VANCOUVER, May 8, 2018 /PRNewswire/ - Nevsun Resources Ltd.
(TSX:NSU) (NYSE MKT: NSU) ("Nevsun" or the "Company") today
announced that its Board of Directors has unanimously rejected a
non-binding unsolicited proposal (the "Non-Binding Unsolicited
Proposal") led by Euro Sun Mining Inc. ("Euro Sun") and also
including Lundin Mining Corporation ("Lundin"). The Non-Binding
Unsolicited Proposal was dated April 30,
2018 and made public by Euro Sun and Lundin on May 7, 2018.
Nevsun shareholders do not need to take any actions in respect
of the Non-Binding Unsolicited Proposal. The Non-Binding
Unsolicited Proposal is not an offer capable of being accepted by
the Company's shareholders nor does it disclose whether such an
offer is intended to be made. It is merely a non-binding
proposal by Euro Sun. If and when a formal proposal is
actually made by Euro Sun, Nevsun shareholders will have 105 days
to respond.
The Board's determination to reject this proposal was made after
careful consideration and receipt of the recommendation of a
special committee of its independent directors (the "Special
Committee"), and after consultation with financial and legal
advisors. The rejection follows an extensive engagement with Euro
Sun's bidding partner Lundin over a period of months with regard to
a possible transaction.
"The Nevsun Board of Directors is unanimous in its belief that
the Non-Binding Unsolicited Proposal fails to reflect the strategic
value of our asset base," said Ian
Pearce, Chair of Nevsun's Board of Directors. "The
Non-Binding Unsolicited Proposal also presents a problematic
structure that could further undermine value to our
shareholders."
The Non-Binding Unsolicited Proposal has serious
deficiencies:
- Does not fully value Timok, our world-class copper-gold
project;
- Has significant structural issues including C$100 million in estimated cash tax costs payable
by Euro Sun, which is expected to be largely borne by existing
Nevsun shareholders;
- Overvalues Euro Sun's Rovina project, which is an unpermitted,
capital intensive ultra-low-grade asset in Romania that Nevsun had previously evaluated
and determined to be highly unattractive;
- 60% of the notional consideration offered comes from shares
that have historically been volatile and do not provide certainty
of value; and
- Is fundamentally uncertain, as it is contingent on completion
of Euro Sun shareholder approvals, waiver or expiry of a right of
first refusal held by Freeport-McMoRan Exploration Company
("Freeport"), and due diligence.
Details of the Non-Binding Unsolicited Proposal
Under the Non-Binding Unsolicited Proposal, Euro Sun would
acquire 100% of the shares of Nevsun. Lundin would not be
acquiring Nevsun. Consideration would be C$2.00 per Nevsun share in cash, plus shares of
Euro Sun and Lundin representing C$3.00 per Nevsun share. The value of the Euro
Sun and Lundin shares would be based on the volume-weighted average
trading price of Euro Sun shares and Lundin shares, respectively,
on the Toronto Stock Exchange for the 30 trading days ending on the
last trading day prior to signing a definitive agreement.
Upon acquisition of the Nevsun shares, Euro Sun would then vend
Nevsun's European assets – including the Timok project – to Lundin.
This would leave the producing Bisha mine in Eritrea as Euro Sun's principal asset.
The transaction would require Euro Sun shareholder approval. The
transfer from Euro Sun to Lundin is subject to a 60-day right of
first refusal held by Freeport.
Reasons for Rejecting the Non-Binding Unsolicited
Proposal
The Board believes that shareholders should be aware of the
following:
- Inadequate value: The Non-Binding Unsolicited Proposal
does not attribute sufficient value to the world-class nature of
Nevsun's Timok asset. Nevsun's Timok copper-gold project consists
of an Upper Zone owned 100% by Nevsun and a Lower Zone, which is
owned through a joint venture with Freeport. Lundin has indicated that it values
Timok at C$4.00 per share. Nevsun
does not agree with that valuation. With an after-tax NAV of
US$1.82 billion, IRR of 80% and
initial probable mineral reserve of 27 million tonnes, Timok Upper
Zone is widely considered to be one of the highest quality copper
projects in the world and deserves a premium valuation reflecting
its value and potential. The Timok Lower Zone represents
substantial value. Nevsun expects to release an initial resource
statement for Timok Lower Zone this quarter.
