiring RED, purely as part of his Leonora gold asset consolidation plan, but he doesn't have any pressing need to do it soon now that he has all the milling capacity he wants for the time being. He can afford to bide his time - so the ball is now in Red 5's court - and their management - to prove that they deserve the positive market re-rating that they've received - RED's market cap has grown to $1.12 Billion now (yes, with a "B", not an "M") and they really don't look THAT good to be honest. They were trading at 13 cps in February and they closed at 33.5 cps today. The market is now valuing RED ($1.12B) as being worth more than SLR ($963m) and SLR have a much stronger balance sheet, a pile of cash, more mines, more mills, better quality assets, and they're producing a lot more gold at much lower costs than RED are. And I don't want to own SLR, due to their management, so I definitely am not buying RED at current levels!! My best guess is that the Red 5 (RED) share price comes down from here as the M&A premium comes out of it. Either way, Raleigh is probably going to ignore RED for a while. He's got plenty to be going on with currently. I'm sure RED will remain on his longer-term radar, but there's certainly no reason for him to move on them while their share price is this high.
About Raleigh Finlayson: The driving force behind Genesis Minerals is Raleigh Finlayson, who built up Saracen Minerals from nothing to be the 4th largest Australian gold producing company on the ASX. Saracen and Northern Star merged, which was effectively an acquisition of Saracen (#4) by NST (#2) at the time. Soon after the merger, Raleigh left NST to build out Genesis Minerals.
Have a look at this presentation that he put together back in August last year (2022) titled "THE FIRST STEP: Merger with Dacian Gold". It didn't end being a straightforward merger, but he got there in the end. The thing to note however is his vision, and how he plans to get there with Genesis. Remembering that he's already done something very similar with Saracen, which was a good ride that ended very well for Saracen shareholders, some of whom were Insto's who have now jumped onboard GMD.
The following article about Raleigh and his sister Marnie - who works for Rio Tinto and is also on the NST Board - is worth a read to get a good understanding about what drives Raleigh - where he has come from, and a little insight into why he does what he does, and where he is doing it (Leonora).
Raleigh Finlayson (GMD) with sister Marnie Finlayson (RIO, NST) near the WA School of Mines in Kalgoorlie. Chuck Thomas
Source: Marnie and Raleigh Finlayson: Rio’s lithium star and her Genesis CEO brother (afr.com) [25 Aug 2023]
Excerpt:
Marnie Finlayson is the battery minerals boss leading Rio Tinto into the decarbonisation era. Raleigh Finlayson is a precious metal stayer chasing more success in gold, where his sights are set on a 126-year-old mine.
The sister and brother grew up tormenting one another on a dusty sheep station in Western Australia. They embody the old-meets-new reshaping of WA’s resources industry in their vast childhood backyard, the Goldfields.
Marnie and Raleigh were raised in the Goldfields, a region as rich in the precious metal as anywhere in the world, a major source of nickel for more than 50 years, and now, a lithium hot spot.
Their entrepreneurial uncles – Peter and Chris Lalor – once controlled a string of gold mines and produced tantalum from assets that are now regarded as world-class lithium discoveries.
Those mines – including Greenbushes in WA’s south-west and Wodgina in the Pilbara – are valued at tens of billions of dollars. The Lalor brothers were about 30 years too early to capture any of that value.
There is mutual respect between Marnie and Raleigh, who are graduates of the WA School of Mines in Kalgoorlie. There is also plenty of sledging and stirring. Raleigh, who is younger, took years to grow into his oversized ears and was “spoiled rotten” as the baby of the family.
Marnie hates being reminded that he taught her to drive.
If you believe Raleigh, their jaunts in an old ute sometimes took them onto the highway – aged four and seven. Marnie declares he’s a notorious teller of tall tales.
Marnie, Rio’s managing director of battery minerals, is keeping a close eye on the lithium projects springing up in the wider Goldfields region. Raleigh, as boss of Genesis Minerals, is digging into family history after Genesis’ $628 million acquisition of the Gwalia gold mine once controlled by their maternal uncles.
The familial ties go further: Genesis also has gold projects, including Ulysses, on land once part of their paternal grandfather’s Melita sheep station.
Marnie and Raleigh are both excited by the emergence of lithium in the Goldfields, where Lynas Rare Earths is building a downstream processing plant at Kalgoorlie.
