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Ramelius Resources eyes takeover target

Ramelius Resources (ASX:RMS) appears to embrace the adage “a takeover a year keeps the wolves at bay,” as evidenced by its latest development.

This time, instead of targeting a small rival, the company’s sights are set on a significant acquisition, nearing $1 billion.

Should the deal materialize, it would align with Ramelius’s strategy of growth through gold mining, punctuated by periodic acquisitions.

On Friday morning, Ramelius confirmed ongoing discussions with Canadian-listed WA operator, Karora Resources.

Despite having substantial cash reserves and a sizable market value, Ramelius may resort to a placement or accelerated fundraising, followed by a shareholder meeting, if necessary.

However, Ramelius emphasized, as customary before finalizing any deal, that the talks remain “incomplete.”

Over the past three years, Ramelius has executed multiple takeovers of listed gold miners, including Apollo Consolidated, Breaker Resources, and, in 2023, Musgrave Minerals, where it thwarted a rival offer from Westgold.

As of December 31, Ramelius held nearly $282 million in cash and gold, with analysts predicting a liquidity boost to approximately $400 million due to the high gold price, increased production, and sales.

Exclusive due diligence is underway for Ramelius to acquire Karora Resources, which, if successful, will replace Ramelius’s aging Edna May operation in the WA goldfields.

Analysts estimate the acquisition could range between $700 million and close to $1 billion, potentially posing financial strain for Ramelius.

Karora’s portfolio, situated near Kalgoorlie, includes full ownership of the Beta Hunt mine, Higginsville gold operations, and Spargos gold mine, with expected gold production of 170,000 to 195,000 ounces this year, about two-thirds of Ramelius’s forecast of 273,000 ounces by June 30.

Ramelius is currently benefiting from high-grade Penny ore being processed at the Mt Magnet Mill, along with a steady albeit high-cost contribution from Edna May.

In late January, Ramelius revised its guidance for both the six months ending in June 309 and the entire 2023-24 financial year, attributing the positive adjustment to stronger forecasted gold production in the second half of FY24, particularly from the Edna May hub.

The upgraded guidance for the second half of FY24 now ranges from 140,000 to 155,000 ounces, compared to the previous 135,000 to 150,000 ounces. Consequently, the company has raised its guidance for the full 2023-24 financial year to 265,000 to 280,000 ounces, up from 250,000 to 275,000 ounces.