Q+A: Ramelius Resources boss Mark Zeptner reflects on 14 years at the WA gold

This is another edition in our executive Q&A series, where Stockhead reporter Josh Chiat sits down with leading figures in the ASX mining industry.

This week, he talks to Ramelius Resources managing director Mark Zeptner.

Kalgoorlie-raised Mark Zeptner stepped out of the comfort and bureaucracy of large-cap mining as an emerging executive with WMC and then Gold Fields into the wild world of small caps in the early 2010s.

His journey initially took him to Mundo Minerals, developing gold assets in far-flung Brazil and Peru for Barry Eldridge and John Langford’s firm as chief operating officer.

After 15 months working in two time zones, a break led to a similar role at Ramelius Resources, then a modest ~$150m junior about to transition from the high-grade Wattle Dam mine to the mature Mt Magnet gold field in WA’s Murchison on the cusp of a gold bear market.

Now the company is worth almost $7bn, and after takeovers of a succession of junior developers including Explaurum, Spectrum Metals, Apollo Consolidated, Breaker Resources, Musgrave Minerals and, perhaps most significantly, Spartan Resources, it’s set its sights on producing 600,000ozpa by 2030 – 10x the rate when Zeptner walked through the door in 2012.

The more-than $2.5bn acquisition of Spartan brought the Never Never mine at Dalgaranga into the fold, turning Mt Magnet – acquired around 15 years ago from departing international miner Harmony Gold – into a “top-10 global production hub”.

RMS delivered 48,839oz at all-in sustaining costs of A$2656/oz in the September quarter, generating $62m in free cash flow, against FY27 guidance of 205-225,000oz at $2150-2350/oz.

From FY30, the company estimates it will produce 420-460,000oz from Mt Magnet alone and 140-150,000oz from its new Rebecca-Roe project east of Kalgoorlie for 560-610,000oz at AISC of $2100-2400/oz.

At Aussie gold prices of A$5500/oz, that would deliver up to A$1.5bn in free cash flow.

Zeptner joined Stockhead to talk through the Ramelius journey, M&A speculation and whether a junior today could follow the Ramelius playbook.

You were chief operating officer originally, and you were producing only 60,000 ounces per annum at the time. Now you’re looking at 600,000 ounces by the end of the decade. How have you been able to maintain that discipline to keep growing the business over that length of time?

It was pretty poetic actually, 60,000 to 600,000. I thought it might have been slightly more but that was all coming from Wattle Dam and at Mount Magnet, the mill was being refurbished on my day one.

How have we been able to maintain the discipline? I suppose, a cliche, staying in the moment, and we’ve tried not to – I’ve certainly tried not to – get ahead of myself and try to get too cocky about what we’ve done and where we’re at, because there was always another challenge, another mountain to climb.

You had to maintain discipline, particularly in the early days when the gold price was much lower. You didn’t have the massive bank balances that you do now.

Now it’s got a different set of challenges given very strong bank balances and high gold price, but back in those days, you couldn’t afford to get too carried away, otherwise it would have come to a pretty horrible end pretty quickly.

We were challenged by short mine life, and that meant that we never really enjoyed a premium on our share price. Having one mine and then replacing it with another mine was really a road to nowhere. We had to use a pretty simple M&A model which was, understand the value of the asset and don’t pay more than that value and any exploration upside that you see, that’s for your shareholders later, not necessarily part of the deal itself.

If you have to include exploration upside then you’re basically putting yourself at risk of overpaying. And so that simple sort of model has applied all the way through and probably sticking to that has ensured that we haven’t blown ourselves up on some really bad deal.

Ramelius was listed in 2003 and you came in later on in 2012, you weren’t a founder. How were you able to come into an established business and have ownership of the story?

So whilst Ramelius was listed in 2003, production didn’t start until 2006 with Wattle Dam. And there’s only been three CEOs of the company.

And I think the (one) factor, and this plays into why for a long time there was a very low profile, was because it was originally spun out of Beach Energy, the oil and gas company in South Australia.

So Adelaide was head office, Adelaide was the registered office and for a long time the first MD was on his lonesome in WA with the Wattle Dam mine whilst everything else was back in South Australia.

If you searched WA gold companies it didn’t even come up until actually 2018 when they moved the registered office to WA.

So, I think the two previous CEOs because of those reasons had a very low profile. So for me coming in, once I was able to start to grow production, acquire Edna May, I think it was probably easy for me to start to build a profile, even though that took some time.

They (Joe Holdsworth and Ian Gordon) were both there for seven years each and I’ve been there for 14. So I probably had more of a chance, given all that, to promote the story and build a profile.

I actually didn’t know the Beach Energy origin story.

It’s an interesting one. They had some tenements in WA and the first MD Joe Holdsworth who’s not that long ago wrote a book, he was quoted as saying “don’t worry about bonanza gold or exceptional, this is s*** loads per tonne” back in the day when you could do that.

They were finding nuggets on the ROM pad at Wattle Dam back in the day. That was a fantastically nuggety ore body.

The profile has really picked up in the last couple of years, travelling to North America and those sort of places, a lot of investors hadn’t heard of us not so long ago, but we’ve worked hard on that.

You spoke about buying assets, but you’ve also recycled assets like Kathleen Valley – though maybe you would have wanted your time again with the lithium there. Wattle Dam, you would recycle quite early in your stint at the company. What gave you the confidence that the Murchison was the right place to be to go from a junior producer into a mid-tier?

I’d heard of Mount Magnet (in my WMC days) and it was always known as a decent asset, but it was hard work and 100,000 ounces was a good year and so it fluctuated around that for a long time.

It’s been mined on and off for 100 years and one thing you do realise is that some of these classic gold camps keep on keeping on.

