The WA gold sector has thrown up a few mysteries over the years, but the latest manoeuvring around the consolidation of the Leonora gold district is a pearler, with Kin Mining appearing to have locked itself out of the only thing it wants from the Genesis Minerals play for Dacian Gold.
As Genesis inches closer to the closing date of its all-scrip bid for Dacian, near neighbour Kin Mining popped up on the market, grabbing about $3m worth of Dacian shares at an average price of around 9.5c a share – a tidy whack for a company that raised $13.7m from a placement and rights issue only a few weeks before.
Kin’s announcement of its 1.6 per cent stake in Dacian on September 28 caused a bit of head scratching around the sector, given Genesis was by then holding more than half of Dacian’s shares.
But the mystery deepened last week when the WA gold hopeful copped a mention on a substantial holder notice filed by a group of companies that revolve around mystery German investor Wilhem Zours.
Zours and his associate companies – Deutsche Balaton, 2invest and DELPHI – collectively hold about 30 per cent of Kin, so anything they do pretty much automatically makes Kin an associate.
But, as last week’s notice makes clear, both Kin and the Zours group were buying on the market at the same time in September – which turns the entire thing from a bit of a mystery into the territory of the outright weird.
Genesis now holds just under 75 per cent of Dacian stock, putting the Raleigh Finlayson-led company in control of its board and operations, and within a whisker of being able to dominate any future meeting held to – for example – delist Dacian from the market.
Sources close to Kin say there’s no intention to build a 10 per cent blocking stake in Dacian and stall the takeover. And that would be difficult, given the only other major share block in Dacian (about 5 per cent) is held by Gold Road Resources, which is believed to have agreed to tip its stock into the Genesis offer.
With Dacian closing on Monday at 10.5c, there’s a little bit of arbitrage available – about $300,000 on Kin’s spending, which seems hardly worth the effort. Particularly given that, by the virtue of its association with the Zours play, Kin has effectively locked itself out of any discussions around the use of Dacian’s mill until next year.
The use of Dacian’s Mt Morgan mill to process ore from Kin’s 1.4 million ounce Cardinia deposit is the real prize for Kin. But, with the company now a Dacian shareholder, it won’t even be able to discuss the toll-treatment of its ore with the Dacian board because any deal could be seen as a benefit not offered to other holders.
Even if Genesis closes its offer on October 17, as planned, that effectively locks the Kin out of discussions around the mill until mid-February, given takeover rules would require Genesis to wait at least four months before offering an improved bid for holdout shares – a stipulation that probably could be seen to include a deal with Kin.
By that time Dacian, which is only using the mill to process its 1.6 million tonnes of low-grade stockpiles, will be close to having to make a decision to mothball the plant given the Mt Morgan mill processed about 500,000 tonnes of ore in July and August.
If that happens, Kin will have to wait until Genesis sorts out its own plans for the use of the mill, in 12 to 18 months, and hope there’s still some space available.
Kin could be hoping its stake makes it difficult for Genesis to get to the 90 per cent needed to trigger a compulsory mop-up, triggering an improved bid – but that would hardly be conducive to neighbourly relations.
The best explanation appears to be that Kin and its German associates could be hoping that mopping up a bit of stock from shareholders keen on cash rather than Genesis shares, then turning them over into the bid, might have the reverse effect and engender a bit of good will for future negotiations. But even that would put Genesis at risk of the perception of a preferential side-deal with a shareholder.
Or perhaps the exercise is just a $3m reminder to Genesis that Kin still wants a seat at the table.
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