Mining M&A Warming Up With Reservoir And Sunridge Deals
As mentioned in the last note, Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) is a strong company, and undervalued stock. Were its flagship Bisha mine not in Eritrea, the stock would be valued considerably higher. (When I mentioned that Nevsun was trading near four-year highs, I was looking at the Canadian chart. Looking at the New York stock in U.S. dollars, this is not the case.)
Operationally, it is a very strong company, having built Bisha, unusually, on schedule and under budget. So merging with Reservoir Minerals Inc. (RMC:TSX.V) and its exciting Timok property, by reducing political risk and diversifying the resource base, could see Nevsun's stock rerate. In any event, the combination will produce a solid midtier resource company. Ending up with some Nevsun shares is not a bad outcome.
Another offer?
However, as mentioned, I don't believe that Nevsun is exactly overpaying, and after the normal drop in the acquirer's share price that occurs in such deals, the premium is a more modest 24%.
I believe there is a chance of another bid, after Reservoir, with Nevsun's cash, has exercised its right-of-first-offer to match Lundin Mining Corp.'s (LUN:TO) bid for part of Freeport-McMoRan Copper & Gold Inc.'s (FCX:NYSE) interest in the project. We are holding for now, again watching the market and any developments; the downside risk is modest so the risk.
As mentioned in the last note, Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) is a strong company, and undervalued stock. Were its flagship Bisha mine not in Eritrea, the stock would be valued considerably higher. (When I mentioned that Nevsun was trading near four-year highs, I was looking at the Canadian chart. Looking at the New York stock in U.S. dollars, this is not the case.)
Operationally, it is a very strong company, having built Bisha, unusually, on schedule and under budget. So merging with Reservoir Minerals Inc. (RMC:TSX.V) and its exciting Timok property, by reducing political risk and diversifying the resource base, could see Nevsun's stock rerate. In any event, the combination will produce a solid midtier resource company. Ending up with some Nevsun shares is not a bad outcome.
Sunridge sale closes
Coincidentally, at the same time one Eritrea-active company is buying Reservoir, another one is selling its assets. After a delay from the deadline announced earlier this month, Sunridge Gold Corp. (SGC:TSX.V; SGCNF:OTCQX)0.34-0.345) has completed the sale of the company's assets to the Sichuan Road and Bridge Corp., and received payments totaling US$68.6 million.
The company's board will meet at the end of the week to determine a record date and, after settling outstanding liabilities, the proceeds will be distributed to shareholders and the stock delisted. A second installment of US$7.33 million will be paid within six months, and those proceeds then distributed.
The company earlier stated that it expects the net proceeds to be "not less than" CA$0.35 per share. My estimate was a cent or two above that, though the strength in the Canadian dollar against the U.S. dollar reduces the Canadian distribution. We are holding for the distribution.
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