Genesis’ production profile was zero 12 months ago but its rapid growth through acquisitions has already made it the third-largest ASX gold producer by market capitalisation, catapulting it into the ASX 200 in the process.
It’s been a remarkable rise for the company but it wasn’t without its challenges.
The company’s first deal, the takeover of Laverton producer Dacian Gold, stalled at 80% ownership, though Genesis was able to recently mop up the rest.
The big prize, St Barbara’s Leonora assets, including the historic Gwalia mine, also wasn’t smooth sailing due to deal revisions and an 11th hour rival bid by Silver Lake Resources.
Since taking ownership of Gwalia on July 1, Genesis has been quietly focused on bedding down the asset.
Its quality over quantity strategy has already seen guidance for this financial year upgraded from 120,000-130,000 ounces to 130,000-140,000oz at all-in sustaining costs of A$2300-2400 an ounce.
That’s just the start for Genesis. Management was in Sydney this week to present a strategy to more than double production to 350,000oz per annum – with a line of sight to 400,000ozpa.
For growth capital of A$520 million, Genesis will add an additional decline at Gwalia, develop the Ulysses and Tower Hill assets and restart Laverton.
With the start of decline development at Ulysses last weekend, the addition of the satellite feed will boost Genesis’ production to 175,000oz in FY25.
Group production under the five-year plan is expected to reach 325,000ozpa by FY29 with AISC declining to A$1600/oz.
Importantly, 92% of the forecast production of 1.3 million ounces is in reserves.
The company announced an updated resource estimate of 226.6 million tonnes at 2.1 grams per tonne gold for 15.2Moz, and updated reserves of 45.4Mt at 2.2g/t for 3.3Moz.
It gives Genesis the second-largest reserve base in Western Australia among its peer group but the company is looking to break away from the pack.
Genesis corporate development officer Troy Irvin pointed out that a vacuum had emerged in the ASX gold space, with no producers valued in the A$3-6 billion range.
“We view this vacuum as a sweet spot,” he said.
Irvin said that would make Genesis large enough to be globally relevant but small enough to remain nimble.
“Our growth story has the potential to set us apart from this group,” he said.
Gwalia
Gwalia’s “golden years” from FY15-18 saw it consistently beat guidance due to grade outperformance.
FY20-23 was the opposite, with Gwalia becoming a perennial underperformer.
General manager, Leonora operations Matt Nixon said Genesis had invested more in grade control drilling.
Since then, grade reconciliation is tracking back up.
“It’s early days but ultimately, knowledge is power,” Nixon said.
Genesis’ current priority at Gwalia is the Hoover Decline, which has a reserve grade of 7g/t gold.
New drilling results outside reserves in that area include 6.7m at 329g/t gold.
Genesis is proposing to build a A$120 million decline into the Rowe area, which has reserves of 250,00oz at 4.4g/t.
The quality over quantity strategy at Gwalia means the excess equipment can be deployed to Ulysses, which will add 60,000-70,000ozpa of production to Leonora once in production.
“We’re going to combine the deepest trucking mine in Western Australia with the newest and the shallowest,” Nixon said.
Tower Hill
The company describes the 1Moz at 2g/t Tower Hill asset, a high-grade bulk mining opportunity just 2km north of Gwalia, as the “jewel in the crown”.
The deposit will be mined via a single 1km-long open pit.
“I love the simplicity of this asset,” Genesis managing director Raleigh Finlayson said.
“You don’t see mines like this – it’s got very good underground grades that we’ll be mining as a pit.”
The A$200 million project is due to start production in FY28, with the current plan only including 7% of reserves.
The deposit has only been drilled to 450m depth with new drill results outside the 1.5Moz resource including 54m at 1.9g/t and 40m at 2.5g/t.
Flight to 400
Genesis has line of sight to 350,000oz per annum by FY34 but is already thinking beyond that.
The 350,000ozpa target assumes no further exploration success or acquisitions.
The ‘ASPIRE 400’ target, which is not in the 10-year plan, is based on resources to reserves conversion, resource growth and the development of further open pit underground mines.
Finlayson pointed to the upside at Ulysses, which has only been tested to 350m depth.
“If we can maintain that production rate at Ulysses, all of a sudden, we’re at 400,000oz – and all with no growth capital,” he said.
Outlook ‘healthy’
While most analysts were surprised by the higher-than-expected capex, the overall reaction was favourable.
“Genesis’ five-year plan was softer than our prior expectations, driven by materially higher capex,” Macquarie analyst Andrew Bowler said.
“However, production beyond five years was materially stronger than our prior estimate, while longer-term AISC also appears to be better.”
Macquarie upgraded Genesis from neutral to outperform with a A$2 price target.
Shaw & Partners senior analyst Peter Kormendy maintained a buy recommendation and lifted his price target by A10c to A$2.30, while Argonaut head of research Hayden Bairstow maintained his buy rating and boosted his price target by 8% to A$2.70.
