Far East Gold (ASX:FEG) shares jumped 6% in quiet Thursday morning trades as it reveals a giant Chinese silver miner is picking up just short of a 20% stake in FEG.
It isn’t silver the Shenzhen stock exchange-listed company – Inner Mongolia Xingye Silver & Tin Mining – wants. Rather, it’s a project Far East Gold recently acquired, the Idenburg Gold Project in Indonesian Papua.
Far East’s capture of a 51% stake in Idenburg remains pending, but made obvious by Thursday’s news is that significant investors see the deal going ahead smoothly.
Xingye will pick up a 19.99% stake in FEG by way of a placement at 20cps – nearly a 50% premium to the price of shares in another recent placement, and, a 20% premium to the company’s closing price on Wednesday.
From the outset, the deal may not seem intuitive. What does a silver miner want with a gold project?
Clearly, diversification and access to the safe haven metal as it continues to smash record highs. Helping it will be a slightly weaker US dollar, if that remains the quo for some time ahead.
But most telling is the name of Xingye’s largest shareholder – an entity called Inner Mongolia Xingye Gold Refinery Group Ltd, which holds just short of 28% in Xingye Silver & Tin.
While unrelated, it’s worth noting Chinese investment has largely bankrolled Indonesian nickel mines in recent history that now see Indonesia the world’s largest nickel exporter and producer.
That macroeconomic happenstance has seen a number of nickel mines shut down in Australia. It’s giving BHP a headache, a company currently pivoting to copper as iron ore and nickel remain in the doldrums.
Perhaps of interest, then, is that FEG chair Justin Werner is also the Managing Director of Nickel Industries (ASX:NIC), an Australian nickel miner that has survived the rout down under. Its major project produces nickel in Indonesia.
NIC’s year-to-date (YTD) gains are up +10.8% as at lunchtime on Thursday.
FEG CEO Shane Menere is based in Indonesia; non-executive directors (NEDs) Michael Thirnbeck and Paul Walker respectively both have ties to Indonesian projects
FEG last traded at 17.5cps.