Ramelius Resources Limited (RMS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Ramelius Resources Acquisition of Apollo Consolidated Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Zeptner, Managing Director of Ramelius Resources. Please go ahead.

Good morning, everyone. Thank you for taking the time to dial in. Joining me this morning is Ramelius' CFO, Tim Manners; and Apollo Consolidated Managing Director, Nick Castleden. Welcome, Nick. As you will be aware, today, Ramelius announced a recommended off-market takeover offer for Apollo Consolidated Limited. Owner of the Lake Rebecca Gold project, located approximately 150 kilometers east of Kalgoorlie, and one of Australia's premier gold provinces. The offer has an implied value of $0.56 per share, comprising $0.34 in cash and 0.1375 Ramelius shares per Apollo share, representing a 20% -- 27% premium to Apollo's last closing price, 38% premium to its 30-day VWAP and 52% premium to its 3-month VWAP. The offer has the recommendation of Apollo's Board of Directors, and you will hear from Nick shortly as to why they believe teaming up with Ramelius is the best course of action going forward. For Ramelius, the acquisition of Apollo is in line with our long-term strategy of achieving growth and creating shareholder value through acquiring current and future operating mining centers. Lake Rebecca rates as one of the best gold discoveries made in Western Australia in recent years and represents a highly attractive opportunity to ultimately develop a new mining operation in one of the world's premier gold mining jurisdictions. The existing 1.1 million ounce mineral resource at Rebecca provides a strong platform from which to pursue the commercial development of a mining operation, which fits Ramelius' criteria in terms of scale and asset quality. Furthermore, the geological prospectivity across the Lake Rebecca tenement package offers the potential to continue expanding the existing resource base with a view to significantly extending the mine life. Ramelius will undertake a comprehensive review to determine the optimal pathway to first cash flow from Lake Rebecca, but we believe it offers a near-term development opportunity that will provide significant additional production, cash flow and mine life over the long term. I'll now pass over to Nick for his initial comments.

Thank you, Mark, and good morning to everybody that has dialed in. As Mark just described, Apollo has come a long way in recent years since we made the Lake Rebecca discovery, and it's made its ways with the current mineral resources, over 1.1 million ounces. As we know, they're pretty hard to find in the gold fields, then we've been lucky in us to find one that has the makings of a potential new stand-alone mining operation. And as a company, I suppose, we've grown from a resources start-up to where we are now, and many of our shareholders have been with us for that entire journey, and we sincerely thank them for their support. Now as you expect, as the Lake Rebecca discovery has grown, we've had approaches and seen corporate interest from some very seasoned WA gold miners, about which -- yes, I'm sure you'd understand I can't say much more, and I won't make any additional commentary. But suffice to say, following the completion, it was a pretty competitive process. Ramelius has emerged with this offer, and we see this offer as an excellent outcome for our shareholders. Besides the corporate attention and the offer being pitched at a healthy premium to Apollo's all-time trading highs. There's several significant factors that also guided our decision to recommend this offer. In particular, as we started to head through the technical studies and put our minds to the challenges of going as a line and building this thing ourselves in this competitive environment for manpower and materials. It's become clear that Rebecca is most efficiently developed by someone, with the experience and the team and the finances and the flexibility to swing skills into action as it's needed. On that front, Ramelius brings in excellent credentials in the business of taking a variety of new gold projects online and has the ample experience personnel and funding to take the project forward from here. I must say the manner in which the Ramelius guys and the BD team processed and worked through the Rebecca data and identified the key technical points was pretty impressive. It's also clear that our shareholders would have been exposed to the cost pressures evident in the industry if we're going to take it through full feasibility and to development ourselves, along with the associated market risks, equity risks and dilution et cetera, along the way. In our view, Lake Rebecca looks to be an excellent fit into Ramelius' longer-term production profile. And the Ramelius shares that Apollo shareholders will receive offer the stability of a multi-project house as well as upside as the Lake Rebecca project is being explored and built on and progresses towards development. The offer provides a good mix to our shareholders with about 60% cash. That provides certainty. They receive some pretty liquid equity in a proven and well-respected WA gold miner. As you've seen in the announcement of Apollo directors have been entered into binding agreements to accept in the absence of a superior offer -- this offer with respect to all of the shares that they own or control, and that's within 7 days of the offer formally opening. We recommend on that basis, the offer to all our shareholders. We hope they join us, and we look forward to joining Ramelius' existing shareholders to participate in the next stages of the Rebecca journey.

So just to sum up. Thanks, Nick. In summary, we see this as a great opportunity to take the excellent work done by the Apollo team and to advance Lake Rebecca to its full potential. We hope that Apollo shareholders come on board with us for the journey. And we look forward to communicating with you more, as we progress. We would like to now how many -- open the line for questions please.

[Operator Instructions] Your first question comes from Andrew Hines from Shaw and Partners.

Congratulations on the acquisition Mark. A quick question just in terms of how quickly you intend to move in terms of the exploration effort that's required here? I'm not that familiar with the young Lake Rebecca project. Can you give us a little bit of background on how many rigs are operating there at the moment? And how much would you sort of continue on the same pathway that they've been on? Or would you look to accelerate things, additional rigs? And how much money would you be looking at spending on the project over the next couple of years?

