Review of Tiger Resources Divestment of its DRC Mining Assets
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On 22 January 2018, Tiger Resources Limited ('Tiger') (ASX:TGS) announced1 it will divest 100% of its mining and exploration assets in the Democratic Republic of the Congo ('DRC'). This divestment includes the sale of the Kipoi, Lupoto and La Patience projects (collectively the 'Projects') which are located in the world renowned Katanga Copper Belt in the DRC. Sinomine Fuhai (Hong Kong) Overseas Resource Investment Co., Ltd. ('Sinomine HK') will acquire the Projects for USD$260M, comprising of cash payments totalling USD$250M and the assumption of liabilities by Sinomine HK of USD$10M. In addition to the cash payment, Tiger is entitled to receive royalty payments from revenue generated from the sale of copper and cobalt by Sinomine HK of up to an aggregate amount of USD$20M. In 2016, Tiger produced 23,119 tonnes of copper cathode at an all-in sustaining cost of USD$1.76/lb. The Projects host the following JORC 2012 Resource and Reserve (as at 31 Dec 2016):
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Transaction Market Metrics Comparison
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Normalised Average Multiples2
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Using a Reserve multiple based on the USD$260M upfront consideration (which includes the USD$10M assumed liability) and the acquired Projects Reserves of 1,351Mlb of copper and copper equivalents, the Projects transacted at USD$0.192/lb. This figure represents a material discount to the MinesOnline.com 1, 3 and 5 year normalised average Operation metrics of USD$0.305, USD$0.347 and USD$0.444 respectively.MinesOnline.com notes that when the MinesOnline.com transaction database is filtered for long term African-only transactions, the Reserve multiple for Operation projects decreases to USD$0.230 which is more inline with the Tiger DRC transaction multiple. MinesOnline.com also notes that Tiger's shares have been in voluntary suspension from the ASX since 22 February 2017.
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TGS Price at posting:
4.9¢ Sentiment: None Disclosure: Not Held