- Problematic structure: The Non-Binding Unsolicited
Proposal would dilute Nevsun's shareholders' exposure to Timok
leaving them Bisha's assets and liabilities by virtue of their
shareholdings of Euro Sun which are currently estimated at 77
percent of pro forma Euro Sun shares outstanding. The new Euro Sun,
a Bisha-focused stand-alone entity, would face fundamental
viability challenges, including:
- substantial value leakage due to transaction costs, including,
based on preliminary tax advice, C$100
million of taxes payable. These costs would typically
be borne by the acquirer, but under the Non-Binding Unsolicited
Proposal are borne by Euro Sun – which is effectively Nevsun
shareholders;
- a misaligned shareholder base, as many investors own Nevsun for
exposure to Timok; and
- challenges raising capital to fund the ultra-low grade Rovina
project.
- Euro Sun is not an attractive partner: Euro Sun is a
junior, non-operating company with a market capitalization less
than one-tenth of Nevsun's market capitalization. Euro Sun has
faced difficulty raising financing. Its most significant
shareholder is junior mining promoter Forbes & Manhattan.
The Bisha mine is 40% owned by the local government, which has no
relationship with Euro Sun. A negative reaction by the
government would compromise Bisha. As such, the Non-Binding
Unsolicited Proposal is potentially destructive of significant
shareholder value and the existing relationships with our partner
associated with Bisha.
- Euro Sun's Rovina project is marginal: Nevsun previously
conducted due diligence on Euro Sun's only meaningful asset, the
ultra-low grade, unpermitted Rovina development project in
Romania. Nevsun found the Rovina
asset to be unattractive. The capital requirements of the Rovina
project, estimated to be US$509
million in Euro Sun's 2010 preliminary economic assessment
would divert to Rovina Nevsun's cash on hand and cash generated
from Nevsun's operations instead of being deployed to generate
higher shareholder value in Bisha or Timok. Romania is historically a challenging
jurisdiction for permitting mining projects.
- Diminishing premium: The notional consideration that has
been offered consists of three parts: C$2.00 in cash, C$2.00 in Lundin shares and C$1.00 in Euro Sun shares. The notional premium
of 40% as of April 30, 2018, the date
of the Non-Binding Unsolicited Proposal, declined to a much lower
notional premium of approximately 30% just before the Non-Binding
Unsolicited Proposal was made public by Euro Sun and Lundin. The
true premium is even lower, however, as the notional premium does
not reflect value leakage from tax and other transaction costs.
- Value uncertainty: 60% of the value of the notional
consideration is proposed to be in the form of Euro Sun and Lundin
shares, which have historically been volatile and do not provide
certainty of value. As such, Nevsun does not believe it is a fair
characterization to describe this offer as being valued at
C$5.00 per Nevsun share.
- Deal uncertainty. The Non-Binding Unsolicited Proposal
is subject to, among other things, a Euro Sun shareholder vote,
waiver or expiry of Freeport's
60-day right of first refusal and completion of due diligence.
Because no voting support agreements from Euro Sun's substantial
shareholders were offered, the Non-Binding Unsolicited Proposal
effectively gives Euro Sun a free, non-binding option on
Nevsun.
- Diligence: A notional 20% of the offered consideration
is composed of shares in Euro Sun and a notional 40% of the offered
consideration is composed of shares in Lundin. However, Nevsun has
not been given an opportunity to conduct customary due diligence on
either of those companies or their liabilities.
