Silver Lake Resources may be plotting another spoiler campaign for Raleigh Finlayson’s Leonora consolidation play

Is Silver Lake’s raid on Red 5 the prelude to a takeover offer, or is there a broader plot afoot in the Leonora region?

Silver Lake Resources has kicked off a new wave of jostling over the rich Leonora gold district in WA, snaring an 11 per cent stake in Red 5 in a surprise raid on the gold producer.

As revealed in The Australian’s DataRoom column on Monday, Silver Lake snared its stake at a slight premium to Red 5’s last trading price, building a big enough stake in the gold producer to either launch a future move – or to block an alternative offer from a rival gold player such as Genesis Minerals.

The surprise raid was launched as the bulk of the world’s gold sector meets in Colorado in the US for the annual Denver Gold Conference – Silver Lake is the only one of the major producers in the Leonora region that is not presenting at the conference. Red 5 is due to present overnight, Australian time, with Genesis presenting the following day.

Silver Lake was a spurned late suitor for St Barbara earlier this year, with the struggling miner instead opting to sell its flagship Gwalia gold assets to Raleigh Finlayson’s Genesis.

Silver Lake said on Monday the acquisition of 383 million shares in Red 5 was a “strategic investment” in the company’s operating King of the Hills mines, as well as the company’s broader position around Leonora.

The company did not flag any immediate intention to build on its position on Monday, and market sources say the move is likely to be aimed at dealing the company to a further round of consolidation in the region.

After capturing St Barbara’s assets in the region, Genesis is still settling in its strategy to best exploit the multiple deposits and mills it controls. In an investor presentation this month, the company outlined a plan to selectively mine high grade areas of Gwalia and open the nearby Tower Hill deposits as an open pit mine potentially capable of producing 300,000 ounces of gold a year.

But that plan would involve trucking Tower Hill ore to a mill owned by Dacian Gold – the first target of Genesis’ regional consolidation moves in 2022. Genesis’ failure to fully capture Dacian – it remains stuck on 80.1 per cent of the company’s shares – complicates that plan.

Instead, Red 5’s mill at its King of the Hill mine would offer a closer processing option – and Genesis now owns an extensive tenement base around Red 5’s mine, courtesy of the St Barbara deal.

Also in play is Kin Mining, which recently changed out its senior management in a move market sources suggest is a signal it is looking for a suitor.

Kin, and its major suitors centred around mystery German investor Wilhelm Zours, also control the blocking stake in Dacian. With Kin worth only $48m on the market, the company’s 1.2m ounce deposit – which sits between Gwalia and Dacian’s mothballed Mt Morgan operations – would be a logical feed for many of the regional mills.

Market sources suggest that if Silver Lake were to make a formal move on both Red 5 and Kin, it would be well positioned for a follow-on merger with Dacian, effectively collectively all of the major players in the Leonora region into a single company.

Silver Lake shares closed down 8c to 88c on Monday, with Genesis down 8c to $1.56. Red 5 shares were up 4.5c to 26.5c.