Nevsun, Reservoir shareholders approve sweetened offer

TORONTO (miningweekly.com) – The TSX-listed stock of base metals producer Nevsun Resources fell nearly 10% on Friday after the company announced a sweetened bid for Reservoir Metals that would give it control of a portfolio of development projects in Africa and Europe, including the flagship Timok copper/gold project, in Serbia.

Reservoir on Friday said more than two-thirds of its shareholders had approved the takeover after Nevsun increased the original $365-million cash-and-scrip offer by $75-million in cash.

Nevsun, which operates the Bisha copper/zinc mine, in Eritrea, on April 24 announced the friendly merger to create a new midtier base metals company. Nevsun had also agreed to provide Reservoir with $135-million in funding to help it buy out its partner from the upper portion of Timok. Reservoir exercised its right of first offer with Freeport-McMoRan Exploration to acquire Freeport's 55% interest in the Timok project upper zone of the Cukaru Peki copper/gold deposit, and increased its interest in the lower zone.

However, the deal sparked activism from two Reservoir shareholders who argued that the consideration for Reservoir was not enough. China-based firms Shandong Xiangguang Group and Jing Bao were in April involved as part of a syndicate with an alternative financing proposal for Reservoir, which Reservoir’s board rejected in favour of the arrangement with Nevsun.

Shandong Xiangguang Group, through its affiliate Mega Profit Worldwide, and Jing Bao together owned about 14% of Reservoir’s stock. Shandong Xiangguang Group as recently as Wednesday acquired a further 3.5% stake in Reservoir.

Meanwhile, Nevsun shareholders approved the merger on Friday, with 98.95% of the votes cast in favour of the arrangement.

Nevsun’s TSX-listed stock on Friday fell to C$3.84 apiece, while the TSX-V-listed stock of Reservoir jumped 21% to C$10.05 each.