Nut's n Bolts.

Well.... after a nice long wait, I finally had time to sit down and give the Merger conference call the time it deserves.
(It can still be accessed via the link provided in the Announcement "Transformational Combination of Ramelius & Spartan")

I am going to try and be as unbiased as possible, though it's challenging when the likes of @Joelstar continues to make such a good argument/rationale for the merger, albeit, perhaps then my slight angst is not with the logic of the deal (synergies etc etc etc), but with manner in which it has been delivered to me (perhaps a little petty of me? but I would have hoped that even with all the logical and sound arguments for why RMS shareholders should come out of this with 50% more of the company (proportionally) than myself, it leaves a bitter aftertaste, that likely will go away over time, but, it did not need to be there, perhaps I just want to see a few unhappy posters on the RMS threads! ha).

I will again also say that RMS does bring a lot to the table, in some ways more, because of course, they are currently producing (oh boy, I know that saying it can get a few fired up, as SPR could have been potentially mining now, but.. realistically, it would have only been the open pit).

This slide and the comment by MZ in the first 1 minute, is where I will start.... Almost everything in this slide is about... RMS... yet.. if I can take a moment to ponder it all. Undoubtedly, RMS has the cash being generated, we don't, but... at the same time, RMS has just acknowledged that they likely need to spend approx $800m to upgrade the plant, open up Eridanus and build Reb/Roe.... Basically all the profit from RMS over the next 18 months (which is their cash cow period). What does SPR bring, well... technically almost nothing as the slide seems to try and imply. IMHO, just the semantics alone annoy me a little , as Dalgaranga can process up to 3.2mtpa, that is 60% more than Mt Magnet, so... yeah MZ - it should be the Dalgaranga hub, with Mt Magnet trying to keep up.



In the first minute, MZ confirms that the reserve for NN/Pepper is now due... before the end of CY25 (which is strange, because as will read later on, SL states the mining study will be completed mid year... which I assume must have a reserve included). Why...? No reason is provided at all. How does that square up with RMS' own argument that the rationale for the deal is to "accelerate" it? We now know SL only mentioned the Ball Mill delay because... it was needed to suit the narrative. Now yes.... if NN/Pepper ore is sent to Mt Magnet, it will be in a shorter timeframe, but SPR has spent $15-20m to keep the plant in a ready state for restart....so..... yeah...





SPR have been working very hard on ensuring that they met their mid year deadline for reserves... IMHO, most the work has already been done. How else can they be so confident on an 80-85% conversion. The numbers have already been run. RMS is as professional as they come though, so I don't doubt the need to run the numbers, but... I am 99% they are doing it right now.... do we need to wait until years end?



I think part of the reason this all feels a little rushed, is... that both SL and MZ realised that the reserve would be so powerful a driver to solidifying SPRs value, that, it basically had to be front run with a deal, otherwise, even with all the cash RMS is collecting, it might not be enough if SPR also succeeded with the drill bit. Hard to bet against the SPR Geo team considering what they have achieved so far, even with... a recent 2 month hiatus. I think the mining study would have also been.... basically market leading and would have given the independent accessor of the merger a real challenge to say this deal was 'fair'. Can you imagine the IRR for a Dalgaranga restart!! Just imagine comparing it to DEG (Hemi).

*** I had to come all the way back to this after listening to the vest last 3 minutes of the call, where Tim askes the blunt question... can you do more out of Dalgaranga than 200k p.a..(just from NN+Pep) SL says yes yes... they (SL and MZ) will be "looking at the mining study towards the end... wait, middle of this year"...... so the study is not stopping, but IMHO just slowing down enough to be completed after the deal is completed (that is with my skeptical hat on!).

Then you have the gumshoe of RMS, to include the reserves for Rebecca/Roe, which won't be in production before NN/Pepper, yet.... not include NN/Pepper, which, again, technically, they cannot, except... they can, though providing a "Production Target", which they did again with the Mt Magnet plan as well (including exploration target ounces!). Basically.. it just when it suits RMS, and... having a production target showing Dalgaranga producing upwards of 200-250k p.a at a lower cost than their own assets, would not look great when the split is 40/60.



Was nice to hear the MZ agreed with Simon, that NN/Pepper are the most exciting discoveries in Australia, though the bit about having an aggressive exploration program, is simply not true, RMS has starved it's Geo teams of funds for perhaps 2 years, with the only drilling being infill/extensions. This has suddenly changed at RMS in the last 2 weeks.... what a coincidence Luckily they might have SL at the helm of exploration.

I also note that the 'spokes' for Edna May are gone, and I assume we will soon see an announcement regarding the official closure of Edna, or perhaps it will just be hidden away in the quarterly?