In terms of what's happening at the moment, I'll let Nick answer that question. But we're basically be continuing on with the current exploration efforts while we assess how -- if we ramp that up possibly going forward. Nick?

Yes. Currently, we have 1 rig on site with -- that's in our C rig. That's working through a mix of exploration and 3 colors. And then when we've got some -- enough of the [ pre-call ] has been placed. We bring in down rig to collect tails through the deeper parts of the Rebecca deposit. And I think that will roll through to the end of this calendar year.

Yes. Yes. One of the features of the deal is to take on existing geos and geo offsiters as part of it. I think there's about half a dozen of those, Nick, so that we can maintain momentum on exploration. I'm assuming the deal is done by Christmas, we'll probably reassess whether we need to bring in an extra rig to ramp up those efforts, we'll look at that once we get through the completion, Andrew.

Okay. Great. And just following up from that, how far away is this project from feasibility study stage, how much more time do you think you need before you move into that stage of development work?

There's some very early studies that Apollo have commenced, some baseline flower and fauna. So it's probably quite a deal earlier stage than previous acquisitions. So I wouldn't want to hazard a guess. It's -- like I said, it's much more earlier stage. Some studies have commenced, GRES for example, doing some metallurgical work and some very early stage, mill locations, tailings dam location work. But it's pretty early stage. We have a resource. We don't have a reserve. So we really want to expand that resource and really do a lot more drilling before we get too into detail on feasibility and prefeasibility studies.

Next question comes from Richard [indiscernible].

Congratulations on this. Hope it all goes well for you all. Geographically and by the look at the resource and the location of our other production centers, can I assume that the end result, if all goes well, will be a production center mill? Would that be the way it would have to be?

Yes. Richard, you're spot on there. This is not something that we would envisage trucking into our existing Mt Magnet or Edna May processing centers. We get the obvious question on the third hub. We are looking at a third hub as well as longer-term growth projects. And we -- when this opportunity arose, we thought it was too good an opportunity to pass over. So ultimately, we'd like to think, as you feed your pipeline of projects, that this does become a new processing and mining hub for Ramelius.

[Operator Instructions] Our next question comes from Michael Orphanides from Tribeca Investment Partners.

A question, if I may. What kind of conversion do you expect of the resource to reserve. It's probably a bit premature, but any sort of color?

I suppose the one comment I can make on that and happy for you to comment, too, Nick, is that quite a high percentage of indicated resources is part of the 1.1 million ounces. So that gives you an excellent head start. And we'd expect despite the grade relatively low grade between 1 and sort of 1.5 grams. We'd expect quite a high conversion of resource to reserve.

Yes, Michael, the way that we've put ounces to the market up to now is inside optimized shelves, and we've used what we think is some kind of realistic mining costs and gold price to calculate those ounces. So that sort of had 1 degree of finances run over them. And we don't -- we actually don't relief anything that falls outside those pit shells. So we think -- I mean, internally, we thought that quite a bit of this will come through to reserves in due course.

Yes. And it's -- if you look at some of the materials, Michael, there's some unclassified material within the pit shell that can potentially convert. And also there's some material outside the pit shell, which is -- looks pretty promising as well that on another scenario will potentially expand pit shells. So there's a whole lot of more work to be done there, but we expect a pretty decent conversion from this.

Good to hear. Just sort of one quick follow-up. Can you remind us what price the resource was done at?

Yes, Australia, $2.250 an ounce was the optimization run.

You have another question from Andrew Hines from Shaw and Partners.

Just some follow-up. A couple of -- just follow-up quick questions. Mark, I think if you want to get this to a processing hub, I presume you're thinking about sort of 100,000 ounce per annum type operation and you probably need a resource here of at least sort of 1.5 million ounces sort of to get you up to those numbers. And I just want to confirm that's the way you're thinking about the potential of this area. And then maybe a question for Nick, just in terms of the geology here. I noticed that the Rebecca, Duchess and Duke are all sort of similar geology, and you've got this Cleo discovery recently, which looks a little bit different. Can you maybe just give a little bit of background about the nature of that the geology here and why Cleo is different from the other ones?

Thanks, Andrew. Again, I'll go first. Yes, to answer your question around what we see here potentially. We talk a lot about mine life at Ramelius and we see this as potentially a 10-year project at 100,000 ounces a year, and that's what we -- that's what we're aiming for. And notionally, on a resource basis, you're not far off that. We're pretty confident we're going to find more ounces to build us up to those sorts of numbers. In terms of the geology, Nick?

Yes. Look, so the -- you're right, Duchess and Duke and Rebecca are all in the same -- it's broadly the same high stroke and all look really similar. And that's a granite direct, somewhat granite type host rocks and the loads are disseminated sulfide. So they're quite gradational and have pretty good geometries and width. The Cleo discovery is pre resource. It's a bit more recent, and that's been more of a mafic host rock with the same sort of disseminated sulfides, but it's a bit more subtle. The important -- for us, I suppose, is that finding gold in the mafic's opens up some exploration to run going forward, which is -- it gives a bit more space to hunt the next thing.

