Lundin makes another offer to acquire NevsunNevsun Resources says Lundin’s latest acquisition offer undervalues its assets
Nevsun Resources says Lundin’s latest acquisition offer undervalues its assets
By Kelsey Rolfe
July 17, 2018
The north pit at Nevsun's Bisha mine in Eritrea. Nevsun said Lundin Mining's newest acquisition offer was not representative of the company's worth. Courtesy of Nevsun Resources
Lundin Mining’s announcement that it would make an all-cash offer to acquire Nevsun Resources for $1.4 billion was met with a prickly response on Tuesday morning.
Nevsun advised its shareholders not to take any action in response to Lundin’s Monday announcement, and CEO Peter Kukielski said the offer was not representative of the company’s worth.
“This latest announcement from Lundin continues to ignore the fundamental value of Nevsun and its assets,” Kukielski said in a press release.
Lundin first expressed interest in acquiring Nevsun’s Timok copper-gold project in Serbia in February. In May, it partnered with Euro Sun Mining Inc. to make a formal offer to acquire the company for $1.5 billion, or $5.00 per share. The offer would have given Nevsun’s European assets, including Timok, to Lundin, and its Bisha copper-zinc mine in Eritrea to Euro Sun.
Nevsun rejected the proposal, saying it did not reflect “the strategic value of our asset base.”
Lundin’s new offer is worth $4.75 per share, which the company said was an 82 per cent premium on Nevsun’s closing price on Feb. 6, when Lundin first reached out to the company.
“After having made a series of proposals and observing the recent changes in the political landscape related to Eritrea, we have determined that the best course is now to make an all cash offer directly to Nevsun shareholders,” said Lundin CEO Paul Conibear in a statement. “Our offer will represent the clearest path for Lundin Mining to acquire the Timok project and for Nevsun shareholders to realize on the value of their investment without dilution and financing risk.”
Kukielski said that Lundin’s offer did not recognize the work that Nevsun has put into both its projects since February, including releasing a pre-feasibility study for the Timok Upper Zone that reported an after-tax net asset value of US$1.82 billion, beginning construction on the Serbian project, and extending Bisha’s mine life to 2022.
“The work we have been doing has also been noticed by several strategic parties that have expressed an interest in participating in the development of Timok,” Kukielski said.
Nevsun said that if it receives a formal offer from Lundin, it will consider it before making a recommendation to shareholders.
Timok has a Probable Mineral Reserve of 27.1 million tonnes grading at 3.3 per cent copper and 2.1 grams/tonne gold, and an expected mine life of 10 years. Nevsun said it expects to begin commercial production in 2022.
According to a May report from Reuters, Lundin’s board of directors does not want to invest in Eritrea because of its poor human rights record, and initially brought in Euro Sun so it would not have to own Bisha. The company’s Monday announcement did not address what it would do with the Eritrean mine.
A human rights case, currently being heard in a British Columbia court, was brought against Nevsun by three Eritrean refugees who alleged that government-owned construction firms used them as slaves during the construction of the Bisha mine. The lawsuit alleges the refugees were conscripted into the military under Eritrea’s national service program and deployed at the mine.