Canadian miner Nevsun Resources on Wednesday announced that it had agreed to a C$1.86-billion friendly takeover by China’s Zijin Mining, as it seeks to fend off a hostile takeover by Lundin Mining.
Zijin will pay shareholders C$6 a share in cash, representing a 57% premium over the company’s closing price of C$3.82 a share on May 7 – the day that Lundin Mining first publically announced its intention to acquire Nevsun.
The offer is also higher than the C$4.75 a share bid that Lundin launched on July 26.
Nevsun’s board had rejected the bid from Lundin on the grounds that it ignored the value of company’s assets, particularly the value of the Timok copper/gold project in Serbia. The Lundin bid will expire on November 7.
Nevsun, however, recommended that shareholders accept the Zijin offer and noted that a circular would be mailed to shareholders by no later than September 18.
"This premium transaction is an excellent outcome for our shareholders, and the result of a rigorous and competitive global process to generate maximum value for Nevsun's outstanding assets," Nevsun chairperson Ian Pearce said.
"The all-cash consideration of C$6.00 per share better reflects the fundamental value of Nevsun's mining and development assets, while also providing an appropriate change of control premium to our shareholders."
Zijin chairperson Chen Jinghe said that, as new owner, the group would continue to work with stakeholders in Eritrea and Serbia to advance the mining and development assets.
“At the Bisha mine in Eritrea, our objective will be to further extend the life of the mine and explore for new deposits. At the Timok project we intend to rapidly develop the Upper Zone (UZ) and bring it into production, and continue to advance and define the world-class potential of the Lower Zone (LZ)."
An April 2018 prefeasibility study has confirmed the Timok UZ project as one of the best development-stage copper assets in the world. Based on an assumed copper price of $3.15/lb in 2020, when project construction is expected to start, the Timok UZ has an after-tax net present value, applying an 8% discount rate, of $1.82-billion, and an internal rate of return of 80%.
The mine is expected to produce 1.7-billion pounds of payable copper over a decade of operations, excluding from inferred resources, producing on average 1.89-million pounds of copper a year, at an average C1 cost of $0.92/lb of copper.
Nevsun said in April that it planned to start production in 2023, although the company would like to start production earlier in 2022.
The LZ deposit – a joint venture with Freeport-McMoRan – contains 31.5-billion pounds of copper and 9.6-million ounces of gold. The LZ has porphyry copper inferred mineral resource of 1.7-billion tonnes, grading 0.86% copper and 0.18 g/t gold (0.96% copper equivalent).