St Barbara to sell Leonora gold assets after cancelling Genesis merger
The gold producer has blamed a ‘material increase in funding requirements’ for cancelling the Genesis tie-up, warning it was in danger of breaching banking covenants.
St Barbara chairman Tim Netscher will step down this month, after the company confirmed it will sell its Leonora gold assets to Raleigh Finlayson’s Genesis Minerals, cancelling the pair’s merger plans in favour of a $600m cash and scrip sale of its flagship assets.
St Barbara blamed a “material increase in funding requirements” for the decision to sell its flagship asset, after another poor quarter from the company’s Gwalia gold mine put pressure on its balance sheet.
The company warned it was in danger of breaching its banking covenants, given the problems at both Gwalia and the company’s Canadian operations, saying its bankers could have demanded the repayments of the majority of its senior secured debt if an alternative transaction structure was not put in place.
As flagged by The Australian last week, rather than a reverse takeover of Genesis and a spin out of St Barbara’s Papua New Guinea and Canadian assets, the new deal will see Genesis offer cash and shares to St Barbara to buy the company’s Gwalia mine and other nearby gold deposits.
The Australian understands St Barbara has agreed to accept upfront cash of $370m, Genesis scrip worth $170m at $1.15 a share, with an additional $60m worth Genesis shares due when satellite deposit Tower Hill first produces ore.
St Barbara shareholders will now emerge with about 19.5 per cent of Genesis shares if the transaction is approved, with the company to be left with no debt and about $197m in cash.
Genesis said on Monday it had received firm commitments for a $470m placement at $1.15, to uphold its end of the revised deal.
St Barbara also announced the retirement of long-term chairman Tim Netscher after almost eight years leading the company’s board, flagging further board changes in the wake of its revised deal with Genesis.
Mr Netscher joined the company in 2014 and has led its board since mid-2015. His place will be taken by former Incitec Pivot executive Kerry Gleeson, who also joined the St Barbara board in 2015.
St Barbara said Ms Gleeson will “oversee a board renewal process”.
After the sale of its WA gold assets to Genesis, St Barbara will be left with its gold projects in Nova Scotia in Canada - the subject of its disastrous 2019 takeover of Atlantic Gold, which cost the company $780m at the time.
It will also hold its Simberi mine in PNG, which has an uncertain future until a path is found to profitably exploit the difficult-to-treat refractory ore that makes up the bulk of its remaining resources. In addition it will hold about $26m worth of shares in ASX-listed resources juniors including Kin Mining - also a player in the Leonora district - Catalyst Metals and Peel Mining, and a suite of Australian exploration tenements.
St Barbara will also have $197m with which to pursue its future, with the company saying its focus will be to “establish a refreshed corporate culture and identity focused on value”.
With the company expecting to mothball its only operating mine in Canada early in the new financial year, St Barbara says it hops to begin development of the nearby deposits in the 2026 financial year, when it also expects to land on a development plan for the future of its PNG assets.
St Barbara shares closed down 3.5c to 61c on Monday, with Genesis up 11c to $1.21.