St Barbara Limited ('St Barbara') (ASX: SBM) refers to its announcement of 17 April 2023 outlining the terms of the agreement ('Transaction Agreement') with Genesis Minerals Limited ('Genesis') (ASX: GMD) in respect of the sale of its Leonora assets ('Leonora') for $600 million (at that time), comprising Cash of $370 million; 147.8 million shares in Genesis, then valued at $170 million1 and An additional 52.2 million shares in Genesis, then valued at $60 million1 contingent upon the Tower Hill Project achieving first production ('Performance Rights').
The consideration under the Transaction Agreement had an implied value of $625 million based on the closing price of Genesis shares on ASX on 12 May 2023 of $1.275 ('Genesis Closing Price'). On this basis, the net after-tax value to St Barbara under the Transaction Agreement is estimated to be $599 million2 . St Barbara is pleased to advise that Genesis has executed a binding agreement to amend the Transaction Agreement ('Revised Transaction Agreement') to the effect that: Genesis will issue an additional 5 million shares upfront to St Barbara upon completion of the transaction and The 52.2 million Performance Rights will be accelerated and converted into Genesis shares immediately upon completion of the transaction (rather than being contingent upon the commencement of production at Tower Hill), provided that St Barbara shareholders approve the transaction on or before 30 June 2023.
St Barbara will issue a notice of meeting to approve the transaction in the coming days so as to hold the necessary meeting of St
Barbara Shareholders before 30 June 2023.
Following this amendment, in consideration for the sale of Leonora, Genesis will pay to St Barbara on completion: Cash of $370 million and 205 million shares in Genesis, valued at $261 million based the Genesis Closing Price.
The consideration under this Revised Transaction Agreement had an implied value of $631 million based on the Genesis Closing Price. On this basis, the net after-tax value to St Barbara under the Revised Transaction Agreement is estimated to be $604 million. The Revised Transaction Agreement will result in St Barbara shareholders collectively having increased upfront economic exposure to 19.9% of Genesis (on a post-transaction basis). It is anticipated that St Barbara's shareholding in Genesis will be substantially, if not fully, distributed to St Barbara shareholders via a return of capital post transaction3 . In addition, under the terms of the Revised Transaction Agreement, Genesis has agreed to pay a cash deposit of $25 million. The deposit will be held in an escrow account and is non-refundable if Genesis shareholders do not approve the transaction at the Genesis shareholder meeting or if St Barbara validly terminates the Agreement (excluding for a St Barbara Superior Proposal4 ). The funds are otherwise repayable to Genesis. Genesis is not required to pay St Barbara a break fee if the deposit is retained by St Barbara
In light of the above comparison, the St Barbara Board has concluded that the Revised Non-binding, Indicative and Conditional Proposal by Silver Lake does not satisfy the 'fiduciary out' exceptions to the 'no talk' and 'no due diligence' obligations under the Transaction Agreement in value to the Genesis Revised Transaction Agreement, based on the last closing share price of both Genesis and Silver Lake on 12 May 2023; The Silver Lake Revised Non-binding, Indicative and Conditional Proposal is subject to significant uncertainty given it is not fully funded, is conditional on completion of detailed due diligence and does not provide any up-front financial commitment by Silver Lake that it will be able to complete the transaction; In St Barbara's view, Silver Lake has not provided any reasonable or quantitative assumptions to support its proposed consideration which could otherwise be confirmed via due diligence; The Silver Lake Revised Non-binding, Indicative and Conditional Proposal does not deliver sufficient cash to St Barbara up-front to meet St Barbara's future liquidity requirements, likely creating a market expectation of a pending block sale of a substantial portion of the 7.5% of Silver Lake shares proposed by Silver Lake to be retained by St Barbara, thus creating a potential overhang on the Silver Lake share price and exposing St Barbara to a high level of market risk in having to divest those shares at prices below the Silver Lake Closing Price;
The Silver Lake Revised Non-binding, Indicative and Conditional Proposal is subject to significant timetable risk given the unrealistic requirement to complete mutual due diligence in a 2 week timeframe in order to complete by Silver Lake's suggestion of late July. St Barbara considers this timeframe is unrealistic in light of the due diligence requests made by Silver Lake and what will be required for St Barbara to gain confidence in the outlook for the Silver Lake portfolio (including a newly acquired asset in North America) and The transaction rationale and level of synergies which could be achieved by Silver Lake for the benefit of St Barbara shareholders (as incoming shareholders of the pro forma entity) is significantly weaker when compared to the synergies which St Barbara shareholders are expected to benefit from (as the holders of Genesis shares) under the Genesis transaction, including Leonora specific exposure. In particular, Silver Lake has indicated that execution of its strategy of filling the Gwalia mill post-acquisition of Leonora may include agreement of a toll treatment arrangement with Genesis in relation to Ulysses which, in St Barbara's view, appears unlikely to be achieved.
In the current circumstances and taking account of the matters outlined above (and others), St Barbara is not entitled to engage with Silver Lake in respect of the Non-binding, Indicative and Conditional Proposal. The St Barbara Board will not intentionally breach the 'no talk' and 'no due diligence' obligations under the Revised Transaction Agreement, which would give rise to a Genesis termination right. St Barbara has no expectation that Genesis or Genesis' committed investors would provide a release from St Barbara's binding exclusivity obligations. Accordingly, St Barbara will not be engaging further with Silver Lake in respect of the Revised Non-binding, Indicative and Conditional Proposal. St Barbara notes: The Revised Transaction Agreement with Genesis remains in full force and effect and the parties are proceeding in accordance with the contemplated timetable to effect the sale of Leonora under the terms of the Revised Transaction Agreement; The St Barbara Board has not changed its unanimous recommendation in support of the sale of Leonora to Genesis on the terms of the Revised Transaction Agreement and St Barbara shareholders do not need to take any action in relation to the Revised Non-binding, Indicative and Conditional Proposal.
St Barbara is advised by Macquarie Capital (Australia) Limited as financial adviser and King & Wood Mallesons as legal adviser.
Contact:
Tel: +61 3 8660 1959
ST BARBARA LIMITED 
