ASX:SPR
Spartan Resources Ltd
Investment Summary
The fund managers believe that **Spartan Resources Ltd's recent surge in share price**, now at approximately $1.90, reflects **strong investor confidence driven by Ramelius Resources' takeover bid**. They note that Ramelius, having acquired a 19.9% stake, presents a logical strategic partner given its operational capabilities and proximity to Spartan's high-grade underground gold resources. In their opinion, the combination of Spartan's assets and Ramelius' operational expertise will soon yield **material production growth and strong free cash flows**, projected at around $450 million annually. Furthermore, the fund managers highlight Spartan's **significant exploration upside** and existing infrastructure, making it an appealing acquisition target amidst a **rising gold bull market**. They caution, however, about the potential for competing bids due to the increasing **M&A activity in the sector**. Overall, with the anticipated proforma merger resulting in **a strong cash balance and attractive valuation**, the fund managers remain bullish on Spartan's future prospects.
Commentary From The Managers
Paragon Funds
31 Mar 2025
$1.90
- Paragon Funds reaffirms the ‘Spartan is in play’ thesis from June 2024, recognizing Spartan Resources Ltd’s high-grade underground gold discovery in WA.
- Ramelius has acquired nearly 20% of Spartan through a share raid, indicating strong interest.
- Spartan’s underground gold resource has expanded to 2.3moz at an impressive grade of 9.2 g/t, supporting projected production of ~220koz p.a..
- At current gold prices, Paragon anticipates strong free cash flows of ~$450m p.a..
- Ramelius has proposed a cash-and-scrip takeover bid for the remaining Spartan shares.
- Paragon considers Ramelius the logical acquirer due to proximity and clear synergies.
- Ramelius has a proven track record of surpassing operational guidance and generating sector-leading free cash flows.
- The proforma merger could result in a cash balance of ~$1b with no debt by financial close around ~3Q25.
- This positions the merged entity for self-funded growth targeting ~450koz p.a. production over a solid ~10-year mine life.
- The proforma market cap is expected to be around ~$4.5b, with an attractive EV/FCF multiple of ~4x FY28F.
- Paragon sees potential for further re-rating of the merged company and supports accepting Ramelius’ bid.
- Given the strong gold market and exploration upside, a competing bid for Spartan cannot be ruled out.
Blackwattle Investment Partners
31 Mar 2025
$1.90
- Blackwattle Investment Partners continues to hold Spartan Resources due to its surge of 44.7% in the month.
- Surge was driven by anticipation and confirmation of a bid for the company from Ramelius Resources (RMS).
- Ramelius had already established a 19.9% holding in Spartan prior to the bid.
- The expectation of an acquisition was more a matter of when, not if.
- Our Small Cap funds have been invested in Spartan since December 2023 at $0.49, versus last price of $1.90.
- We supported each capital raise along the way.
- The combination of Spartan and Ramelius makes strategic sense for multiple reasons.
- We intend to roll our holding into the combined entity.
- The new entity will demonstrate strong cash flow and an excellent management team.
- With Spartan, the combined entity will experience material production growth.
Blackwattle Investment Partners
31 July 2024
$1.27
- Blackwattle Investment Partners continues to monitor Spartan Resources due to its impressive market performance, following a +31% move in June and a +29% move in July.
- The company is actively exploring and developing its flagship Dalgaranga Gold Project located in WA’s Murchison region.
- The project features a collection of high-grade deposits, which remain open at depth and are yielding excellent drill results.
- A significant 45% Mineral Resource Estimate (MRE) upgrade occurred during the month, enhancing the project's potential.
- The revised MRE now stands at 2.5Moz at 4.8g/t, situated on existing mining leases.
- The project is conveniently located within 2km of existing mill and processing infrastructure.
Paragon Funds
30 June 2024
$0.94
- Paragon Funds highlights Spartan’s Never Never (NN) gold discovery at the Dalgaranga project in WA as a significant upside surprise.
- NN is recognized as one of the best underground gold discoveries in WA, characterized by high grade, consistency, and scale.
- Since acquiring Spartan a year ago, Paragon Funds anticipates a 1moz+ Reserve at NN this quarter.
- A new high-grade zone called Pepper has also been discovered, providing additional exploration upside.
- Spartan has a 2.5mtpa processing plant currently on care and maintenance, representing a significant sunk cost.
- There are expectations for a near-term restart of processing, primarily focusing on high-grade underground ore, aiming for production of 160koz+ p.a..
- This production could generate approximately $250m p.a. of free cash flow, positioning Spartan at about 4x 2yr forward FCF.
- The company has drawn corporate interest, with Ramelius acquiring an 18% stake.
- As M&A activity increases in the region, the likelihood of competing interest for Spartan is high.
- Takeover offers in the market typically feature premiums of at least 30%.
- Spartan’s management is well-aligned and effectively guiding the company, increasing the chances of rejecting takeover bids unless a full premium is offered.
Blackwattle Investment Partners
30 June 2024
$0.94
- Spartan Resources is focused on developing its Dalgaranga Gold Project in WA’s Murchison region.
- The project features high-grade deposits, which remain open at depth.
- Outstanding drill results have been reported, located less than 1km from the existing processing plant and infrastructure.
- In the recent month, Spartan’s share price rose by 31.3% due to market interest.
- Ramelius Resources acquired a 17.9% strategic investment in Spartan, indicating strong asset quality.
- This investment suggests a potential for M&A opportunities in the future.
- Blackwattle Investment Partners continues to hold due to the project’s robust fundamentals and strategic positioning.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.