Dacian Gold hits record high, Rohan Williams talks up takeover prospects

Dacian Gold’s shares hit a record high yesterday and its boss Rohan Williams says there is more value to come.

Dacian Gold executive chairman Rohan Williams. Picture: James Croucher

Rohan Williams has heard all the comments from the managing ­directors of Australia’s goldminers about how more acquisitions are off the table, but it’s fair to say he doesn’t think they’re being totally honest.

“If you believe that, then there are fairies in the garden too,” he says.

Mr Williams’s Dacian has been one of the best-performed stocks in Australia’s red-hot gold sector, climbing from less than 30c a share early last year to trade at a record high yesterday of $3.38 as the market wakes up to the potential of Dacian’s ground near Laverton in central Western Australia.

That return is a windfall for Mr Williams and the 10 individuals he affectionately calls the “Kalgoorlie Mafia”, who agreed to pour $10 million in seed capital into ­Dacian in 2012.

He is firmly convinced that the run isn’t over yet, with further value to come as its Mount Morgans project progresses towards production.

The company is expected to unveil more promising exploration results from its Westralia deposit in the coming days ahead of a series of resource upgrades in the weeks to come.

And there’s always the prospect of a takeover offer, despite all the commentary from Dacian’s bigger rivals that they’re not looking for mergers and acquisitions.

“Of course they’re going to say that, but they’re looking at everything, they have to be,” he says.

“Their boards will be demanding they do something with their stock prices where they are. I know I would be if I was on their boards.”

The record highs being recorded across the Australian gold sector in recent weeks, which have now been exacerbated by the boost to gold following last month’s Brexit result, have made it harder for executives to see value in acquiring other smaller players.

But Mr Williams believes growth through M&A will be a key plank for those bigger companies in delivering growth and convincing investors to continue buying stock. It’s a thesis that obviously suits Mr Williams, given Dacian is one of the few gold development plays offering meaningful scale.

The company’s discoveries around Mount Morgans are expected to support more than 200,000 ounces a year of gold production when it is commissioned in early 2018, which will make it a top 10 Australian gold producer.

That would cap a stunning journey for Dacian, which bought Mount Morgans from the ­administrators of failed miner Range River Gold in 2013 for $8m. To fund the purchase, Mr Williams was introduced to a room full of high net worth individuals who he would come to refer to as the “Kalgoorlie Mafia”.

“A lot of them were all part of the old (Western Mining) school of the 70s and 80s; they were a combination of mining people, mechanical engineers, metallurgists and geologists that had all made good careers for themselves and who had all done pretty well for themselves,” he recalls.

“I hadn’t met many of them before, but over 45 minutes I told them what I thought and what I was hoping I could do. The next day I had $10m.”

Those 10 original investors including Mr Williams continue to hold around 40 per cent of Dacian, which is worth around $340m. The company will need to raise around $200m in debt and equity in the not-too-distant future to fund construction and give Dacian adequate working capital headroom, but, given the market interest in the sector and the booming gold price, that should not be much of a problem.

Blue Ocean Equities, one of 11 brokers to cover the stock, has lifted its price target for Dacian to $3.30 and flagged potential upside to $5.50 once it gets into production.

Blue Ocean is excited about the possibilities of Dacian’s Callisto prospect, which will be drilled next month, while the firm also believes that South African giant Gold Fields will be running the numbers on an acquisition of Dacian. Gold Fields owns the Granny Smith mine and processing plant 20km from Mount Morgans. “We continue to believe there is a strong chance that Gold Fields bids for Dacian at some point,” Blue Ocean wrote. “For us, the primary question is when.”