Nevsun's Board recommends that shareholders
REJECT the Hostile Bid and
DO NOT TENDER YOUR
SHARES
VANCOUVER, Aug. 9, 2018 /PRNewswire/ - Nevsun Resources Ltd.
(TSX: NSU) (NYSE AMERICAN: NSU) ("Nevsun" or the "Company") today
announced that its Board of Directors, after careful consideration
and receipt of the recommendation of a special committee of its
independent directors (the "Special Committee"), and after
consultation with its financial and legal advisors, has rejected
the hostile offer by Lundin Mining Corporation ("Lundin"), to
acquire all of the outstanding shares of Nevsun for C$4.75 per share in cash (the "Hostile Bid"). The
Board unanimously recommends that Nevsun shareholders REJECT the
Hostile Bid and not tender their shares. In the Board's view the
Hostile Bid:
- Fails to recognize the fundamental and strategic value of
Nevsun's unique portfolio of producing and development assets,
underpinned by the world-class Timok Project
- Provides an inadequate premium for control, lower than
precedent transactions
- Is lower in value than previous transactions proposed by Lundin
to Nevsun
- Is lower in value than other alternatives which are expected to
emerge
"The Nevsun Board of Directors is unanimous in its belief that
the Lundin offer substantially and fundamentally undervalues Nevsun
and fails to reflect the strategic value of our asset base," said
Ian Pearce, Chairman of Nevsun's
Board of Directors. "The TImok Project is one of the world's best
development stage copper projects, and our Bisha mine continues to
generate strong operating cash flow with a mine life that has
recently been extended. These assets together represent excellent
current and long-term value to our shareholders, and demand a
significant premium from anyone who would intend to acquire them.
Both the market and equity research analysts have recognized the
progress Nevsun has made. Rather than reflecting this enhanced
value, Lundin has offered an inadequate premium that is below
precedent transaction values, and indeed below copper transaction
values that Lundin itself has previously executed. The inadequate
value is underscored by the fact that Nevsun's shares have traded
higher than the offer price each day since Lundin launched its
hostile bid."
Added Dave Smith, Chair of the
Special Committee: "We have actively and extensively engaged with
Lundin over the last several months, including offering access to
confidential information and detailed management presentations. Our
continual message was that we require full and fair value that
reflects the strategic value of all our assets, and the interests
of our shareholders. Our Board's focus is squarely on shareholders'
interests, and with our advisors we have been actively considering
available opportunities to maximize value for shareholders through
a strategic investment in Nevsun. To ensure we have left no stone
unturned, the Board has commenced a strategic review process to
consider all alternatives available to Nevsun to maximize value –
above and beyond the proposals already generated by Nevsun's recent
strategic investment process – including a potential acquisition of
Nevsun as a whole. Discussions are ongoing with several parties
that have expressed interest in value-enhancing alternatives to
Lundin's hostile bid, and we fully expect that superior offers or
other alternatives will emerge from this process."
Since March 2017 the Board of
Directors and management have been actively involved in the review
of various financing alternatives to support the development of the
Upper Zone of the Timok Project, and the Company has signed 18
non-disclosure agreements with parties to that end.
This process culminated on August 7,
2018 with four proposals being received from major and
mid-tier mining and smelting companies indicating their willingness
to purchase up to a 19.9% equity interest in Nevsun along with
various proposals for partnering to develop the Timok Project.
Three of these proposals to acquire a non-controlling interest in
Nevsun are at a premium to the price per Nevsun share offered in
the Hostile Bid for full control of Nevsun. The Nevsun Board is
evaluating these proposals, and with its advisors will also review
all value-maximizing alternatives in the context of Lundin's
undervalued offer, including, but not limited to, an acquisition of
all outstanding Nevsun shares.
Tendering Nevsun shares to Lundin's opportunistic Hostile Bid
before the Board and its advisors have had the opportunity to fully
explore all available strategic alternatives to maximize
shareholder value may preclude the emergence of a superior
alternative transaction.
Lundin's Hostile Bid is open until November 9, 2018. Shareholders are urged to TAKE
NO ACTION as Nevsun's Board pursues a full range of
value-maximizing alternatives.
