Euro Sun Mining Inc. [ESM-TSX; CPNFF-OTC] has amended its portion of the $1.5 billion joint proposal with Lundin Mining Corp. [LUN-TSX; LUMI-Sweden] for the acquisition of Nevsun Resources Ltd. [NSU-TSX; NYSE AMERICAN] to 50% cash and 50% stock.
The proposed offer now comprises $5 per share for Nevsun’s entire stock and includes $150 million in cash from Euro Sun and $600 million in cash from Lundin along with $150 million worth of Euro Sun shares and $600 million in Lundin shares.
On Tuesday, Nevsun shares rose 0.70% or $0.03 to $4.30 on volume of 189,183. The 52-week range is $2.49 and $4.93.
Nevsun is a leading mid-tier base metals company. It operates Bisha, a high grade open pit copper-zinc mine in Eritrea and is developing the Timok copper-gold project in Serbia. Timok is located in the historic Bor mining district and benefits from close proximity to existing mining infrastructure.
Euro Sun is amending its portion of a non-binding unsolicited proposal, worth $5 a share that was dated April 30, 2018 and made public by Euro Sun and Lundin on May 7, 2018.
Since making the proposal public on May 7, 2018, numerous meetings have been held with shareholders of Nevsun, both in person and via teleconference, Euro Sun said. To date, shareholders representing over 30% of Nevsun shares outstanding have expressed support for the Euro Sun led offer and encourage all parties to actively engage in a friendly transaction.
Nevsun’s second largest shareholder, for example, recently said the $1.5 billion takeover proposal from Lundin and Euro Sun looks “pretty fair.”
“Nevsun should engage more fully with Lundin Mining and Euro Sun Mining, which made the proposal and run a full sales process,” said Jamie Horvat, director of global equities for M&G Investment Management, which owns 9.5% of Nevsun. He was speaking during an interview with Reuters News service on May 9, 2017.
Euro Sun is focused on the exploration and development of its 100%-owned Rovina Valley gold and copper project, located in west-central Romania, which hosts the second largest gold deposit in Europe.
Lundin is a diversified Canadian base metal mining company with operations in Chile, the United States, Portugal, and Sweden, primarily producing copper, nickel and zinc. In addition, Lundin holds an indirect 24% equity stake in Freeport Cobalt Oy business, which includes a cobalt refinery in Kokkola, Finland.
“We are ready and willing to engage with Nevsun in friendly and meaningful discussions to conclude a transaction in the best interests of all stakeholders,” said Euro Sun President and CEO Scott Moore.
“We have extensive operational experience across Africa and look forward to meaningful investment into Eritrea and the Bisha Mine allowing it to meet its full potential,” he said.
Under the terms of the initial offer, Euro Sun would acquire 100% of Nevsun. Lundin would not have acquired Nevsun. Consideration would be $2 per Nevsun share in cash, plus shares of Euro Sun representing $3 per Nevsun shares.
Upon acquisition of the Nevsun shares, Euro Sun was planning to vend Nevsun’s European assets, including the Timok project, to Lundin. This would leave the producing Bisha mine in Eritrea as Euro Sun’s principal asset.
The transaction would require Euro Sun shareholder approval. The transfer from Euro Sun to Lundin is subject to a 60-day right of first refusal held by Freeport.
The Nevsun Board of Directors said it is unanimous in its belief that the non-binding unsolicited proposal fails to reflect the strategic value of our asset base,” according to a statement by Ian Pearce, Chair of Nevsun’s Board of Directors.
“The non-binding unsolicited proposal also presents a problematic structure that could further undermine value to shareholders,” he said.
Nevsun has previously said the non-binding unsolicited proposal has the following serious deficiencies:
- Does not fully value Timok, the world-class copper-gold project.
- Has significant structural issues, including $100 million in estimated cash tax costs payable by Euro Sun, which is expected to be largely borne by existing Nevsun shareholders.
- Overvalues Euro Sun’s Rovina Project, which is unpermitted, capital intensive ultra-low-grade asset in Romania that Nevsun had previously evaluated and determined to be highly unattractive.
- 60% of the notional consideration offered comes from shares that have historically been volatile and do not provide certainty of value.
- Is fundamentally uncertain as it is contingent on completion of Euro Sun shareholder approvals, waiver or expiry of right of first refusal by Freeport-McMoran Exploration Co., and due diligence.