WA gold play Red 5 beefs up defence after Silver Lake buys 11pc

West Australian gold miner Red 5 isn’t resting on its laurels after listed peer Silver Lake Resources’ sharemarket raid earlier this month. The purchase of an 11 per cent stake by Luke Tonkin’s Silver Lake didn’t just put Red 5 into play, it threw down the gauntlet to Raleigh Finlayson’s Genesis Minerals.

Now, Street Talk can reveal Red 5, whose shares have risen nearly 30 per cent since Silver Lake’s arrival for a market value of $941 million, has drafted in Gresham Partners as defence adviser. It’s a wise move: Finlayson isn’t likely to let a cashed-up Silver Lake swoop on Red 5 without a fight, and recent buying suggests we may see another shareholder notice from the former in coming days.

Red 5 operates the King of the Hills gold mine, about 35 kilometres north of St Barbara’s Gwalia gold mine, that Genesis acquired in July. With one potential suitor already in the tent – and a defence adviser on duty – the big question for Red 5 is why not open up the business to anyone who wants to have a look?

Top of the list would be Genesis Minerals. Consolidation among gold players in WA’s Leonora region has been a talking point for the past five years.

But it’s only recently that a company – which happens to be Genesis – has taken the lead on making it happen, first taking out Dacian Gold, then St Barbara, and seeing off Silver Lake in the process. It’s also worth remembering Genesis was able to corral support from deep-pocketed investors for its St Barbara play, with backers including AustralianSuper, Kerry Stokes’ Australian Capital Equity, Paradice Investment Management and Eley Griffiths Group. You would have to think Finlayson’s kept his backers close for when he finds his next M&A target.

Red 5 lost $8.7 million after tax in the year to June, but had King of the Hills in commercial production for only half the year, meaning its financial performance is expected to be better in the year to June 2024.