Spectrum Metals’ share price has jumped 40% from Friday’s close on news of a take-over bid from gold titan, Ramelius Resources which has the blessing of the Spectrum board. The cash and scrip offer represent a 70% premium to Spectrum’s 30-day volume weighted average share price. Ramelius says there are strong synergies between the two companies and the board of Spectrum has endorsed those views.
The spectacular success story of Spectrum Metals’ discovery last year of the Penny West Gold Project in WA appears to be entering its final chapter after gold titan, Ramelius Resources, made a play this week for 100% of Spectrum.
Spectrum’s stock soared 40% today on the back of Ramelius’ cash and scrip offer that effectively values Spectrum at around 70% more than its 30-day volume weighted average share price.
Unlike some of the takeover bids that have hung around the market over the last 12 months, there appears to be a merging of minds between the Ramelius and Spectrum boards with Spectrum directors fully endorsing the offer.
The principal terms of the offer include one Ramelius share for every ten Spectrum shares and a cash consideration of 1.7c for each Spectrum share. The offer effectively values Spectrum at between 14c and 15c a share, representing a spectacular, 28-bagger for the Paul Adams-led company when compared to its share price of just half a cent at the beginning of last year.
Ramelius has a number of gold mines in Western Australia, including its Mount Magnet Gold Mine that is in proximity to Spectrum’s Penny West.
It already boasts over 4m ounces of gold resources in WA and last financial year, it delivered an impressive US$77m in EBITDA. Penny West should fit neatly into Ramelius’ gold resource portfolio.
Ramelius has doubled its gold resources and reserves over the last four years through a combination of organic exploration and strategic acquisitions. It churned out some 200,000 ounces of gold last financial year and is forecasting potentially up to 225,000 ounces this financial year without Penny West.
The Board of Ramelius declared a 1.0 cent, fully franked dividend last financial year. No doubt Spectrum shareholders will be pleased to get their hands on an unexpected early dividend from Ramelius after swapping their non dividend paying Spectrum shares for the potentially dividend paying Ramelius shares.
Spectrum largely re-wrote the small cap play book last year after deploying a strategy of getting historical high-grade mothballed gold projects to ride again, courtesy of modern-day exploration techniques.
It had a geological theory about another high-grade gold lode hanging around the old, partially mined out Penny West pit and that theory ended up checking out in spades – gotta love it when a plan comes together.
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