• After ramp up blues, will Chinese premium be enough to satisfy the board and shareholders of Tietto Minerals?
  • $649 million offer comes in hefty or cheap depending on your perspective
  • Ramelius, Pantoro and St Barbara report


Gold miner Tietto (ASX:TIE) is the latest delicately balanced mid-tier gold fish staring down the shark’s mouth.

Hoping to follow in the footsteps of West African success stories like West African Resources (ASX:WAF) and its terrific Sanbrado mine, it has faced a slower than expected ramp up at its 3.8Moz Abujar mine in Cote d’Ivoire.

The operation is expected to produce 170,000ozpa from 2024 to 2032, but early doors it has seen production forecasts struggle to keep up with realities of life as a gold miner. Having turned out 33,800oz in the September quarter, it needs to produce between 41,000-51,000oz to hit guidance of 75,000-85,000oz at all in sustaining costs of US$1175-1350/oz in the December quarter.

It had previously guided 105,000-120,000oz for the second half.

Enter opportunistic 7% shareholder Zhaojin Mining Industry, a Chinese Hong Kong-listed gold miner with a similar production profile to Aussie giant Evolution Mining (ASX:EVN).

A 58c per share offer, all cash, would value Tietto at around $649 million and at a 36% premium to its Friday close of 42.5c.

20% owned by China’s largest state-sponsored gold producer Zijin Mining, Zhaojin produced 618,000oz and processed or smelted an additional 260,000oz from third parties in 2022 and with $1.17b in the bank would seem to have the heft to both carry out its planned acquisition and invest a bit in the Abujar ops.

It could be a tantalising prospect for investors who have seen shares in the new gold producer fall sharply this year.

Sell out now and early investors could crystallise a gain of over 700%.

At the same time, with the war in Gaza and Israel prompting safe haven demand that drove US dollar gold prices beyond US$2000/oz for the first time since March and only the fourth time in history on Friday, there could be upside of an ASX listed West African gold miner.

It follows a raft of takeover activity in the African market, where ASX listed gold stocks regularly complain they cop a bum rap for projects that for their scale and profitability would be worth many times what they’re given credit for if they were near Kalgoorlie rather than Kinshasa (we know Africa is many different countries by the way, that’s just a bit of lyricism).

The Tietto bid comes just two months after the board of Orecorp (ASX:ORR) endorsed a cash and share merger offer from TSX listed Chinese silver miner SilverCorp Metals to progress the development of its Nyanzaga gold project in Tanzania.


Would TIE be selling low or high?

There are a couple questions for Tietto shareholders, whose board has urged they take no action in response to the Zhaojin bid.

Could they see another offer come in over the top? Canaccord Genuity gold analyst Paul Howard suggested in a note this morning that could be a possibility.

“Note that TIE’s largest shareholder is Chijin (Chifeng) with 12.95%. Chijin owns Wassa in Ghana, Sepong in Laos and attempted to acquire Bibiani off RSG-ASX in 2021,” he said.

Then there is the question of whether a sale now would be a lowball or highball deal?

As noted, gold is looking pretty strong today, though US treasury yields (a more fundamental link to underlying gold prices) are high and safe haven buying often wanes after the initial wave of fear washes over (as happened after the Russian invasion of Ukraine).

A producer ramping up production in that environment could see very strong gains once the gold market re-emerges from the funk it’s endured over the past couple years.

That said, ramp-up risk has already been seen at Abujar, where grade control drilling and revised pits has shown there will be lower grades than initially anticipated through its mill over the life of mine. Perspective will play a big role in how analysts and investors view the Zhaojin offer.

“Our price target is $0.40 and heavily risked. Unwinding our risking, TIE would be valued at $0.90. We continue to use a 10% discount rate. We are yet to fully model the new LOMP (life of mine plan),” Howard said.

“We have a SPEC BUY rating. On balance, the $0.58 takeover price is fair when considering the current productions risks surrounding TIE. If a suitor has a higher risk tolerance, the offer price appears low relative to our unrisked valuation.”


Speaking of gold

As prices topped US$2000/oz, the big three gold producers on the Aussie market – Northern Star (ASX:NST), Evolution and the newly dual-listed Newmont Corporation (ASX:NEM) – were among a handful of ASX large caps on an upward trajectory.

A handful of gold reports also graced the market, led by ~250,000ozpa mid-tier Ramelius Resources (ASX:RMS).

Ramelius produced 55,523oz at $1975/oz in the September quarter, more than initially budgeted, and said it remained on track to hit a full year target of 250,000-275,000oz, weighted to the back end of FY24, at $1550-1750/oz.

Its Mt Magnet hub delivered 30,710oz at $1817/oz but saw less ore than expected from the Penny underground mine, one of the highest grade gold resources in Australia and a satellite mine for the Mt Magnet mill.

RMS delivered operating cash flow of $44.3m and underlying free cash flow of $6.4m after a net spend of $17m on a deal that saw it acquire Musgrave Minerals and its high grade Cue gold project.

Also in West Africa, West African Resources rose 2% despite announcing a lift in royalty rates in Burkina Faso.

The company, which is on track to produce between 210,000-230,000oz at the Sanbrado mine this year, said the introduction of three new royalty tiers would add US$6-8/oz to its cost base, but would not impact financing for its 7.7Moz Kiaka project nearby.

From the back end of 2025, the development of Kiaka would make WAF a 400,000ozpa gold miner.

“The new royalty rates follow extensive consultation between mining companies and the Ministry of Mines for Burkina Faso. The rates are capped at 7% over US$2,000 per ounce, which results in a modest $6 to $8 increase per ounce in WAF’s 2023 AISC per ounce at current gold prices,” WAF exec chair Richard Hyde said.

“WAF remains on-track for 2023 guidance of 210,000 to 230,000 ounces of gold at an AISC of less than US$1,175/oz.

“West African is on track to become a +400,000 ounce per annum gold producer with the development of our second gold mine at Kiaka. Our unhedged 10-year production outlook estimates production of more than 200,000 ounces of gold per annum in 2023 and 2024, and more than 400,000 ounces of gold per annum from 2025 to 2032.”

Pantoro (ASX:PNR) meanwhile fell 25% after its cashflow report revealed it copped a $15.3 million cash drain at its operations in the September quarter.

Pantoro produced 13,145oz at its Norseman gold mine, up 27% on the previous quarter of 10,345oz, but didn’t report all in sustaining costs. It is currently looking for a buyer for its mothballed Halls Creek assets.

St Barbara (ASX:SBM) also fell 13% after revealing guidance for its Atlantic and Simberi mines which showed it would produce just 6000oz at $3100-3200/oz in Canada and 60-70,000oz at $2750-3050/oz in PNG in FY24, with the former transitioning into a period of care and maintenance.


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