Nevsun Resources (NYSEAMERICAN: NSU) is flying early on in this morning’s trading session, and for good reason. The company announced news regarding Lundin Mining’s statement that it intends to make a formal acquisition bid. Of course, the news excited investors, who are sending the stock screaming for the top. Today, we’ll talk about:
- The response to the potential takeover bid;
- what we’re seeing from NSU as a result; and
- what we’ll be watching for with regard to the stock ahead.
NSU Announces Response To Potential Takeove Bid
As mentioned above, Nevsun Resources is having an incredibly strong start to the trading session this morning after acklowledging and responnding to acquisition news. In a press release issued early this morning, the company responded to a news release issued by Lundin Mining Corporation stating that it inedends on making a formal offer to acquire NUS. In the release issued early this morning, the company recommended that shareholders take no action in response to this announcement. In a statement, Peter Kukielski, President and CEO at NSU, had the following to offer:
This latest announcement from Lundin continues to ignore the fundamental value of Nevsun and its assets. Despite the progress we have made in enhancing Nevsun’s value, Lundin’s notional takeover offer represents only a 13% premium to Nevsun’s closing trading price of C$4.21 per share on the TSX on July 16, 2018, and only a 9.1% premium to the volume weighted average trading price of Nevsun’s shares over the 30 days ended July 16, 2018.
Since Lundin first expressed interest in Nevsun, we have released a pre-feasibility study (PFS) for the Timok Upper Zone with an after-tax NAV of US$1.82 billion, received a critical exploration decline construction permit in February, began construction in May, and in June released an initial inferred resource for the Timok Lower Zone containing 31.5 billion pounds of copper and 9.6 million ounces of gold. At the same time we have extended the mine life at Bisha through 2022, adding 3.3 million tonnes of high-grade ore to the mill, resulting in additional payable production of 470 million pounds of zinc and 52 millions pounds of copper over this time frame. The work we have been doing has also been noticed by several strategic parties that have expressed an interest in participating in the development of Timok.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news causes moves. In the case of Nevsun, the news proved to be overwhelmingly positive. After all, when management is so determined to avoid a takeover as they believe the value of the compnay is far greater, investor excitement ensues, and that’s just what we’re seeing today. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:29), NSU is trading at $3.64 per share after a gain of $0.43 per share or 13.40% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NSU. In particular, we’re interested in following the story surrounding the company’s potential takeover bid and whether or not it can negotiate a bid strong enough to meet what the company’s management believes its value is. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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