In the same category

Hold Reservoir Minerals After Takeout: Adrian Day

IMG Auteur
 
Published : April 24th, 2016
800 words - Reading time : 2 - 3 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : GoldWire

24hGold - Hold Reservoir Miner...

On Sunday, Reservoir Minerals announced it has agreed to be acquired by Nevsun Resources. Adrian Day shares his initial thoughts on the deal.

Reservoir Minerals Inc. (RMC:TSX.V, 6.96) announced it has agreed to be acquired by Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT), which operates the high-grade copper-zinc Bisha mine in Eritrea. Nevsun has a cash balance of US$438 million. Under the terms of the deal, Reservoir shareholders will get two Nevsun shares for each Reservoir share. At Friday's closing price, this amounts to CA$9.40 in Nevsun shares per Reservoir share, a healthy premium.

Nevsun will also subscribe for a private placement and lend Reservoir funds to exercise its "right of first offer" to match the offer Lundin Mining Corp. (LUN:TSX) made in early March for all of Freeport-McMoRan Copper & Gold Inc.'s (FCX:NYSE) interest in the upper zone and part of its interest in the lower zone. The new combined Nevsun-Reservoir company will then own 100% of the upper zone, while it could be diluted by Freeport down a minimum of 46% of the lower zone.

Nevsun is in a strong financial position to advance the Timok project. For Nevsun shareholders, who have been wanting Nevsun to undertake an M&A transaction, it's a good deal: Timok matches Bisha in terms of project quality, while Serbia is definitely a step up in the geopolitical risk table from Eritrea (but then virtually everywhere would be).

Is it a good deal for Reservoir shareholders? The premium is attractive, though it should be pointed out that only 10 days ago, Nevsun shares were trading at CA$3.90, so it remains to be seen if these new four-year highs for Nevsun hold. Moreover, we think Nevsun is buying Reservoir cheaply. In other circumstances there could have been a bidding war, but Lundin's agreement with Freeport triggered a deadline for the right to match its offer (expiring May 4), and Reservoir's value is greatly enhanced if it exercises that right (in other words, there is not much time for anyone else to make a competing bid).

We are going to hold for now, listen to the conference call, watch how the market reacts, and assess any possible developments. But clearly, the end-game is underway, and it's only a question of how much we gain.

Disclosure: 1) Adrian Day: I or my family own shares of the following companies mentioned in this interview: Reservoir, Freeport. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this interview: Reservoir, Freeport. Clients of Adrian Day Asset Management own over 5% of the shares outstanding of Reservoir. I determined which companies would be included in this article based on my research and understanding of the sector. Statement and opinions expressed are the opinions of Adrian Day and not of Streetwise Reports or its officers. Adrian Day is wholly responsible for the validity of the statements. Adrian Day was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. The companies mentioned in this interview were not involved in any aspect of the article preparation or editing so the expert could comment independently about the sector. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

 

Data and Statistics for these countries : Eritrea | Serbia | All
Gold and Silver Prices for these countries : Eritrea | Serbia | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Visit The GOLD Report - www.theaureport.com – a unique, free site featuring summaries of articles from major publications, specific recommendations from top worldwide analysts and portfolio managers covering gold stocks, and a directory, with samples, of precious metals newsletters. To subscribe, please complete our online form, or send an email with the word 'Subscribe' in the subject field to subscriptions@theaureport.com. The GOLD Report is Copyright © 2005 by Streetwise Inc. All rights are reserved
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.