Based on conversations in the pubs around Kalgoorlie last night, a lot of delegates kicked goals on the first day at the Diggers & Dealers Mining Forum.
Combined, possibly as many as the various West Coast Eagles legends roaming the conference and then the watering holes.
Yesterday’s theme was gold, or green gold or trendy gold or iconic gold or Tiffany’s gold.
For all the rhetoric, foremost on investors’ minds was sustainably profitable gold, which ends up being the benchmark.
One of Australia’s largest yet lowest-profile gold producers kicked off yesterday’s run of precious metals discussions when still-newish Gold Fields boss Chris Griffith presented the South African-based and listed producer’s investment thesis.
It is often forgotten that Gold Fields, across its St Ives, Agnew and Granny Smith mines and 50 per cent stake of Gruyere, all in Western Australia, produces more than one million ounces a year. It puts Gold Fields right up there in Australia’s top four alongside Newcrest Mining (ASX: NCM), Northern Star Resources (ASX: NST) and US giant Newmont.
Mr Griffith, who took over from the long-serving Nick Holland last year following a lengthy stint running Anglo American Platinum, has already begun stamping his mark on the South African major.
Given his background, Mr Griffith was of course asked about any interest in last year’s Emerging Company winner, Chalice Mining (ASX: CHN), which is sitting on a massive platinum group metals discovery in a state forest east of Perth. It was a pretty firm no from the Gold Fields supremo.
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- Day 1 wrap
Instead, Gold Fields has launched a $US6.7 billion takeover bid for Canadian producer Yamana, which will transform the company’s global portfolio.
Yamana is, of course, just an errant ‘r’ away from being confused with the Yamarna Greenstone Belt north-east of Kalgoorlie, where Gold Fields is operating the Tier 1 Gruyere mine, discovered by Gold Road Resources (ASX: GOR) in 2013.
Gruyere is working towards producing at its nameplate 350,000 ounces annually (on a 100 per cent basis) so is a highly desirable asset that comes with a mine life of more than 10 years.
Assuming Gold Fields sticks to its Yamana strategy and leaves the ‘r’ out, Gold Road will be able to continue to explore the Yamarna belt in its hunt for another million-ounce monster to match the cash flow power of Gruyere.
“(Gruyere) is a very simple project and it is just getting better,” Gold Road boss Duncan Gibbs told delegates during his 5.05pm graveyard presentation slot.
Mr Gibbs’ message to investors about Gold Road’s value journey is equally simple: strong business and balance sheet; consistent low-cost production for more than 10 years; growing production via exploration or M&A; and free cashflow and continued dividend payments (20 to 40 per cent of free cash flow).
Sounds easy for the 2011 Emerging Company award winner at Diggers..
From an investor narrative point of view, Gold Road’s M&A opportunity is Diggers’ 2020 Emerging Company winner, De Grey Mining (ASX: DEG).
Gold Road inherited a 14.4 per cent stake in De Grey through its just-completed takeover of DGO Gold. De Grey’s flagship asset is the Mallina gold project in the Pilbara, which includes the massive Hemi deposit, and investors are getting themselves in a lather about Gold Road’s next move.
Little known is that, as part of the DGO bounty, Gold Road also picked up two tenements which are surrounded by Mallina.
Gold Road is excited about the potential for the two tenements to host Hemi-style deposits. And Gold Road is excited about having a seat at the table to discuss Hemi’s future. Talk about having a foot in both camps.
A highlight of Day 2 was, of course, the Kalgoorlie miner. The daily paper is excellent but in this case the focus is on Northern Star, the biggest private sector employer in town and owner of the iconic Super Pit – and pending “Super Underground”, as an excited managing director Stuart Tonkin exclaimed while highlighting the untapped potential at Mt Charlotte.
Mr Tonkin, an alumnus of Kalgoorlie’s WA School of Mines, also used his presentation to focus on the ‘S’ of the ESG topic that has featured prominently in presentations over the first two days.
Northern Star is growing out its team skills through the employment of 50 apprentices, 90 graduates and 180 trainees. Talk about investing in the next generation of workers.
On another metric, over the past 12 months Northern Star has pumped $3 billion into the local economies where it operates – WA, Alaska (Pogo) and a bit in the Northern Territory – all this during a “fascinating yet challenging and very dynamic year”, as Mr Tonkin put it. Mildly.
“We have the portfolio, the people and the strategy to deliver,” he added about Northern Star’s returns-focused approach that will see value prioritised over volume.
The value proposition today will be for delegates to guess the winners of tonight’s gala dinner awards.
This scribe has a history of failure in predicting the winners, eclipsed only by his complete inability to win Lotto.
But here are some contenders.
- For the Digger – Capricorn Metals, BHP, Gold Fields, Mincor Resources, Red 5, Karora Resources
- For the Dealer – Sandfire Resources, IGO, Agnico Eagle
- For the Emerging Company – Global Lithium, Predictive Discovery
- For the Champion – Josh Kennedy, David Mundy
- For the People’s Choice – the crew who keep the freshly made fruit and veg juices flowing and the coffee machines functioning