And Nick, I'm just looking at the math, you've got quite a bit of ground there between Rebecca and Duchess, which looks from the map here pretty lightly drilled. Are you expecting to find additional resource sort of way along that strike? Or is there something different in the middle here that means it's why you haven't drilled that out as much?

That's -- look, it's not the area that where the rig is actually today. But there's a corridor of transported cover that goes from Duchess through to Rebecca. We were exploring in that transported cover and found the Rebecca deposit, which has taken nearly all of our attention. And now we've started to step our way back through that transported material heading back down towards Duchess. And we know there's some pretty reasonable structures and a lot of fluid moving around in the rocks below transported cover. So we think there's plenty of space to play in that zone. So that's in between the rigs doing resource desk type work that are out there in that zone.

Where is the rig at the moment Nick?

It's actually at Cleo, [ dug some ] holes at the northern end of Cleo, extensional holes.

[Operator Instructions] Your next question comes from John Macdonald from Argonaut.

I was just interested in how the process of meeting and talking came about? Where, who made the first approach? And how long the process is taken before you both got comfortable?

That's a little bit of a loaded question, John. The opportunity, I suppose, we're always looking at projects and -- but once we understood that there may be some interest from Apollo in talking about their project and taking it forward. We're, obviously came in, one thing you don't control is the timing of these things. So when there's an opportunity, you've got to be ready to go. And I'd fair to say that it's been over a relatively short period. When we like something, we go hammer and tongue on the [indiscernible]. So that if we don't like something, we can move on to the next thing. And obviously, we like this and here we are today. So without giving you too much specifics, John, hopefully that gives you a flavor.

Your next question comes from Stuart McKinnon from The West Australian.

Mark and Nick, I guess this is sort of more of a macro question. Are you finding as you're scanning the market opportunities as you would have done in recent times. But the sort of market, I guess, for doing deals is a bit more friendly now than it was, say, last year or the valuations sort of coming down, what people are expecting for their assets a bit more reasonable this year? And is that why we're seeing maybe a little bit of an uptick in deals at the moment?

I don't think gold price, if you talk to that, has made a massive difference. The Aussie dollar gold price is pretty similar. One thing that has happened, obviously, through COVID, there's been more cost pressures in the market. But I think just generally, from our viewpoint is that we see the junior end of the market a bit more willing to consolidate. Recognizing the risks of being a single asset producer in the current environment is not easy. So I see a bit more of that happening, just starting to see that around the industry. It's probably good half for you to comment on that, Nick. That's what we're definitely saying. Tim is nodding his head, is heading up our BD efforts. That's probably the main factors at play, Stuart.

Okay. And just 1 follow-up, if I can. Yes, just around -- sorry, it's gone. Don't worry. I'll pass it on. Sorry.

You can always come back on Stuart as Andrew Hines did.

Your next question comes from Tim McCormack from Canaccord.

Just quick one probably for both of you. I remember before the Apollo Resources, the large low-grade 1 drop, there was a lot of contemplation about potentially optimizing it more focused on underground. Is that something that the Ramelius guys are seeing for potential in the medium or longer term in this asset? Or is it just more bulk, low grade?

Interesting sounds we've got in the background there. But look, the Jennifer load, which is in the Rebecca resource or Rebecca deposit, certainly has some higher grades and some underground potential, and that is something that will be a focus down the track. Obviously, the initial focus is on an open pit operation. But definitely, if there are extensions to the Jennifer load or more loads like the Jennifer, as opposed to what you see, for example, at Duchess and Duke, there is underground potential there. Nick, you will be a bit closer to that.

Yes. Tim. Look, I think that all the structural consultants that look at the main Rebecca deposit see potential for the structural repetition that the hosted Jennifer to happen down below the optimized shelves. So I expect that over the course of time, the rigs will find that and it could well be a lot faster open pit mining. I think the current optimization runs take out maybe 3/4 of Rebecca inside of pit show. So I don't know if that's going to change much.

Okay. So that was just the one query I had, and it would be good to say that [indiscernible] to get into production when that goes well.

[Operator Instructions] Your next question comes from Stuart Mckinnon from The West Australian.

I'm back guys. Remembered what I was going to ask. So I guess looking at Ramelius in previous acquisitions, you sort of see that you're all sort of a hub and spoke sort of model where you have your 2 operating hubs and you're looking for sort of satellite projects around that. Was it a conscious decision that you wanted to go for a third operating center? Or was it just simply a case of this opportunity arose in your thought, we can open up another operating center. Can you talk us through sort of the rationale? Mark, if you can?

Yes, we're looking for a third operating center that's -- if it's not in production, it's closer to production in this project as well as -- this is a longer-term project. You've got to be looking at both, and you don't control the timing. So this is a longer-term project that's got fantastic exploration potential in a great part of the world for gold mining. So look, we still remain, I think, capable financially and operationally capable of picking up a third asset that's in production. This could be called a fourth asset, if you like, but it's going to take a little longer to bring into production.

[Operator Instructions] There are no further questions at this time, and that does conclude our conference.