In a Target Statement made to the ASX, Spectrum Metals’ Board has unanimously urged its shareholders to accept the friendly take-over bid by Ramelius Resources. The ASX300 listed company’s implied offer of 15 cents per Spectrum share is serious 70% increase to its 30-day volume weighted average share price of just over 8 cents.
With Ramelius’ offer representing an implied value of about $231m for Spectrum’s Penny West gold project, shareholders now have an opportunity to hold an undiluted equity position of around 18% of the dividend paying Ramelius.Ramelius’ market cap sat at around $958m this week and it held cash and bullion at the end of last year amounting to $87.7m. Ramelius is in a strong position to be able to continue exploring and potentially develop the Penny West gold project even further. Spectrum held about $5.6m in cash at the end of last quarter.
According to Spectrum, should Spectrum’s shareholders accept the take-over offer, they would likely be shielded from any future dilutive equity raisings, with the smaller gold explorer needing to raise more cash to keep the lights on, let alone the tens of millions it takes to develop a new gold mine.
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.
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.
Mt Magnet is about 150km north-west of Penny West which means that any potential ore streams from Penny West can be treated at Ramelius’ processing plant that comprises of a 1.9Mtpa mill that already processes ore from five open pit and two underground mining operations.
The Spectrum story is one of a strategy gone right where the company was looking to specifically focus on old mining areas that historically showed very high grades.
The theory was that the old timers likely did not explore the area fully and that some gold would be left in the old pit – or below it and other lodes may well still be hiding within the vicinity.
For Spectrum the theory checked out brilliantly and resulted in a trade sale of some $230m – now that’s what exploration is all about.
Is your ASX listed company doing something interesting ? Contact : matt.birney@businessnews.com.au
By Matt Birney
