RMS (ASX) Ann: Mt Magnet Mine Plan presentation

Originally posted by speculator101: ↑

Hmmm... an interesting day to say the least.

12 hours after the release, I am still a little confused at just how RMS got to this point.... as others have touched on, this release was the culmination of many years of drilling and studies.... yet, I think most can admit to it being underwhelming, perhaps even, a major stumble compared to the many years of RMS successfully improving the company's production profile and LOM plans.

Just to be clear, RMS really has been working on this announcement for over 4 years.... I genuinly think that for whatever reason, the past 2 years (other than the acquisition of MGV) has seen RMS take it's foot off the pedal. Exploration has mostly focused on infill/extension, yet suddenly, RMS is touting their exploration budgets across all of their assets.... let alone them having not moved on another deposit that would fill the production gap that Penny and to a lesser extent Cue leave. RMS has been hunting for an acquisition for years....

I am still waiting for the announcement regarding Edna May officially turning off (perhaps it won't get one... just a mention in the quarterly).

I really appreciate all the discussion above, though I am a little surprised at no-one touching on just how much the LOM plan has changed, particularly in regards to the near term. Whilst I am all for extending a LOM plan, the Mt Magnet LOM is... bloody lumpy, with glaring peaks and troughs, not what... investors want to see. Which brings up one of my major concerns or... confusion. This is the exact opposite of what RMS has been doing for years, that is... bring high grade ounces forward into the mine plan, and pushing back the low grade, the whole LOM has almost been tossed on it's head, except for the next 18 months....

Then.. there is Penny.... clearly a big disappointment, though from what I can tell, Cue's recent positive performance grade wise, is going to help a little....

The few additions to the reserves other than Eridanus open pit are not....glamourous, with Eridanus U/G mining target.... at 1.4g/t!

And Hesperus, with approx 125k included in the LOM, at.... 0.8g/t... hmm..

The large increase in reserves is... nice, but.... Eridanus, as I expected, has a high strip ratio and.... is incredibly expensive in the front end, with... almost 100mt to be moved! To get just 10k ounces in FY27, 18k in FY28 and 28k in FY29..... with the cost sitting around $351m. The IRR is.... surely uninspiring?

The above only works with the plant upgrade, which... is not actually reached FID... and won't start construction until late 2026.... But either way, there is another $100m, plus the plant being down for 20 days during transition.

Then you have Reb/Roe and the funding required for that.... $313m.

I have been harping on about this invisible capex 'hump' for a while (unlikely to be positively viewed by RMS holders, but I am always trying to gauge if RMS is where I want my capital, versus other companies...). RMS has been very savvy at not spending a dime on non-sustaining capex over the past 2 years, which has partially enabled them to harvest so much FCF (spot price helping a lot too). This is all about to change.

So... above all together, I get around $760m over the next 3 years. That excludes the other growth capex required at Cue and the other mining operations at Mt Magnet (approx $120m).

I will again be clear, and I have posted this many times - I think RMS are a great crew, very professional and have proven themselves again and again, but.... Mt Magnet is an old camp, and I think the LOM plan shows it (though sure, they will find more gold, but... most likely, marginal ounces).

I think a week ago, many viewed RMS as a powerhouse, and yes.. it's going to generate a lot of FCF in the near term, but... it's clear as day where most of it is going to go (at least on paper). RMS not having moved on SPR sooner puzzles me to no end, when they must have known 99% of what today's announcement was going to contain, months... years ago.

RMS have stumbled... and I would argue, they are not desperate for an acquisition SPR being the obvious choice, yet their position of strength is much reduced. I will even go so far as to say, that I would not accept a 1:1 offer. Just IMHO and... anything can happen.

Good luck to all shareholders (I am quite biased as most know, yet I hope that even for those that don't agree, you discuss the points, not the poster).

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Just another point I'd add, is that despite the obvious negatives. RMS will still generate a large amount of FCF over the next 5/6 qtrs to add to the already large amount of CoH. Also holding 1/5th of SPR places them in a pretty bloody good position to do a deal with SPR. Whilst the table has very much turned turned with this announcement, placing SPR in a much stronger negotiating position, the fact is that there is still very much benefits for both in a merger. I think that today's announcement has increased the chances of a deal to significantly greater than 50% and SL would surely be open to it on the right terms. Your suggestion at less than 1:1 is a little optimistic IMO, as RMS, even after taking into account CAPEX, will still have a large cash hoard, that SPR can benefit from
PS I mentioned on the VAU thread that a SPR/RMS merger would possibly end up seeing the new entity merging with VAU at some point. Who knows?