Deals on the Agenda as RMS looks for growth

From today's Australian

https://www.theaustralian.com.au/business/dataroom/deals-on-the-agenda-for-ramelius-resources/news-story/cb72b4801811281b4731ef1608ad42d1

A tie up with WGX?

DEALS ON THE AGENDA AS RAMELIUS RESOURCES LOOKS FOR GROWTH

Ramelius Resources could target Gascoyne Resources or embark on a merger with WestGold as part of its efforts to grow operations.

The company said while delivering its half-year results this week that it was poised to act on growth opportunities, both organic and inorganic, and was well-placed to execute quickly on a transaction, signalling that mergers and acquisitions could be afoot.

Ramelius is understood to be in search of an opportunity in Australia, preferably in Western Australia, where it can add 100,000 ounces of gold a year. It already has its Edna May and Mt Magnet production hubs in WA and wants to add a third production hub. The company is sitting on $150m of cash, which could be used for deals.

Last year, Ramelius purchased Apollo Consolidated, which gave it access to the Rebecca Gold Project, also in WA, but that would not be producing gold for about four or five years.

Gascoyne Resources has operations nearby, and Ramelius could pick them up for next to nothing after the company almost collapsed last year. It could provide Ramelius with a longer-dated option, according to one analyst.

WestGold, which tried to buy Gascoyne several years ago, could be a merger candidate for Ramelius. WestGold has a $461.8m market value, whereas Ramelius is worth $755.4m. There was talk about the two companies merging some time ago, but differing management styles were thought to have prevented a deal.

While the two companies do not have a lot of synergies, analysts say, they both have short mine lives and large resource bases, and the current management of both companies is now more aligned.

Ord Minnett analysts described the Ramelius result this week as solid, with the worst expected to be behind the company in terms of higher costs with the production of higher-grade ore in the future.

“We think the company has turned a corner with margin and free cash flow improvements imminent,” they said.

Ord Minnett expects the Ramelius cash balance will increase by about $134m over the next year, with margins improving 14 per cent.