Lundin Mining Corp. [LUN-TSX; LUMI-Sweden], on Tuesday July 17, announced plans to launch an all-cash hostile takeover bid for Nevsun Resources Ltd. [NSU-TSX; NYSE AMERICAN], saying it will take the offer directly to the companyâ€™s shareholders.
News of the $4.75 per share offer, worth $1.4 billion, means Lundin is effectively abandoning the complicated joint proposal whereby Lundin was seeking to only acquire Nevsunâ€™s Timok copper-gold project in Serbia, leaving Euro Sun Mining Inc. [ESM-TSX, CPNFF-OTC] with the producing Bisha Mine in Eritrea
Timok accounts for 89% of Nevsunâ€™s asset value, according to a Scotiabank report.
â€œWhile we view the proposed transaction as a positive for Lundin shares, we believe the deal risk remains high due to the likely requirement of a higher bid and a strong potential for a white knight,â€ said Scotiabank in a report.
Nevsun shares jumped 13.5% or $0.57 to $4.78 on the news on volume of 6.8 million shares in early trading Tuesday.
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. Timok is located in the historic Bor mining district and benefits from close proximity to existing mining infrastructure.
The company was previously the target of a high profile proposal that would have seen Euro Sun acquiring 100% of Nevsun. Upon acquisition of the Nevsun shares, Euro Sun would then have vended Nevsunâ€™s European assets, including the Timok project, to Lundin. This would have left the producing Bisha Mine in Eritrea as Euro Sunâ€™s principal asset.
Published reports say the proposal had been structured this way because Lundin Mining covets the Timok copper-gold project but its board of directors wasnâ€™t keen on investing in Eritrea, where the Bisha Mine is located.
However, Nevsun recently rejected the $1.5 billion takeover proposal. It said the unsolicited offer was dated April 30, 2018 and made public by Euro Sun and Lundin on May 7, 2018.
â€œThe Nevsun Board of Directors is unanimous in its belief that the non-binding unsolicited proposal fails to reflect the strategic value of our asset base,â€ said Ian Pearce, Chair of Nevsunâ€™s Board of Directors.
â€œThe non-binding unsolicited proposal also presents a problematic structure that could further undermine value to shareholders,â€ he has said.
Still, a senior official at Nevsunâ€™s second largest shareholder, M&G Investment Management, recently said the $1.5 billion takeover proposal from Lundin and Euro Sun looked â€œpretty fair.â€
â€œNevsun should engage more fully with Lundin Mining and Euro Sun Mining, which made the proposal and run a full sales process,â€ said Jamie Horvat, director of global equities for M&G Investment Management, which owns 9.5% of Nevsun.