- Tietto sees record high gold prices as fresh evidence Zhaojin’s takeover bid isn’t worth the paper it’s written on
- The company sees direct endorsement from 5 brokers in Australia
- However, one year returns are below 5% despite increased production
- Despite decent liquidity, the company’s announcement on Thursday didn’t produce any real market reaction
Tietto Minerals (ASX:TIE), a company being repeatedly hit with a $630M takeover attempt by China’s Zhaojin Mining, has today once again encouraged shareholders to reject any deal they receive.
Shares were flat at 61cps in mid-afternoon trades on Thursday.
In October last year, Zhaojin offered Tietto shareholders 58cps for all shares in Tietto the Chinese heavyweight doesn’t already own, which reflected a 36.5% premium at the time.
Zhaojin Mining subsidiary Zhaojin Capital only holds a 2.76% stake in Tietto, per public data viewed at 2.30pm AEDT on Thursday.
Citicorp is the largest holder at just over 15%. Tietto, meanwhile, is a recommended ‘Buy’ from 5 Australian brokers; 1 broker rates TIE a ‘Hold’ and nobody is rating the stock a ‘Sell.’
Tietto currently boasts a market cap of $689.2M and has decent liquidity for a stock of its size with average four week turnover reflecting 1.564M shares – around $1M a day.
Zhaojin, for its part, ultimately wants control of Tietto’s Ivory Coast-based Abujar gold mine.
The Chinese miner has extended its unsolicited offer to Tietto four times so far, but Tietto says communications from the company aren’t defined by forthcomingness and definitely not by urgency.
For those following the saga, today’s news may seem like a ‘nothing’ type of announcement.
But the reasoning included in Tietto’s latest briefing to shareholders points towards a macro tailwind opportunity which could further ensure the deal doesn’t go ahead.
Tietto listed the following reasons today behind its belief shareholders should continue rejecting any and all bids.
- Gold production is increasing from Abujar with 2023 QoQ growth steadily climbing
- Gold prices are at US$2,100/oz, reflecting a 5% increase since Zhaojin first began circling
- Increased stockpiles give Tietto flexibility during the next wet season on-site
- The mining fleet at Abujar has been expanded and continues to expand
- Tietto is staying on top of costs while generating more cash with QoQ growth clocking 84% between Q3 and Q4 of the 2023 calendar year
Notably, Tietto said on Thursday it does not believe any one of its shareholders has accepted the deal.
Should this be the case, it would be a true sign of conviction in a stock that has only returned 4.27% to shareholders in the last year. (Versus the ASX200, Tietto is underperforming by -1.72% as at 2.30pm AEDT).
On the whole, once you get past the carefully crafted management-speak in Tietto’s Thursday release, the company ultimately sees its West African gold play being more valuable in the long run than what Zhaojin is offering.
In other words: as far as Tietto are concerned, the Chinese mining giant is lowballing. Shareholders appear to agree.
Whether or not Tietto’s superior value proposition that its own operations apparently provide see ripe fruit on the branch remains to be seen, but Tietto has been proactive, in a word, at encouraging shareholders to reject.
The company has already seen an independent expert claim Zhaojin’s bid “materially undervalues” the company. Tietto attracts a level of attention many other Australian companies of its size don’t – case in point: Reuters covered that update late last year.
So far, shareholders are clearly siding with Tietto – though, the lack of a strong market reaction to Thursday’s news could also give one food for thought.