Huge gold and copper mine deal delivering for WA miner Greatland Gold and its backers
ASX-bound Greatland Gold’s $700m-plus deal for gold and copper mines is making its backers, including Andrew Forrest, a lot of money. But it took connections and luck to make it happen.
Canaccord Genuity analyst Alex Bedwany is calling it the gold deal of the decade. Greatland Gold chairman Mark Barnaba says it took courage and a little luck. Chief executive Shaun Day says it was four years in the planning and execution.
Greatland’s acquisition of the Telfer gold and copper mine and the neighbouring Havieron project from Newmont Corporation for up to $US475m is looking more and more like a bargain. The deal has already made Greatland’s backers, including Fortescue founder Andrew Forrest, a lot of money.
The tale of how the deal was done stretches from the Perth beachside suburb of Cottesloe to the Great Sandy Desert in Western Australia to Denver in Colorado and the London Stock Exchange, but it’s a reminder the mining world can be a small place.
London-listed Greatland is likely to make its debut on the ASX in June as a $4bn company, as the gold price continues a record-breaking run that has taken it to $US3357.40 an ounce.
Telfer has been spewing cash since the moment Greatland took over the running of the mine on December 4.
Perth-headquartered Greatland ended the March quarter with a cash balance of $398m after generating free cashflow of $253m with no debt.
A day after releasing those results last week Greatland lifted the lid on the upside at the ageing Telfer mine and big new plans for the development of Havieron.
In their first big foray into gold, separated billionaires Andrew and Nicola Forrest have so far made a profit of $446.1m on paper backing Greatland over the past three years.
And the Forrests have a pathway, via their private mining company Wyloo, to boost their shareholding from 8.45 per cent to almost 21 per cent at a fixed price much lower than where the shares are trading.
Complex and challenging
The ASX listing will reflect the giant steps Greatland has taken under the leadership of Mr Barnaba, the chairman of AirTrunk, long-time Fortescue director, and Mr Day.
Greatland stock was trading at close to 5 pence on the AIM – the sub-market of the London Stock Exchange tailored to help smaller, riskier companies secure capital – as recently as mid-November. The stock is up more than 170 per cent since then and closed at 14.35 pence going into the Easter break.
Mr Barnaba compares the acquisition of Telfer/Havieron to a python trying to swallow much bigger prey. The Woma species is found around Telfer in the Great Sandy Desert.
“On the one hand, you may be able to feed forever, and that’s great, but on the other hand the act of consuming it might prove fatal,” he says. “What we set out to achieve was both complex and challenging. While it’s easy to claim we were the natural owner – given Greatland’s discovery and 30 per cent stake in Havieron – the reality was that the value of the asset we were acquiring was greater than our own enterprise value.
“The clearest indicator of whether we got it right lies in the outcome – completing that equity raise just four months ago at a recapitalisation price of 4.8 pence, and now trading above 14 pence. Returns of this magnitude in such a short period are rare in transformational transactions of this nature.”
Convinced Newmont and other backers
Newmont took some convincing that Greatland was a serious contender but was swayed by the backing of the Forrests through Wyloo, Greatland’s high-powered board and a history of doing asset sales with Mr Day on the other side.
Mr Day, Mr Barnaba and Newmont chief executive Tom Palmer have all known one another for a while.
Mr Day and Mr Palmer, who has run the world’s biggest gold company since 2019, are near neighbours in Cottesloe. The Forrest family also own homes, including an oceanfront compound that covers half a hectare, in a suburb sprinkled with mining millionaires.
Mr Barnaba was Macquarie Capital’s head of global resources when he met Mr Day, who at the time was the chief financial officer helping turn Northern Star Resources from a penny dreadful stock into one of the gold sector’s great success stories.
The Northern Star journey involved buying unwanted and unloved assets from gold majors, including Newmont’s 50 per cent stake in Kalgoorlie’s fabled Super Pit for $US800m in 2020 and the Jundee mine in 2014.
Mr Day’s main contact in the Northern Star transactions (and the Greatland deal) was Newmont’s business development team, but he also crossed paths with Mr Palmer.
These days they can bump into one another at Cottesloe social haunts when Mr Palmer is not at Newmont’s headquarters in Denver.
Under Mr Palmer’s leadership, Newmont acquired the Telfer mine and a 70 per cent Havieron stake in its $26.2bn takeover of Newcrest Mining in 2023.
They became the first assets sold and the only bilateral transaction as Mr Palmer set about trimming Newmont’s global portfolio in the wake of the Newcrest deal.
Leveraging connections
The Greatland board that Mr Barnaba helped pull together using his connections is now preparing for life on the ASX and all the options for developing Havieron without disrupting production at Telfer.
Those connections included former Fortescue chief executive Elizabeth Gaines and former BHP iron ore boss Jimmy Wilson.
Mr Barnaba and Ms Gaines are linked through the roles they have played at Fortescue, where they now sit together on the board.
Another leading figure in Fortescue’s history, former director of operations Paul Hallam, has been on the Greatland board since 2021.
Yasmin Broughton, who recently played a key role in what was an $8bn sale of 40 per cent of the undeveloped Rhodes Ridge iron ore project to Mitsui, is another Greatland director with WA links.
The deal Greatland struck for Telfer compares favourably with the one finalised by Northern Star last week to acquire De Grey Mining and its undeveloped Hemi gold project in WA’s Pilbara.
Northern Star paid $6.1bn in scrip to secure Hemi in a transaction that is set to propel it back into the ranks of the world’s top five gold producers but represents a departure from its successful strategy of buying older assets and turning them around.
