MDL has commented on the third supplementary bidder’s statement by Eramet released on Wednesday, 30 May 2018. Like those before it, this latest statement highlights Eramet’s continuing selective disclosure to avoid paying fair value to MDL in an attempt to capture the future value of TiZir for its own shareholders.
MDL stands by its recently issued guidance and its board’s recommendation to reject the offer, both of which are supported by the detailed work of respected independent and industry experts.
Despite criticising the price forecasts of TZ Minerals International (TZMI) and those adopted by the Independent expert, it is not prepared to stand behind or adopt any price forecast, including the broker consensus forecasts the company itself references in its latest bidder’s statement.
It is worth noting that Eramet has highlighted zircon and ilmenite pricing, while ignoring forecasts for titanium slag, being the main product that drives TiZir revenue.
Additionally, it should know that the pricing for sulphate ilmenite has little to no impact on the financial performance of TiZir given that the majority of this product is consumed internally.
It is also worth noting that the company criticises short-term pricing forecasts, which again are not the most significant value driver for TiZir, given GCO’s 30+ year mine life.
When developing its long-term view on pricing – being the key value driver for TiZir – an independent expert used long-term price assumptions derived from historical real term median prices, equating to US$1,099/t for premium zircon and US$599/t for chloride slag.
These assumptions are substantially below current spot prices, TZMI forecast prices and broker consensus prices, respectively.
Eramet is also aware that there is the potential for TTI to produce at even higher rates given that the furnace is currently operating below design capacity with respect to power input.
As an insider, Eramet also knows that throughput rates and heavy mineral concentrate production have increased year-on-year since mining began at GCO.
Eramet is also aware of the numerous optimisation projects underway at GCO as well as the potential to capitalise on the excess capacity of the mineral separation plant which may lead to future increases in production.
While Eramet focuses on past operational performance when addressing MDL shareholders, it is the future performance of TiZir that Eramet seeks to claim for its own shareholders.
MDL notes that its shares have traded consistently above the offer price of A$1.46 per share since Eramet launched its bid on 27 April 2018.
This trading sends a strong message on the part of MDL shareholders as to the adequacy of the offer.
MDL understands the company’s desire to own 100% of TiZir as, in Eramet’s own words, TiZir is an ‘important player in the titanium dioxide and zircon markets.