Two Gold Mining Firms Merge in Western Australia
The bull run of gold across the world, has prompted another merger of gold mining companies, this time with Spartan Resources and Ramelius Resources in West Australia to join forces on Monday valuing the new company in a cash and share deal at $4.2 billion.
The price of gold has vaulted past $3000 an ounce for the first time, as demand from central banks, global economic uncertainty and US President Donald Trump’s regime of tariffs pushes investors towards the haven of gold.
With a combined resource estimate of 12.1 million ounces, Spartan’s main prospects are its Never Never and Pepper gold deposits, which form part of its misfiring Dalgaranga project. It also operates its Rebecca-Roe standalone project 150 kilometres east of Kalgoorlie, according to Australian Financial Review.
Dalgaranga produced 70,000 ounces of gold in 2022 before being closed due to low-grade ore. The higher quality ore from Spartan’s Dalgaranga mines will be sent to Ramelius’ nearby processing facilities.
Mark Zeptner, Ramelius Resources managing director, said that the combination of Ramelius’ production expertise and financial strength, together with Spartan’s culture of discover will provide an ideal platform for strong shareholder returns.
“The Never Never and Pepper gold deposits are the jewel in the crown for Spartan, and this transaction allows the processing of these to be fast-tracked and de-risked,” Zeptner said.
According to him, the best way for both parties to share the upside is if it’s a scrip-based deal and if that project continues to grow as part of a bigger portfolio, whereas cash is finite and the price paid on the day is it. But by the same token, a little bit of cash is not unwelcome.
Spartan shares rose 9% on Monday to $1.74, while Ramelius stock slipped 1% to $2.18. Ramelius owns a 19% stake in Spartan.
Spartan Resources Executive Chairman Simon Lawson, who will be deputy chair of the new company, said that combining with the lowest cost, highest margin gold producer only 65 km from them helps to unlock their ounces sooner and will produce lower cost gold.
The price equates to a 27.5% premium to Spartan’s average share price over the past month. Northern Star’s $5 billion bid for De Grey offers a 44% premium, while Westgold’s takeover of Karora was at an 18.9% premium.
Bouncing Gold Prices
The deals have been driven by the high price of gold, which is being buoyed by demand for bullion by central banks shifting their assets away from the greenback. After dropping to $1600 an ounce after the COVID-19 pandemic, gold enjoyed a bull run in 2024, rising from $2050 to $2900.
Australian miners tend to produce gold at an average cost of between $1800 and $2800 per ounce – offering them good returns at the current price of $4750.
Ramelius last week flagged lower production and higher-than-expected costs and capital expenditure at its Mount Magnet gold mine, dragging its shares down 20 per cent in a day.
The company also attempted to buy Toronto-listed WA gold miner Karora Resources a year ago but lost out to bigger rival Westgold Resources. Ramelius was also unsuccessful in its $3 billion merger with Westgold in the past.
