Zijin taps deeper into Serbian copper sector with €1.2bn Nevsun takeover

Zijin taps deeper into Serbian copper sector with €1.2bn Nevsun takeover
Surface plan map showing location of drill holes at Nevsun's Timok project in Serbia.
By bne IntelliNews September 5, 2018

China’s Zijin Mining Group has agreed to buy Canada’s Nevsun Resources, which is the 100% owner of the high-grade copper-gold Timok Upper Zone and 60.4% owner of the Timok Lower Zone in Serbia. The deal, agreed on September 5, was valued at CAD1.86bn (€1.2bn). 

The transaction extends Zijin’s planned investments relating to Serbia to over $2.5bn, after last week the government selected it to become strategic partner in copper smelting and mining complex Rudarsko Topionicarski Basen Bor (RTB Bor). The Chinese company has pledged to invest $1.26bn in RTB Bor. In addition, Zijin Mining is obliged to recapitalise the miner with $350mn.

The deal with Zijin allowed Nevsun to fight off a hostile takeover attempt from Lundin Mining Corp, which had offered CAD$4.75 per share — well below the CAD6 offered by Zijin — back in July. Zijin’s offer, which Nevsun executives recommended shareholders to accept, represented a 57% premium to the Nevsun share price on May 7, the day before Lundin made its offer, which was rejected in August. They claimed the Lundin offer “ignored the fundamental value of Nevsun's assets”. 

Referring to the deal with Zijin, Ian Pearce, chair of Nevsun's board of directors, said that the “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.”

Some analysts say Zijin’s takeover would have cost more had the copper price not fallen over the summer amid growing fears of new international trade wars. China, the world’s largest copper consumer, is firmly in US President Donald Trump’s sights.

Despite the recent fall in copper prices, however, long-term demand is expected to remain strong driven by, for example, infrastructure projects especially in developing Asia and wider adoption of electric cars. 

Chen Jinghe, chairman of Zijin, said in a statement that as the new owner of Nevsun, Zijin would continue to advance ongoing projects. 

“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," Chen Jinghe, chairman of Zijin, said.

As part of the deal with Nevsun, Zijin Mining Group will also take over assets in Eritrea. Nevsun has significant exploration areas licensed in Macedonia, but last year citizens of the southern Macedonian town of Gevgelija resoundingly voted 'no' in a referendum on whether to allow Nevsun’s Reservoir Minerals to open two gold mines in the area. 

Formed in 1993, Zijin is based in Fujian, China and is a leading global mining company specialising in gold, copper, zinc and other mineral resource exploration and development. It manages an extensive portfolio, primarily consisting of gold, copper, zinc, and other metals, through investments in China and nine other countries. 

This follows an extensive investment spree spanning several continents over the last eight years. South China Morning Post estimated in 2016 that the company had spent around RMB7.9bn on 13 overseas deals in Africa, Asia, Australasia, Canada and Latin America. Of these, the purchase of a 49.5% stake in Ivanhoe Mines’ Kamoa copper project in west Africa was the most significant, accounting for RMB2.52bn of the total. As of close of trading on September 5, the company had a market capitalisation of HKD83.094bn on the Hong Kong stock exchange, Bloomberg data showed.