Compelling Reasons to Reject Lundin's Undervalued Hostile
Bid
The basis for the Nevsun Board's recommendation that
shareholders reject the Hostile Bid is set forth in the Nevsun
Directors' Circular, which was filed today with the Canadian
regulatory authorities, is being mailed to shareholders, and is
available on Nevsun's website. The reasons for the Nevsun Board's
recommendation include, among other things, the Board's belief
that:
- The Hostile Bid fails to recognize the fundamental value of
Nevsun's highly coveted asset portfolio. The Timok Project is a
uniquely strategic asset, and Bisha is a cash flow generator with a
recently extended mine life. It is the Board's belief that the
Hostile Bid provides inadequate value for these assets and ignores
the significant progress and several key milestones reached at
Timok and Bisha in recent months. The 100%-owned Timok Upper Zone
project is one of the highest quality development stage copper
projects in the world due to its high grades, expected low capital
intensity and low operating costs. The pre feasibility study for
the Upper Zone alone demonstrates a NAV of US$1.82 billion after tax, and the Timok Lower
Zone is one of the world's ten largest development stage copper
projects, with an initial inferred resource containing 31.5 billion
pounds of copper and 9.6 million ounces of gold. Combined with the
successfully operating Bisha mine, these assets deserve a premium
valuation to what Lundin is offering.
- The Hostile Bid is significantly below implied multiples of
precedent base metals transactions. The Hostile Bid implies a
Price / Net Asset Value ("P/NAV") of 0.7x, a significant discount
from the 1.0x P/NAV observed in recent comparable base metal
transactions and well below the multiples Lundin paid for its other
strategic copper assets such as Candelaria and Tenke.
- The Hostile Bid is significantly below implied premiums of
precedent transactions. Lundin's takeover premium is
substantially inferior to control premiums paid for other companies
developing base metal projects. The Hostile Bid premium is
approximately 20% lower than those observed in precedent
transactions involving base metal developer transactions, all-cash
mining transactions and Canadian hostile transactions. This low
premium does not, in Nevsun's view, reflect the strategic
importance, value or quality of Nevsun's assets, nor the unique
investment opportunity Nevsun affords to Lundin or any other
potential acquiror at a time when high quality base metal assets
are in demand. Furthermore, Lundin's purported offer premiums are
to highly selective dates and ignore Nevsun's positive developments
since Lundin's initial press release on May
7, 2018 including the Timok Lower Zone resource release
confirming it as a world class deposit, and the Bisha mine life
extension through 2022 which further reduces the funding
requirements for the Timok Project.
- Superior offers or other alternatives are expected to
emerge. Beginning in March 2017,
Nevsun's Board, management and advisors have been evaluating
various financing alternatives to support the development of the
Upper Zone of the Timok Project. Nevsun has entered into
confidentiality and standstill agreements with 18 interested
parties, and has received four proposals from major and mid-tier
mining and smelting companies indicating their willingness to
purchase up to a 19.9% equity interest in Nevsun along with various
proposals for partnering to develop the Timok Project. Three of
these proposals to acquire a non-controlling interest in Nevsun are
at a premium to the price per Nevsun share offered in the Hostile
Bid for full control of Nevsun. A strategic investment in the
Company would also substantially reduce the financing risk
associated with the Timok Project. The Nevsun Board is evaluating
these proposals, and is also is actively pursuing other potential
value-maximizing alternatives to the Hostile Bid, including the
acquisition of all Nevsun shares by another party. Tendering Nevsun
shares to Lundin's offer before the Board and its advisors have had
an opportunity to fully explore all available alternatives to the
Hostile Bid may preclude a financially superior transaction from
emerging.
- The Hostile Bid is opportunistically timed to deprive Nevsun
shareholders of future potential value. The Nevsun Board
believes that the Hostile Bid, if completed, would allow Lundin to
capture the upside value in Nevsun for Lundin shareholders at the
expense of Nevsun shareholders. Nevsun continues to enhance the
value of the Company as it builds on the recent disclosed progress
in moving Timok towards full commercial production. Advancing a
project from development to production is generally a positive
value catalyst, and this progress has attracted significant
interest from strategic parties. The approximate 56% increase in
the trading price of Nevsun's shares on the TSX from the beginning
of 2018 through to the announcement of Lundin's Hostile Bid on
July 26, 2018 bears out the momentum
that Nevsun's management has created.
- The market views the Hostile Bid as inadequate. Nevsun's
shares have traded ABOVE the Hostile Bid price every day between
when the Hostile Bid was launched and the last trading day prior to
the filing of this Directors' Circular. The Hostile Bid price
represents a 4% discount to the closing price of Nevsun common
shares on August 8, 2018. The
performance of the Nevsun common shares during this period is a
strong indicator that the market believes that the Hostile Bid
undervalues Nevsun's common shares. The Hostile Bid also represents
a 19% discount to the median equity analyst target price of
$5.88 per Nevsun share from the eight
analyst reports that were issued following the announcement of the
Hostile Bid.
