Ramelius expands portfolio expansion with strategic acquisition

Ramelius Resources began FY 25 on a strong footing, achieving record gold production and robust financial performance. The company exceeded its production guidance and maintained its cost targets, marking the fifth consecutive year of meeting both metrics. In addition, the company acquired Spartan Resources Limited, which broadens Ramelius’ portfolio and enhances its operational scale.

Ramelius Resources Limited is an Australian mid-tier gold mining company. The company owns and operates several gold mines, including the Edna May Gold Mine, Marda Gold Mine (North Yilgarn), Mt Magnet Gold Mine, Penny Gold Mine, Symes Gold Mine, and Tampia Gold Mine (Narembeen). The Edna May deposit is situated within the Westonia Greenstone Belt, part of the Southern Cross Province in Western Australia’s Archaean Yilgarn Craton. The Mt Magnet gold project is located next to the town of Mt Magnet, approximately 500 kilometers northeast of Perth in the Murchison Goldfield of the Western Australian Yilgarn Craton. This project includes sub-projects such as Eridanus, Hill 60, and Shannon.

The Penny Gold Mine is positioned about 150 kilometers southeast of Ramelius Resources’ Mt Magnet mining and processing operations and roughly 550 kilometers northeast of Perth. Additionally, the Roe Gold Project is located between two operating gold mines, 100 kilometers east of Kalgoorlie, Western Australia. The company has around 300 employees.

Record gold production,

Ramelius Resources reported record FY 25 gold production of 301,664 ounces (over 8,500kg), up 3% y/y, at an All-In Sustaining Cost (AISC) of AUD1,551 per ounce. This production exceeded the upper end of the upgraded guidance range of 290,000 – 300,000 ounces and met the lower end of the upgraded AISC guidance range of AUD1,550 – 1,650 per ounce. This marks the fifth consecutive year that the company has achieved both its gold production and AISC guidance. Ramelius Resources also posted record operating cash flow of AUD770.5m and underlying free cash flow of AUD694.9m.

Strategic acquisition

Ramelius Resources Limited has successfully completed the acquisition of the remaining 80.10% stake in Spartan Resources Limited, previously held by Tembo Capital Holdings UK Ltd, 1832 Asset Management L.P., Fourth Sail Capital US LP, and other stakeholders. This transaction, worth approximately $2.4bn, was carried out via a scheme of arrangement. Eligible Spartan shareholders received 0.6957 new Ramelius shares and AUD0.25 in cash per Spartan share. The merger broadens Ramelius’s portfolio, enhances operational scale, and positions the company as a leading gold producer in Australia. Spartan will be delisted from the ASX, reflecting full integration between the two entities.

Strong balance sheet

Ramelius Resources has posted a revenue CAGR of 11.6% over FY 21-24, reaching AUD883m in FY 24, driven by higher gold production volumes, an increased realized gold price, and improved grades, particularly from key developments at the Penny and Eridanus deposits. EBITDA rose at a CAGR of 11.4% over the same period, reaching AUD439m, with a margin of 49.8%. Net income increased at a CAGR of 19.5% to AUD217m.

Consistent earnings growth led to an increase in FCF over FY 21-24, reaching AUD328m in FY 24 from AUD92.4m in FY 21, supported by an increase in CFO from AUD306m to AUD455m. Cash and cash equivalent rose from AUD229m to AUD424m. Moreover, total debt declined from AUD26m to AUD10.5. This resulted in improved gearing from 0.4x to 0.08x in FY 24.

In comparison, Westgold Resources Limited, a local peer, reported a lower revenue CAGR of 7.9%, reaching AUD716m over FY 21-24. EBITDA rose at a CAGR of 3.6% to AUD265m. Net income increased at 7.5% CAGR over the same period, reaching AUD95m.

Looking ahead, analysts anticipate revenue CAGR of 8.9% over FY 24-27, reaching AUD1.1bn in FY 27. In addition, analysts expect EBITDA CAGR of 4.5% to AUD527m, with a margin expanding of 46.2%. Net income is estimated to rise at a CAGR of 17.6% to AUD353m. Likewise, analysts estimate an EBITDA CAGR of 48.1% and a net profit CAGR of 71.4% for Westgold Resources.

Outperforming peer stock returns

Over the past year, the company’s stock has delivered returns of approximately 37.1%. In comparison, Westgold Resources’ stock delivered lower returns of 6% over the same period. In addition, the company paid an annual dividend of AUD0.5 in FY 24, resulting in a dividend yield of 2.6%.

Ramelius Resources is currently trading at a P/E of 7.7x, based on FY 25 estimated EPS of AUD0.4, which is lower than its 3-year historical average of 29.4x and Westgold Resources’ P/E of 25.9x. In terms of EV/EBITDA, the company is currently trading at 6.2x, based on the FY 25 estimated EBITDA of AUD773.3m, which is higher than its 3-year historical average of 3.2x and just above that of Westgold Resources (6x).

Ramelius Resources is monitored, and generally liked, by seven analysts, with five having ‘Buy’ ratings and two having ‘Hold’ ratings, with an average target price of AUD3.2, implying 9% upside potential from its current price.

Overall, the company has demonstrated strong operational and financial performance, having consistently met production and cost targets, while expanding its portfolio through strategic acquisitions. The successful integration of Spartan Resources Limited further enhances its position as a leading gold producer in Australia.

However, Ramelius Resources faces several risks, including gold price volatility, operational execution challenges, and production risks. Project development and cost overruns, acquisition and integration risks, and fluctuating investor sentiment also impact the company. Additionally, sector-wide challenges such as rising input costs, regulatory compliance, labor shortages, and environmental requirements threaten profitability and efficiency.

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