Finlayson’s growth-hungry Genesis out to close the gap on Evolution and Northern Star

Raleigh Finlayson’s Genesis Minerals (ASX: GMD) turned back the clock at a packed Resources Rising Stars investor lunch at Fraser’s atop Perth’s Kings Park on Thursday, for a moment at least.

Finlayson told the 220 in attendance – many on their way to Diggers & Dealers next week – that only five years ago Genesis was a $100m market cap company with no reserves, no milling infrastructure and about a million ounces in resource.

“Fast forward to today, completion of the (Vault) transaction in November, we will be a $12.5 billion company.’’

That was it for the history lesson because the clear intent of Finlayson’s presentation was to build a case for the potential for the $12.5b Genesis to close the value gap on the $23b Evolution (ASX:EVN) which sits behind Northern Star (ASX:NST) with its $29.5b market cap.

Finlayson noted that Northern Star has had its own challenges, making Evolution the market leader in the Aussie gold space by default.

“I think there is significant opportunity for us, both on free cash flow generation and growth organically, to really start to make that gap a bit smaller between us and the other two leaders,” the ex-Northern Star managing director of Saracen fame said.

He said the installed infrastructure base of the emerged group in the Leonora-Laverton region gave a Gensis a particular advantage in the chase.

“If the gold price goes lower, we've got installed infrastructure to continue to make very good, strong cash flow on a down cycle.

“But on the upcycle, we've actually got more resources in the ground than Evolution at half the market cap,” Finlayson said.

Like the rest of the gold sector, Genesis’ share price heading in to completion of the merger with Vault has been hit by the slide in gold prices from record levels in January. The stock is off by as much as 40%.

Finlayson’s message to the room was pick a gold price, and Genesis has a strategy.

“If the gold price comes off, we're actually in a capital light infrastructure, capital light position as a business to be able to get through that long winter,” he said.

“But if gold price goes up, as I mentioned, we're less than half the market cap of Evolution with more resources in the ground.”

Looking forward, Finlayson said the market should be looking at the enlarged group as moving to 700,000oz of annual gold production across Leonora-Laverton. He said the international majors would call that a globally-significant operating hub.

Being “absolutely globally relevant” would put Genesis on the radar for better stock performance, or for drawing attention from the majors that need to replace their reserves. In other words, the Vault merger creates a gold company that could well attract the M & A attention of the majors.

Develop:

Like his old partner from the Northern Star/Saracen days, Bill Beament won’t be taking to the stage at Diggers & Dealers next week.

But he was on hand at the RRS luncheon at Fraser’s to present to the sharp suits in the audience who may or may not complete their swing through WA with a visit to D&D.

Like Finlayson at Genesis, Beament has been busy in his post Northern Star/Saracen days building his hybrid mining and mining services company Develop (DVP) into something a lot bigger.

In three years or so it has become a $1.5 billion company ($4.65 a share), with Beament owning 20% of the company. It was worth near 20% more than that on Tuesday when it released its June quarterly.

The quarterly was well received on the day. But come Wednesday the stock was sold off by close to 20%. There was no real reason for the sell off. It could have been a programmed sale for no other reason than event selling on the quarterly being released.

Whatever the reason, Beament was showing no signs of being rattled at Fraser’s. He literally bounded on to the podium. He acknowledged that there was a little niggling in the market on metal recoveries at the company’s redevelopment of Woodlawn mine near Canberra.

Beament called for some perspective. “We literally only turned the bloody thing on 12 months ago. And this is a three-stage concentrator. It takes a long time to normalise, get your chemicals, your reagents, suppressants right,” he said.

Having said that, Beament said make no mistake, Woodlawn’s quarter-on-quarter recoveries numbers showed stunning improvement.

“So we're very happy.”

Beament also put some perspective on Develop’s earnings potential in light of the value hit on the stock on Wednesday.

While Woodlawn (copper/zinc) completes its ramp up, Develop is also developing its Pioneer Dome lithium project and its Sulphur Springs copper/zinc project, both in WA.

Collectively the trio look good for annual EBITA of about $1 billion within a couple of years.

Beament made the point that once that earnings capacity is locked in, the market is going to give him an earnings multiple of four to eight times, with no more shares on issue.

“So it's pretty simple math,” he saud.

Benz Mining:

Leading into D&D it can be a bit of a guessing game to figure which of the companies are going to create a lot of interest.

Benz Mining (ASX:BNZ) could well be the one. Its chief executive Mark Lynch-Staunton is due to present the company’s story on day one of the conference on Monday.

Despite the pressure being felt elsewhere in the gold space, Benz has been motoring higher in response to the newsflow from its Glenburgh project in the Gascoyne region of WA.

It’s the one that has an exploration target on it of 10.1m to 12moz grading 0.6g/t to 0.7g/t gold. When the target was released, it was widely dismissed as a thumb sucking exercise, with the grade seen as being underwhelming.

But given the company has increased its share price while all others have been weakening, it seems Glenburgh is developing a big fan base.

Recent drilling has highlighted what the exploration already encapsulated - a big chunk of the exploration target is at a much higher grade than the global estimate, with recent assay results returning thick intersections at impressive grades proving the point.

Is Glenburgh a tier 1 project with the potential for 500,000oz of annual production for real? The true believers are growing by the day and Lynch-Staunton could win over more fans in Kalgoorlie next week, including the major gold companies in the room.