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Nevsun Resources Ltd
Symbol NSU
Shares Issued 302,592,672
Close 2018-09-04 C$ 4.94
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Nevsun to be acquired by Zijin for $1.86-billion

2018-09-05 06:06 ET - News Release

Mr. Peter Kukielski reports


Nevsun Resources Ltd. and Zijin Mining Group Co. Ltd. have entered into a definitive agreement pursuant to which Zijin will make a takeover bid to acquire all of the issued and outstanding shares of Nevsun for $6 per share in cash. The offer is valued at $1.86-billion ($1.41-billion (U.S.)).

The cash consideration of $6 per share represents a premium of 57 per cent over Nevsun's unaffected closing price of $3.82 on May 7, 2018, the day Lundin Mining Corp. first publicly announced its intention to acquire Nevsun. In addition, the offer is $1.25 per Nevsun share, or 26 per cent, more than the $4.75-per-share hostile takeover bid for Nevsun launched by Lundin on July 26, 2018. The offer is not subject to any financing conditions.

Details of the offer will be included in a takeover bid circular that Zijin will file and mail to Nevsun shareholders in the coming days, but no later than Sept. 18, 2018. Nevsun's board of directors unanimously recommends that Nevsun shareholders tender their shares to accept the offer. The basis for this recommendation will be included in a Nevsun director circular that will be filed and mailed to Nevsun shareholders concurrently with the filing of the Zijin takeover bid circular. Nevsun's board of directors continues to recommend that Nevsun shareholders reject the hostile takeover bid launched by Lundin on July 26, 2018, and not tender their shares to the Lundin offer, which will expire on Nov. 9, 2018.

"This premium transaction is an excellent outcome for our shareholders and the result of a rigorous and competitive global process to generate maximum value for Nevsun's outstanding assets," said Ian Pearce, chair of Nevsun's board of directors. "The all-cash consideration of $6 per share better reflects the fundamental value of Nevsun's mining and development assets, while also providing an appropriate change of control premium to our shareholders.

"Zijin is a proven mining industry operator with a $10-billion (U.S.) market capitalization and a demonstrated track record of successfully completing international transactions. The board unanimously recommends that Nevsun shareholders tender their shares to accept this offer and receive the significant value that it represents."

Chen Jinghe, chairman of Zijin, added: "Nevsun is an exceptional operator, with a strong focus on safe, efficient and sustainable mining practices. As the new owner we will continue that focus, and we look forward to working with stakeholders in Eritrea and Serbia to advance these mining and development assets. At the Bisha mine in Eritrea, our objective will be to further extend the life of the mine and explore for new deposits. At the Timok project in Serbia we intend to rapidly develop the upper zone and bring it into production, and continue to advance and define the world-class potential of the lower zone."

Nevsun's board of directors had previously rejected the hostile bid from Lundin on the grounds that it, among other reasons, ignored the fundamental value of Nevsun's assets. Following the launch by Lundin of its hostile bid, a special committee of Nevsun's independent directors, with the assistance of Nevsun's advisers, initiated a review of all value-maximizing alternatives, including, but not limited to, an acquisition of all issued and outstanding Nevsun shares. This process has involved a number of global parties undertaking comprehensive due diligence on Nevsun. The offer is a result of this full strategic alternative review process. Nevsun's board of directors and the special committee concluded that the offer currently represents the best alternative available to Nevsun and provides Nevsun shareholders with the highest value proposition.

Formed in 1993, Zijin is based in Fujian, China, and is a leading global mining company specializing in gold, copper, zinc and other mineral resource exploration and development. Zijin manages an extensive portfolio, primarily consisting of gold, copper, zinc and other metals through investments in China and overseas across nine countries. Listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, Zijin has a market capitalization of approximately $10-billion (U.S.).

Among Zijin's substantial global mining activities are strategic partnerships with Toronto-based Barrick Gold Corp., related to the Porgera mine in Papua New Guinea; and Vancouver-based Ivanhoe Mines Ltd., related to the Kamoa-Kakula copper project in the Democratic Republic of the Congo. Zijin also completed a board-supported takeover of Norton Gold Fields Ltd., an Australian mining company, in 2015. Zijin is looking to participate in global mineral resources allocation, satisfy the demand arisen from economic development of China, and become a key global player in the production of gold, copper and zinc. Its strategic focus includes a combination of internationalization, project upsizing and asset securitization, as well as a combination of its core business (that is, gold and copper production) with other types of metal mineral businesses.

