Amid record gold prices, this $2.4bn gold deal is unlikely to be the last

Spartan Resources and Ramelius Resources will create a new mid-tier gold miner as price records continue to fall.

It's the gold merger we were all waiting for. Pic: Getty Images

• The gold deal we were all waiting for is here, with Ramelius and Spartan set to tie the knot

• $2.4bn acquisition will make RMS a 500,000ozpa miner beyond 2030

• SPR up 1700% on a company-saving 2023 recap

A second major deal in WA's booming gold scene in under six months lit up the ASX yesterday as Spartan Resources (ASX:SPR) and Ramelius Resources (ASX:RMS) finally announced a long-awaited barely disguised engagement.

The $2.4 billion acquisition will come at a price to RMS of 25c cash and 39.5% of its company in shares, the benefits being the purchase of the high-grade Dalgaranga gold project and a potential rerate in its production profile from 300,000ozpa to 500,000ozpa beyond 2030.

That would make the understated mid-tier gold miner out of Mount Magnet in WA's Mid West the largest Aussie producer listed solely in the country bar Evolution Mining (ASX:EVN) and Northern Star Resources (ASX:NST), the latter of which is attempting to sew up its own $5bn deal to acquire Hemi gold project owner De Grey Mining (ASX:DEG).

It comes as gold touched a record high of US$3000/oz on Friday, fetching well over $4700/oz when the merger, an 11% premium on Spartan's last traded price, was announced Monday.

That doesn't preclude a potential challenger for the prize, Spartan's 2.85Moz Dalgaranga which includes a mothballed processing plant and 2.3Moz at 9.32g/t across the extraordinarily large and high-grade Never Never and Pepper deposits.

Ramelius boss Mark Zeptner told Stockhead the $2.5bn goldie would not be complacent, even if it already owns ~20% of its target and has the support of Spartan's board along with major shareholders accounting for ~18% of the register.

But while this much spoken about transaction appears to be done, there is likely to be more dealmaking on the cards as gold prices present a major incentive.

"Some of the other consolidation we've seen maybe hasn't been able to leverage those synergies that we think we've got here," Zeptner said.

"And maybe that explains why not all of the mergers have been as successful in the first instance as some had hoped.

"I'm not really sure whether it is going to continue down this path but what tends to happen is they go in waves.

"And at the moment we're definitely going through one of those waves. So I wouldn't be surprised if there is more."

A comeback for the ages

The remarkable aspect of the deal is the turnaround story at Spartan Resources.

Originally known as Gascoyne Resources, the miner has already been in administration once when Simon Lawson, previously a top mine geologist during the early days at Northern Star, stepped in as MD following its merger with his explorer Firefly Resources.

Now exec chair at Spartan, Lawson's first big conundrum was shutting the Dalgaranga mine and plant, where low grades meant the company was facing bankruptcy again.

He raised $50 million at 10c a share in a recap completed in February 2023, at a time when many burned investors would have been fearful to stump up more dough.

The trump card was a recent high-grade discovery just 140m from the base of the Gilbey's pit called Never Never, named after a whiskey brand but drawing connotations, too, with the legend of Peter Pan – ergo, a fantasy.

But the discovery turned out to be more than a dream. Within 18 months it had grown from a little over 300,000oz to 1.49Moz at over 8g/t.

The even higher-grade Pepper discovery brought underground resources to 2.3Moz at 9.32g/t. An exploration decline called Juniper has been sunk and by May will be within 100m of the deposit.

By the end of the year, high-grade ore from Never Never will be ready to run through Ramelius' operating Checkers Mill, around 65km away, an advantage of the merger and example of the synergies Zeptner has claimed.

At a sale price of $1.78, the gain for those investors who participated in the recap came in at close to 1700%.

"I've felt almost like an imposter for most of this ride," Lawson divulged.

"It's been so incredible in terms of developing discovering Never Never, initially 140m away from the old pit that we were mining.

"Unfortunately we had to shut the plant down because to me, it was a race between burning capital on drilling and losing money as a gold miner.

"It's been almost an unreal set of circumstances. But this happens with geology, sometimes when they're there, the stars align and when you drill holes as frequently as we do you can make things happen."

Fighting orthodoxy

To some extent Spartan's success has come down to its commitment to push back against orthodox thought.

One is the belief, backed up by longitudinal research, that on average gold discoveries are getting deeper under cover as historic gold fields age and that shallow finds are likely to be smaller in scale.

"You can walk into a lot of these – what people would consider to be mature – gold fields and actually challenge it statistically, get in there with drill rigs and actually look in the very obvious places, because you never know why a decision was made not to put a drill hole there," Lawson said.

"If you take a different angle, and I must admit, a lot of the initial motivation when it came to drilling at Dalgaranga was desperation.

"I wanted to know, is there more potential to this thing before we run out of money? Because it was looking very dire when I first joined there.

"I'm not that smart. This isn't that lucky. This is a gold field that always has existed and hadn't been discovered yet. So how many more of these same kinds of situations exist across just West Australia?"

Lawson will be joining the Ramelius board as non-exec deputy chair after the scheme, or if it doesn't receive 75% shareholder support an alternative takeover offer, passes, promising to marry Spartan's penchant for exploration with Ramelius' operating nous. Deanna Carpenter will also head across as a non-exec director.

While it could well have stepped in at an earlier stage, the timing could be perfect for Ramelius as it looks to arrest a declining production profile coming at Mt Magnet in the medium term, after a recent growth phase driven by high-grade satellite ore sources like the Penny and Break of Day deposits, which saw it generate more than double the free cash flow of gold giant Northern Star in the December half.

"We've never gone in on a couple of holes ... we wait 'til there's a resource and we can get an idea of value," Zeptner said.

"No regrets. Simon has done a fantastic job, we did see it when there were a few holes in the top of it.

"By the same token, there's been other stories and not in this case, fortunately, where the couple of homes haven't turned into something."

At Stockhead, we tell it like it is. While Spartan Resources is a Stockhead advertiser, it did not sponsor this article.

Originally published as Amid record gold prices, this $2.4bn gold deal is unlikely to be the last