The devil will be in the detail - SBM has a lot of impaired "uneconomic" assets and debt x2 RED, and RED's debt should be easily managed with the expected KOTH free cash flow. The market assessment has SBM's MC A$20m less than RED, and as RED rerates after full commissioning (expected in the December quarter), the gap between RED and SBM's MC will grow. In RED's latest quarterly presentation, the MD said KOTH would be the natural processor for a number of stranded gold prospects in the Leonora region, to supplement its own abundant KOTH and Darlot proven resources and reserves. So, Gwalia ore, though desirable, is not necessary for KOTH to be a profit monster. A merger between a cleaned up, problem free SBM and RED may be a win-win for both partners, but RED will not take on a whole lot of issues that would distract from optimising KOTH's enormous potential .... and maybe RED's lenders will insist ??
SBM Price at posting:
52.3¢ Sentiment: Hold Disclosure: Not Held
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