When we started moving into the porphyries you sort of open your eyes up to go, wow, there’s a lot of gold that’s gone through this area. Only the high-grade banded irons have been focused on. There’s lots of other opportunities.

So I went in eyes open on that in the early days at Mount Magnet. I knew about the Hill 50 underground mine. One of my first questions was, are we going back down there? And the answer was no, we’re mining open pits. We’re mining stuff close to the surface.

We might get to the Hill 50 deposit one day, and that still remains the case. So it was just the opportunity of being in a camp where you know there’s lots of opportunities, it was (just) understanding the geology and putting money into exploration.

In the early days it was hard because you might have had a $5-10 million budget and we had projects in Nevada and projects in Queensland and how do you divvy that up?

So it did take me some time to then pull back from Nevada, pull back from Queensland once we’d had a fair crack at those assets, recognising you need to find a whole new standalone mine in those areas to make a go of it.

We did give (Wattle Dam) a fair crack in terms of drilling it out to make sure that the orebody didn’t continue before we sold it.

So It just came about that let’s put our dollars and relatively few dollars in those early years into our best cash flow generating asset, let’s support the engine room rather than be off in other parts of Australia or other parts of the world looking for the miracle mine.

Like your peers you’ve got a lot of growth ahead of you, but the equities in the gold market aren’t really showing it. I think you’re down about 8% year-to-date. How do you reconcile the weak performance of the Aussie golds?

Unfortunately, there’s no easy answer to that one. I think the cost inflation, I’ve seen a couple of numbers come out from other quarterlies and they’re up maybe even more than people were thinking.

That’s playing into investors’ thinking. I think for us it’s really simply about execution. The fundamentals to the gold price in terms of countries running up large debt positions, the US dollar being challenged, lots of turmoil, wars here, there and everywhere.

Many of the fundamentals are supportive for gold itself.

I’ve come to terms with the fact that we have an M&A overhang no matter what we do or say. So that, specifically for Ramelius, is possibly an issue.

But what you won’t be able to deny if we deliver on our project builds at Mount Magnet and Rebecca-Roe is that we’ll have an excellent production position at low cost with capital coming off.

The rerate will have to happen because there’ll be too much of a gap in terms of cash flow generation and the market cap. That’s frustrating having to wait for that. All we can do is deliver milestones along the way to say, look, we’re on track, we’re managing costs, our production profile is still intact.

And in fact, if anything, with our exploration efforts, try to keep topping up those profiles. Which is what we did. recently where we took FY30 from 500,000 ounces to 600,000 ounces due to exploration success and incremental additions to that profile.

When you talk about an M&A overhang, is that a reference to the speculation that has popped up around Carosue Dam in the wake of the Gold Fields-Northern Star bid?

I’ve done about 10 acquisitions in my time. Counted them up, it might even be more than that.

So you do get associated with (it) and we’ve been the acquirer – we’ve been active in M&A.

Whilst the four-year plan and beyond, we don’t actually have to buy or find anything to deliver on, you sort of carry that M&A baggage around with you no matter what.

As you probably know yourself, the Carosue Dam story has been out and about sort of on an annual basis almost for the last four or five years.

Because strategically, it does make a certain amount of sense, whilst it’s unlikely to happen due to a number of reasons.

It’s something that because of who we are and because of the strategic fit, you put two and two together. Similarly, having 10% of Benz and being a historical acquirer leads to M&A speculation whether we like it or not.

So Benz was a set of steak knives in the Spartan deal but now it’s a $1.7bn company. How do you think about your stake there?

You’re right, not everyone’s aware that we inherited that position. We didn’t buy into it.

So we currently have around 10% of that.

That was sitting in Spartan’s portfolio and Gascoyne before it. And from memory, it was a 500,000 ounce resource, which given its isolation was unlikely to be enough to be a standalone operation.

So the Benz guys have come in, they’ve been very aggressive and they’ve had a great run on the market. And so at this point in time, we’re happy shareholders and we’ll continue to watch with interest.

It’s not like we need to sell our stake because we need cash or anything like that. So for us, it’s quite an interesting seat at the table on a project that sort of could be anything … who knows.

They’ve got a lot of drilling to do because a lot of the ounces are in the very low confidence categories. But they’ve got plenty of cash to be able to do that, so for us it’s a watch with interest.

The market’s arguably pretty tough today for small caps. Do you see a pathway today for a company to follow the Ramelius playbook where you incrementally grow into that multi-billion-dollar mid-tier without being taken out?

I see that playbook being repeated.

We used a hub and spoke model and obviously in 2017 got hold of Edna May and then around 2021, Rebecca and Roe. So we had the three assets that we thought we needed to be 300,000 ounces.

As it turns out, we’re going to get to 600,000 with two.

So I argue where we’ve ended up is in a better place, less assets and double the ounces.

That whole hub and spoke (model), you don’t have to look very far to see that playing out at Forrestania, where you have regional consolidation around Westonia-Southern Cross, where they’re looking to do something very similar. We can sort of identify with what they’re doing there. (Forrestania recently bought Ramelius’ Edna May mine for $300m, with RMS becoming a large shareholder.)

Unless you’ve got a world-class asset, being a single asset producer has its challenges. Do you mine it until it runs out and give the money back to shareholders? That rarely happens.

Do you mine and then replace it with another asset, which is just a life as a junior producer, or do you look to grow? I think there’s still a few in that boat where they’ve got half-decent assets, they’re building production. There’ll potentially be consolidation between some of those smaller guys.

Not all of those assets will fit the majors’ requirements, which generally are low cost, long life.

We’re probably in that position now where we’re not looking at three-year assets anymore, we’re looking at 10-year assets.

And ideally they match our sector-leading cost profile, which is that around that $2300 an ounce Aussie all-in sustaining cost.

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