@Joelstar - pretty sure the above does indeed give us a proper breadcrumb that Mt Magnets stockpiles are going to be trucked north as soon as practical (though not once in the call were the stockpiles mentioned)? Now I cannot really argue with this, hence, why my position has not changed... I am disappointed in the metrics, but the rationale makes perfect sense, and am looking forward to being a holder in the combined assets.



With a bit of a look through on what is provided, it does become apparent that RMS provides some clarity, sort of on what Dalgaranga is going to be able to achieve... On the 'Compelling rationale' slide, it mentions +350koz/pa for the Mt Magnet hub, but... the recent plan shows that after FY26, it will average around 100k p.a for 6 years or so (this is pre-Eridanus expansion). But even with Eridanus, the production at Mt Magnet is hobbled for a few years due to the huge cuttback at Eridanus. Though I suppose, I need to temper that with their view that ore from NN will go to Mt Magnet first, which does make sense if they want to fill the void that Penny in particular will leave.



I don't at all disagree with MZ on the ASX 100 aspirations. RMS will... become a lower cost, higher margin (than even now) with SPR deposits. There is no doubt about that.



Slide 18 in the presentation is perhaps the best one, with MZ articulating all the benefits really, if... always with a bent on Mt Magnet somehow being the center of attention, yet simply, it is not, particularly in regards to where the highest margins will come from (though it is the star of the show right now, and... if NN ore goes there first... will continue for a while longer).

I was also pondering if SPR will still provide an updated MRE mid year...? If I can be clinical about it, no.... though perhaps after the deal goes through?
Remember, the SPR team (and... I am sure RMSs Geo team are just as good), can basically produce an updated MRE in less than a week (inhouse).
Though I note, we might soon get an MRE on Freak? I really hope they don't stop drilling at Freak in the near term....
Was pleasing to hear that they expect assay results from drilling in coming weeks (not for Freak, but the surface drilling I think).



Though I do love the little caveat MZ included regarding the Eridanus cuttback being reliant on the updated mining study at the end of this year... hmmm.. perhaps RMS will actually flip the switch, and just mine the U/G at Eridanus! Thereby saving $300m on stripping, and another $100m on the plant upgrade.... hmm... that could be a lot of dividends. Oh.. and then you have Rebecca/Roe... perhaps there is a little wiggle room on getting that started earlier too?

Again though... this is why I am not selling a share, this company is going to hopefully, become a peer to CMM both operationally and board/management wise.



The question time at the end was incredibly interesting, albeit only 15 minutes! hmph.... wishing I could have thrown a few questions at them hahaha!
So interesting that SL said... first ore from Never Never could reach Mt Magnet before years end.................................................. If I can step back, that timeline is... accelerated from 2 years away (Ball mill excuse ), which is pretty exciting, even if the initial mining area of Never Never is not the highest grade, high enough of course! SL implied that if they are basically at the ore body by mid year, there is no reason why they cannot be mining it by years end.

The tax implications was particularly interesting, as it's not just about the tax losses SPR have, but.. depreciation. MZ mentioned that RMS just paid $68m in tax... which is likely to put a big dent in their cash build this quarter, even though it will be good, it's a big hit, that SPR could reduce dramatically in the near to medium term.

They also touched on when ore would come from Pepper and SL explained... 2 years to hit the bulk of NN + Pepper which is.. the honey pot.
He also mentioned that realistically, 18 months was their internal timeframe for their standalone production (so... not quite 2 years...). SL admits that this timeframe does fit in nicely with Penny and Cue ending (or winding down in regards to Cue). Good to have confirmation that the road between the two plants is basically ready to go...

Finally, they were questioned about the 500k target by FY30 and could it be brought forward... MZ stated it was a reasonable aspirational target for that time period, but did quip at the end, that they will try to get there earlier.

A shame no-one asked about the 9mt of stockpiles at Mt Magnet, or the Never Never open pit ore....
All the brokers were very positive on the deal. Which is fair, as... it makes a lot of sense!

The discussion surrounding the plant/s throughputs and uses was... very nuanced. Sure... Eridanus has a lot of ore for the open pit, but... Dalgaranga has up to 3.2mtpa capacity... MZ admits that at some point, expanding Mt Magnet's plant (above 3mtpa) is basically the same as building a brand new one! Whilst I may be coming across as critical, it's more just that I see so many benefits to the merger, that my only quibble is an equitable outcome for all shareholders.

So am I still on the fence..? yep. Annoyed about the short term, but also excited for the long term. Good luck to all holders.
Anyway, enough from me. Let the tussle continue!