The Ramelius Offer grossly undervalues BRB and its assets in my view. The Offer implies a total value for Breaker of $127.5 million (326.84M shares @ $0.39/share, using latest RMS share price).
Subtracting Breaker’s $77.7M in cash implies an Enterprise Value of $49.8M or $29.8/per Resource ounce, well below our peers and coming off a very low base pre-Offer (see graph below). To put this into perspective, Ramelius paid Apollo Consolidated $131/oz for the inferior Rebecca Gold Project when the gold price was significantly lower, a figure that factors in Apollo’s cash.
I think the best way forward is to be patient and hold out with Major Tom for a fair deal…either a competing offer, a higher Offer price, or a Ramelius walk-away.
To be very clear, Ramelius needs the Lake Roe Project to establish a robust, extensively de-risked open pit and underground mine. Without it, the Rebecca Project won’t make it as a standalone development, and will become a stranded deposit to be gobbled up by Northern Star’s Carosue operation as a toll treat, unless Ramelius grow the resource base with the drill bit.
If Ramelius want Breaker, they should pay a fair price for it.I don’t see the share price going south from here, the Offer has set a new floor on the share price, and I’m guessing it’s probably Ramelius in the market doing most of the buying.I note that t he Offer is conditional upon achieving plus 50.1% acceptance.The implication is if they don’t get it, they walk.
Lake Roe is bigger and higher grade compared to Rebecca.Lake Roe has 1.7Moz grading 1.6g/t gold vs 1.1Moz grading 1.2g/t at Rebecca. The Open Pit Resource at Rebecca is constrained by “an open pit Whittle shell”, but I think it’s a zero profit pit shell and so no reflection on the underlying Open Pit economics, which Ramelius remain very quiet about.A zero profit pit shell is standard practise for many practitioners when doing a Resource estimate.
The Underground potential at Bombora dwarfs the Underground potential at Rebecca, and the Bombora Underground will continue to grow.Unlike Rebecca, robust open pit ounces at Bombora can transition to long-term,high-grade underground ounces at whatever depth is most profitable, and in this high-cost environment, UG ounces can be more profitable as you move less dirt.That what the deeper drilling at Lake Roe was all about.
I tend to agree with Paulb7… this Breaker Board may have responded to pressure to monetise from the bigger shareholders, but if so it shouldn’t be at the expense of the other shareholders.
I think this Board hasn’t done enough to protect the value of the Lake Roe Project in the market, or shareholder interests, in particular the annoying aspects mentioned by Asculpeous. I agree that shareholders have been led down the garden path and this Board should be ashamed of themselves.
A focus on monetising the assets has also not helped the share price or the Enterprise Value. When Peter Cook took the reins as Chairman 18months ago the Enterprise Value (EV)/ per Resource ounce was $60/oz. By Friday just gone the EV/Resource ounce was a paltry $10/oz due to non-delivery, a lack of forward guidance and soul-destroying assets sales starting with the first Manna deal in December 2021.
Where is the Resource update? Where is the UG study? Why was drilling stopped? Why has management been decimated?
Where is an independent assessment of fair and reasonable that should be provided with any Board recommendation to accept?
As I see it, the Offer does not assign any appreciation in value arising from combining the Lake Roe and Rebecca Projects to yield a robust, largely de-risked open pit and underground mining development in waiting. One plus one equals three in this case but BRB shareholders are getting less than one, and it is gob smacking that this Board is recommending this to shareholders as a good deal!
BRB also gets nothing for the extensional and discovery upside--the enhanced UG potential arising from the deeper drilling and the high-grade growth potential, the satellite deposits, the Li royalties, or the high-potential Ularring Project.
The Board has form in doing poor deals, suggesting poor decision-making, or poor governance, or both.The most obvious value-destructive deal was the first deal on our Manna Lithium discovery, when BRB sold an 80% interest to GL1 for $13.5M (Dec 2021).Within a year, BRB sold the remaining 20% for $60M and it now has an estimated NPV of A$2.8 billion using GL1 data, or ~$1B using more conservative broker research (Feb 2023).
How does the EV/gold Resource oz compare toour peers?...not very well!
Hold firm and good luck to all shareholders.Not investment advice, so DYOR
