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Explaurum surges 50% on takeover offer from Tampia Hill neighbour Ramelius Resources

Ramelius seeks to capitalise on synergies between the gold resources from Tampia Hill and the operating Edna May project.
Takeover sign
Explaurum has recommended shareholders take no action

Explaurum Ltd (ASX:EXU) is a leading ASX gainer with shares up almost 50% after fielding a takeover offer from Ramelius Resources Limited (ASX:RMS).

The company traded at an intra-day high of 11 cents after the offer of one Ramelius share for four of Explaurum, which values the target’s shares at 12.31 cents.

Explaurum, which is focused on the Tampia Hill Gold Project in Western Australia, has recommended that its shareholders take no action on the offer at this stage.

Tampia Hill near Edna May

Tampia Hill is near Narembeen, 240 kilometres east of Perth, and in close proximity to Ramelius’ Edna May operations.

In its takeover offer, Ramelius said the price offered was a 66.2% premium to the last closing price of Explaurum shares.

Ramelius believes that the “combination of the companies represents a compelling argument for mutually enhanced shareholder value”.

“Stable platform of mines”

In a statement it said: “Explaurum shareholders will become shareholders in a profitable, financially secure company with a stable platform of established Australian mines managed by a high-quality team:

- In FY18 Ramelius produced 208,118 ounces of fine gold at an All In Sustaining Cost (AISC) of $1,191/ounce and recorded a Net Profit after Tax for the Financial Year of $30.8 million;
- As at June 30, 2018, held $95.5 million in cash and gold bullion with no debt; and
- FY2019 is forecast to be another very strong year with gold production of around 200,000-220,000 ounces at an AISC of $1,150-$1,250/ounce.

READ Explaurum intersects high-grade supergene gold mineralisation at Mace prospect

Given Explaurum’s market capitalisation and the capital funding requirements for the Tampia Hill project, Ramelius said the offer reduced risks associated with remaining an Explaurum shareholder.

These include:

- Uncertainty over access to debt funding for the Tampia Hill project;
- The potential for significant shareholder dilution via a project level equity raising;
- Assuming it can be established, potential for high debt levels needing to be serviced via a single asset operation; and
- Plant design, construction, commissioning, and mining risks.

Project synergies

“The proximity of the Edna May mine to Explaurum’s Tampia Hill project provides potential to realise significant capital cost savings and operational synergies while maintaining exposure to ongoing exploration potential,” Ramelius stated.

Ramelius managing director Mark Zeptner said, “There is clear logic in the combination of Explaurum’s assets with Ramelius’ WA operations.

“After the successful acquisition of Edna May last year, Ramelius is focused on building on its growth strategy to extend mine life and maximise the value of existing infrastructure in its portfolio.

“This compelling offer is the next step in that growth strategy and is expected to provide significant benefits to both Explaurum and Ramelius shareholders.”

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