Tethyan deal is due to be finalised soon. I thought of putting up some info on some people/companies involved. Warning that this is a long comment. Since this comment will talk about takeover prospects, I’ll also talk a bit about some other related companies that could be interested.
While a lot of this comment will talk about takeover, please note that I’m not suggesting that shareholders hold on till takeover (which may or may not come). Each shareholder must take their own decisions.
Also I’m holding on since 20 cents (my original comment below – 13 bagger for me today on original investment) and hence my ADT risk/reward profile might be different and hanging on till takeover, selling earlier, etc are all attractive strategies for me, which I’m always analysing on a daily basis. https://hotcopper.com.au/threads/ipo-adriatic-metals-limited.4086841/page-52?post_id=32918650
Of course, thanks to all for the great analysis all along which has also given me much more confidence to hang on. 2 people deserving special thanks for their consistently exceptional analysisIMHO would be Datt of Datt Capital and @PamplonaTrader and their analysis definitely gives more confidence in ADT.
1/ Basic info about Teth deal
ADT entered into arrangement with Tethyan (Teth) to take over Teth. Following completion of the Arrangement, it is expected that Tethyan Shareholders will own approximately 6.9% of the issued and outstanding Adriatic Shares.
Teth shareholders will of course benefit from all our world class assets including Rupice, Veovaca, exploration potential at Borovica, Jurasevic-Brestic, Orti and West Veovaca etc.
Combined ADT-Teth (new ADT) will get Kizevak and Sastavciprojects which already have a historical resource (foreign estimate and not JORC compliant)
As Paul said in recent podcast, Tethyan projects potential not even scratched yet. With drilling results and JORC in time to come, we’ll probably be able to better quantify Teth’s assets' role in our eventual share price
Teth transaction also helps ADT expand into Serbia, and a company with mines in both Bosnia and Serbia could be very attractive. Also it could be a launchpad to perhaps later move on to other Balkan countries
Former chairman was Richard Warke of Augusta group, and Augusta group is involved with Tethyan. As Paul said in recent podcast, it is hoped that Richard Warke will continue being involved as he is good at seeing value.
Here is an article about Richard Warke with some excerpts -
“Arizona Mining is only the latest in a string of mining company sales orchestrated by Warke, a mining executive who, over the last 25 years, has either found or led over $4.5 billion worth of companies in the international resource sector. In the process, he’s made billions of dollars for investors smart enough to invest in his companies and built a personal net worth of over $1 billion.
The zinc, lead and silver mine on the U.S.-Mexico border was an original discovery that Warke grew from zero to become one of the five largest base metal mines in the world, with a value of $2.1 billion. Warke accomplished that in a bear market for zinc prices and an uncertain outlook for the world economy.” - excerpts
Some info from Solaris website about Augusta group track record in creating value on eventual takeover-
Ventana group – Around 13000% return
Augusta resource – Around 3300% return
Arizona mining – Around 6100% return
Equinox gold (not sold) – Around 1700% return
“When we purchased Arizona Mining, we took a risk. One that fortunately paid off. We explored and discovered the zinc, lead and silver mine on the U.S.-Mexico and grew it to one of the five largest base metal mines in the world. And that was during a bear market for zinc prices.
Tethyan Resource, which is a member of the Augusta Group of Companies, is a precious and base metals mineral exploration company focused on the Tethyan Metallogenic Belt in Eastern Europe, mainly Serbia, where it is acquiring and exploring a portfolio of quality precious and base metals projects with known mineralization and compelling drill targets.” - excerpts
a/ Richard Warke has a good track record in finding value early
b/ Warke has been extremely good in creating exit value on sale
c/ Some investors following Warke could have bought into ADT. He has already made his old investors billions
d/ Warke’s recent Arizona mega deal involved zinc, lead and silver – all stuff which ADT has
e/ Warke sees value in Teth too – known mineralization and compelling drill targets
3/ Don Taylor
Mentioned earlier that Don Taylor is a director with Tethyan
Here’s a note on Don Taylor
“In 2010, exploration geologist Don Taylor was brought on to guide exploration. It was then he discovered the large Taylor Zn-Pb-Ag deposit in the Patagonia Mining District. For this discovery, Don Taylor, now Chief Operating Officer of Arizona Mining, Inc., was awarded the prestigious Thayer Lindsley award for ‘Best Global Discovery’ at the 2018 Prospectors and Developers Association of Canada Convention in Toronto, Canada.
