Silver Lake has put itself on a fresh collision course with Raleigh Finlayson’s Genesis Minerals by acquiring a strategic stake in a gold miner that many in the market expect will be one of Mr Finlayson’s future acquisition targets.
Silver Lake confirmed on Monday it had bought 11 per cent of Red 5 Limited, which operates the King of the Hills gold mine, about 35 kilometres north of the Gwalia gold mine that Genesis acquired in July.
The Gwalia acquisition was a central plank in Mr Finlayson’s plan to consolidate the fragmented gold mining district around the West Australian town of Leonora. However, he was able to secure the asset only after a hard fought bidding war with Silver Lake.
Leonora, in Western Australia, has long been a gold mining district. Now the sector is in for a rapid consolidation. Getty
Genesis has an undeveloped gold resource about 30 kilometres south of Gwalia, and it owns 80 per cent of nearby Dacian Gold, which controls a gold mill and a marginal mine that is idle. It has not made a bid for Red 5, but many expect Red 5 will be the next acquisition target under Mr Finlayson’s plan to consolidate the numerous marginal operators near Leonora and use economies of scale to create a single, lucrative hub.
But Silver Lake’s 11 per cent stake in Red 5 means that at the very least, it will be able to prevent any future suitor passing the 90 per cent ownership threshold that allows a suitor to compulsorily acquire all remaining shares.
German investor Delphi did the same when Genesis tried to acquire Dacian; Delphi’s 10.56 per cent stake means Genesis must treat Dacian like a standalone ASX-listed company and conduct transactions at arm’s length, rather than fully capitalise on potential efficiencies.
SilveRead more on afr.com