MOD Resources surges, says Sandfire takeover undervalued

22nd January 2019 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – The share price of copper developer MOD Resources increased by 50% on Tuesday after the company told shareholders that the A$113-million indicative takeover offer from fellow-listed Sandfire Resources undervalued the company.

MOD on Tuesday revealed a A$15-million capital raise to fund working capital to advance its T3 copper project, in Botswana, towards production and for defining additional resources within the surrounding T3 expansion project.

MOD has received firm commitments to raise A$10-million through an institutional share placement, with an additional A$5-million fully underwritten rights issue to be offered to existing shareholders.

Some 33.33-million shares will be placed to institutional and sophisticated investors at A$0.30 a share, under the company’s existing placement capacity, while eligible shareholders will be offered one new share for every 13 shares held, at a price of A$0.24 a share.

MOD MD Julian Hanna said that funding from the capital raise would enable the company to progress the T3 copper project towards a development decision and conduct further drilling for additional resources.

“The unsolicited, indicative proposal for 100% of the company received from Sandfire confirms the potential of the T3 copper project; however, the board considers it significantly undervalues the assets of the company. With strong ongoing support of our shareholders through a placement and a fully underwritten rights issue, we believe the company will have sufficient working capital to achieve our objectives,” Hanna said.

He noted that the funds would also enable MOD to progress negotiations with a number of parties in respect of funding the development of the T3 project.

In the meantime, MOD said that it was willing to engage with Sandfire, and grant the company confirmatory due diligence if a ‘compelling price’ was presented, one which was capable of being supported by the MOD board and shareholders.

“MOD has not received any offer capable of acceptance by the company’s shareholders and no certainty that the indicative proposal will result in a transaction,” the company said.

Sandfire’s indicative offer consisted of A$0.38 a share, which was equivalent to one Sandfire share for about every 17 MOD shares.

MOD told shareholders that the indicative proposal undervalued the company’s assets, and that the acquisition would be highly accretive to Sandfire in terms of resources, reserves, extended mine-life and net present value per share.