Tietto Minerals Ltd (ASX:TIE) has attracted a buy recommendation from Foster Stockbroking and maintained a 12-month share price target of A$0.87 based on the analyst’s risk evaluation.
Notably, Foster Stockbroking has highlighted the catalysts for its buy recommendation which include:
- Resource upgrade;
- Mining Convention;
- Heap leach and underground studies;
- Financing; and
- Final Investment decision (FID).
Tietto is currently trading at $0.45 per share with a market cap of A$206.42 million.
Investment highlights
The following are extracts from the Foster research note.
US$130M-US$140M debt package mandated: TIE announced it had mandated Taurus Mining Finance to deliver a project facility of up to US$140 million debt for the funding of Abujar.
No mandatory hedging: The most salient feature of the mandate is TIE’s request for no mandatory hedging, signalling its intent to be fully leveraged to the gold price. Other features it is seeking are no penalty for early repayment, a five-year tenor and freedom to undertake exploration during construction. Repayment would commence June 2023, approximately six to nine months after TIE’s targeted first production.
Debt package in-line with our forecasts: Our earnings forecasts and valuation model for TIE assumes that the company will require A$310 million to fund Abujar, including working capital, corporate, exploration and other costs. We had assumed this would be funded 60:40 by debt: equity, or A$186 million:A$126 million - respectively, meaning our debt assumption in US$ terms (US$140 million) is in-line with the Taurus mandate announced.
Debt package builds momentum for FID by end CY21: TIE has previously targeted FID for Abujar by end CY21 and we believe yesterday’s debt mandate maintains the momentum to achieve this milestone, as well as facilitate progress on the potential equity funding side of the equation.
Other catalysts – Mining Convention, resource upgrade: Meanwhile the Mining Convention and a resource upgrade - focused on improving measured category - are also expected by end CY21. Recent drill results from its infill program have progressed the latter. All these dovetail with TIE’s ambition for first production in 4Q CY22.
Earning and valuation
No changes to earning or valuation: Foster has made no changes to earnings or valuation of TIE, given the Taurus debt mandate is in line with our assumptions.
The analysts risked valuation is $0.87/share (0.6x NPV10), while our unrisked 1.0x NPV10 is $1.49/share.