Lundin Goes Solo: Makes New Move on Nevsun

Lundin Mining (TSX:LUN) has announced it plans to make another offer for Nevsun Resources (TSX:NSU). The C$4.75-per-share offer values Nevsun at C$1.4 billion.

The new offer, made on Monday (July 16), comes after a previous offer involving both Lundin and Euro Sun Mining (TSX:ESM) fell through.

The new offer is below the original, which valued Nevsun at C$1.5 billion. This time Lundin is going it alone, forgoing involvement with Euro Sun, which Nevsun had derided by calling the company an unattractive partner.

In its release, Lundin says it “intends to make a formal offer to acquire all of the issued and outstanding common shares of Nevsun,” but notes that no formal offer has yet been made.

Nevsun’s response on Tuesday (July 17) was again to pour cold water on any speculation or excitement over the offer, with the company advising shareholders to take no action.

Speaking at the Sprott Natural Resource Symposium in Vancouver, Nevsun CEO Peter Kukielski reflected on the attention. “It’s becoming very clear to me that when you’re a great little company like Nevsun is, everyone wants to own you.”

But in his company’s release it was all business. “This latest announcement from Lundin continues to ignore the fundamental value of Nevsun and its assets,” he said.

“Despite the progress we have made in enhancing Nevsun’s value, Lundin’s notional takeover offer represents only a 13 percent premium to Nevsun’s closing trading price of C$4.21 per share on the TSX on July 16, 2018, and only a 9.1 percent premium to the volume weighted average trading price of Nevsun’s shares over the 30 days ended July 16, 2018,” he added.

In Vancouver, Kukielski emphasized that Nevsun has substantially added value to its two assets in Serbia and Eritrea in the time since Lundin’s previous joint offer in May, making Nevsun far more attractive to buyers beyond Lundin.

The fall of the offer price from C$5 to C$4.75 was certainly not lost on Kukielski. “Lundin’s number is going in the wrong direction,” he quipped.

Lundin has a different take on premiums though, harking back to prices before and after the original discussions between the companies in early 2018.

“The Offer Price represents a significant premium of 82 percent to the closing price of C$2.61 on February 6, 2018, the date of the first offer to Nevsun related to our interest in acquiring Timok,” Lundin says in its release.

“This is a 33 percent premium to the closing price of C$3.58 per Share on the TSX as of April 30, 2018, the date of Lundin Mining’s previously announced prior proposal to Nevsun,” it also states.

Paul Conibear, CEO of Lundin, commented, “following our attempts to constructively engage Nevsun since early February 2018, after having made a series of proposals and observing significant recent changes in the political landscape related to Eritrea, we have determined that the best course now is to make an all cash offer directly to Nevsun shareholders.

He added, “[o]ur 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.”

Conibear even seemed to go so far as to allude that Lundin’s first offer was behind Nevsun’s increase in value since. “We believe that the proposed Nevsun acquisition consideration is full and fair value and represents a significant premium to Nevsun’s unaffected share price prior to the announcement of our first proposal,” he explained.

Lundin said that it intends to make a formal offer “on or about July 27.”

Kukielski and Nevsun said that if such an offer eventuates, shareholders will have 105 days to respond. They added that “Nevsun reminds shareholders that Lundin has previously made highly conditional confidential non-binding offers to Nevsun but has never presented a binding offer to Nevsun or its shareholders.”

Nevsun was trading at C$4.79 on the TSX at the time of writing (11:30 a.m. PST), up 13.78 percent on its previous close. Lundin was up by 1.07 percent at C$7.56.

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