Remarks by Wayne Bramwell to Business News this time last year have proved somewhat prophetic, considering recent events in the Western Australian gold sector.
Remarks by Wayne Bramwell to Business News this time last year have proved somewhat prophetic, considering recent events in the Western Australian gold sector.
Speaking following a takeover tussle between his Westgold Resources and Ramelius Resources for control of Musgrave Minerals – a battle ultimately won by Ramelius – Mr Bramwell highlighted the competitive nature of WA gold’s mid-tier.
“The M&A piece is all quite tactical, it’s quite strategic,” the Westgold managing director said in August 2023, the last time Business News ran its annual Goldminers feature.
“There’s a fair bit of gamesmanship.”
The events of the ensuing 12 months have only enhanced that claim.
Westgold and Ramelius have been key players in a flurry of merger and acquisition activity that has reshaped the top and middle tiers of WA’s gold sector.
A month after the Mark Zeptner-led Ramelius bought Musgrave, gold heavyweight Newcrest Mining agreed to Newmont’s $26.2 billion acquisition offer.
In December, Raleigh Finlayson’s rising Genesis Minerals acquired Dacian Gold in a $111 million move, and Red 5 bought Luke Tonkin-led Silver Lake Resources in a $1.2 billion deal settled in June this year.
The creation of a consolidated company – an enlarged Red 5 led by Mr Tonkin – is an attractive prospect for investors at a time when the Australian dollar gold price is touching $3,500 an ounce.
Not to be outdone, Westgold is following hot on Red 5’s heels.
At time of writing, the company was in the final throes of a $1.2 billion deal for Canada-listed Karora Resources, a deal done by the time this edition hit newsstands.
The deal will create a potential top five WA gold producer with a pro-forma market capitalisation of $2.2 billion and annual output in the vicinity of 400,000 ounces.
It also serves as a reminder of the competitive nature of the precious metal business in WA.
In March, Ramelius expressed a public interest in a move for Karora. It entered exclusive discussions with the Toronto-listed goldminer to explore a possible merger.
Weeks later, having been unable to reach final agreement with Karora management, Ramelius told the market that no deal would be done.
Hours later, Karora told its shareholders it had opened negotiations with a third party.
That party was Westgold.
Westgold took a particular interest in Karora’s Beta Hunt mine, historically a nickel project and now a goldmine, where the ASX-listed company sees great potential.
“That’s a forty-year-old nickel mine,” Mr Bramwell told Business News.
“Karora have only been mining gold there the past four years. They’ve done a little bit of drilling and a lot of good work there in the past four years.
“We’ve been tracking that and starting to see what that could become. It didn’t take us long during a site visit there to understand the real potential of the Fletcher lode and all the other gold lodes within that mine.
“For us, this was never a nickel story; this was all about gold.”
Gold may have been the driver, but it is difficult to explore the story of the Westgold-Karora without wading into what has grown to be a significant and compelling rivalry between a couple of WA goldminers.
Gamesmanship appears to have come to the fore in the growth stories of both Westgold and Ramelius, as the two seemingly tangle for regional supremacy.
Late in May, Ramelius shocked the market when submitted a request for intervention by the Takeovers Panel in the deal between Westgold and Karora.
In doing so, Ramelius revealed that it was subject to a confidentiality deed with Westgold, which imposed a 12-month mutual standstill on the pair ending in November this year.
That suggested the two had, late last year, been in talks on a deal of their own.
Among its gripes, Ramelius argued the terms of Westgold’s deal for Karora left it under the control of what it deemed an “unacceptable lock up device”, one that required the consent of the latter to release it from the standstill.
It also questioned the size of a $44.1 million termination fee on the deal, and alleged the synergies outlined by the two companies were “hypothetical and misleading”.
Following some tweaks, the Takeovers Panel opted not to intervene. Neither did it share Ramelius’s view of the corporate synergies.
The requirement for Karora’s release consent is now gone, but the standstill clause between Westgold and Ramelius remains.
The parties are limited in what they can say about the saga, but have talked around the subject at the Diggers & Dealers Mining forum this week.
The Karora deal to create an enlarged Westgold has since been completed.
Meanwhile, Ramelius has turned its attention to Spartan Resources, in which it bought a significant strategic stake in June and July before that company’s share price rocketed on the back of an impressive mineral resource upgrade at its Dalgaranga gold project.
Strategy and rivalry are hallmarks of a sector where M&A activity is hot. Mr Bramwell expects that hunger to continue.
“Newcrest-Newmont, Silver Lake-Red 5, Karora-Westgold; the drums are beating around Regis and Gold Road. Who knows whether that’s true or not. And obviously people like Ramelius buying a strategic stake in Spartan,” Mr Bramwell said.
“I think the thematic is real, and it’s probably going to escalate.
“I think there’s a lot of people now, particularly among the gold producers. Some of their balance sheets are in pretty good shape, some of them are unhedged.
“Now is the time to take advantage of those opportunities where it can enhance the portfolio, or the cash flow generation out of these things.”
Don’t expect Westgold to meet the market on that front, though.
Mr Bramwell said the goldminer’s hands would be full for the next 12 to 24 months as it sought to optimise its consolidated portfolio, by adding Beta Hunt and Karora’s Higginsville operation in the southern Goldfields to its books.
“I think the focus will be to deliver the things that we believe the Karora assets can do,” he said.