“I think it’s brilliant,” Raleigh says.
“When gold has had its really low days, nickel has supported it and vice versa. All of a sudden we’ve got another commodity [lithium] or commodities when you think about rare earths, that help support the region. You don’t have that sort of feast or famine, and it’s more sustainable.
“I remember not that long ago you couldn’t sell a house in Kalgoorlie and now suddenly, you can’t get one.”
Marnie, Raleigh and their older brother, Daniel, grew up on Jeedamya Station near Leonora.
All three spent school holidays working at the Gwalia gold mine, about 40 kilometres from their home, when their uncles were directors of Sons Of Gwalia. The mine’s long history includes a chapter late in the 19th century when it was run by Herbert Hoover, later the 31st president of the United States.
The 46th president, Joe Biden, has fired up lithium interest in the wider Goldfields region through his Inflation Reduction Act.
Marnie was hooked on mining from the start. Raleigh grew to love it. Daniel has his own successful business on the WA coast making cray pots, the traps used to catch lobster that fetched huge prices on the Chinese market before Beijing’s trade war in 2020.
No childhood on the Goldfields where sheep eventually gave way to cattle can be described as idyllic.
“We grew up in quite a difficult environment. We loved it and hated it at the same time, growing up on the station and working hard,” Marnie says.
Raleigh says: “It was tough just about every year, but a drought would make it even harder. But every year was a good year as far as how tight the family was and continues to be. So for us, there was no better childhood to be blunt, as hard as it was.”
Pocket money
Even shovelling rocks at Gwalia for $5 an hour could not dissuade Marnie from mining.
“I shovelled rock for 12 hours a day. It was my first experience in the industry and I absolutely loved it. From the first moment I started, I knew that the mining industry was absolutely the one for me,” she says.
Marnie presented a battery minerals strategy she developed to the Rio board at the end of 2021. She has lived in Serbia, where she was in charge of Rio’s Jadar lithium project and also ran Rio’s borates operations in California.
The Rio board was sufficiently impressed to back it and make her head of battery minerals.
Why a passion for battery minerals for someone who grew up in the Goldfields, and agreed to join the board of another gold miner, Northern Star, last year?
“I’m passionate about ensuring that mining delivers the materials that are required for the energy transition because I believe that’s critical for ensuring there’s a good future for my children and their children,” she says.
“I see myself in a perfect position to be able to mobilise that, not just through the materials that are produced through the battery materials strategy, but more importantly – and this is Rio’s objective – how they are produced. We’ve got an overall societal challenge about ensuring that mining is done in a sustainable manner.”
Marnie joined Northern Star’s board after Raleigh’s departure as its managing director.
Will they ever work together? “You never say never,” Marnie says. Chuck Thomas
Superpit
It was around August 2021 when Raleigh started to think about his next big challenge after deals that included Saracen’s $1.1 billion acquisition of a half share in the Superpit mine on Kalgoorlie’s doorstep, and a $16 billion merger with Northern Star. His gold industry contemporaries Bill Beament and Jake Klein were lamenting the investor focus on decarbonisation and related minerals.
Asked by The Australian Financial Review in March last year about why he stuck with gold and set about consolidating Leonora, Raleigh replied: “It would have been the easy and obvious option to flip out of gold and into the new fancy metals.”
Today, his response is more even-handed.
“It’s what I know,” he says.
“I could very comfortably go to those [Genesis] shareholders and articulate the strategy and articulate that we’ve got good knowledge of the area and that we have operated lots of mines to be able to get that type of equity over the line at zero premium or zero discount.
“If it had been a green metal and I’m sitting there trying to convince myself – let alone my shareholders – that I’ve got experience and knowledge in that space, it is probably a different conversation.”
Raleigh acknowledges that lithium has “gone beautifully” since he opted to stick with gold. He also points out the gold price is hovering at about $3000 an ounce compared to about $900 an ounce when he started out at Saracen.
Peter and Chris Lalor founded the third and final iteration of Sons of Gwalia in the early 1980s, and turned the listed company into one of Australia’s biggest gold producers at its peak. Things went badly in the mid-2000s.
Early bets
In its heyday, Sons of Gwalia was the world’s biggest supplier of tantalum to the electronics industry. Most of it came from Greenbushes, whose abundant lithium was largely ignored.
