RESOURCES Ramelius Resources Limited

RESOURCES

Ramelius Resources Limited(RMS $1.59) Buy

Euroz Hartleys LimitedAll information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Hartleys Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.

Analyst Date Price Target

Michael Scantlebury 18th October 2021 $1.94/sh from $1.90/sh

RMS launches bid for Apollo

Event

RMS has made an off-market take-over offer for Apollo Consolidated (AOP). RMS is offering $0.34/sh in cash (A$64m net cash component) and 0.1375 RMS shares per AOP share, which equates to an EV of A$128m (AOP has A$35m in cash).

Impact

We see the proposed acquisition giving RMS the potential to grow its production profile to ~350kozpa over the medium term through the establishment of a 3rd production hub.

Analysis We view the proposed transaction price of (EV) A$128m to be fair value, given our early stage analysis of the largely Indicated 1.1Moz at 1.2g/t Lake Rebecca Gold project. Our early stage back of the envelope assumptions result in a post tax NPV10 value of ~A$150m.y We assume a production profile of ~100kozpa over 10 years at an AISC

of ~A$1,600/oz. Assuming continued exploration success at the project.There are numerous opportunities to improve on our preliminary estimate including: potential underground operations, higher grade material upfront, exploration potential and lowering of the strip ratio (operating costs). RMS has a solid track record of profitable satellite operations which could add significant value if repeated with the Rebecca project.

Action

We maintain our Buy recommendation on RMS, with an increased price target of A$1.94/sh up from A$1.90/sh.

Key Catalystsy Takeover completes (expected December)y Galaxy (Saturn & Mars) underground PFS due DecQy September quarterly report due DecQ. y Edna May stage-3 cutback PFS due DecQ.y Gold price.

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RMS mine plan - EH (Rebecca included)

Euroz Hartleys Lake Rebecca - Potential Production Euroz Hartleys - Existing Production

Ramelius Resources Ltd Year End 30 JuneShare Price 1.585 A$/shPrice Target 1.94 A$/shValuation 1.43 A$/sh Shares on issue (Post Trans) 866 mMarket Capitalisation 1372 A$m Enterprise Value 1172 A$m Debt 0 A$m Cash (Post Trans) 200 A$m Largest Shareholder Van Eck 10.9%

Production F/Cast 2021A 2022F 2023FAttrib. Prod’n (kt) 271 285 280Cash Cost (A$/oz) 954 1148 1096AISC (A$/oz) 1317 1510 1405

Assumptions 2021A 2022F 2023FGold Price US$/oz 1850 1800 1800AUDUSD 0.75 0.74 0.74

Key Financials 2021A 2022F 2023FRevenue (A$m) 634 678 635EBITDA (A$m) 340 291 290NPAT (A$m) 127 83 68Cashflow (A$m) 306 237 243 CFPS (Ac) 37 29 29P/CFPS (x) 4 6 5 EPS (Ac) 13 10 8EPS growth (%) 0 0 0PER (x) 12 16 19 EV:EBITDA (x) 3.2 3.2 3.1EV:EBIT (x) 6.1 6.7 7.4 DPS (Ac) 2.0 2.0 2.0Dividend Yield (%) 1% 1% 1% ND:Net Debt+Equity (%) na na naInterest Cover (x) na na na

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Disclaimer

This analyst declares that he has a beneficial interest in RMS.

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Analysis

The Rebecca Gold project is located 150Km east of Kalgoorlie. AOP owns 160km2 of tenements on the Norseman-Wiluna Greenstone belt. The project contains 3 main deposits, Rebecca, Duke and Duchess. Rebecca hosts the higher-grade Jennifer Lode. The Rebecca deposit is a single open pit deposit and hosts the 840koz of the total 1.1Moz resource.

There is currently 1RC drill rig on site at Rebecca, we expect exploration to ramp up significantly if the transactions completes, after which feasibility studies would commence.

AOP have already commenced technical studies (including engineering, metallurgical, hydrological and environmental). Although its still early days with the Rebecca gold project we believe the project has the potential to begin production in CY25, assuming approvals and development studies are received/completed in a timely manner.

Lake Rebecca Gold Project

Source: AOP

Adding to our confidence is the fact that AOP has constrained its existing Rebecca resource to a pit shell of A$2,250/oz and the mineralisation continuity see in the drilling to date. Drilling at Rebecca has been completed on 35m x 50m spacing.

Our early stage back of the envelope assumptions result in a post-tax NPV10 value of ~A$150m. Production profile of ~100kozpa over 10 years at an AISC of ~A$1,600/oz. Assuming continued exploration success at the project.

We note our assumptions are early stage in nature and are subject to change pending further study work from the Company. We assume completion of the takeover.

Some of our back of the envelope assumptions include:y First gold production CY25y Strip ratio <7:1 (waste:ore)y Diluted head grade ~1.1g/t y Industry average mining costsy Standalone processing infrastructure ~3Mtpay Capex of ~A$200m funded from existing cash and forecasted

cashflowsy Metallurgical Recovery of ~90% y We assume a A$2,300 long term gold price



The Rebecca deposit is a single open pit deposit

Project has the potential to begin production in CY25

Constrained Resource within a A$2,250/oz pitshell.

Production profile of ~100kozpa over 10 years at an AISC of ~A$1,600/oz.

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Taking into account recent cost inflation in the mining industry, we believe that that total capex of assumption of ~A$200m is defendable. With recent build examples including CMM’s Karlawinda gold project which has a capacity of ~4.5Mtpa which had a (3 stage crushing, ball mill) total capex of ~A$170m.

The offer is subject to 90% minimum acceptance by AOP shareholders and we note that AOP directors and management representing 13.7% of AOP shareholding.

We note that there is a 1.5% NSR on E28/1610 owned by TRR Services Australia Pty a subsidiary of UK based AIM listed Trident Royalties Plc. All resources owned by AOP are located within E28/1610.

Lake Rebecca Deposits

Source: AOP

We believe that that total capex of assumption of ~A$200m is defendable

The offer is subject to 90% minimum acceptance by AOP shareholders

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Location of RMS operations and the Lake Rebecca Gold Project

Source: RMS

Rebecca deposit within optimised pits

Source: AOP

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Key Variables

Val/ Sh Gold $$1.43 -20% -15% -10% -5% 0% 5% 10% 15% 20%

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SD

15% $0.686 $0.792 $0.898 $1.005 $1.111 $1.217 $1.323 $1.429 $1.535

10% $0.763 $0.874 $0.985 $1.096 $1.207 $1.318 $1.429 $1.540 $1.651

5% $0.848 $0.964 $1.080 $1.197 $1.313 $1.429 $1.546 $1.662 $1.778

0% $0.941 $1.063 $1.185 $1.307 $1.429 $1.551 $1.673 $1.795 $1.918

-5% $1.044 $1.172 $1.301 $1.429 $1.558 $1.686 $1.815 $1.943 $2.072

-10% $1.158 $1.294 $1.429 $1.565 $1.701 $1.836 $1.972 $2.107 $2.243

-15% $1.286 $1.429 $1.573 $1.716 $1.860 $2.004 $2.147 $2.291 $2.435

EH Forecast FY'2021 FY'2022 FY'2023 FY'2024

Gold (US$/lb) $1,849.66 $1,800.00 $1,800.00 $1,700.00

AUDUSD $0.75 $0.74 $0.74 $0.74

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RMS mine plan - EH (Rebecca included)

Euroz Hartleys Lake Rebecca - Potential Production Euroz Hartleys - Existing Production

Our Share Price Sensitivity

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A$/shVol 'm RMS 12 month price history

Our Market Sensitivity Valuation - $1.43/sh

Target Price - $1.94/sh

Bull Scenario - $2.80/sh A$ gold price rises and holds above our long term assumptions and/or the Company is able expand production beyond 300kozpa, at minimal capex.

Base Scenario - $1.94/sh The Company continues to optimise its mine plan and with production being maintained at an av-erage of ~280kozpa out till FY28, at similar AISC (~A$1,300-1,450/oz). RMS is able to extend mine life at both the Mt Magnet and Edna May opera-tions. Gold prices tracks close to current levels.

Bear Scenario - $0.85/sh A$ Gold prices fall 30% and/or both production hubs underperform compared to our assump-tions, resulting in higher opex and or lower production. The Company is unable to extend the mine life at any of its operations.

Company SummaryRamelius Resources Ltd (RMS) is a gold producer focussed on its two production hubs located in the WA goldfields. The ~2.0mtpa Mt Magnet mill largely sources its ore feed from the Eridanus open pit along with a number of other under-ground and open pit deposits. The ~2.1-2.7Mtpa Edna May mill sources its ore from the Enda May underground mine and its Marda operations. RMS currently has a strong net cash position of A$264m.

DisclaimerThe projections and information above is based on the set assumptions outlined. Due care and attention has been used in the preparation of this information. However actual results may vary from forecasts and any variation may be materi-ally positive or negative. Forecasts by their very nature, are subject to uncertainty and contingen-cies, many of which are outside the control of Euroz Hartleys.

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Market Statistics Year End 30 JuneShare Price 1.59 A$/sh Issued Capital Fully Paid Ord 815.1 m Options/Perf rights 9.8 m AOP share issued 40.8 mTotal Dil. (post trans) 865.7 m Market Capitalisation $1,372 mEnterprise Value $1,172 mCash & Bullion (post trans) $200 mDebt $- m

DirectorsR Vassie NE ChairM Zeptner MDM Bohm NE DirD Southam NE DirN Streltsova NE DirR Jones Comp Sec Shareholders Van Eck 10.9%Vangaurd Group 5.4%

Asset Valuation A$m A$/sh(+) Mt Magnet 569 0.66 (+) Edna May 227 0.26 (+) Rebecca 150 0.17 (-) Corporate (45) (0.05)(+/-) Heding (20) (0.02)(+) Exploration 150 0.17 (+) Unpaid Capital - - (+) Investments 6 0.01 (+) Cash 200 0.23 Total 1,237 1.43 Price Target 1,683 1.94

F/Cast Production (A$m) 2021A 2022F 2023F 2024FMt Magnet 100% Throughput Mt 1.9 2.0 2.0 2.0Milled grade g/t 2.8 2.4 2.7 3.1Gold Production Koz 161 145 164 185Cash Costs (C1) A$/oz 801 1,135 985 836AISC A$/oz 1,195 1,442 1,299 1,146 Edna May 100% Throughput Mt 2.7 2.2 2.1 2.2Milled grade g/t 1.3 2.2 1.9 1.4Gold Production Koz 110 140 116 91Cash Costs (C1) A$/oz 1,179 1,162 1,251 1,285AISC A$/oz 1,496 1,580 1,555 1,522 Group Production Koz 271 285 280 276 Group Cash Cost A$/oz 954 1,148 1,096 984 Group AISC A$/oz 1,317 1,510 1,405 1,270 Assumptions Spot Gold Price US$/oz 1,850 1,800 1,800 1,700 FX Rate ass’d A$/US$ 0.75 0.74 0.74 0.74

Ratio Analysis (A$m) 2021A 2022F 2023F 2024F

Cashflow 306 209 237 243Cashflow Per Share 37 25 29 29Cashflow Ratio 4 6 6 5Earnings 107 62 83 68Earnings Per Share 13 8 10 8EPS Growth -0 -42% 33% -17%P/e Ratio 12 21 16 19Enterprise Value 1,079 1,036 942 893EV/EBITDA 3 4 3 3EV/EBIT 6 9 7 7Net Debt/(Net Debt + Equity) na na na naInterest Cover na na na naEBIT Margin 28% 17% 21% 19%Return on Equity 20% 10% 17% 28%Return on Assets 15% 8% 12% 15%Dividend per Share 2.0 2.0 2.0 2.0Dividend Payout Ratio 13% 27% 20% 24%Dividend Yield 1.3% 1.3% 1.3% 1.3%Dividend Franking 100% 100% 100% 100%

Profit and Loss (A$m) 2021A 2022F 2023F 2024F(+) Gold revenue 678 698 681 635 (+/-) Hedging Revenue (44) (20) (2) - (+) Interest Income - - - - (+) Other Revenue - - - - Total Revenue 634 678 678 635 (-) Operating Costs (257) 430 393 351 (-) Dep/Armort (163) 118 126 146 (-) Writeoff (expl’n) (5) (5) (5) (5)(-) O/H + News Bus Dev. (11) (12) (12) (12)(-) Provisions (21) (23) (23) (23)EBITDA 340 254 291 290 EBIT 177 112 142 121 (-) Interest Expense (3) - - - NPBT 175 89 118 98 (-) Tax (48) (27) (35) (29)(-) Minority Interest - - - - Net Profit 127 62 83 68 (+/-) Net abnormal 1 - - - Net profit After Abnormal 127 62 83 68

Cash Flow (A$m) 2021A 2022F 2023F 2024FNet Profit 127 62 83 68 (+) WC adj. (34) - - - (+) Dep/Amort 163 118 126 146 (+) Provisions & W/O 26 29 29 29 (+) Tax Expense 48 27 35 29 (-) Deferred Revenue - - - - (-) Tax Paid 25 27 35 29 Operating Cashflow 306 209 237 243 (-) Capex + Dev. 85 83 75 155 (-) Exploration 21 32 32 23 (-) Asset Purchased 41 64 20 - (+) Asset Sale - 30 - - (+/-) Other 37 - - - Investing Cashflow (183) (149) (127) (178) (+) Equity Issues (rts,plc,opts) - - - - (+) Loan Drawdown/receivable - - - - (+) Loans from(to) other entities 3 - - - (-) Loan Repayment 47 - - - (-) Dividends 16 16 16 16 Financing Cashflow (59) (16) (16) (16) Net Cashflows 63 43 94 49 (+/-) FX Adj. - - - - EoP Cash Balance 229 272 365 414 EoP Net Cash 229 272 365 414

Balance Sheet (A$m) 2021A 2022F 2023F 2024FAssets Cash 229 272 365 414 Current Receivables 2 2 2 2 Other Current Assets 102 102 102 102 Non-Current Assets 514 440 239 (62)Total Assets 846 816 708 456 Balance Sheet Borrowing(s) - - - - Current Accounts payable 58 58 58 58 Other Liabilites 152 152 152 152 Total Liabilties 211 211 211 211 Net Assets 636 605 498 246

Reserves and Resources Reserves Resources mt g/t koz mt g/t kozMt Magnet 11.0 1.3 440 60.0 1.7 3,200 Edna May 1.2 1.5 56 33.0 1.0 1,100 Vivien 0.2 5.1 30 0.6 5.3 99 Marda 1.6 1.9 100 4.0 1.8 230 Tampia 2.5 2.7 230 8.2 1.7 460 Penny 0.5 14.0 230 0.6 15.0 300 Rebecca 29.1 1.2 1,105 Total 17 2.0 1,100 136 1.5 6,505 EV per oz 1065 180

Disclaimer


Copyright & Distribution

The material contained in this communication (and all attachments) is prepared for the exclusive use of clients of Euroz Hartleys Limited (ACN 104 195 057) only.

Euroz Hartleys Limited is the holder of an Australian Financial Services Licence (AFSL 230052) and is a participant of the Australian Securities Exchange Group.

The information contained herein is confidential. If you are not the intended recipient no confidentiality is lost by your receipt of it. Please delete and destroy all copies, and contact Euroz Hartleys Limited on (+618) 9488 1400. You should not use, copy, disclose or distribute this information without the express written authority of Euroz Hartleys Limited.

Disclaimer & Disclosure

Euroz Hartleys Limited, and their associates declare that they deal in securities as part of their securities business and consequently may have an interest in the securities recommended herein (if any). This may include providing equity capital market services to the issuing company, hold a position in the securities, trading as principal or agent and as such may effect transactions not consistent with the recommendation (if any) in this report.

Euroz Hartleys Limited declares that they may have separately or jointly acted as an underwriter, arranger, co-arranger or adviser in equity capital raisings, and will have received a fee for its services, from or any company mentioned within this report during the last 12 months.

You should not act on any recommendation issued by Euroz Hartleys Limited without first consulting your investment adviser in order to ascertain whether the recommendation (if any) is appropriate, having regard to your objectives, financial situation and needs. Nothing in this report shall be construed as a solicitation to buy or sell a security, or to engage in or refrain from engaging in any transaction.

Euroz Hartleys Limited believes that the information and advice contained herein is correct at the time of compilation, however we make no representation or warranty that it is accurate, complete, reliable or up to date, nor do we accept any obligation to correct or update the opinions in it. The opinions expressed are subject to change without notice. No member of Euroz Hartleys Limited accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this material.

We cannot guarantee that the integrity of this communication has been maintained, is free from errors, virus interception or interference.

The author of this publication, Euroz Hartleys Limited, it’s directors and their associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Euroz Hartleys Limited, and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of transactions arising from any advice mentioned in publications to clients.

Analyst Certification

We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities, and we are not in possession of, nor does this Research contain any inside information.

No part of our compensation was, is or will be directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in this research, nor has any attempt been made to influence this Research.

Contact DetailsEuroz Hartleys Limited +61 8 9488 1400

Research AnalystsJon Bishop - Head of Research +61 8 9488 1481Mike Millikan - Resources Analyst +61 8 9268 2805 Kyle De Souza - Resources Analyst +61 8 9488 1427Michael Scantlebury - Resources Analyst +61 8 9268 2837 Steven Clark - Resources Analyst +61 8 9488 1430Trent Barnett - Senior Analyst +61 8 9268 3052 Gavin Allen - Senior Analyst +61 8 9488 1413Harry Stevenson - Industrials Analyst +61 8 9488 1429 Seth Lizee - Research Analyst +61 8 9488 1414

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