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From: Er-News (er_news@dehai.org)
Date: Thu Jun 02 2011 - 22:10:06 EDT
RBC sees Nevsun as potential acquisition target
By: Liezel Hill
30th May 2011
TORONTO (miningweekly.com) – Nevsun Resources, which operates the
Bisha mine in Eritrea, could be a potential takeover target,
according to RBC Capital Markets analyst Jonathan Guy.
Guy, who has initiated coverage of Nevsun with a rating of
'outperform, above average risk', believes Nevsun could be a good
target for either a tier-two gold miner or a mid-tier base-metals
producer, he wrote in a May 27 note.
He added, however, that concerns about political risk in Eritrea
“could deter some suitors”.
Nevsun CEO Cliff Davis told Mining Weekly Online on May 18 that it
was possible the company could become a target, but said that he was
not soliciting offers or looking for buyers.
Bisha, which is the first modern gold mine in Eritrea, was completed
on schedule and actually ahead of budget, Guy noted. The first gold
pour took place in January this year.
Although it has started off as a gold and silver producer, Nevsun
will start producing copper from the mine in 2013, followed by zinc
output a few years later.
“We do not believe that the weighting of production towards base
metals rather than gold is likely to act as a deterrent,” Guy said.
The company is still in talks with the Eritrean government on the
final valuation for a 30% stake that the government agreed to buy in
Bisha. (It owns a total of 40%, including the 10% free-carried
interest to which it is entitled under Eritrean law.)
Nevsun has indicated that the valuation should be agreed on by June,
and Guy said he expects the adjustment payment will be around $300-
million, to be funded by cash flow from the mine.
RBC has a target price of C$8 a share for Nevsun, compared with
Monday afternoon's price of C$6,14 a share.
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