Monsters of Rock: Gold Road keeps skin in the game at De Grey

Gold Road retains cornerstone stake in large WA gold developer De Grey, but sees ~$500m stake diluted
Lithium developer/ miner Liontown awards $71m paste plant contract at Kathleen Valley to GR Engineering
Struggling gold miner Pantoro launches (another) capital raising

Gold Road Resources (ASX:GOR) has kept its skin in the game at De Grey Mining (ASX:DEG), signing up for its full entitlement as part of an institutional offer that formed part of a crucial $600 million equity raise.

GOR will emerge with around 17.3% of the company, still its largest shareholder despite being diluted down from a 19.9% position after not participating in an additional institutional placement that formed part of the raising.

The Gruyere gold mine owner, which is known to be looking for a second producing asset, picked up 46,249,692 new shares at $1.10 a pop, its full allotment under the 1:7.95 institutional entitlement offer that made up $174m of the raising.

De Grey announced today that the institutional bookbuild has been completed, raising $514.3m before costs. Only a retail component of the entitlement offer is left, with the 1:7.95 share offer to pull in ~$85m after it opens on Wednesday.

The $600m in fresh cash will be one of two major funding packages for De Grey’s Hemi, where a final investment decision is expected later this year.

It opens the door to a debt package likely to come in at around $1.1 billion. The mine, which will produce 530,000ozpa over its first decade, is expected to cost around $1.3b to construct with a production start date in late 2026 and will be one of Australia’s five largest producing operations.

“The support from existing and new shareholders for the institutional component of the Equity Raising has been overwhelming and reflects the high quality of the Hemi Gold Project at a global level,” DEG MD Glenn Jardine said.

“I would also like to extend my appreciation to the De Grey Board and management, the joint lead managers and our legal and financial advisors for their considerable efforts in successfully executing this landmark transaction.

“Our focus remains on completing the project financing and implementing the project execution plan as we move towards the start of the construction phase.”

Gold Road acquired its stake in De Grey after taking over DGO Gold a couple years back. The holding has given GOR a foot in the door when it comes to partaking in any sale process for the $2.3b company or its key asset.

But it also could be cashed in if GOR needs to raise capital for another acquisition, having recently taken part in (and exited) a process for a 40% stake in Canada’s Greenstone Gold Mines.

Gold Road had $146.2m in the bank at March 31 but valued its listed investments (largely the De Grey stake) at $469m.

Gold Road Resources (ASX:GOR) and De Grey Mining (ASX:DEG) share prices today

Pantoro raising and Liontown awarding contracts

Liontown Resources (ASX:LTR) is in the final stretch of its development of the Kathleen Valley lithium mine.

And its latest contract suggests options to expand the mine beyond its initial 3Mtpa production capacity remain in focus.

LTR has delivered a $71m EPC contract for a paste plant at Kathleen Valley to GR Engineering Services (ASX:GNG), funded from a recently announced $550m finance facility.

The lithium developer ceased plans to go early to 4Mtpa after a previous $760m finance package fell through as lithium prices tanked.

They have since rebounded slightly, with a plan around the future expansion of the underground development expected to be communicated to the market later this quarter.

The paste plant will include two trains capable of producing up to 160 cubic metres of paste an hour and designed to accommodate a future expansion of mining rates to 4Mtpa.

“Delivery of cemented paste fill is an integral part of the underground mining cycle at Kathleen Valley, maximising recovery of the underground orebody and planned production rates, as well as reducing the size of the surface tailings dam that would otherwise be required,” Liontown noted.

The second train has been brought forward to ‘provide latent capacity to derisk underground mining operations’ among other benefits.

“We are pleased to award the contract for the design and construction of the Paste Plant which will support and further de-risk the planned underground production rates at Kathleen Valley. GRES has designed and constructed multiple paste plant facilities throughout Western Australia and the GRES team has mobilised and commenced initial works at Kathleen Valley,” LTR MD Tony Ottaviano said.

Pantoro needs more money, despite gold prices near record highs

Meanwhile in the world of gold, Pantoro (ASX:PNR) has headed back to the market for a reported $88m after launching a capital raise today.

The owner of the Norseman gold mine is in a trading halt, having produced 19,235oz in the March quarter, generating $15.6m in EBITDA and only $400,000 in net positive cashflow.

PNR had $46.8m in the bank at March 31.

The raising comes despite Pantoro being unhedged with spot gold prices at near record levels of ~$3500/oz.

The $422m capped miner previously sold its lithium and base metal rights to Mineral Resources for an initial $30m last year, and has raised over $100m in equity since the start of 2022.

The materials sector was virtually unchanged in a slow crawl into the weekend for the ASX’s big miners.