Greenbushes is now considered the world’s best hard rock lithium mine and is owned by New York-listed battery chemical giant Albemarle, China’s Tianqi and its partner, IGO Limited.
In 2002, the late Peter Lalor said there was no magic in “new metals” after having his fingers burnt on a mistimed lithium venture once.
Hype around lithium and its use in ceramics, glass, speciality steels and even treating bipolar disorder in the 1990s had compelled Sons of Gwalia to build a lithium plant next to the Greenbushes tantalum plant.
Lalor described how a rival producer out of Chile ruined his plans to dominate what was then a small global market in lithium.
“They had a much lower cost of production and, basically, we were not competitive,” he recalled. “It was essentially a better ore body in the form of a brine deposit, which meant the lithium was recovered in an evaporative process. A hard-rock ore body can never compete with that.”
The brine versus hard rock debate rages today, but these days the big players Albemarle, SQM, and future partners Livent and Allkem, keep a foot in both camps.
Rio too; it acquired the Rincon brine project in Argentina for $US825 million last year and hasn’t given up hope on the Jadar lithium-borates project despite Serbia revoking its licences and approvals in January last year.
Living in Serbia opened Marnie’s eyes to the pace of electrification in Europe. “I really got to understand the importance of batteries for the energy transition and became very passionate about it,” she says.
“We as an industry have a role to play to show how mining can be done well, and how we minimise the impacts and how important it is to the future.”
Small world
Raleigh bumped into old mate and Northern Star chief executive Stuart Tonkin, another WA School of Mines alum, on the streets of Kalgoorlie.
“Stu goes, ‘I always suspected Marnie was better and smarter than you, and now it’s been confirmed’,” he recalls. “I said, ‘Mate, I didn’t have to suspect it. I’ve always known it’.”
Raleigh, who turns 45 in November, says their professional paths are likely to cross in either an executive or non-executive capacity somewhere down the track after the near-miss at Northern Star.
“We do talk a lot about what she is seeing and thinking and ditto for me. We sort of mentor each other in lots of ways, provide support and spitball different ideas,” he says.
Marnie says Raleigh didn’t apply himself in the classroom but had a lot of fun. His boarding school encouraged him to get an apprenticeship, and their father suggested the army.
His second job, after Gwalia, was working part-time at the Superpit.
“One thing Ral and I absolutely share is a passion for people, and we’ve got very similar leadership styles. We just apply them in different types of companies,” Marnie says. “We do talk a lot about leadership.”
Will they ever work together? “You never say never,” Marnie says. “If you’d told me five years ago, ‘You’ll be managing director of battery minerals for Rio Tinto and sitting on the Northern Star board’, I would have laughed.”
--- end of excerpt ---
See Also: https://ceoworld.biz/directory/exec/raleigh-finlayson#
And: (25) Raleigh Finlayson | LinkedIn
And: Raleigh Finlayson Excellence Redefined_Ep11_WASM Alumni Podcast | WASMA Mining & Resources Podcast (podbean.com) [14-Nov-2018]
And: Finlayson starts from the beginning with Genesis | The West Australian [22-Sep-2021]
And: Finlayson to spearhead Genesis Minerals - Australian Resources & Investment (australianresourcesandinvestment.com.au) [23-Sep-2021]
And: Five or so questions for Genesis Minerals MD Raleigh Finlayson - Stockhead [4-April-2022]
And: Diggers & Dealers 2023: Genesis boss Raleigh Finlayson sees heritage backflip as opportunity for approvals | The West Australian [9-Aug-2023]
Genesis Minerals Managing Director Raleigh Finlayson during the 2023 Diggers & Dealers Mining Forum on Wednesday August 9, 2023. Photo Credit: Carwyn Monck/Kalgoorlie Miner.
Disclosure: Yeah, I do hold GMD shares, both here and in my larger real money portfolios, including my SMSF. I wouldn't be betting against Raleigh. He's got the form, and the backing, and the determination, and he's not half bad at what he does either. Really top-notch calibre and highly-driven Management is often the key to success in industries with a heap of different players, like the gold industry, and Raleigh ticks all of the boxes.
There was a significant uptake in shorts on ~15th September, which seems to align with when the annual report was released.
This makes me suspicious, though I don't know what the shorts are about.
