Ramelius Resources (ASX: RMS) is a Perth-based gold miner with key operations at Mt Magnet, Edna May, and Penny. It grows through efficiency, acquisitions, and exploration, with a strong focus on expanding its resource base.

Ramelius has proposed a A$2.4 billion acquisition of Spartan Resources to consolidate assets and boost production, creating a leading mid-tier gold producer on the ASX. The deal aims to unlock operational synergies and increase annual gold output to 500,000 ounces by 2030.

Transaction Details

The acquisition is structured as a scheme of arrangement, offering Spartan shareholders A$0.25 in cash and 0.6957 new Ramelius shares for each Spartan share. This values Spartan at approximately A$1.78 per share, representing an 11.3% premium over its last closing price of A$1.60 on March 14, 2025, and a 27.5% premium to its 30-day volume-weighted average price of A$1.40. The total equity value of the deal is A$2.4 billion on a fully diluted basis.

Strategic Rationale

The merger aims to position the combined entity as the largest mid-tier, pure-play gold producer on the Australian Securities Exchange (ASX), with a pro forma market capitalisation of approximately A$4.2 billion. The integration is expected to leverage Spartan’s flagship Dalgaranga Gold Project and Ramelius’s Mt Magnet operations to enhance production capabilities, targeting an annual output of 500,000 ounces by the 2029-30 fiscal year.

Operational Synergies

Spartan’s Dalgaranga Gold Project, located approximately 65 kilometres northwest of Ramelius’s Mt Magnet mine, is a key asset in this merger. The project previously produced over 70,000 ounces of gold in 2022 before its processing plant was placed under care and maintenance in November of that year. The integration plan includes processing high-grade ore from Spartan’s Never Never and Pepper deposits at Ramelius’s Mt Magnet facility, with a potential restart of the Dalgaranga plant in the future.

Financial Implications

The combined group is projected to have estimated gold reserves of 2.6 million ounces. The merger is expected to generate significant pre-tax cash flow, with projections indicating approximately A$2.5 billion at a gold price of A$3,500 per ounce and A$4.3 billion at A$4,500 per ounce over the life of the mine plan.

Board and Shareholder Support

The Spartan Board has unanimously recommended that shareholders support the transaction, in the absence of a superior proposal and subject to an independent expert concluding that the scheme is in the best interests of Spartan shareholders. Major shareholders, including Tembo Capital, 1832 Asset Management, and Fourth Sail Capital, collectively holding approximately 18.9% of Spartan’s shares, have indicated their intention to vote in favour of the scheme.

Market Reaction

Following the announcement, shares in Ramelius dropped 3.4%, while Spartan’s stock rose over 9%. This reflects the market’s mixed reaction to the proposed merger, considering factors such as the premium offered, and the strategic benefits anticipated from the consolidation.

Industry Context

The proposed acquisition comes amid a backdrop of rising gold prices, with Australian-dollar gold hitting a record high above A$4,240 per troy ounce in late October 2024. This surge has been driven by global economic instability, prompting investors to seek safe-haven assets, thereby supporting increased merger and acquisition activity across the gold mining sector.

Outlook

The merger is anticipated to enhance the exploration potential of the combined entity, with plans to focus on extending high-grade sources further. The updated Mt Magnet mine plan outlines a full mill over a 17-year period, producing 2.1 million ounces, with ongoing exploration aimed at extending high-grade sources further. The plan includes a significant pre-tax cash flow generation over the mine life, with projections indicating approximately A$2.5 billion at a gold price of A$3,500 per ounce and A$4.3 billion at A$4,500 per ounce.

Regulatory and Approval Process

The transaction is subject to customary conditions, including Spartan shareholder approval, court approvals, and regulatory consents. A Scheme Booklet containing detailed information about the transaction, including reasons for the unanimous recommendation of the Spartan Board and an independent expert’s report, is expected to be sent to Spartan shareholders in mid-June 2025. A meeting of Spartan shareholders to approve the scheme is anticipated to be held in mid-July 2025, with implementation to follow shortly thereafter, pending approvals.