Nevsun Reservoir deal shows M&A appetite for quality mines -execs

By Nicole Mordant
VANCOUVER, April 25 (Reuters) - A tussle for control of a
promising copper project in Serbia shows there is appetite for
high quality mining assets in stable countries and may be a
harbinger of further industry mergers and acquisitions,
executives involved in the deal said on Monday.
Nevsun Resources Ltd NSU.TO said on Sunday it had agreed
to buy fellow Canadian mining company Reservoir Minerals RMC.V
for $365 million, getting its hands on the large, high-grade
Timok copper-gold project in eastern Serbia. L3N17S1MX
Another Canadian miner, Lundin Mining LUN.TO , had also
been gunning for a stake in Timok after agreeing last month to
buy part of U.S. mining giant Freeport McMoRan Inc's FCX.N
stake. ASC08F4E
Timok is jointly owned by Reservoir and Freeport, which is
under pressure to sell assets to reduce its $20 billion debt
pile. The Reservoir-Nevsun deal trumps the Lundin one as
Reservoir has the right to make the first offer if Freeport
wants to sell.
Nevsun was one of many companies interested in acquiring
Reservoir and Timok, Reservoir Chief Executive Officer Simon
Ingram said.
"There were lots of groups in the data room," he said in an
interview.
A drop in copper prices to seven-year lows below $2 a pound
in January has created opportunities for miners with strong cash
balances to acquire assets, added Nevsun Chief Executive Cliff
Davis.
The commodity price drop has forced many debt-laden miners
to look at selling off choice assets.
"We should see more M&A in the marketplace.... There are
various assets that are good quality that are financially
burdened," Davis said in an interview.
With a goal of cutting its debt in half, Phoenix,
Arizona-based Freeport said in January it would consider selling
any mining assets if it got the right offer. That includes
world-class assets in stable locations such as its Morenci
operation in Arizona.
High price expectations among sellers are among factors that
have inhibited mining acquisitions in recent years, but that may
be changing, Davis said.
"They are getting more realistic and that will precipitate
more M&A," he said.
Reservoir shares closed up nearly 20 percent at C$8.35 on
the deal, while Nevsun shares slipped more than 10 percent to
C$4.22. Lundin shares were little changed at C$4.38.
The loss of Timok is not a "significant" negative for Lundin
as it has several internal growth opportunities and is expected
to pursue other acquisitions, RBC Capital Markets analyst Fraser
Phillips said in a note to clients.