COMMODITY CAPERS: At the 2020 Diggers & Dealers Forum there was much excitement centred around the big gold merger between Saracen Mineral Holdings and Northern Star Resources with the new entity to become the owner of Kalgoorlie’s Super Pit operations.
At the time, Northern Star boss Bill Beament suggested there could/should be more gold company mergers, a reasonable call considering the current climate for gold and the price being generated thereby.
In the lead up to annual Kalgoorlie gabfest, Gascoyne Resources (ASX: GCY) and Firefly Resources (ASX: FFR) appear to have taken Beament’s advice on board by announcing this week the two companies would be merging.
In the announcement informing the ASX of their intentions, the two companies declared the merger will, “combine two gold companies with complementary assets in the Murchison region of Western Australia, unlocking a number of synergies by leveraging Gascoyne’s gold mining expertise and available processing infrastructure at Dalgaranga, for the benefit of Firefly’s highly prospective suite of assets including its flagship Yalgoo gold project, which is located only 110km by road from Dalgaranga.”
In an associated conference call, Gascoyne Resources managing director and CEO Richard Hay explained that regional consolidation of tenure around Dalgaranga had been a clear part of the company’s strategy since it gained re-instatement to the ASX back in October last year.
“This transaction – or this merger – is a major step forward for Gascoyne in accelerating our strategy to increase mine life, increase production profile, and build and grow our Resource inventory, and very, very importantly, is the exploration upside of the combined companies between Gascoyne and Firefly,” Hay said.
“Firefly’s Yalgoo gold project is highly complementary with Dalgaranga.”
In the During the same call, Firefly Resources managing director and CEO Simon Lawson – who will ultimately join the Gascoyne Board as a non-executive director, declared his Board had recommended unanimously in favour of the merger proposition.
“The Board believes there is many reasons to support this merger,” Lawson continued.
“Obviously, there is significant exposure at Yalgoo, and we are leveraging investment of over $100 million in infrastructure at Dalgaranga.
“Gascoyne is the logical owner of the Yalgoo gold project, and we will be working very strongly with the team at Gascoyne to complete the merger over the coming months.”
Reasons given for the merger by the two entities includes:
• Strategic consolidation of the higher-grade Yalgoo (Melville) Mineral Resource is within haulage distance of Dalgaranga;
• Firefly’s Melville gold deposit at Yalgoo contains a shallow, from surface, Mineral Resource of 196,388 ounces at 1.45 grams per tonne gold (0.7g/t Au cut-off) and located 110km by road from the Dalgaranga production hub;
• Approximately 80 per cent of the Melville Mineral Resource estimate currently sits in the Indicated category (156,753 ounces at 1.47g/t gold with a 0.7g/t Au cut-off);
• Opportunities to optimise the Dalgaranga mine schedule given the presence of higher-grade ore at Yalgoo which will serve as valuable blending material at Dalgaranga in the future; and
• Potential for mine life extensions at Dalgaranga through the integration of Yalgoo ore, with enhanced potential to unlock the full value of the existing Mineral Resources at Dalgaranga and Yalgoo of 845,000 ounces.
“The integration of high-grade Yalgoo ore in our production plan moving forward has excellent potential to extend mine life, reinforcing Gascoyne’s position as a key gold producer in the Murchison region,” Hay said in the combined ASX announcement.
“Furthermore, the merger with Firefly will consolidate approx. 1,200 square kilometres of the Yalgoo and Dalgaranga greenstone belts under single ownership, significantly enhancing the exploration upside potential with over 100 high quality targets.
“Any discoveries can quickly be brought into production at Gascoyne’s high quality, low cost Dalgaranga processing plant.”
In a steak knife, but wait there’s more moment, it was announced that, in conjunction with the Merger, Gascoyne and Firefly have agreed the terms of a demerger of the lithium rights over the Yalgoo project area as well as the Paterson copper-gold project and Forrestania gold-lithium project which is intended to be acquired by a newly incorporated wholly owned subsidiary of Firefly to be named Firetail Resources Limited, along with the lithium rights over certain tenements at the Dalgaranga project.
“Firefly shareholders will hold approximately 32 per cent of the merged entity, with the transaction providing an opportunity for immediate value realisation at an attractive premium,” Lawson said in the combined ASX announcement.
“Through their holdings in the enlarged Gascoyne, Firefly shareholders will stand to benefit from the re-rating that we would expect to flow from the creation of a larger gold company with an increased mine life and enhanced production profile.
“In addition, they are intended to benefit from the proposed demerger of our copper-gold and lithium exploration assets through Firetail Resources and receive an in-specie distribution in this exciting new energy metals focused company.”
TO READ THE FULL ANNOUNCEMENT: CLICK HERE