Capricorn rising as merger hints say future is golden
The $6.6bn Capricorn Metals is in the spotlight for potential corporate activity after it was believed to have made approaches to Genesis Minerals about a goldmining merger.
It comes as speculation mounts of a $8bn-$10bn merger deal brewing in the Australian gold mining sector involving Capricorn.
DataRoom understands that the approach to Genesis was made about four weeks ago, but it is unclear whether the pair have held further talks.
Other sources say that Capricorn has been “sniffing around” when it comes to opportunities.
The share price of Genesis Minerals is up this year by 171 per cent with its market value at $7.6bn.
Capricorn’s share price has rallied 133 per cent this year, as both companies prosper on the surging gold price, which has smashed new records this year beyond $US4000 an ounce.
Sources say that a deal would elevate Capricorn from mid-cap status and Genesis Minerals could be a good fit from a nil-premium merger perspective.
They were described by market observers as two companies of similar quality.
Gaining greater scale as a gold company also enables a miner to attract passive index funds.
For the year to June, Capricorn generated a $150.3m net profit, up from $87.1m in the 2024 financial year.
Its gold production guidance for the 2026 financial year is 115,000 to 125,000 ounces, up 4.3 per cent on the midpoint guidance for the 2025 financial year.
Former Regis Resources boss Mark Clark has run Capricorn as executive chairman since 2019 and is believed to be keen to retreat from executive life.
Capricorn has the Mount Gibson gold development project, which is in the advanced stages of permitting for development, but generates its cashflow from the Karlawinda project in Western Australia, which is currently subject to expansion.
Karlawinda has been generating cash for four years. It is forecast to produce between 115,000 and 125,000 ounces this financial year.
Mount Gibson is expected to produce about 150,000 ounces annually for the first 15 years.
The cost of its infrastructure is $260m and is expected to be paid back in 2.3 years.
Sources believe another option is a deal with $C8bn Canada gold company Oceana Gold, which has operations in New Zealand and has been scanning the Australian market for opportunities.
Also looking at large goldmining deals in the Australian market are the $19bn Harmony Gold out of South Africa and Agnico Eagle, with persistent talk it is keeping close tabs on Northern Star.
It comes after a run of major buyouts in the gold space in the Australian market, including Newmont’s $29bn privatisation of Newcrest Mining last year, Gold Fields buying Gold Road Resources for $3.6bn, Northern Star buying De Grey Mining for $5bn and Ramelius Resources buying Spartan Resources for $2.4bn.
Globally, gold miners have billions of dollars of cash on their balance sheets on the back of the surging price of the commodity, fuelled by geopolitical tensions and a retreat from the US dollar.
Analysts at Barrenjoey consider Capricorn Metals undervalued based on the large amount of growth not yet priced in, and it has it has its top stock pick among the goldminers.
Neither Capricorn nor Genesis Minerals responded when contacted for comment by DataRoom.
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