Greatland struck a deal to pay $US155m of cash upfront plus $US52.4m owed to Newmont for past work on Havieron. Greatland also issued shares worth $US167.5m at the time to Newmont, which became its biggest shareholder with a 20.4 per cent stake.
The deal included a provision where Newmont eventually receives another $US100m depending on the gold price and production at Telfer-Havieron.
Greatland issued about $US334m worth of new shares in total to finance the deal, with Wyloo subscribing for up to $US100m.
Projected profits
Stockbroker Mr Bedwany said Greatland was on track to make back the $US207.4m in cash it paid upfront this financial year (after just seven months of ownership) in what was proving a remarkable deal.
“In the gold space, you can see a lot of value get destroyed by M&A activity but this one seems like it might be the deal of the decade, or even the century,” he said.
“No.1 the timing was excellent. On the day that they announced the deal the gold price was about $US2350 an ounce and now it’s above $US3300.
“And then you look at Shaun’s background at Northern Star where they specialised in finding assets owned by larger companies that had sort of been forgotten or might be on the periphery and then extracting value.
“They’ve already extended the life of Telfer and it’s not just going to pay back the original purchase price – it’s probably going to finance the development of Havieron, which is a massive operation.
“You don’t see many gold mines run for 30 years at multi-hundred thousand ounces. Where else do you see massive upside and great deal-making for an asset in Australia? You might see it somewhere else, Africa perhaps, but certainly not in a great jurisdiction like Australia.”
Gold production of 90,000 ounces in the March quarter bettered Macquarie forecasts by 22 per cent. Costs were 11 per cent lower than the investment bank expected and the cash build almost $200m better than it anticipated.
Canaccord, Macquarie and Argonaut’s Hayden Bairstow are among the analysts who have a buy rating on the stock.
Meanwhile, Greatland has appointed Bank of America, Barrenjoey and Canaccord as brokers ahead of the cross listing on the ASX as Greatland Resources, whereby existing shareholders maintain their proportional ownership.
ASX listing
Mr Barnaba described the AIM as an excellent trading platform but noted that it was not primarily geared toward mining, which is why the ASX entity will eventually dominate the cross listing.
“Listing in Australia gives us access to local indexes and aligns us with other ASX-listed peers,” he said. “Importantly, it also enables investment from funds that are restricted to ASX-listed companies only.”
Mr Day joined Greatland as chief executive in February 2021 with an owner’s mandate.
“I joined Greatland with the express purpose of acquiring the portion of Havieron that we didn’t own together with Telfer next door, which effectively combines what is potentially Australia’s best development asset with existing infrastructure at Telfer,” he says.
“It is a really rare confluence to have existing cashflow plus this big organic growth profile, and is very much from the Northern Star playbook.”
His acquisition plan was based on finding a strategic investor with deep pockets and credibility, and he wanted Mr Barnaba on the board, based on their Northern Star history.
Wyloo signalled it wanted gold exposure in June 2022 with a “fill or kill” share raid aimed at securing 15 per cent of Regis Resources that fell short of the mark.
The Forrest-owned entity run by Luca Giacovazzi started providing backing as Greatland slugged it out with Newcrest over the value of Havieron. An independent valuer put a notional value of $US1.2bn on Havieron and after arbitration Newcrest walked away from an option to increase its stake from 70 per cent to 75 per cent.
The arbitration victory was crucial as Mr Day worked away on two separate fronts through 2022 – building the relationship with Wyloo and adding board firepower with the help of Mr Barnaba.
Valuation and due diligence
Eventually, on September 12 that year, Greatland unveiled Mr Barnaba as its new chairman and Ms Gaines and Mr Wilson as non-executive directors. In a separate announcement on the same day, Greatland said it had secured $220m from banks and an equity investment of up to $120m from Wyloo to fund its share of developing Havieron.
Fast forward to 2024 and Wyloo agreed to underwrite the equity raise that enabled Greatland to acquire Telfer-Havieron and complete the Day vision.
Instead of taking a fee, Wyloo – which did a deep technical dive into the potential of Telfer-Havieron – took options over the Newmont shareholding. It has a call option to buy half of Newmont’s 20.4 per cent stake at 7.2 pence plus warrants for other shares at 10 pence that could take its shareholding to nearly 21 per cent.
Wyloo also has right of first refusal should Newmont look to sell the remainder of its stake.
One of the question marks over the Telfer mine ahead of the sale was the condition of two tailing dams hit with prohibition notices by WA safety authorities.
Newmont voluntarily stopped using the dam that was still active and worked hard to bring it up to its global standard.
During the remedial work and dam upgrade, Newmont kept mining but stopped processing. That left 30 million tonnes of ore at surface – representing more than 450,000 ounces of gold and more than 15,000 tonnes of copper sitting there at zero mining risk or cost to Greatland.
Subtract recovery and processing costs and the ore left at surface still adds up to a potential $1bn profit for Greatland.
Mr Day said Greatland did an extended period of due diligence at Telfer that allowed it to hit the ground running.
The deal was completed at about 4pm in WA on December 4 and within 15 minutes new owner Greatland fired up the second of two processing trains at Telfer.
“I think that that in itself was a remarkable point in the transaction, and a real statement to the team at Telfer about our intent,” Mr Day said.
“Our immediate focus is to establish ourselves as a consistent, reliable, long-term producer of low-cost gold. If we’re able to do that, we give ourselves the best opportunity to drive value on the ASX, and the ASX is clearly the best resources exchange on the planet.”
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout