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Explorum Ltd (EXU) - Cheap As Chips

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Explaurum (EXU) has received an off-market takeover offer from Ramelius Resources (RMS) with a bid of one RMS share for every four EXU shares. This values EXU at A$59.2m (12.3cps or EV/Reserve of $122/oz) and represents a 66.2% premium to the last traded price of 7.4cps. Whilst the deal appears opportunist, taking advantage of share price weakness, we think it does make sense for RMS with its existing infrastructure synergies in the region at Edna May. Our EXU target price of $0.21ps considers the potential for EXU to develop the project as a standalone operation and applies considerable exploration upside at Tampia. The value upside for RMS is substantial in our view, and provides significant flexibility in ore sources at the Edna May operation which could transform and de-risk the project with higher production and a longer mine life. RMS’ bid price however lacks value for the exploration and production upside which we view as considerable given EXU’s recent near mine success at The Mace and Anomaly 8 Prospects. We see value in the proposal, we think RMS will have to come back to the table to sweeten the deal to win over EXU shareholders. Spec Buy maintained and target price of $0.21ps.   

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