The Hunt is On: Lundin Launches Hostile Takeover Bid for Nevsun

In the early hours of Thursday (July 26) morning, Lundin Mining (TSX:LUN) made good on its promise to have another run at Nevsun Resources (TSX:NSU), announcing it was formally commencing the offer to acquire all of the fellow Canadian miner’s shares.

Under the terms of the offer, originally revealed on July 17, Lundin is putting a C$1.4-billion price-tag on Nevsun and its historically lucrative Eritrean mine and advanced development stage project in Serbia, offering shareholders C$4.75 in cash per share.

The Canadian miner said in its release that the offer represented a significant premium on Nevsun’s share price before any public disclosure of a takeover bid earlier this year—pegging the premium at 82 percent above Nevsun’s value in February and 42 percent above the company’s April closing value.

For the C$1.4 billion, Lundin is hoping to get its claws into the Timok project in Serbia, with its projected ten-year mine life and 27 million tonnes of ore grading 3.3 percent copper. It would also acquire the Bisha mine in Eritrea, which produced 71.6 million pounds of zinc and 8.9 million pounds of copper in Q1 2018.

Lundin has decided it’s had enough of the Nevsun’s leaderships hard-to-get strategy, noting in a message to Nevsun shareholders that “good-faith negotiations” had gotten them nowhere, painting the situation as black and white.

“You [shareholders] can take advantage of an opportunity to realize a significant premium, immediate liquidity, and certainty of value for your investment in Nevsun.

“Or, you can opt for the status quo, continued uncertainty amid an unpredictable commodities market, the very real likelihood of significant shareholder dilution in the near future, and the financing and execution risks of developing the Timok project under Nevsun, who run only one mine of a very different nature to Timok.”

But Nevsun was quick to respond, putting out a release later in the day advising shareholders to do nothing “until the board of directors has made a formal recommendation to shareholders,” adding that the offer will remain open for 105 days.

Nevsun was measured in its response to the hostile bid, repeating the same points it made after the mid-July announcement that Lundin was failing to recognize recent improvements at its Bisha mine in Eritrea and progress at the Timok project in Serbia.

“These achievements have set the stage for further value enhancement, and attracted the attention of several strategic parties that have expressed an interest in participating in the company’s continued development,” said Nevsun.

The company did not specify any additional interest, or address the lower offer from Lundin, but CEO Peter Kukielski had noted in Vancouver last week that the “number is going in the wrong direction.”

According to Nevsun, with the formal offer now made, a special committee will consider the company’s options before making a recommendation to the board. A recommendation to shareholders will follow within 15 days.

Nevsun had said it would release its Q2 report today (July 26), something Lundin clearly didn’t want to bother waiting for.

As of 1:00 p.m. EST, Lundin Mining was trading down 0.69 percent at C$7.24, while Nevsun was trading up 0.63 percent at C$4.79.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.