Altamin’s largest shareholder and suitor backs US$65m Gorno deal with Appian

Altamin has received an unexpected show of support for its US$65m Gorno funding deal with Appian. Its unwelcome suitor – and largest shareholder – VBS Exchange.

While Altamin (ASX:AZI) continues to dismiss VBS’ 9.5c takeover offer as being “neither fair nor reasonable”, VBS has expressed its support for its recently announced US$65m Gorno funding deal with Appian. That’s a strong acknowledgement of how much it will help drive development of the advanced Gorno zinc project in Italy.

That VBS has also thrown its support behind Altamin’s strategy of developing a European pipeline of battery metal projects is also telling. Though that could be coming from its role as the company’s largest shareholder – at 33.32% now – perhaps in recognition of the unlikelihood that its takeover bid will pass the halfway mark, much less the finish line before it expires on 1 August.

The offer from Appian, a global specialist mining private equity fund which has successfully completed seven mine builds in the last four years, is an endorsement of the company’s strategy and the Gorno project as well as Italy’s standing as a mining destination.

Importantly, the binding US$10m first tranche to boost exploration and infill drilling along with up to US$55m for project construction ensures that Altamin is largely free carried for development of the advanced zinc play.

This might grant Appian a 67.4% interest in Gorno once completed, but it still leaves the company with a significant 32.6% stake in a project that promises to be keenly profitable if the 2021 Scoping Study is anything to go by.

Profitable business

In the Scoping Study, Altamin estimated that the project would deliver post-tax net present value and internal rate of return – both measures of a project’s expected profitability – at US$211m and 50% respectively.

Capex was estimated at a very manageable US$114m with payback estimated within 2.5 years and a mine life of nine years. All-in sustaining costs are estimated at US60c per pound of zinc equivalent.

All this was underpinned by a resource of 7.8 million tonnes grading 6.8% zinc, 1.8% lead and 32 grams per tonne silver.

This could be decidedly conservative given that that study used an assumed zinc price of US$2,850 per tonne, which is quite a fair bit lower than the currently going price near the US$3,050/t mark on the London Metals Exchange (LME).

There is also every reason to believe that this will increase further with the European Union demand alone expected to increase by up to 15% due to zinc’s importance in the march towards net zero emissions.

Further resource growth could also deliver further improvements to project economics.

Cash preservation

That the deal preserves the company’s cash balance of $4.836m as at 30 June 2022 also raises the potential that it could deliver more news from its other battery metal projects.

These include its promising Punta Corna cobalt-nickel project in northern Italy and its lithium in brine exploration licence applications at Campagnano and Galeria in the Lazio region of central Italy.

This article was developed in collaboration with Altamin, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.