Happy New Year to all holders
2024 has been a fantastic year for AUD Gold rising from $3,100 to $4,200. The largest ever yearly rise in AUD gold price terms. Margins have doubled for AUD Gold producers.
Despite this SLR/RED/VAU holders are down for the year.
What a disgrace. The SLR Board members should be sacked for their failure to lift the share price. The share price is actually lower that what it was five years ago when gold was at $2,000.
The reason the share price is down, is that VAU at some point is going throw their shareholders under the bus and make a takeover bid for GMD. That's where the upside has gone in 2024 - to GMD whose EV is now almost double that of VAU, despite producing half the ounces of VAU and having a $500 million capex bill out to 2029. Given GMD only made about $5 million last quarter, it's not hard to see how GMD plan to fund that capex is it. They will end up getting their hands on the VAU cash and spend it on capex.
The last line in the most recent announcement was the giveaway. VAI is dropping $80 million to expand the KOTH mill to leverage strategic Leonora position with a view to increasing the mill capacity to 7mtpa.
Assuming 0.9 grams a tonne which is the average grade of the open KOTH pit this will add around 25,000 ounces for every million tonnes put through the mill. Not a bad investment sure - but I would have thought the money should be used to extend high grade resources to lift overall grade being put the mill at both KOTH, Mt Monger and Deflector.
If you look at GMD's forward plan they intend to truck Tower Hill ore of 2 grams a tonne 80-100kms to the east to process at their Laverton Mill. It might be economical at $4,000 a tonne, but it would make a lot more sense to truck the ore to KOTH. Jupiter isn't that great and Westralia will require further capex in addition to Tower Hill. Long story short GMD are cash strapped in regard to meeting their capex requirements.
Blending 2 gram Tower Hill ore at Koth could lift output by 100,000 ounces with next to no extra milling costs and less trucking costs, so there are definitely synergies in merging the two companies
But why should VAU be valued at half GMD given it has the mill, the cash and no significant capex requirements - certainly nothing in comparison to GMD.
The board including Tonkin need to take the blame for this. They have constantly undersold the VAU assets and squandered hundreds of millions on Sugar Zone. That mistake cost them with buying Gwalia from SBM and is now costing us more due to the fact the stock is being marked down as it is now going to make another bid for GMD, except the GMD CEO is talking GMD up.
Daisy at Mt Monger is one of the most underrated underground mines in Australia - it's stated indicated resources are at record highs and there are at least five lode extensions and three new zones in play here. Yet the talk of the town is that Daisy is running out of ore. This is rubbish. Why isn't the board selling VAU assets better. Why aren't they reopening another underground mine at Mt Monger - Cock Eyed Bob or Maxwells.
VAU should have over $900 million in the bank in twelve months, and from then on should be making $600 million per annum at current gold prices as the hedges roll off. There is no significant capex apart from the KOTH upgrade. Despite this the company is valued at an EV to earnings of just 3.5 times despite having over 10 years of reserves. A shocking indictment on managements ability to market the worth of our assets.
I expect some sort of tie up that will see Vau exchange 6 shares for 1 GMD share i.e. valuing the VAU share at around 42 cents. The VAU board will claim this is a great result at it is 30 percent higher than the average price of the last six months. GMD is really worth more like $1.80 tops so VAU shareholders will really only be getting 30 cents a share.
Of course, we all know the share price has been manipulated down to drive this transaction. The major shareholders are in favour of the deal or they would have sacked the board by now.
The tie up was always there between RED and GMD. SLR didn't really fit in regard to synergies but had the cash and the egotistical board who lusted after Gwalia at the expense of shareholders. The proof is in the pudding of the share price which languishes at five-year lows thanks to a board that is lazy, (under investment in exploration), incompetent (sugar zone) and dishonest (putting their egos in front of shareholder interests in pursuing these tie ups.)
GLTA/IMHO
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