Euro Sun Mining Inc. and Lundin Mining Corp. are increasing the cash component of their roughly $1.5-billion takeover proposal for Nevsun Resources Ltd., but the Vancouver-based base metals miner is still showing little interest in being acquired.
In early May, Euro Sun and Lundin Mining submitted an unsolicited joint proposal worth $5 a share for Nevsun, which represented a 30-per-cent premium.
Lundin offered $2 in cash and $2 in shares, while Euro Sun’s contribution was $1 in stock. Euro Sun is now proposing a 50/50 mix of stock and cash for its portion. Lundin’s portion of the offer remains unchanged.
“Euro Sun’s amended proposal,” Nevsun spokeswoman Heather Taylor wrote in an e-mail to The Globe and Mail, “fails to reflect the strategic value of our asset base.”
The offer also presents “a problematic structure that could further undermine value to our shareholders,” she added.
On May 8, the day after the initial proposal was tabled, Peter Kukielski, chief executive officer of Nevsun, expressed a willingness to do a deal, but said he wanted “cash and Lundin shares, and nothing else.” He made it clear that he had no interest in engaging with Euro Sun, whose market capitalization is a fraction of Nevsun’s. Mr. Kukielski was not available for an interview on Monday.
Sam Crittenden, an analyst with RBC Dominion Securities Inc., wrote in a note on Monday that while the latest bid is “more attractive” for Nevsun shareholders, he also pointed out that Euro Sun’s financing options are challenging.
As of March 31, Toronto-based Euro Sun held $3.6-million in cash and its current market value is $70-million. It would need to raise $150-million to fund its cash component of the deal.
In a statement on Monday, Euro Sun said that shareholders holding more than 30 per cent of Nevsun’s stock support the joint offer for Nevsun.
Shares in Nevsun rose 2.4 per cent on the Toronto Stock Exchange on Monday to close at $4.27 apiece, about 15 per cent below the proposal price, indicating that investors still have doubts that the deal will happen.
While Nevsun has an existing copper and zinc mine in Eritrea, its high-grade, copper-gold project in Serbia called Timok, is its most prized asset. Mr. Crittenden recently named Timok in a report looking at the world’s most desirable undeveloped copper assets.
If the joint Lundin/Euro Sun proposal is successful, Lundin would gain control of Timok, while Euro Sun would own the Eritrean mine
Toronto-based Lundin has tried and failed to acquire Timok on a number of occasions, bidding US$265-million in 2016 to buy it from then owner Freeport McMoRan Inc.
Lundin has also tried to deal directly with Nevsun to buy Timok, without the participation of Euro Sun. But Nevsun has made it clear it will only considering selling the whole company, and not just Timok.