Ramelius Resources breaks through 50% in Spectrum Metals takeover, declares offer unconditional

Ramelius Resources (ASX: RMS) has now acquired 50.5% of takeover target Spectrum Metals (ASX: SPX) and has made the offer unconditional with accelerated payments to accepting Spectrum shareholders.

The minimum acceptance level was 50.1%. The offer has now been declared free of all defeating conditions.

On 10 February, the companies announced they had entered into a binding agreement for Ramelius to acquire all the Spectrum shares it did not already own.

Ramelius, by this takeover, will acquire the Penny West project in Western Australia. It has a maiden resource of 799,000 tonnes at 13.8 grams per tonne, for 355,500 ounces of contained gold.

Ramelius said when announcing the agreement that there was “significant” potential to increase the resource at both depth and along strike.

Penny West is about 150km from Ramelius’ Mt Magnet mining operations and its ore can be treated at the latter’s plant, offering cost savings and operational synergies.

Ramelius today announced accelerated payment terms, under which both Spectrum shareholders who have already accepted the offer, as well as those yet to do so, will be paid within 10 business days.

It added that the Spectrum board members had unanimously recommended the offer in the absence of a superior proposal.

Ramelius has now achieved a majority stake.

“Given this control position, Ramelius believes it is unlikely that a superior proposal will eventuate,” the company said today.

Ramelius buying ounces well below gold price

The takeover is taking place against a background situation in the gold sector where the number of large discoveries has diminished over the past decade.

Many companies are now looking to buy rather than find gold given, one, that the discovery rate is diminishing and, two, takeovers and mergers usually work out more cheaply per ounce acquired than exploration.

Ramelius is paying $208 million for Spectrum; the known contained gold at Spectrum’s Penny West project is 355,500oz. So, that $208 million is, per ounce, less than a quarter of the price of gold (with gold at $2,566/oz as Comex closed Tuesday) — although with the cost of mining it to come.

Of course, the high grade is very much part of the attraction — plus the potential for enlarging the discovery. Already though, Penny West is one of the highest grading undeveloped gold assets in Australia.

The Spectrum shareholders were offered a price that is 52% premium to the preceding closing price.

The company listed in 2007 as Territory Uranium and in 2014 became Spectrum Rare Earths with a project in the Northern Territory. Switching to gold seems to have changed its fortunes.