Long have we been curious when Nevsun might pounce on a deal. Nevsun has maintained for years it wanted to do one, but was in no rush. Meantime - as it mined through the gold-rich cap of its otherwise base-metal rich Bisha deposit in Eritrea, its cash pile mounted, to over C$500 million now.
And Friday Nevsun maintained that stance in a conference call, though with a bit of colour perhaps. Nevsun's President and CEO Cliff Davis said in answer to analyst questions that it was "having some very good conversations" and "if we can get a party to the line" they are "ready to pull the trigger in the near term."
At CEO.ca, Eric Coffin (HRA Advisories) thought Nevsun could mean it this time, opining that Nevsun shareholders were ready - as previously not - for the miner to do a deal.
Near term indeed. As it turns out, that would mean this weekend. News came that Nevsun would, in a friendly deal, take over Reservoir Minerals for its stake in the high-grade Timok copper project in Serbia. Reservoir has been on the clock to exercise its right of first offer (ROFO) on the Timok copper project after Lundin Mining made a bid for Freeport McMoRan's rights and stake in the project. Nevsun's deal - announced Sunday and leaked early on the Nevsun website as noted by CEO.ca user @PamplonaTrader - upsets that transaction.
At stake is one of the (few and) more important discoveries of the past decade. Reservoir and Freeport McMoRan operate in the Bor copper district in Serbia. The discovery - made back in 2012 - caught the market by storm with early intercepts like 160 metres @ 10.16% copper. Since, the partners have outlined sizeable resources that are particularly notable for a high-grade component: 1.7mt at 13.5% copper and 10.4 g/t gold in massive sulphides in indicated resources. That comes within a lower grade deposit, with inferred resources of 35mt at 2.9% copper and 1.7 g/t gold. Assuming Nevsun gets the deal done, this becomes its chief asset in development.
The deal - mostly in stock - will see Nevsun shareholders end up with about 67% of combined company, with 33% for Reservoir shareholders. At two Nevsun shares and $0.001 cash for each Reservoir share, it values Reservoir at US$365 million. Meantime, to cash up Reservoir so it can complete the ROFR, Nevsun ponies up US$135 million: about US$90m through a private placement giving it a 19.99% interest in Reservoir and then also through a US$44.7m loan. The transaction - with the ROFO - covers 100% of the upper, high-grade zone of the Timok project.
So Nevsun charts a course to grow - pinning its future growth and diversification on what looks to be one of the highest-grade copper-gold resources on the market.
More to come (conference call this AM)
