Sandfire Resources has succeeded in its second attempt at taking over MOD Resources with a new and improved offer of AU$167 million.
In January, the major miner tried to buy out MOD with a bid of AU$0.38 per share, or AU$113 million. While Sandfire’s AU$1 billion market cap overshadows MOD’s comparatively modest AU$121.5 million cap, the latter stood its ground on the basis of its T3 copper project in Botswana.
The takeover offer was turned down as MOD believed Sandfire had undervalued the company’s assets.
In an announcement on Tuesday (June 25), the companies stated that they have executed a binding scheme implementation deed. Through the scheme, MOD shareholders can either receive AU$0.45 in cash per share up to a maximum of AU$41.6 million, or 0.0664 Sandfire shares for each MOD share.
The AU$0.45 per share offer represents a 45 percent premium on MOD’s closing share price of AU$0.31 on Monday (June 24), and a 108 percent premium to MOD’s closing share price on January 18, the last business day before MOD publicly turned down the previous offer.
“The MOD board considers the implementation of a scheme with Sandfire to reflect a compelling value proposition for MOD shareholders, who will benefit from Sandfire’s platform to deliver the T3 project into production and realize the full potential of the underexplored Kalahari copper belt,” MOD Managing Director Julian Hanna said in the statement.
“We see this partnership as providing the opportunity to maximize value from T3, which can be funded from Sandfire’s balance sheet and cash flows.”
MOD shareholders will be asked to approve the scheme at a meeting expected to be held in October.
The company completed a feasibility study for its coveted T3 asset in March, laying out an estimated life-of-mine revenue of US$2.3 billion, a pre-tax net present value of US$368 million and an internal rate of return of 33 percent.
The project, set to entail an 11.5 year open-pit mine and a 3 million tonne per year processing plant, will require development capital of US$182 million. With first production targeted for Q1 2021, T3’s ore reserve hosts 34.4 million tonnes of copper with a grade of 1 percent copper and 14.6 million ounces of silver with a grade of 13.2 grams per tonne silver.
As of Monday, copper was trading at US$5,916 per tonne on the London Metal Exchange.
While the fresh deal did wonders for MOD’s share price, which jumped 29.03 percent to AU$0.40 on the ASX on Tuesday, Sandfire took a 11.17 percent hit; it closed at AU$6.28.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.