It has been an eventual start to 2025, and we are only mid Feb.
SPR has just awoken from it's summer slumber (many on the team took a well earned break), yet a lot has changed since the 27 of June 2024.
The date you ask...? RMS took 9.8% of Spartan.
Yet even then RMS was fairly honest about Mt Magnet being able to generate 'significant free cash flow over the medium term'.
Why not the long term, well... because RMS, even with the ever present Eridanus Pit "option", will not move the dial for Mt Magnet because, in the end, they are constrained by a very old plant that is not able to process at much higher than 1.9mta. Yet, as I have discussed many times over the past 12 months, Mt Magnet has lots of ore... too much ore. It's why they keep looking at a plant expansion, yet... they keep pushing it down the road (it's been a few years now, literally).
I could probably write about his all day, but after a few searches, it's far easier to look back at my previous discussions (surprisingly, even for me, most of them are not too far off, which is rare! ha).
Suffice to say, for those settling in on a couch or at the kitchen table for a lazyish... Sunday breakfast, these provide what I think, are the many reasons behind why RMS will make a bid for Spartan, a strong bid.
This thread is filled with great thoughts by many posters (most of which are still hanging around
Though
@Joelstar initial thoughts sort of sum it all up very succinctly.
Though after listening to some very engaging podcasts regarding mining companies, business cycles and growth, RMS... has a hole, it needs to fill it and there is literally other company that can fill it quite like SPR. Edna May is about to be turned off..... Dalgaranga could... be up and running within 12 months... with Rebecca/Roe in 12-18 months after that. It's all about the "runway". Project pipeline etc. Investors want a clear plan for growth from a company and whilst of course, there are always other options out there, SPR offer everything and more (IMHO).
Looks like my earlier prediction of 500k p.a is going to be on the low side, with Reb/Roe likely to be able to produce above 130k p.a and SPR likely to produce over 200k p.a. So... a company with 3 production hubs, producing north of 500k p.a (I am still excluding the 3mt at 0.95g/t of high grade stockpiles (45k ounces p.a), and 4.3mt at 0.5g/t (25k ounces p.a) sitting at Mt Magnet that could... be processed at either Mt Magnet or Dalgaranga, which has been stated as the reason for RMS to expand the plant at Mt Magnet, yet... SPR will have upwards of 1.5mtpa of latent processing capacity, that is a huge amount of cash to be unlocked).
Then you have the tax advantages to be garnered by a combined entity, because... RMS is printing cash at the moment and likely paying out the nose in tax, because they are running on fumes right now by not spending any non-sustaining capex on..... anything at all (just read the Dec Quarterly, it's basically an empty document compared to the past 5+ years where RMS was mining new pits, opening new U/G mines etc).
RMS has been incredibly savvy with their 'hand of cards'. Particularly in regards to Eridanus, as the more I ponder if, the more optionality if gives RMS. Sure.... the open pit is the likely option, but why lock themselves into it, when they might have another plant up the road with 1.5mtpa of latent capacity, so no need to upgrade the old Mt Magnet plant, just send all the low grade stuff north west. Or... don't do the large open pit, just go U/G at Eridanus and fill Mt Magnet with high grade, at a lower throughput etc etc. Cue offers further pivot points, with likely open pit ore that is profitable, even if trucked to either plant. Cue also has U/G potential, but.. that is a way off.
Another great thread is the June Q 2024, which... once you get past my grumblings about how well RMS has been at.... being sly about Edna May, there is again, lots of great discussion about the benefits of a combined company with SPR.
Ann: June 2024 Quarterly Activities Report (particularly these posts -
post 1 and
post 2 )
The most glaring miss for RMS (well... it's not a miss, it's a calculated delay)
This also reinforces my thoughts on how RMS is crafting the narrative that they are capex light, highly profitable and that is what they want the market to focus on. Then you have the clear and.... still undisclosed cost for expanding Eridanus open pit and a plant expansion. Plus the $300m+ for Reb/Roe to be developed. Yet SPR with perhaps $150m, will provide 200k+ at potentially the lowest cost ounces in W.A (ignore those with copper credits......).
RMS modus operandi for T/Os is pretty clear, though I will say firstly, that SPR has been a little different, because RMS does not usually take a large stake from the get go, they usually acquire under 5%, then basically get the large/st holders to agree to terms, then make their move. RMS doing things differently, tells me that unlike past moves, this is not a fait accompli. This gives me some hope that the outcome is not set in stone, but... I am also trying to be impartial, as while I want SPR to stay independent as I view the upside as being greater than if it becomes part of a larger combined company, I am also trying to be realistic about may eventually occur.
AOP - sell of non-core assets, undertake large cap raising, undertake studies... reduce exploration... eventual T/O comes with cash component, that largely is paid for with the cash that is acquired!
BRB - sell of non-core assets, undertake large cap raising, undertake studies... reduce exploration... eventual T/O comes with cash component, that largely is paid for with the cash that is acquired!
MGV - a little different... WGX made the first move, which forced RMS hand.... though WGX was in a far weaker position due a myriad of reasons, meaning RMS literally outbid them.
All of these acquisitions were for companies that were...not ready to be developed (MGV was the closest). SPR is again a different company with actual infrastructure, permits, even an underground decline 3-4 months away from being finished with the clear plan to enable development to commence.
