That’s an offer we can only refuse: In Italy, Altamin knows what it’s worth

Take your pick – grossly undervalued; fails to take in Altamin’s swag of future battery metals exploring; the Gorno prospects alone and a cash offer that’s about one-tenth the company’s net present value. Altamin’s board of directors couldn’t have been clearer in their advice to shareholders this morning regarding the VBS’ takeover offer.

In one of the more comprehensive takedowns of an unsolicited takeover bid we’ve enjoyed reading this year, the Altamin (ASX:AZI) board on Wednesday morning are dismissing the May 3rd VBS play for full control of it. It’s calling the bid “neither fair nor reasonable” and recommends shareholders reject the offer as just way, way off the mark.

After VBS offered 9.5 cents per AZI share for full control of the base and battery metals explorer – valuing Altamin at $37.2 million – the board got independent expert BDO on the horn to come in and do a thorough stocktake… and that hasn’t reflected well on VBS.

Part of the Victor Smorgon Group and Altamin’s largest shareholder, with a disclosed Voting Power of around 24.3%, the independent appraisal is going to be hard reading for VBS’ advisers who are looking either incredibly bad at math or just being “neither fair nor reasonable.”

Neither fair nor reasonable

After more than a month of touring the facility and crunching the numbers the independent expert estimates Altamin’s fair market value somewhere in the range of $0.195 to $0.309 per Share (with a preferred value of $0.253 per Share).

Little wonder then Altamin (ASX: AZI) wants to shoot down the $37 million plus VBS bid, which the board has insisted all along undervalues AZI’s portfolio of projects in Italy.

The letter to shareholders is a great read and lays out the various commercial and strategic factors that led to the ‘neither fair nor reasonable’ conclusion.

Although, perhaps, in the end it just comes down to VBS failing to put together anywhere near a sufficient premium for control of a company that’s been insanely busy.

AZI’s been accumulating uniquely prospective projects, obtaining all the regulatory nods and rigmarole, winning the goodwill of the communities it’s become a part of. And that’s without even opening the first page – and potential upside – of a rather attractive portfolio, rich in strategic battery metals projects.

This is how the board shot down the offer:

The offer values the company at A$37.2 million. The Altamin share price is a small cap on a wild ocean. So, it’s “subject to meaningful volatility.”

For example, the price of Altamin shares fell by 21.7% in the eight trading days prior to announcement of the offer, during which time the average daily turnover of Altamin shares was only $39,022 per day, with less than 500,000 Altamin shares on average traded per day.

The Offer Price of $0.095 per Share represents:

“Given the lack of liquidity in Altamin shares, the directors believe that VWAPs (such as those referenced above) provide a more appropriate basis for estimating premiums associated with the offer relative to a point value measured at the close of any particular trading day,” AZI advised shareholders.

Misreading Gorno

The net present value (NPV) assessment for AZI’s Gorno Project alone is around US$211 million, or circa A$300 million at current (very ordinary) exchange rates.

Outside of Gorno, AZI has now accumulated an impressive suite of battery metals projects (including a bunch of new applications for base and battery metals exploration licences) in Italy, which are not only well-progressed but which the board considers are “highly prospective and provide Altamin and its shareholders with significant potential upside from further exploration”.

And the NPV doesn’t even include the potential additional value from these new exploration greenlights into any future Mineral Resource Estimates.

Then there’s the price of zinc – it was US$2,850 per tonne, when the Scoping Study was done. It’s about US$4,000 per tonne now.

“If Altamin shareholders accept the offer, they lose all exposure to the potential upside of Altamin’s Gorno Project,” the board warns.

Then there’s the fact VBS entirely ignores these projects in its “proposed intentions and strategy for the Company,” which focuses solely on the Gorno Project.

Altamin has been a busy bee in Italy

There’s been the recent sampling at AZI’s Punta Corna Cobalt Project in northern Italy which have returned high-grade cobalt, nickel, copper and silver results.

An initial diamond drill program is all set and aims to intersect the multiple mineralised veins that have already been identified and mapped.

“Punta Corna has the potential to provide Europe with an ethically sourced, sustainable, domestic supply of cobalt, nickel and other green energy metals, and in the opinion of the directors has the potential to be a ‘company maker’ in its own right,” the board said.

AZI has lodged lithium in brine exploration licence applications over 3,240ha at Campagnano and Galeria in the Lazio region of central Italy.

These are adjacent to the Cesano exploration licence held by Vulcan Energy Resources (ASX:VUL).

Also, AZI has begun a further exploration licence application over 5,983ha at Ferento, also in the Lazio region, with the potential for geothermal energy and lithium content in the brines.

“If found to be present in sufficient concentration, this could provide an opportunity to commercially extract the lithium for sale to electric vehicles customers in the EU as well as the production of geothermal energy.”

The company continues to zero-in on Italy’s untapped reservoir of strategic metals, locking in twin exploration applications to open up both prospective lithium production and geothermal power generation.

Strategic review

Altamin is reasonably advanced through a strategic process to determine the various options to fund future development at its Gorno Project.

AZI says it’s already received indicative, non-binding proposals from a number of third parties covering a range of potential financing structures, including alternative corporate and asset-level and earn-in or joint venture transactions as well as potential long-term offtake agreements, and associated prepayment funding.

These strategic options are plenty. But here comes the teeth.

“While the outcomes of the review remain uncertain and there can be no assurances that it will result in any transaction, the board is committed to exploring all options that are in the best interests of, and have the potential to maximise value for, Altamin shareholders.

“If you accept the offer, unless the acceptance is legally able to be withdrawn, you will not be able to accept a third party proposal, should one emerge.”

So if you’re holding AZI, best crack open a fine Italian wine tonight and have a think.

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.