In summary, Nevsun's Board of Directors believes that the
Non-Binding Unsolicited Proposal is not in the best interest of
Nevsun or its stakeholders. Consistent with its fiduciary
duties, the Board of Directors remains open to any transaction that
is in the best interest of the Company.
Previous Engagement with Lundin
Lundin initially approached Nevsun in May
2017 to discuss a potential acquisition of Nevsun.
Since then, Nevsun has engaged in good faith with Lundin to explore
various transaction structures that may benefit the Company and
create shareholder value.
In March 2018, Nevsun agreed to a
month-long exclusivity period with Lundin. Following such
exclusivity period, Lundin made a proposal to acquire only Timok
and other exploration assets in Europe. Nevsun rejected the
offer as inadequate for a number of reasons, including inadequate
value and the structural difficulties associated with their
offer.
Advisors
Counsel for Nevsun's Special Committee is Borden Ladner Gervais
LLP. The Special Committee's independent financial advisor is Citi.
Counsel for the Company is Blake, Cassels & Graydon LLP. The
Company's financial advisor is BMO Capital Markets.
Forward Looking Statements
The above contains certain statements that are deemed
forward-looking statements or forward-looking information within
the meaning of the United States Private Securities Litigation
Reform Act of 1995, and applicable Canadian securities laws.
Forward-looking statements are frequently, but not always,
identified by words such as "expects", "anticipates", "believes",
"hopes", "intends", "estimated", "potential", "possible" and
similar expressions, or statements that events, conditions or
results "will", "may", "could" or "should" occur or be achieved.
Forward-looking statements are statements concerning the Company's
current beliefs, plans and expectations about the future, including
but not limited to statements and information made concerning: the
value of the consideration in the Non-Binding Unsolicited Proposal;
the tax and transaction costs of the Non-Binding Unsolicited
Proposal;, the business, prospects and future activities of, and
developments related to Euro Sun, Lundin or the Company; our goals,
strategies, future growth and other events or conditions that may
occur in the future, and are inherently uncertain. The actual
achievements of the Company or other future events or conditions
may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties and other
factors, including, without limitation, the risks more fully
described in the Company's Annual Information Form for the fiscal
year ended December 31, 2017 (the
"AIF") and the Company's management discussion and analysis for the
fiscal year ended December 31, 2017
(the "MD&A"), which are incorporated herein by reference. The
Company's forward-looking statements are based on the beliefs,
expectations and opinions of management on the date the statements
are made and the Company assumes no obligation to update such
forward-looking statements in the future, except as required by
law. For the reasons set forth above, investors should not place
undue reliance on the Company's forward-looking statements.
Further information concerning risks and uncertainties
associated with these forward-looking statements and our business
can be found in our AIF and MD&A, which are available on the
Company's website (www.nevsun.com), filed under our profile on
SEDAR (www.sedar.com) and on EDGAR (www.sec.gov) under cover of
Form 40-F.
About Nevsun Resources Ltd.
Nevsun Resources Ltd. is the 100% owner of the high-grade
copper-gold Timok Upper Zone and 60.4% owner of the Timok Lower
Zone in Serbia. The Timok Lower Zone is a partnership with
Freeport-McMoRan Exploration Corporation ("Freeport"), which
currently owns 39.6% and upon completion of any feasibility study,
Nevsun Resources Ltd. will own 46% and Freeport will own 54%. Nevsun generates cash
flow from its 60% owned copper-zinc Bisha Mine in Eritrea.
Nevsun is well positioned with a strong debt-free balance sheet to
grow shareholder value through advancing Timok to production.
NEVSUN RESOURCES LTD.
"Peter G.J. Kukielski"
Peter G.J. Kukielski
President & Chief Executive Officer
View original
content:http://www.prnewswire.com/news-releases/nevsun-board-rejects-euro-sun-led-non-binding-unsolicited-proposal-citing-inadequate-value-and-problematic-structure-300644503.html
SOURCE Nevsun Resources Ltd.