| Shares: 1155M issued, 1166M fully diluted at 7 May 2025 | |
| Date / Location of update |
Comments |
| 7th May 2025 Interim (Stock price: A$2.88) |
…we have moved mid-tier Australian gold producer Ramelius Resources (RMS.AX) from the Trading Positions section of the TSI List to the Gold & Silver Stocks section. The stock has gained about 30% in market value since it was added to the List only seven weeks ago and is not a good candidate for new buying near the current price, but its intermediate-term risk/reward is more attractive than that of HCHDF. |
| 5th May 2025 Weekly | Ramelius Resources (RMS.AX) issued its quarterly report for the quarter ending 31st March 2025 (the third quarter of FY2025). The most important information, including the production quantity (80K ounces) and the record-high quarterly free cash-flow (A$223M), was reported a few weeks ago.
The company expects FY2025 production (production for the FY ending 30th June 2025) to be 290K-300K, which is the top one-third of its guidance range. Year-to-date production is 228K ounces, so the company expects to produce 62K-72K ounces during the current quarter. This should mean that the June quarter is another quarter of very strong cash generation. The most important upcoming milestone for RMS will be the completion of its merger with Spartan Resources, which is scheduled to happen by early-August. The merger will have the initial effect of reducing RMS’s per-share production, earnings and cash flow, but it will lead to much better numbers within a few years. We have A$3.50 in mind as a share price target for this year. |
| 24th March 2025 Weekly (Stock price: A$2.20) |
Ramelius Resources (RMS.AX), a mid-tier Australia-based gold producer, was added to the TSI Stocks List last week as an intermediate-term trade. In a brief write-up we noted that the biggest company-specific risk was the possibility of the company doing a large acquisition to address its lack of organic growth. The specific possibility we had in mind was a takeover of Spartan Resources (SPR.AX), a company in which RMS already had a 20% stake.
Prior to the start of trading last Monday (17th March) the news that we were concerned about was announced. Specifically, RMS has agreed to buy SPR at a price that values the target company at about A$2.4B. This is a very high price to pay, but the RMS-SPR combination makes sense given the close proximity of SPR’s deposits to RMS’s Mt Magnet production hub. Moreover, the purchase of SPR means that RMS now has an organic growth path from the FY-2026 expected production of 200K ounces of gold to an annual production rate of around 500K ounces/year in 2030. Previously, the company was expected to have an average annual production rate of around 240K ounces for the next ten years. Also, the in-ground gold resources that will be contributed by SPR have a much higher average grade than RMS’s existing resources and should result in RMS’s overall cost/ounce being well below what it would have been. Consequently, the high entry price possibly will be justified within the next few years by a massive increase in cash-flow. Fortunately, the market took the news in stride. The takeover news prevented RMS from rallying with other gold producers last week, but the stock ended the week unchanged. |
| 17th March 2025 Weekly (Stock price: A$2.20) |
We have added a new gold stock to the TSI Stocks List. The stock is ASX-listed Ramelius Resources (RMS.AX), a mid-tier gold producer with operations in Western Australia.
RMS has 1155M shares outstanding, giving it a current market cap of A$2.54B (US$1650M) at last week’s closing price of A$2.20. For the current financial year (the year ending June-2025) the company should meet its production guidance of 270K-300K ounces of gold at an AISC of around A$1600/oz (US$1040/oz). The company has a very strong balance sheet, with A$379M of working capital, A$360M of listed investments (a 20% stake in Spartan Resources (SPR.AX)) and no long-term debt. This means that its enterprise value is about A$740M lower than its market cap. The following daily chart shows that the RMS stock price plunged last week from around A$2.80 to its 200-day MA in the low-$2 area before recovering a little to end the week at A$2.20. The catalyst for the price plunge was an updated mine plan and long-term production forecast from the company that obviously came as a negative surprise to many traders. As far as we can tell, the reason for the sell-off is that production will be lower than expected, especially over the next two years. According to the production forecast issued last week, production will fall from 270K-300K ounces this FY (FY2025) to 200K ounces in FY2026 and only 136K ounces in FY2027 before picking up as new mines are brought into production. Average annual production over the next 10 years is expected to be 244K ounces at an AISC of A$2130/oz (US$1380/oz). Even with the lowered production forecast, RMS’s projected earnings and cash-flow create meaningful upside potential. Specifically, we think there’s a good chance of the stock price rising to A$3.50 (60% above the current price) before the end of this year. There is strong support at A$1.80-$2.00 and in our opinion this would be the ideal place for new buying, but an opportunity to buy at the ideal level may not arise and the risk/reward is sufficiently attractive at the current price to warrant some buying. The main company-specific risk is that due to the company’s lack of organic growth potential, management will make a large, high-priced acquisition. RMS has been added to the TSI List as an intermediate-term trade with a target of A$3.50. |
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