Tietto investment just the latest sign of China’s growing interest in West Africa

In January, Chifeng Jilong Gold Mining Co. acquired Canada’s Golden Star Resources and its Wassa gold mine in Ghana. Now the Chinese gold miner is investing A$49.3 million (US$33.9 million) for an 8% stake in West Africa-focused Tietto Minerals (ASX: TIE). 

Tietto is developing its Abujar gold project in western Cote d’Ivoire and says it’s on track to deliver first gold in the fourth quarter of this year and produce 260,000 oz. of gold in 2023.  

A definitive feasibility study completed in October 2021 envisioned an open pit operation with a mine and processing life of 11 years and average life-of-mine gold production of 155,000 oz. per year (200,000 oz. a year in the first six years of production) at a life-of-mine all-in sustaining cost of US$832 per ounce. 

Under the binding placement agreement, a subsidiary of Chifeng Jilong will receive 85 million newly issued shares of Tietto at a price of A58¢ per share — about a 15% premium to Tietto’s 20-day volume weighted average price as of Sept. 7 — for a 7.87% stake in the company. Chifeng also has the right to appoint a non-executive director to Tietto’s board of directors. 

The funds will be used to further study a potential heap leach operation at Abujar and expanded exploration drilling with a fleet of eight drill rigs. 

The investment “means Tietto is secure in its pathway to first gold production at the Abujar gold project as we look forward to delivering the updated LOM [life of mine] production plan in Q3 CY22,” Tietto’s founder and managing director, Caigen Wang, said in a press release. 

Chifeng, which has gold mines in China, Laos and Ghana, described West Africa as “a strategic region” and said its investment in Tietto “is in line and driven” by its “investment thesis.” 

In a note on precious metals and West Africa, mining analyst Craig Stanley of Raymond James pointed to the growing interest in the gold-producing region and the number of acquisitions in recent years. 

“In the past three years, we count 10 producers/mines and 13 pre-production companies/projects that have been acquired in the region,” the analyst noted. “West Africa is the second-largest gold producing region in the world and the top for discoveries with 79 million oz. discovered over the last decade.” 

According to Tietto’s feasibility on Abujar, total capital costs will run to about US$200 million, with a pay-back period (post-tax) from first production of just under one year. The mine will generate an after-tax net present value at a 5% discount rate of US$722 million and a post-tax internal rate of return of 95%. The numbers were based on a gold price of US$1,700 per ounce. 

In a corporate presentation at the end of August, Tietto noted that another Chinese company, Zhaojin Mining, owned a 7.47% stake in the company. Other shareholders included Hongkong Ausino Investment Ltd. (5.11%) and T. Rowe Price & Associates (9.45%).