Update 9:23AM PST: Nevsun is not aware of a bid for the Company
Rumors are circulating this morning that the latest takeover in the mining space will be Nevsun Resources (NSU.T). Bloomberg is reporting that QKR Corp, a mining fund backed by Qatari investors, is set to make a $1 billion bid for Nevsun. QKR Corp is led by Lyold Pengilly, a former banker at JP Morgan.
Nevsun's stock was halted at 7:22 am (pst) and is up 13.2% on 1.9 million shares traded giving the company a market cap of ~$956.9 million.
Representatives from both companies have refused to comment at this time.
Nevsun had $570 million in working capital ($380 million in cash) and no debt at the end of September. The company has now transitioned from a gold producer into a copper producer and has strong earnings and free cash flow at current metal prices. The strong free cash flow allows Nevsun to pay a dividend of 14 cents per share annually.
The company's Bisha mine is expected to produce 180-200 million pounds of copper at a grade of 4% per year. In 2016 the mine will become a zinc mine. This could be optimal timing as many analysts see a deficit in the zinc market in the next couple years.
Nevsun owns 60% of the Bisha mine and the Eritrean government owns the other 40%.
QKR is a mining fund that was established to buy distressed mining assets that are near or in production. The fund made its first bet earlier this year purchasing a gold mine in Nambia from AngloGold Ashanti for $110 million.
QKR has deep pockets as it is backed by Poland's richest man Jan Kulcyzk and Qatar's sovereign wealth fund.
Here's the Nevsun chart:
The rumored takeover has pushed Nevsun's share price to $4.67, which is close to a 3 year high.
It remains to be seen if the deal will close or if another offer will come in.
Investors should also keep an eye on Sunridge Gold (SGC.V), a junior stock with interests in Eritrea, run by former Nevsun employees. Sunridge is up 19% already this morning, and looks to be backed by some smart guys here in Vancouver.
Share price: $4.80
Shares outstanding: 199.35M
Market cap: $956.9 M
I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.