Dual-listed Nevsun Resources has rejected the hostile offer by Lundin Mining Corporation to acquire all of the outstanding shares in the company for C$4.75 per share in cash.
This announcement follows a meeting by the board of directors who after careful consideration and receipt of the recommendation of a special committee of its independent directors, and after consultation with its financial and legal advisors, felt the deal undervalued the company.
In the board's view, the hostile bid:
- Fails to recognise the fundamental and strategic value of Nevsun's unique portfolio of producing and development assets, underpinned by the world-class Timok project
- Provides an inadequate premium for control, lower than precedent transactions
- Is lower in value than previous transactions proposed by Lundin to Nevsun
- Is lower in value than other alternatives which are expected to emerge
"The Nevsun board of directors is unanimous in its belief that the Lundin offer substantially and fundamentally undervalues Nevsun and fails to reflect the strategic value of our asset base," says Ian Pearce, chairman of Nevsun's board of directors.
"The Timok project is one of the world's best development stage copper projects, and our Bisha mine continues to generate strong operating cash flow with a mine life that has recently been extended. These assets together represent excellent current and long-term value to our shareholders, and demand a significant premium from anyone who would intend to acquire them.”
“Rather than reflecting this enhanced value, Lundin has offered an inadequate premium that is below precedent transaction values, and indeed below copper transaction values that Lundin itself has previously executed. The inadequate value is underscored by the fact that Nevsun's shares have traded higher than the offer price each day since Lundin launched its hostile bid."
Added Dave Smith, chair of the special committee:
"We have actively and extensively engaged with Lundin over the last several months, including offering access to confidential information and detailed management presentations. Our continual message was that we require full and fair value that reflects the strategic value of all our assets, and the interests of our shareholders.”
“To ensure we have left no stone unturned, the board has commenced a strategic review process to consider all alternatives available to Nevsun to maximise value – above and beyond the proposals already generated by Nevsun's recent strategic investment process – including a potential acquisition of Nevsun as a whole. Discussions are ongoing with several parties that have expressed interest in value-enhancing alternatives to Lundin's hostile bid, and we fully expect that superior offers or other alternatives will emerge from this process."
Since March 2017 the board of directors and management have been actively involved in the review of various financing alternatives to support the development of the Upper Zone of the Timok project, and the company has signed 18 non-disclosure agreements with parties to that end.
This process culminated on 7 August 2018 with four proposals being received from major and mid-tier mining and smelting companies indicating their willingness to purchase up to a 19.9% equity interest in Nevsun along with various proposals for partnering to develop the Timok project.
Three of these proposals to acquire a non-controlling interest in Nevsun are at a premium to the price per Nevsun share offered in the hostile bid for full control of the company.
The board is evaluating these proposals, and with its advisors will also review all value-maximising alternatives in the context of Lundin's undervalued offer, including, but not limited to, an acquisition of all outstanding Nevsun shares.
Lundin's hostile bid is open until 9 November 2018.