Monsters of Rock: Westgold opens road to Beta Hunt

Westgold is a step closer to securing a $2bn merger with TSX-listed Karora Resources.

Josh Chiat

5 min read

July 8, 2024 - 4:54PM

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Ramelius Resources knocked back by Takeovers Panel as adjustments set stage for Westgold/Karora merger
But RMS and Regis Resources both have solid production updates
Meteoric Resources rolls out first study numbers on closely watched Caldeira rare earths project in Brazil

A gambit from Ramelius Resources (ASX:RMS) to complicate a merger between Westgold Resources (ASX:WGX) and TSX-listed Karora Resources looks like it's failed to bear fruit on Monday.

The RMS trick shot to halt the consolidation of the Beta Hunt and Murchison gold mines in WA under a single 400,000ozpa banner missed the mark after the Takeovers Panel knocked back complaints from the Mount Magnet mine owner about the deal.

Ramelius, which had previously walked away from its own merger talks with Karora, owner of the famously nuggety and occasionally spectacular Beta Hunt, has since gone on to acquire a $180m, 18% stake in Spartan Resources (ASX:SPR), itself a former takeover target of Westgold.

RMS made complaints to the panel about deal protection arrangements, a standstill contained in a confidentiality deed which Westgold and Ramelius entered into, and the disclosure of claimed operational and corporate synergies in the announcement of the Karora-Westgold deal.

The panel declined to undertake proceedings, as it were, also saying a termination fee Westgold may have to pay to Karora was not anti-competitive.

The sole impact was an undertaking for Westgold and Karora to amend provisions relating to fetters on a 'fiduciary out'.

The decision removes a roadblock to the transaction's completion, which is expected to take place at the end of July, 12 days after a July 19 vote to approve the deal by Karora shareholders.

Ironically, Ramelius shares were on the up today after the Mt Magnet and Edna May gold mine owner announced it had met the upper end of its upgraded guidance of 285,000-295,000oz at 293,033oz.

That included 82,058oz in the June quarter (guidance of 75,000-85,000oz), generating underlying free cash flow for the quarter of $137.3m and FY24 of $315.8m.

Its cash on hand came in at $446.6m at June 30, up from $407.1m at the end of March, though a further $92m flew out the door for additional Spartan shares earlier this month.

All in sustaining costs are set to come in at the lower end of the range of $1550-1650/oz. RMS' gold production for FY24 was originally pegged at 250,000-275,000oz.

Regis finally banking cash

Less triumphantly, but Regis Resources (ASX:RRL) was the second gold producer to hit guidance for 2024, announcing it had delivered ~418,000oz from its Duketon and 30% owned Tropicana assets over the past financial year.

Its FY24 guidance had been set at 415-455,000oz, with the end result of 417,700oz (106,400oz for the June quarter) scraping over the bar like an exhausted high jumper Fosbury Flopping at the edge of their range.

Duketon delivered 75,600oz in the June quarter, hitting its 280-305,000oz guidance range for the year at 289,900oz.

Not to Tropicana. Regis' share of the AngloGold run mine produced 30,800oz for the quarter and 127,800oz for the year, shy of its 135-150,000oz range.

Regis has plenty of concerns when it comes to future growth. The low grade Duketon is getting older and deeper, while an over the top estimate for capex at its McPhillamy's project in New South Wales, long assumed to be its long-term growth lever, has put the cat quite violently among the pigeons.

But a decision to clear hedges ahead of a run up in gold prices to record highs this year paid off. Helped by a $20m tax refund, RRL banked $109m in the June quarter, leading its cash and bullion account to a record $295m on June 30.

RBC's Alex Barkley, who has an outperform rating and $3.10 price target on the gold producer, said the company was now close to being in a neutral gearing position with $300m of debt on the books.

The results came with a caveat that heavy rain in WA's Goldfields hammered Tropicana earlier in 2024.

"Q4 gold production of 106.4koz was in-line with consensus at 106koz, RBC was higher at 114koz not having adjusted our estimates lower for slower rainfall recovery," Barkley said in a note.

"Weather issues at Tropicana, and a potential miss at the closing Duketon North operation, reduce any potential negative read-through in today's result."

Rare earth day

Meteoric Resources (ASX:MEI) shares were down 12.5% following the release of a scoping study on its Caldeira ionic clay project in Minas Gerais, Brazil.

The closest watched project in Brazil's emerging clay rare earths scene, the company says it will be able to produce rare earths at a C1 cash cost of US$7/kg over its 20 year mine life and US$5.50/kg total rare earths oxides over its first five years.

That comes with selective mining of higher 4500ppm TREO ores over the early production years to pay off a US$297m capex that comes with a 35% contingency on top.

Impressively, the study did account for the impact of spot prices (not always the case with early stage projects), and the complexity of rare earths marketing.

The project would produce 11,000tpa of TREO over its initial five years with life of mine output of 9100tpa.

31% of that would be NdPr, the main rare earth metals linked to EV and renewables bound permanent magnets and the pricing benchmark product for rare earths in China.

1% would be heavy rare earths dysprosium and terbium, also magnet metals but largely produced only in China domestically.

NdPr output would hit a high of 4378t in the second year, with NdPr operating cost equivalents of US$17.60/kg in the early years and US$21.30/kg over the LOM.

At current cyclical low spot rates of US$51/kg for NdPr on the Shanghai Metals Market, MEI anticipates it would generate a basket price of US$21/kg, with a pre-tax IRR of 14% and post-tax IRR of 9%.

But at the stronger prices expected by industry forecasters Adamas, the project would generate an IRR of 38% post-tax and 27% pre-tax, envisaging NdPr pricing of US$111/kg and basket pricing of US$45/kg with a 2.2 year payback.

A pre-feasibility study is coming next, with CEO Nick Holthouse saying the project's low position on the cost curve meant it could still operate in low pricing cycles.

"This Scoping Study represents a fundamental shift away from conventional understanding of flowsheet complexities, capital intensity and, perhaps most importantly, operating cost and capital intensity perceptions in the rare earth industry," he said.

"While the Scoping Study base case is focused on a 5Mtpa throughput and truncated 20 year mine life, Caldeira’s ability to grow beyond that mine life and product output is very much open ended due to its resource size and future exploration upside. This represents a truly unique opportunity in the rare earth sector."

Meanwhile, Core Lithium (ASX:CXO) was up almost 10% after beating guidance from its now mothballed Finniss lithium mine in the Northern Territory.

The company's cash balance built from $80.4m to $87.6m in the June quarter, but it has conserved costs by shutting down mining operations and only processing stockpiles at Finniss after falling lithium prices plunged the company into lossmaking territory late last year.