Nevsun shareholder Adrian Day presses for takeover talks

Nevsun's Bisha copper-zinc mine in Eritrea, Africa. Source Nevsun Resources Ltd.

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By Peter Kennedy

Nevsun’s Bisha copper-zinc mine in Eritrea, Africa. Source Nevsun Resources Ltd.

Nevsun Resources Ltd. [NSU-TSX, NYSE AMERICAN] is facing growing pressure to enter into negotiations with its would-be suitors Euro Sun Mining Inc. [ESM-TSX, CPNFF-OTC] and Lundin Mining Corp. [LUN-TSX; LUMI-Sweden].

Having been approached in connection with a takeover, “Nevsun should now enter good faith negotiations with any suitor,” said Adrian Day Asset Management.

Adrian Day Asset Management is one of Nevsun’s top 10 shareholders, with 3.1 million shares.

The Annapolis, MD,-based firm issued the call in an open letter to the company’s board on Wednesday, June 6, 2018.

“We would urge the company to use all efforts to maximize value for shareholders…..even if it does mean breaking up the company,” the asset management firm’s Chairman Adrian Day said in a letter that was obtained by Reuters News service.

Day is reacting to news that Nevsun recently rejected a $1.5 billion takeover proposal from Lundin Mining and Euro Sun. Nevsun said the unsolicited offer was dated April 30, 2018 and made public by Euro Sun and Lundin on May 7, 2018.

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.

Under the terms of the offer, Euro Sun would acquire 100% of Nevsun. Upon acquisition of the Nevsun shares, Euro Sun would then 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.

Published reports say the proposal has been structured this way because Lundin Mining covets the Timok copper-gold project but its board of directors isn’t keen on investing in Eritrea, where the Bisha Mine is located.

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-McMoran Exploration Co.

“The 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,” said 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.

However, not everyone appears to agree with that view.

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.

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.

Earlier this week, Euro Sun said it had amended its portion of the $1.5 billion ($5 a share) joint proposal with Lundin. It now includes have cash and half stock, compared to all-stock previously.

Euro Sun’s flagship assets is the Rovina Valley project in west-central Romania, located approximately 300 km northwest of the capital city of Bucharest. According to Euro Sun’s website, the Rovina project hosts a measured and indicated resource of 10.84 million ounces of gold equivalent ounces.

Nevsun has complained that the proposed offer overvalues the Rovina Project, which it said is an unpermitted, capital intensive ultra-low-grade asset in Romania that Nevsun had previously evaluated and determined to be highly unattractive.

On Thursday June 7, Nevsun shares eased 0.69% or $0.03 to $4.34, leaving the company with a market cap of $1.31 billion, based on 302.3 million shares outstanding.  The 52-week range is $4.93 and $2.49.

On June 5, 2018, Nevsun said it held a ground-breaking ceremony to mark the start of construction of an exploration decline at the Timok Project. “We look forward to unlocking significantly more value for our shareholders and stakeholders as we advance toward construction of the Timok Upper Zone, a much-anticipated initial resource for the Lower Zone, and ongoing regional exploration on our highly prospective land package,” said Nevsun CEO Peter Kukielski.

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