“I mean, we’re still optimising our own part of the business in the Murchison, but there’s also the southern Goldfields stuff. There’s some untapped opportunity there, which just needed a better-funded group with some more horsepower to unlock.
“We bring equipment, people and cash into the southern Goldfields, and we think there are elephants to be found there.
“Particularly in the Karora assets. No-one’s touched the Higginsville assets for about ten years, and they haven’t even scratched the surface of how big the gold potential is at Beta Hunt.
“Those two opportunities are going to keep us busy for some time.”
Hits and misses
The appetite for ounces is driven by an Australian dollar gold price that has soared in recent times, fuelled by a favourable exchange rate and the yellow metal’s status as a safe-haven asset amid economic and geopolitical uncertainty.
The price touched a record high of $3,756 an ounce during overnight trade on April 13 of this year, according to analysis from Surbiton Associates.
But price strength is not the sole driver of performance for the state’s goldminers, much as they may wish it were.
Inclement weather through the March quarter weighed on the production targets of a number of the state’s major producers.
Among the hardest hit was the Tropicana joint venture of AngloGold Ashanti and Regis Resources, which over a three-day span weathered 314 millimetres of rain in early March.
The impacts of that weather event were still being felt at the end of June, according to Regis, with the company’s quarterly report revealing the JV had yet to fully normalise its mining activities.
Newmont’s Tanami mine in the NT and Gold Fields’ St Ives projects also reported lower-than-anticipated output over the period.
Super Pit owner Northern Star was another challenged by the forces of nature, with managing director Stuart Tonkin joking on a quarterly call that Kalgoorlie had been momentarily turned into an island during the early part of the year.
Despite those setbacks, Northern Star achieved its financial year group guidance but missed at the Yandal production hub, after a fire triggered by a scrubber unit in the gold room led to an unplanned 10-day work stoppage.
Mr Tonkin, who has set an ambitious target of 2 million ounces across the miner’s operations in the 2026 financial year, also spoke of labour price escalation in recent years: a factor that could become more pressing should the gold price fall.
Mr Tonkin said he expected the nickel industry’s struggles to ease some of the burden of labour attraction and retention in the year ahead.
“It’s sad to say, we’re beneficiaries of that retraction,” he said.
“But it also was unique that all the cycles peaked at once, with two years of border locked, that we had iron firing, lithium firing, nickel firing and gold firing all at the same time, with inability to get imported labour.
“The state was short 25,000 resource workers, that’s why you got cost escalation.
“This is the opposite side of that hill.”
Even in seemingly prosperous times, some topology has proved too challenging.
The appointment of receivers and administrators at debt-laden Calidus Resources in July and the subsequent closure of its Warrawoona goldmine was a reminder that a high gold price is not a performance guarantee.
In that case, a large hedge book of gold committed well below spot value, added to high production costs, led financier Macquarie to call in KordaMentha.
Its assets, including Warrawoona and the Nullagine gold project once mined by Novo Resources subsidiary Millennium Minerals, are now up for sale.
Banking on gold
Among the state’s newest gold producers at its namesake Goldfields project, Bellevue Gold surprised the market late in July when it revealed its five-year growth plan.
Having returned the historic project to commercial production in March, the Darren Stralow-led producer set a path to production of 250,000 ounces by the 2028 financial year.
In tandem, Bellevue aims to reduce all-in-sustaining-costs to between $1,500 and $1,600 an ounce by the 2029 financial year.
To fund its plan and free-up its balance sheet, Bellevue made a $150 million placement fully underwritten by Macquarie Capital, Canaccord Genuity and UBS Securities Australia.
After focusing on development for the past two years, Bellevue has set its sights on growth, including a ramp up of regional exploration.
Also tapping investors was De Grey Mining, which raised $600 million in May.
Not yet a producer, De Grey raised the cash in a bid to accelerate the progress of the flagship Hemi discovery: a low-grade, 10.5-millionounce deposit in the Pilbara the company hopes to turn into a low-cost goldmine in the years ahead.
And, following the commitment by a syndicate of commercial banks to a $1 billion senior debt facility, De Grey is placed to pull the trigger on Hemi, pending regulatory approvals and a final investment decision.
De Grey hopes to produce first gold from the project in 2026, with cash flow funding further development of broader regional exploration targets, including 2.2-million-ounce resources known collectively as the Hemi Regional deposits.
“Our strategy is to time the development of the Hemi Regional project using cash flow generated from the fully commissioned Hemi project, while also bringing forward cash flows from the Hemi Regional deposits as soon as practicable,” De Grey managing director Glenn Jardine said in July.
“The Hemi Regional deposits will not displace any material from Hemi but will aim to utilise the expected latent capacity within the front and back ends of the Hemi plant.”
With an US election on the horizon and an Australian election to follow, the gold price’s trajectory to 2026 and beyond is anyone’s guess.
Even the most bullish, with the most skin in the game, are unable to predict what lies ahead longer term.
Confident of gold in the year ahead but unwilling to make a prediction beyond it, Mr Bramwell said gold’s return to prime-time spots on the Diggers & Dealers Mining Forum program was evidence of the fickle nature of commodity cycles.
“Look at nickel, even look at lithium,” he said.
“Twelve months ago at Diggers & Dealers, lithium was the headline act, and all the gold producers were pushed into the Wednesday slots that no-one wanted to hear.
“Twelve months on and gold’s on Monday, and all the lithium guys are the ones who are left pushed onto the Wednesday.
“Twelve months is a long time in these commodity games.”