- Lundin has a strong self-interest to secure Timok for itself
– and the ability to pay a significantly higher purchase price for
Nevsun. Following its significant reduction in copper exposure
through the sale of its stake in the Tenke copper project, Lundin
has a strategic imperative to secure a new copper asset as part of
its stated corporate strategy. Lundin also has a record of
executing dilutive transactions to secure strategic assets within
its investment criteria. Both of these factors indicate an ability
to increase its current offer. Nevsun's Board believes that if
Lundin wants to acquire Nevsun, it should be willing to provide
full and fair value to do so and not be able to take advantage of
Nevsun shareholders with a low value and opportunistic bid which
transfers value to Lundin.
- The Hostile Bid is financially inadequate. Both BMO
Nesbitt Burns Inc. ("BMO") and Citigroup Global Markets Inc.
("Citi") have provided a written opinion to Nevsun's Board that the
consideration being offered pursuant to the Hostile Bid was, as of
the date of such opinions, inadequate, from a financial point of
view, to Nevsun shareholders.
- The Hostile Bid is highly conditional at the expense of
Nevsun. The Board of Directors believes that tendering shares
to Hostile Bid would, in effect, constitute the grant to Lundin of
an option to acquire Nevsun at a price that does not recognize the
fundamental value and potential of Nevsun's assets, particularly
the Timok Project.
Consistent with the unanimous rejection of the Hostile Bid as
undervalued and inadequate, Nevsun's management and Directors WILL
NOT TENDER their shares to Lundin's offer.
Nevsun's Long Record of
Engagement
The Nevsun Board's rejection of the Hostile Bid follows a long
history of open and continual engagement with Lundin since
March 2017. This included Nevsun's
Board and management considering a number of proposals, structures
and partnerships. This extensive engagement is outlined in detail
in the Nevsun Directors' Circular under "Background to the Hostile
Bid." As this background makes clear, a lack of engagement or
openness to a transaction has never been an issue.
Take No Action and Reject Lundin's Hostile Bid
Nevsun shareholders are urged to REJECT the Hostile Bid. To do
so, Nevsun shareholders should TAKE NO ACTION.
Shareholders are encouraged to carefully review the Directors'
Circular in its entirety. This document has been mailed to Nevsun
shareholders and is available free of charge on SEDAR at
www.sedar.com, and on Nevsun's website at www.nevsun.com.
Nevsun Shareholders who have already tendered their Nevsun
Shares to the Hostile Bid and who wish to obtain assistance in
withdrawing them are urged to contact their broker or Laurel Hill
Advisory Group, at 1-877-452-7184 (toll-free in North America), or 1-416-304-0211 (collect
calls outside North America), or
by email at assistance@laurelhill.com.
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. Laurel Hill
Advisory Group is Nevsun's strategic advisor and information
agent.
Qualified Persons Statement
The technical content of this press release was previously
disclosed in a News Release by the Company dated March 28,2018 titled "Nevsun Advances Timok Upper
Zone Copper-Gold Project with Release of Robust PFS" and was
reviewed by the associated Qualified Persons ("QPs") listed below
for specific aspects of the PFS as defined by the National
Instrument 43-101.
Mining & Mineral Reserves– Jarek Jakubec SRK Vancouver
Mineral Processing – Mick Bunyard
- Hatch
TSF – Mihajlo Samoukovic, Knight
Piesold Vancouver
Infrastructure, Capital & Operating Costs- Mark Sucharda, Hatch
Economic Evaluation – Robert
Duinker, Hatch
Each of the individuals listed above are independent QPs for the
purposes of NI 43-101. All scientific and technical information in
this press release in respect of the Timok Project or the PFS is
based upon information prepared by or under the supervision of
those individuals.
As disclosed in the Company's news release dated June 26, 2018, the initial inferred resource for
the Timok Lower Zone contains 1.7 billion inferred tonnes grading
0.86% copper and 0.18g/t gold containing 31.5 billion pounds of
copper and 9.6 million ounces of gold.
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 about the Lundin
formal offer for all of the shares of Nevsun and the terms and
conditions of an such offer, the business, prospects and future
activities of, and developments related to the Company, 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 joint venture with
Freeport-McMoRan Exploration Corporation ("Freeport") which
currently owns 39.6% and upon completion of any feasibility study
(on the Upper or Lower Zone), 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 Kukielski"
Peter Kukielski
President & Chief Executive Officer|
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SOURCE Nevsun Resources Ltd.
