Monsters of Rock: Markets whimper on FMG news, gold reports and Rick Rule

Fortescue shares down after job chopping restructure and hydrogen concerns
Evolution and Genesis launch gold reports
Silver Mines nabs $30mn funding deal with mining bigwigs

Andrew Forrest’s heavily well manicured Fortescue (ASX:FMG) was bent out of shape today, falling 1.5% on the news that it would scotch plans to produce what many observers had assumed to be an impossible amount of green hydrogen by 2030 in a restructure that will claim 700 heads at the iron ore miner and green energy technologist.

Its plans to fully decarbonise in the Pilbara (costed at US$6.2bn) are still in play, but the disrobing of its hydrogen cloak has provided an equally combustible gas for political firefights today, stocking the armoury of the Federal Liberal-National Opposition against billions in hydrogen production subsidies announced by the Albanese Government in its last budget.

For an issue that drew widespread political and media attention, the drop was relatively muted and hardly out of step with a 2% fall yesterday in iron ore prices (now around US$105/t).

News about Twiggy has a life of its own, but it’s far removed from the concerns of investors who only really care about how big their next dividend is going to be and whether it’s worth reinvesting.

The pause on new green hydrogen and iron projects beyond the smaller scale US$750mn developments announced to date in Phoenix, WA and Queensland will mean less capex flying out of iron ore revenues for that, theoretically supporting both payouts and capex for decarbonisation at FMG’s 190-200Mtpa iron ore mines.

FMG paid out 65% of profit after tax in February, with its interim divvie up 44% YoY to $1.08/sh, but the first half saw stronger iron ore prices while the company has been hit by production issues including the clean up from a train derailment and weather in the back end of the financial year.

RBC expects total payouts for FY24 to come to 205cps.

EVN and GMD lead gold reports on another record day

Gold hit a record again on the LBMA overnight, climbing north of US$2480/oz.

Happy days for Evolution Mining (ASX:EVN) and Genesis Minerals (ASX:GMD), who were lucky enough to report on this auspicious occasion.

EVN missed guidance but delivered a 2.8% rise on the market having used the time honoured tactic of getting the bad news out of the way early.

Its final quarter was solid, with gold production up 14% to 212,070oz and copper stable at 20,318t, with all-in sustaining costs down 13% to $1275/oz (including copper credits from Northparkes and Ernest Henry).

EVN banked cash as well, up 87% to $403m on net mine cash flow of $583m, with gearing down 23% over the year to 25%.

There was some good news from exploration at Ernest Henry in Queensland as well, where a hit at the Bert orebody returned a best-ever intercept of 51.7m (43m true width) at 4.12g/t gold and 1.65% copper.

EVN’s total output clocked in at 718,224oz gold and 69,189t copper for the financial year, while costs at the Mungari and Red Lake mines remained elevated but came down 1% and 11% respectively in the June quarter on higher production.

Genesis was down 0.5% after hitting its guidance of producing 130,000-140,000oz in the Leonora gold district of WA, churning out 134,451oz at $2356/oz.

That included 34,617oz at $2698/oz in the June quarter. Investors will be watching nervously though to check in on FY25 guidance, currently set at 175,000oz at $2300/oz but set to be updated in September.

Genesis plans to grow its output to 325,000ozpa at $1600/oz within five years. But it has taken steps that could accelerate its expansion, hedging 18,000oz at near record gold prices of $3666/oz to bring forward a restart of the Laverton mill acquired in its takeover of Dacian Gold and purchasing a 260 room mining camp and tourist accommodation site to expedite the construction timeframe for the large Tower Hill development near the Gwalia mine.

Raleigh Finlayson’s GMD finished the quarter with $173m in the bank and no debt.

Silver Mines attracts big dogs

This firm’s a little smaller than we’d normally cover in MOR and its 6.1% drop today looks unappealing to the naked eye.

But it’s the names on the ticket that have a $30.2 million convertible debenture for an obscure silver development in New South Wales under our watchful eye today.

Rick Rule and Harry Lundin, both giants of the North American mining game, have joined up with MMCAP International to deliver the funding via their co-owned investment firm Bromma Asset Management.

It comes with investors seeking pure-play silver opportunities amid a decade-high run in prices for gold’s country cousin.

SVL says the funding will go towards drilling, engineering studies for a DFS, pre-construction activities and admin.

The notes can be converted to stock at 22c per share, a 33% premium to its previous last traded price of 16.5c, but SVL can choose to convert the notes to stock of its own volition if it can get on a run and climb above 37.5c for 15 trading days before the debentures mature in four years from their issue date.

Bowdens is one of two undeveloped mining projects that achieved the rare step of gaining development approval for the NSW Independent Planning Commission last year alongside Regis Resources’ McPhillamy’s gold deposit.

The materials sector closed down 0.24% today.