Comments: Ampella just released two announcements related to their budget for drilling/exploration and their intention to open the company for possible takeover bids (For more info, click here for drilling targets and here for the takeover). The unreasonable and ridiculous sell-down of AMX share price could have led the management to announce these statements, which could give a more realistic picture to the public about the value this company holds. What to do. When investors in general don't know how to appreciate the value of this company and drive it down to ridiculously low levels, then just let the takeover bids do the talking. Every now and then, I saw some sellers purposely drove down the share price, even when the price was trending upwards. Could it be that some brokers purposely drive down the share price so much until a takeover bid is imminent? I don't know. But it's good that the company is taking steps to address and stem the slide in share price. Do note that major shareholders and directors had been holding the shares tightly even when the price was sliding from above $3 to current $1 level. This says very much about the confidence that they have in AMX. Since these announcements, the share price had risen 15%, but for me, this is only the beginning. There will be exciting times ahead for AMX.
For previous posting, click here.
By David Winning
West Africa-focused gold explorer Ampella Mining certainly looks a reluctant seller after firing the gun on a sales process in the wake of several new bid approaches.
The Perth-based miner has mandated Macquarie Capital and Gresham Advisory Partners to run a formal process after receiving interest from “several global players in the gold sector” on top of separate requests for due diligence made late last year.
The bids look opportunistic: Ampella’s shares have fallen from above A$3.30 at the end of 2010 to A$1.05 now, giving it a market value of 250 million Australian dollars (US$260 million). In contrast, the stock of ASX-listed peers that also have gold assets in Burkina Faso, such as Gryphon Minerals, aren’t down as much.
Ampella Chairman Peter Mansell pointedly stressed Monday that with around A$55 million dollars in cash on its balance sheet it would have to be a knockout offer to secure a board recommendation.
Its cash pile means the company can fund all its exploration and development work at the Batie West project in Burkina Faso for the next 12-18 months. In short, no firesale.
“With our strong balance sheet, Ampella is now very well placed to continue down its current path and in the absence of a compelling alternative that is what we intend to do,” Mr. Mansell said in a statement.
“Having said that, we have had approaches from serious global players in the gold sector and we concluded that we had a duty to all shareholders to properly test whether any one of those parties is prepared to make an offer to acquire Ampella on terms that would be attractive to our shareholders.”
After strengthening balance sheets when gold prices surged to a record high above US$1,900 a troy ounce last year, mining companies are now setting out on the acquisition trail.
ASX-listed Norton Gold Fields, which owns the Paddington gold mine in Western Australia state, halted trading in its shares at the end of last week after receiving an unsolicited buyout approach.
Earlier this year, a person familiar with the matter told Deal Journal Australia said Newmont Mining has received several expressions of interest in its 51% interest in the undeveloped McPhillamys deposit in Australia’s New South Wales state, which contains an estimated 3 million troy ounces of gold.
Ampella said its sales process is likely to take 2-3 months, and it wouldn’t be updating the market on the status of discussions with interested parties until it had made a final decision.