Dancing with the Wolf Ramelius needs to establish a 3rd...

Dancing with the Wolf

Ramelius needs to establish a 3^rd production centre to maintain their ~250,000pa production rate past their 3-year forecast, or risk fading into insignificance. RMS are good operators, but their two production centres (Edna May and Mt Magnet) are mature operations that need replacing. RMS’s current cost of production is ~$2,870/oz using Euroz-Hartley Corporate All-In Cost metric (CAIC) of production (Dec 2022 quarter; Euroz-Hartley, Feb 2023). The CAIC takes into account allcosts, with the exception of capital expenditure on new production centres, adjustedfor equity raised and dividends paid.

The Penny underground operation at Mt Magnet will provide some relief, but the current Penny Reserve of 230Koz will only last for two years (Euroz-Hartley, 21/3/2023). After that it is back to the hard, high-cost grind unless something else turns up.

The RebeccaProject will not fly on its own as a standalone development. Ramelius needs the bigger, higher grade Lake Roe deposits to make a standalone operation possible. Lake Roe is the cheapest, tastiest complementary morsel nearby that can provide both near-term open pit feed, and long-term, high-grade underground feed.

Acquiring Lake Roe gives RMS a faster route to replacement production, and a larger ~3Mt processing plant that lowers unit costs.

I think RMS will keep chasing Lake Roe until they get it, and will raise the current Offer price if necessary to make it happen due to the pressure of maintaining their production profile, and the benefits a successful takeover of BRB will bring. But first they will try to stitch up as many early acceptances as they can at a bargain price. We should keep in mind that RMS have zero take-up until they get 50.1% (including the US acceptees).

I think shareholders should not be in any hurry to accept the RMS Offer. Early acceptance lowers the odds of an increased Offer by RMS. Also, shareholders who accept early may miss out on any competing, higher Offer that may arise.

Tangs, fyi, Breaker is not hanging on to RMS coattails, arguably it’s the other way around. RMS is going up along with the rest of the gold sector and needs the ounces BRB has defined.

Good wishes to all BRB shareholders

DYOR