Unlike the other companies, SPR is match fit, which.... not trying to be rude in any way to the past teams who ran the companies above, but none of them were interested in actually mining their own assets. Simon and Craig want.... really want to mine Dalgaranga (the whole team of course).
For all intensive purposes, SPR is full funded to production (debt or other avenues could be pursued for the little extra they might need... could always slow down on drilling... lots of levers).
SPR have the better ore body... the better asset and the higher upside exploration wise (RMS could still surprise with Penny, I hope they do, but... past drilling has proven unsuccessful, though well done to the RMS geo team for discovering Eridanus, any 1m ounce discovery is a massive achievement).
What RMS has is.... cash... and more cash coming in every day. Though as the above graph shows, RMS is close to half way through Penny's sugar hit and.. already started on the Cue sugar hit.
@Joelstar recently mentioned that he was puzzled why RMS is not increasing exploration spend... with all the cash they have, but...they have not. That alone for me is another tell that whilst their assets are ok... they view others as better, hence, just acquire them instead. Even MGVs dirt looks more prospective than Mt Magnet.
No one can deny there are not going to be synergies between the two companies. With Cue now in RMS, I feel the synergies are even greater.
I have said it before and here it is again, smart operators acquire better assets than they have already, to future proof their business, a lot of it is to do with timing. Even the messaging from RMS is sometimes a little crafty.... look at this from the Rec/Roe PFS. I mean... they won't be producing any gold from Reb/Roe until FY27. I will just add, after further reading/pondering, Reb/Roe will end up doing just fine, as it does not yet include any ore from U/G
SPR is clearly a better asset than Mt Magnet (particularly in regards to long life low cost production), but... it's not in production. If it was, I doubt RMS could acquire it now, though perhaps a merger or something else. Not long ago, I was confident that SPR would likely stay independent, now... I am less confident, because RMS has been very successful at producing gold, at lost cost (under their control), because the spot price of gold has boomed, almost seamlessly with Edna May tailing off, RMS peak production at Penny and CUE (not under their control), because their hedges are finally running off and whilst SPR has done amazingly in discovering what hopefully will be a 6-7m ounce mining camp (maybe much more), it was an impossibly successful run to date (in fact, I challenge anyone that can think of a company that has been as successful, in their lifetime in less than 2 years). Can it continue, absolutely, I hope it does!!! But like all things it takes time, and right now RMS are making over $2m a day (before tax! ha).
I have spoken to someone in the industry, biased as they are, that could not believe RMS was so bold to include "exploration targets" in their LOM plan for Mt Magnet...... I guess I am just trying to show that RMS has been masterful at projecting a "hand of strength", yet Mt Magnet is not anything like Dalgaranga, it's best years are.... 10000% behind them, why else has RMS has to keep acquiring assets to undertake the hub-and-spoke model, because the hub, is just really the plant and mostly low grade ore..... The growing cash pile in RMS bank accounts, hides many things.
Am I throwing in the towel? No... just enjoying sharing some thoughts.
Just for fun... here is what a combined SPR/RMS LOM plan might look like going forward. As until recently, we had a lot less to go on, particularly in regards to Reb/Roe and even Dalgaranga (though with posters like
@calmbeforestorm who have crunched the numbers for potential reserves, it's far easier to project into the future). To be clear, there are a huge amount of moving parts and I am no privy to most of it. As above, even if I take RMS at their word regarding the 10 Year LOM plan for Mt Magnet, then.... wow... I would love to see what SPR could put out for a PFS/DFS for Dalgaranga that included "exploration target" ore.
Again, there are a myriad of things not included in the below graph (Eridanadus open pit (but.... it does include Eridan U/G), U/G ore from Roe, or U/G from Cue. A few levers (plus the plant upgrade). Below I have just used a bit of BGLs presentation (their 'growth' plan). SPR can produce more than BGL, with less throughput because their reserve and head grade will be higher, especially in the earlier years.
Simon, please apologize to Craig for me, BGL is just the easiest comparison (example, other than me making it all from scratch) for this discussion
I cannot help but show this again.... I know the SPR team would love to add a new bubble mid year, to show where SPR will sit!
Feel free to send me an invoice RMS.
I have really enjoyed the banter on the threads regarding the potential T/O... how it has not happened... how because it has not happened, it never well... etc etc. Gives me a good laugh at times. I mean... Mark Zep and his team at RMS have worked incredibly hard to build RMS to where it is now. They have been there for over a decade now. They have achieved some incredible outcomes where other mines have fallen by the way side. To think they are not being incredible careful, calculated and with conviction, to have spent $100's of millions acquiring SPR script, just seems to be impatience by some. I also note, that many seem to skip over or forget, that as RMS now have 19.99%, they only need to acquire the other 80.01%. i.e. If they decided to just pa cash, it's not... the ticket market price to be paid, it's at a 20% discount off the bat. Throw in the $270m, in cash, the $10m in BNZ shares, the Yalgoo assets, which I think may well be sold off soon as well. The price to be paid, is not as big as it seems for RMS.
What happens next... we will see. Gamesman ship is ongoing as we speak I believe, with all stakeholders doing everything within their power to position themselves to maximise shareholder value for their respective shareholders. It's what they are paid to do. I have not even tried to go into the many other topics of price, potential carrots RMS could dangle, like dividends, special dividends, etc.
And yes... I started this post in the morning, but annoyingly, it's now the afternoon
Looking forward to hearing others thoughts.
(20min delay)