Nevsun rejects Lundin, bets on higher offer
Bisha open pit mine, Eritrea
Nevsun Resources Ltd. [NSU-TSX; NYSE AMERICAN] said Thursday it has formally rejected a $1.4 billion all-cash takeover bid from Lundin Mining Corp. [LUN-TSX; LUMI-Sweden] worth $4.75 a shares.
The company said the decision was reached after careful consideration and the receipt of the recommendation of a special committee of independent directors. Nevsun also said it rejected the hostile bid after consulting with its financial and legal advisers.
Investors reacted by pushing Nevsun shares up 1.83% or $0.09 to $5.02 in early trading Thursday, a sign that a better offer is expected to emerge.
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 consists of the Cukaru Peki Upper Zone and Lower Zone. Nevsun owns 100% of the Cukaru Peki Upper Zone. The Lower Zone is a joint venture with Freeport McMoran Corp [NYSE: FCX].
An initial reserve for the Upper Zone was released in March, 2018. It is estimated to contain a probable reserve for the Upper Zone is estimated at 27 million tonnes at an average grade of 3.3% copper, and 2.1 g/t gold, containing 0.89 million tonnes of copper and 1.8 million ounces of gold.
The Timok Lower Zone is estimated to host an inferred mineral resource of approximately 1.7 billion tonnes, grading 0.86% copper and 0.18 g/t gold, containing 31.5 billion pounds of copper and 9.6 million ounces of gold at a cut-off grade of 0.38% copper equivalent.
At that level, the Timok Lower Zone ranks among undeveloped world copper porphyry deposits in terms of size and grade and benchmarks well against planned and operating block cave mines.
On Thursday, Nevsun said its board of directors and management have been actively involved in the review of various financing alternatives to support the development of the Upper Zone. It has signed 18-non-disclosure agreements with mining and smelting companies indicating their willingness to purchase up to a 19.9% equity interest in Nevsun, along with various proposals for partnering to develop the Timok project.
“Three of these proposals to acquire a non-controlling interest in Nevsun are at a premium to the price per Nevsun share offered in the hostile bid for full control of Nevsun,” the company said.
“The Nevsun board is evaluating these proposals, and with its advisors will also review all value-maximizing alternatives in the context of Lundin’s undervalued offer, including, but not limited to, an acquisition of all Nevsun shares,” the company said.
It went on to say that discussions are ongoing with several parties that have expressed an interest in value-enhancing alternatives to Lundin’s bid. Nevsun said it fully expects that superior offers or other alternatives will emerge from this process.