Ramelius Resources (ASX:RMS): A $3bn gold miner, trading at a very cheap P/E

Ramelius Resources‘ (ASX:RMS) $3bn market cap may suggest it is expensive, but its P/E (7x for FY25 and 10.9x for FY26) would suggest it is cheap. What’s the story?

Ramelius Resources is one of the few aspirants to have made it

20 years ago, Ramelius was another small cap explorer with dreams of making it as a major miner. The pathway is obvious – by stumbling across a major deposit (or perhaps multiple) and developing it into a major mine – but it takes a lot of time, money and luck. The company’s boss Mark Zeptner would know because he has been with the company almost all of the entire journey.

Ramelius’ company maker was its Wattle Dam Project that it mined from 2006 to 2013 by which time it produced 275,000/oz at an average grade of 12.5g/t. Wattle Dam was no Acadia, but more than enough to set it up to grow through M&A. It bought the Mt Magnet gold project for $40m, at a time the project was mothballed and gold prices weren’t in the best of shape. It bought the Edna May mine from Evolution in 2017, Explaurum and Spectrum Resources in 2019, followed by Apollo Consolidated in 2020 and Musgrave Minerals in 2023.

In its most recent annual results, the company made $882.6m in revenue and a @00.3m profit, up 40% and 166% respectively. It sold 294,000oz gold (up 21%) at an AISC (All-in-sustaining-cost) of A$1,583/oz a figure down 16% from the year before and an average realised price of A$2,995/oz (up 16%) and thus explaining its increased profit.

The Mt Magnet gold project continues to be its flagship project, making up 55% of production and revenue and 69% of underlying EBITDA. But of course, the company is hoping to grow production from other projects too. It boasted Total Mineral Resources of 180Mt at 1.5g/t for 8.7Moz of gold, and Ore Reserves of 20Mt at 1.6g/t got 1.1Moz of gold.

Source: Company

The most recent takeover

Ramelius’ most recent acquisition (which we predicted would happen in December last year) was Spartan Resources, which it paid $2.4bn for. Dalgaranga has 15.9Mt @ 5.61 g/t for 2.87Moz of gold. In just two years, Spartan managed to increase the ounces by 680% and the grade by 86%. RMS already had 19.9% of Spartan, but eventually decided it wanted the whole company. The combined company will have a 12.1Moz Mineral Resource and 2.6Moz Ore Reserve and will integrate seamlessly because Dalgaranga lies right nearby Mt Magnet.

The company had actually guided to lower production in FY25 as Edna May winds down – it thought the costs of extending its life outweighed any payoffs that’d come later on. It has guided to 270-300koz gold at an AISC of A$1500-1700.

But we do know that even higher gold prices will be realised. In 1H25, the achieved gold price was A$3,541, a combination of hedge book deliveries and spot sales. The company’s revenue was $508m (up 46%) and its profit was $170.4m (up 313%).

Conclusion

In the longer run, the company aspires to be a 500koz/pa producer by FY30 (5 years from now). This is planned to be underpinned by an expansion from Mt Magnet which will make up 350koz of this.

With this in mind, the company’s low P/E multiple makes it look cheap. The $3bn market cap right now…not so much it must be said. Then again, there are several gold miners priced higher including Evolution (ASX:EVN) which is capped at $14.4bn and Northern Start at $21bn. Even Capricorn (ASX:CMM) is priced higher, at $3.5bn, despite only having one operating project and about to bring another online.

It is easy to think Ramelius is fully valued and can’t get bigger, but many would’ve thought the same back in 2019 and missed out. There’s more growth left in this one.

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