PERTH (miningweekly.com) – Copper miner Sandfire Resources has made an improved A$167-million takeover offer for Africa-focused copper developer MOD Resources.
Under the offer agreement, each MOD shareholder could elect to receive either 45c in cash for each of their shares, capped at A$41.6-million or 25% of the overall consideration, or 0.0664 Sandfire shares for each MOD share held.
The offer price of 45c a share represented a premium of 45% to the closing price of MOD shares on June 24, and a 45% premium to the company’s 20-day volume weighted average share price.
Sandfire in January approached MOD with an indicative offer of A$113-million, which the copper developer said undervalued the company.
The MOD board has now recommended that shareholders accept the new offer in the absence of a superior proposal, and subject to an independent expert valuation.
MOD’s directors and its major shareholder, Tiger Metals, have both confirmed their intentions to vote in favour of the takeover offer, in the absence of a superior bid.
MOD MD Julian Hanna said that the implementation of a scheme with Sandfire reflected a compelling value proposition for MOD shareholders, while it would benefit from Sandfire’s platform to deliver the T3 project into production, and realise the full potential of the under-explored Kalahari copper belt.
“We see this partnership as providing the opportunity to maximise value from T3, which can be funded from Sandfire’s balance sheet and cash flows. At the same time, it will provide MOD shareholders with exposure to Sandfire’s substantial high-grade copper production in Australia and the outstanding potential of MOD’s extensive licence holdings through an accelerated exploration programme.”
Sandfire on Tuesday told shareholders that the acquisition of MOD added a near-term project in Botswana to the company’s global development pipeline, while also adding significant landholding on the highly prospective and under-explored Kalahari copper belt.
“The acquisition ticks all of our boxes from an acquisition criteria perspective and is value accretive based on the T3 asset alone which, importantly can be funded out of cash flow,” said Sandfire MD and CEO Karl Simich.
“We see this transaction as a partnership, with compelling benefits for both sets of shareholders. MOD shareholders will gain exposure to Sandfire’s development and operating expertise, strong balance sheet and a growing global portfolio of base metal development and exploration assets with the potential to deliver transformational growth for the company over the next decade.”
A recent feasibility study into the T3 copper project estimated a capital cost of $182-million to develop an operation capable of sustaining a production rate of 28 000 t/y of copper and 1.1-million ounces a year of silver over an 11.5-year mine life. First production has been targeted for the first quarter of 2021.
The T3 project was expected to have life-of-mine revenues of $2.3-billion and earnings before interest, taxes, depreciation and amortisation of $1.1-billion, with the feasibility study estimating a pre-tax net present value of $368-million and an internal rate of return of 33%.
Simich on Tuesday said that Botswana was an attractive investment jurisdiction for mining, and that the company was excited to partner with MOD’s existing management and in-country teams to further optimise and develop the T3 project, while also embarking on an expansive and well-funded exploration programme designed to unlock the province's potential.
The takeover offer would be subject to MOD shareholder approval, as well as regulatory and court approvals, and an independent expert concluding that the offer was in the best interest of MOD shareholders.