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Nevsun Resources Ltd. has firmly rejected a $1.5-billion takeover proposal from Lundin Mining Corp. and Euro Sun Mining Inc., but is leaving the door open to a deal if Lundin ditches its junior partner.

“We’ve always been very clear with Lundin,” Peter Kukielski, chief executive officer of Nevsun, said in an interview. “We want cash and Lundin shares. And nothing else.”

Mr. Kukielski said the unsolicited offer worth $5 a share, which was made public on Monday evening, “substantially undervalues” the Vancouver-based base-metals company, particularly its high-grade Timok copper-gold project in Serbia.

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The proposal, made up of $2 in cash, $2 in Lundin shares and $1 in shares of Euro Sun, represents a 31-per-cent premium to Nevsun’s closing price on the Toronto Stock Exchange on Monday.

One of Mr. Kukielski’s chief concerns with the proposal is the participation of junior exploration and development company Euro Sun, whose market capitalization is $79-million, which is roughly one fourteenth the size of Nevsun. To finance the deal, Euro Sun would need to raise a huge amount of equity, Mr. Kukielski said. That would likely depress its share price, ultimately making the offer less valuable.

Euro Sun’s involvement would also result in a $100-million tax bill that would be largely incurred by existing Nevsun shareholders, he said. Furthermore, any deal would necessitate a shareholder vote from Euro Sun shareholders, injecting another layer of uncertainty.

“It’s up to Lundin to make an offer for the whole company that delivers value,” he said.

On Tuesday, shares in Nevsun rose 16.8 per cent to close at $4.46 a share, roughly midway between its previous close and the offer price, suggesting investors are not convinced this offer will be successful.

Nevsun has two main assets – the Bisha copper and zinc mine in Eritrea and Timok. Under the proposal, Euro Sun would gain control of the Eritrean mine, while Lundin would own and develop Timok.

After the release of a recent prefeasibility study on Timok, other potential buyers have also approached Nevsun, said Mr. Kukielski, expressing interest in either buying the Serbian project, or the entire company.

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In a report released on Monday looking at some of the world’s most desirable copper assets, RBC Dominion Securities Inc. analyst Sam Crittenden noted that while the Timok project is not huge, it is potentially a high-return asset.

Lundin first approached Nevsun a year ago. This April, it submitted a proposal to buy its European assets, including Timok, but was rebuffed. Lundin also tried and failed to buy the play when it was under different ownership a number of years ago.

In 2016, Lundin bid US$265-million to buy Timok from Freeport McMoRan Inc. Nevsun later trumped Lundin by buying Reservoir Minerals Inc. for US$365-million, which had a right of first offer to purchase the asset from Freeport.

Shares in Lundin fell 2.9 per cent on the Toronto Stock Exchange on Tuesday.

After a quiet spell, the pace of mergers and acquisitions activity has picked up in the Canadian mining sector.

A few weeks ago, London-listed Chaarat Gold Holdings Ltd. offered US$800-million to buy Centerra Gold Inc .’s flagship mine in the Kyrgyz Republic. The Toronto-based miner said it has no interest in selling.

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In March, shares in Canadian junior gold producer Klondex Mines Ltd. surged after U.S.-based Hecla Mining Co. announced a US$462-million takeover offer.

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