Transaction details

The board of directors of Nevsun, acting on the recommendation of the special committee, and after evaluating the offer in consultation with Nevsun's legal and financial advisers, has determined that the offer is fair to Nevsun shareholders and in the best interests of Nevsun. Nevsun's board of directors and the special committee received separate opinions, dated Sept. 4, 2018, from their respective financial advisers, BMO Nesbitt Burns Inc. and Citigroup Global Markets Inc., as to the fairness, from a financial point of view and as of the date of such opinions, of the $6-per-Nevsun-common-share cash consideration offered by Zijin pursuant to the offer to holders of Nevsun common shares (other than Zijin, Lundin and their respective affiliates), which opinions were based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as more fully described in such opinions.

The offer is subject to a minimum tender requirement of 66-2/3rds per cent of Nevsun's issued and outstanding shares (including those held directly or indirectly by Zijin and its affiliates). Nevsun currently has approximately 302,592,672 shares and 7,107,233 options issued and outstanding. Zijin currently controls 3,197,191 shares, equivalent to 1.06 per cent of the total shares issued and outstanding. Nevsun management and directors have entered lock-up agreements and have agreed to tender their shares to the offer. Nevsun shareholders will have an initial deposit period of 105 days which Nevsun has agreed to shorten upon Zijin's receipt of all regulatory approvals.

The offer is subject to approval under the Investment Canada Act and the Canadian Competition Act, approval by relevant authorities in China, as well as customary closing conditions.

The definitive agreement provides for, among other things, a non-solicitation covenant on the part of Nevsun (subject to customary fiduciary out provisions). The definitive agreement also provides Zijin with a right to match any competing offer which constitutes a superior proposal.

A termination payment of $50-million (U.S.) will be payable by Zijin to Nevsun in certain circumstances, including failure to obtain the necessary approvals from relevant authorities in China, subject to certain exceptions. This termination fee is being held by the depository in Canada.

Zijin is entitled to a termination payment of $50-million (U.S.) if the definitive agreement is terminated in certain circumstances, including if Nevsun enters into an agreement with respect to a superior proposal, or if the board of directors of Nevsun withdraws or modifies its recommendation with respect to the offer.

Specific terms and conditions will be included in the Zijin takeover bid circular and the Nevsun director circular which will be mailed to Nevsun shareholders no later than Sept. 18, 2018. These materials along with the definitive agreement will also be available under Nevsun's profile on SEDAR, and on Nevsun's website.


Counsel for Nevsun's special committee is Borden Ladner Gervais LLP. The special committee's independent financial adviser is Citi. Counsel for the company is Blake, Cassels & Graydon LLP and U.S. counsel is Gibson, Dunn & Crutcher LLP. The company's financial adviser is BMO Capital Markets.

Counsel for Zijin is Fasken Martineau DuMoulin LLP. Zijin's financial adviser is Morgan Stanley.

Conference call

Nevsun management will host a conference call and webcast today (Sept. 5, 2018) at 7 a.m. in Vancouver, 10 a.m. in Toronto/New York, 3 p.m. in London to discuss the offer from Zijin. Please call in at least five minutes prior to the conference call start time to ensure prompt access to the conference. Dial-in details are as follows:

North America (toll-free):  1-888-231-8191

United Kingdom (toll-free):   0-800-051-7107

Other international:   1-647-427-7450

The conference call will be available for replay by phone until Sept. 12, 2018, by calling 1-888-859-2056/416-849-0833 and entering pass code 1553148 followed by the number sign.


A live audio webcast of the conference call will be available on the company's website.

About Nevsun Resources Ltd.

Nevsun Resources is the 100-per-cent owner of the high-grade copper-gold Timok Upper zone and 60.4-per-cent owner of the Timok Lower zone in Serbia. The Timok Lower zone is a joint venture with Freeport-McMoRan Exploration Corp. which currently owns 39.6 per cent and upon completion of any feasibility study (on the Upper or Lower zone), Nevsun Resources will own 46 per cent and Freeport will own 54 per cent. Nevsun generates cash flow from its 60-per-cent-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.

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