Western-Australia-based gold miner St Barbara [ASX:SBM] has struck an agreement to merge with neighbour Genesis Minerals [ASX:GMD]. This event will see a new player in the gold exploration industry emerge as ‘Hoover House’.
St Barbara entered a trading halt pertaining to the above but is expected to reopen with a new announcement on Wednesday.
SBM has seen a significant dip in share price over the year, currently trading at a 54% discount over the past 12 months.
It’s also performing at half the market average compared with the wider ASX 200.
Source: tradingview.com
The birth of Hoover House
Genesis and St Barbera have now sealed the deal to merge via a binding Scheme Implementation Deed (SID), joining their gold mining assets in Leonora, WA.
SBM said Hoover House will be ‘one of Australia’s leading gold houses, with a long-life, high quality asset base and substantial potential for organic growth’ and takes its name from the 1890s gold mining US President Herbert Hoover.
St Barbara will acquire 100% of Genesis shares through the merger via a scheme of arrangement.
Genesis shareholders are to receive 2.034 new fully paid ordinary shares in St Barbara for each Genesis share, not representing any kind of premium to the 30-day volume weighted average price.
SBM will demerge assets such as the Simberi mine in Papua New Guinea and Atlantic Gold in Canada, as well as some ASX-listed shares in other companies.
These assets will ostensibly be going to Phoenician Metals, another new commodities player soon to be listed on the ASX, and of which Hoover House will hold a 20% shareholding.
Genesis is to raise $275 million in capital to fund the merged entity and facilitate the transaction. However, this will be conditional on the Scheme and Demerger becoming effective.
ST Barbara’s Board will be unanimously recommending the Demerger to shareholders.
Tim Netscher, St Barbara’s Chair, said:
‘Shareholders will reap the benefits of more production at lower cost and lower risk from this prolific mining district.
‘A significant component of the value delivered by the creation of Hoover House is the unique synergies delivered by the resultant combination of assets, such as the ability to sensibly stage the development of the various orebodies and to match one party’s ore to the other party’s mill capacity.
‘Select assets including Atlantic and Simberi will be de-merged to create Phoenician Metals. This will provide an opportunity for shareholders to realise the long-term value of this well-endowed portfolio in a dedicated vehicle with a high-quality management team.’
The future with Hoover
Hoover House will be headquartered in Perth, Western Australia, with a new strategic plan and five-year outlook to be announced in the September quarter of 2023 post-completion of the merger.
The new company is said to have a production target of over 300,000 ounces of gold a year, compared to St Barbara’s standalone FY23 production guidance of 145–160 ounces for Leonora, with the actual year-to-date production of 56 ounces.
This is expected to be achieved through a partnership of mines, processing capacity and future developments of assets in the Leonora area, including Gwalia operations.
Genesis’ Managing Director, Raleigh Finlayson, said the merger is a major step forward, with the close proximity of combined Leonora assets, shared substantial synergies and path to a market rerate, making for a good deal for both Genesis and St Barbara shareholders.
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