For additional information on the Hermosa project, which includes both the Taylor zinc-lead-silver deposit and the Central silver-manganese-zinc manto oxide deposit, see the Arizona Mining website.
Don Taylor could add similar value to Richard Warke
4/ South 32 and past association with Warke/Taylor
Here is a recent July 6 article on world’s biggest mining companies https://www.mining.com/top-50-biggest-mining-companies/
Australia has 31% in terms of regional breakdown with heavyweights like BHP and Rio too. It placed South 32 at no. 34
ASX biggie South 32 ended up taking over Arizona mining. Refer below AFR article
“Having been so diligently patient over the first three years of life outside of BHP Billiton, it does seem just that little bit odd that South32 has moved to spend $US1.4 billion ($1.88 billion) on an undeveloped zinc and silver project in Arizona at a time of cyclically high zinc prices.
Until now, the owners who made Arizona didn't want to sell.
But they are now ready to accept a cash bid that represents a 50 per cent premium over the standing share price and that leaves them collectively $US550 million richer.
Kerr told The Australian Financial Review that the deal is "a game changer" for South32. Arizona's Hermosa-Taylor project ticks three very big boxes of ambition for Kerr's quest to define his executive legacy.” - excerpts
a/ Having in recent past made a big deal with Arizona mining involving Richard Warke and Don Taylor, S32 might be following them for the next big thing.
b/ ADT has great assets too involving zinc, lead and silver just like Arizona
c/ S32 like ADT, is already on the ASX
d/ S32 is a much bigger player than SFR, who many of us have thought has long been interested in ADT
5/ Other big companies already active in the broader region
Refer old (Nov 2019) article by Datt Capital
“These are world-class metrics by any measure, with an economic capital intensity (initial CAPEX/NPV8) less than half of comparable projects we have examined.
We examined a couple of acquisitions for comparable projects (albeit with inferior economic returns) and noted that: S32 acquired Arizona mining at a value approximately 70% of the project's NPV8 - at scoping study stage Zijin acquired Nevsun at approximately 90% of NPV8 in neighboring Serbia - at pre-feasibility study stage.
ADT is currently trading at approximately 18% of NPV8 - at scoping study stage.
As such we believe any transaction would need to be priced at a minimum of 60% of NPV8 for the management team (who hold ~30% of the company) to even consider. Large miners like Rio Tinto, Lundin, Freeport McMoran and Zijin are active in neighboring countries and would find ADT a very attractive acquisition now that there has been demonstrable progress in terms of feasibility studies. There is a profound lack of quality projects available globally and this has driven up acquisition prices substantially over the last 10 years. We also note that base metals are at a cyclical low and ADT's ground is still very much under-explored, which will provide comfort to any potential acquirer.” - excerpts from Datt article
ADT presentation also mentions that the region has a host of Tier 1 deposits attracting significant investment from the majors like Rio Tinto, Dundee Precious Metals, Zijin Mining, Mundoro and
Fortuna Silver
The mining Top 50 article I linked earlier has Rio at no. 2, Freeport-McMoran at 17, Zijin at 18.
Takeaways -
a/ Many really huge companies already active around the area and could be interested in getting into ADT at some time
b/ Refer 2 egs given by Datt capital about how companies paid amount close to NPV while taking over. One of them is S32 which is discussed above. Fair takeover price (even for cash) might not be the slightest issue for these companies (unlike SFR) if they are interested in an attractive project
c/ 2nd eg. of Datt is Zijin and that project was in Serbia, which gives Zijin further incentive to have a look at ADT. Also relevant to note that Zijin actually beat large company Lundin (active in the region) for Nevsun https://www.mining.com/lundin-gives-nevsun-zijins-1-41-billion-offer/
6/ Conclusions
I’ve tried to give some conclusions for each point separately. A common conclusion is that there could be many companies interested in ADT. This does not mean that a takeover is happening for sure. This is very important to understand. The original purpose of this comment was to highlight some info about Richard Warke and the upcoming Teth deal. While analysing his track record, takeovers obviously becomes a very relevant side analysis.
It is also good for competitive tension in case takeover overs do come about. All this also does make for a good story about ADT potential long term prospects, and market loves a good story.
(20min delay)