Signs of the boom are back, as Apollo Consolidated’s (ASX:AOP) friendly takeover by Ramelius Resources (ASX:RMS) has turned into a bidding war.

Fellow AOP suitor Gold Road Resources (ASX:GOR) one-upped its mid-tier colleague, with a $166 million all cash offer for the junior explorer this morning.

The 56c a share all cash offer would appear to trump the cash and scrip bid from Ramelius, which would have handed Apollo’s shareholders $99m all up in cash at 34c plus the balance in shares.

The Gold Road bid is a 23% premium to Apollo’s 45.5c closing price on October 14, before Apollo entered a trading halt ahead of the Ramelius deal, a 40% premium to the 30 day VWAP of 40c and a 73% premium to its 6 month VWAP of 32.4c.

Apollo stock hit a 12 month low of just 27c on December 15 last year.

Gold Road has also built a 19.9% stake in Apollo after picking up a number of shares at the 56c off-market offer price, effectively blocking the Ramelius bid which has a 90% minimum acceptance condition.

Apollo’s board, which recommended shareholders accept the Ramelius offer, has advised shareholders to take no action in regards to the Gold Road bid until it has prepared a target’s statement.

Apollo owns the 1.1Moz Lake Rebecca gold project around 100km east of Kalgoorlie and is yet to declare an ore reserve, with 815,000oz in the indicated resource category.

Ramelius’s Mark Zeptner said on a call earlier in the week that he foresaw the project as a new production front with the potential to produce 100,000ozpa for 8-10 years.

Gold Road has been known to be on the lookout for a new growth project having bedded down its relatively new Gruyere mine, a 300,000ozpa joint venture it owns in a 50-50 arrangement with South Africa’s Gold Fields.


Juniors keen for majors to take on the risk

Speaking to Stockhead this week before the new Gold Road offer hit the market, Apollo’s Nick Castleden said in the current environment with costs rising and Covid issues distorting the supply chain, it would be a tough time for a junior to build a new gold mine.

That is especially the case for Rebecca, which started as a high grade discovery before emerging as a low-grade bulk tonnage deposit as drilling unfolded.

“As you work through that process, you realise in this market where there’s a shortage of a lot of manpower and everyone’s got capacity constraints that having a completely intact mining team, environmental team, processing team inside a corporation is a more efficient way to tackle the problem rather than trying to assemble it and do it yourself,” he said.

“It’s right in the wheelhouse of guys like Ramelius who’ve got all those people intact and that’s what they mine day in, day out.”

The Gold Road offer has put the cat among the pigeons on that front. While Gold Road owns half of the Gruyere mine, mining giant Gold Fields is the operator and managed its construction.

Ramelius on the other hand is a 270,000ozpa producer with two 100% owned and operating gold mining and processing hubs at Mount Magnet in WA’s Mid West and Edna May in the Wheatbelt.


Ramelius makes guidance, mum on Apollo development

RMS stretched to make guidance in the September Quarter, revealing today that Edna May and Mt Magnet delivered 65,686oz at AISC of $1445/oz.

That puts the company on track to deliver at the lower end of its first half gold production guidance of 130,000-150,000oz at $1450-1550/oz.

MD Zeptner declined to comment in detail on the Gold Road bid on a conference call this morning, but did highlight the volatility in contractor pricing caused by the pandemic that was making it hard to plan new projects.

Ramelius is currently studying a Stage 3 expansion of the Edna May project that could extend its life to more than 10 years.

“I think every time you get a price at the moment, it seems to be still moving,” he said. “And it won’t probably settle down until you know where borders opening and some sort of normality in the market.”

“But look, I’d be guessing on numbers … but I’d say it’s in the region of you know, you’re talking 15 to 20% type changes.”

“That’s a little bit of a guesstimate. There’s significant pre COVID to post COVID contractor pricing (changes).”

Zeptner highlighted the delays to a final investment decision of the 3Moz Bardoc Gold (ASX:BDC) project because of cost blowout as an example of that phenomenon in action.


Other market movements

Elsewhere in the market nickel surged by 5.4% to seven year highs of more than US$21,000/t, on the back of a number of production issues from majors Vale and Norilsk.

IGO (ASX:IGO), Mincor (ASX:MCR), Western Areas (ASX:WSA), BHP (ASX:BHP), Nickel Mines (ASX:NIC) and Panoramic (ASX:PAN), which announced first concentrate from its Savannah nickel mine in the Kimberley this week, were all up.

Gold was up 1% to US$1786/oz ($2,377/oz Australian), but most equities trended sideways, while iron ore held steady at US$124/t as lower than expected supply from majors Vale, BHP and Rio Tinto supported the market.