Zhaojin Capital makes $629m offer for African gold producer Tietto Minerals

A Chinese miner has made a $629m off-market takeover offer for ASX-listed West African gold producer Tietto Minerals.

A Chinese miner has made a $629m off-market takeover offer of ASX-listed West African gold producer Tietto Minerals.

Tietto shares surged in early trade on the announcement that it had received a non-binding indicative proposal from Hong Kong-based Zhaojin Capital.

Zhaojin is Tietto’s second largest shareholder, owning 7.02 per cent, and the 58c-a-share offer for the rest of the company values it at $655.4m.

Tietto stock surged 33 per cent higher to close at 56c, with more than 43 million shares changing hands.

It is a wholly owned subsidiary of China-based Zhaojin Mining Industry Company. Tietto, which started producing gold from its Abujar project in the Ivory Coast on July 6, said there was no certainty the proposal would ultim­ately result in a binding offer.

“The board will carefully consider the indicative proposal and provide shareholders with their advice in due course,” it said.

China-based Chifeng Jilong Gold Mining is the largest shareholder of Tietto with 12.95 per cent.

In a statement Zhaojin – whose parent company is a gold producer and gold smelting corporation and has a long and successful record of investing in the goldmining industry – said the takeover offer was in line with its strategy and it intended to support and accelerate the growth of Tietto and the Abujar Gold Mine, as well as support exploration activities in West Africa.

“The company believes that the acquisition of the target represents an attractive opportunity to expand its business overseas and to improve the overall profitability of its operations,” it said.

The offer is conditional on a 50.1 per cent minimum acceptance condition.

Zhaojin Mining as incorporated in 2006 is a goldmining enter­prise jointly ventured by Zhaojin Group and Fosun International. It is the largest gold producer in Shandong province in China and is headquartered in Zhaoyuan, Shandong.

Tietto managing director Matt Wilcox said the miner more than doubled its gold production to 33,750 ounces in the past three months despite production suffering from the lack of waste stripped during the pre-production period and the ongoing wet season.

“Tietto achieved strong operating cash generation in the September quarter of $28m at a significantly lower average head grade than reserve head grade and at milling rates more than 15 per cent below our planned expansion to 5.5 million tonnes per annum.

“The updated LOMP (life-of-mine plan) we delivered during the quarter demonstrates just how strongly Abujar can perform over a longer timeframe as our mining contractor begins to generate stockpiles enabling grade selection for mill feed.

“Our management team is foc­used on increasing Abujar’s processing capacity through a com­bination of higher operational efficiencies, increased site crushing capacities, and an overall de-bottlenecking study to increase the plant throughput rates.”

The mine’s life is expected to finish in 2032 including average yearly production of 170,000 ounces of gold annually.