Serbia mining: Lundin, Nevsun over Reservoirs Cukaru peki premium copper gold asset

, Mining


Nevsun’s acquisition of Reservoir Minerals would be a great deal for Nevsun and would create a new, well-financed, mid-size base metals company, the offer undervalues Reservoir, Fund Manager Adrian Day  stated.

Having exercised its right-of-first-offer – albeit with a loan from Nevsun – Reservoir now owns 100% of the upper portion of the deposit and a majority of the porphyry.

Reservoir’s recent preliminary economic assessment values the upper portion of the deposit alone at US$1 billion at today’s depressed copper price. Reservoir is trading post-Nevsun bid at an ex-cash market cap at just half that, with no consideration for the porphyry and other assets.

XGC states it has submitted an alternative offer to Reservoir; the term sheet includes a US$80 million private placement underwritten by XGC and a $50 million loan; this would enable Reservoir to repay Nevsun’s loan as well as provide funds for development of the project.

Such a vote would not, of course, mean XGC’s offer would necessarily be accepted. It is possible that Nevsun would sweeten its offer; after all, acquiring Reservoir would be a great deal for Nevsun, adding a second great mine to its portfolio and improving its political profile. It is possible that Lundin returns with a better offer. It would mean, however, that the original Nevsun offer would be rejected and others would have the opportunity to step forward.

Although Reservoir accepted the Nevsun offer, the latest corporate presentation on its website supports the view that Nevsun’s offer undervalues Reservoir as “The Cukaru Peki Deposit”.

Deposits like this, and companies like Reservoir, come along only once in a while. For second and third-rate deposits owned by second and third-rate companies we would gladly and without hesitation accept a decent offer.

Only if the Nevsun proposal is rejected can the XGC proposal proceed, or another offer, including perhaps a sweetened Nevsun offer, come forth. Scuttlebutt in Toronto suggests the XGC proposal buys time for another offer, transmits