Under the proposed all scrip off-market bid, Explaurum shareholders will receive one Ramelius share for every four Explaurum shares held.
The offer values Explaurum shares at $0.123 each based on the 30-day volume weighted average price (VWAP) of Ramelius’ shares on 7 September.
Meanwhile, Ramelius’ offer is a 66.2% premium to Explaurum’s 7 September closing price of $0.074 and 50% higher than Explaurum’s 30-day VWAP of $0.082.
According to Ramelius, it had been unable to come to an agreement with Explaurum’s board despite a number of attempts to “engage in a dialogue” with directors.
The company claims as a result, it has “decided to put its offer to Explaurum shareholders for consideration” in light of its “compelling nature”.
Ramelius’ managing director Mark Zeptner said the company had a “clear logic” for the offer which would result in combining Explaurum’s assets and Ramelius’ Western Australian operations.
Edna May and Tampia Hill
Ramelius owns several gold operations in WA, including the Edna May gold asset, while Explaurum is targeting production from its nearby Tampia gold project by 2020.
During the 2018 financial year, Ramelius produced 208,118 ounces of gold for a net profit after tax of $30.8 million.
The company anticipates it will produce between 200,000oz gold and 220,000oz gold in the current financial year at similar all in sustaining costs (AISC) between $1,150/oz and $1,250/oz.
Explaurum’s nearby Tampia project has a 700,000oz gold resource with an average grade of 2.1 grams per tonne gold.
The company is looking to develop a low-risk open pit operation at the project with estimated AISC of $1,000/oz.
A feasibility study at Tampia indicated an initial 5.3-year mine life, with a 1.8-year payback period to generate life of mine free cash flow of $151 million.
Ramelius believes Explaurum’s Tampia project would provide it with “production options and synergies”.
Additionally, Ramelius said it would look at using its existing processing facilities at Edna May to reduce capital costs at Tampia and generate earlier revenue.
“This compelling offer is the next step in that growth strategy and is expected to provide significant benefits to both Explaurum and Ramelius shareholders,” Mr Zeptner added.