The Next Major Gold Buyout?

Written by Nick Hodge
Posted September 5, 2018 at 4:28PM

I almost didn’t get a chance to write you today.

It seems everyone comes back from vacation all at once. The inbox fills up. And deals start flowing.

One of my recommended companies received a “white knight” takeover bid just this morning, and I spent some of the morning reviewing the details and deciding what to do.

The company was Nevsun Resources (NYSE: NSU)(TSX: NSU).

I’ve been recommending readers of my Wall Street’s Underground Profits newsletter buy shares since October 2016, when they were trading at US$2.75.

The buyout offer today was at more than US$4.50.Nevsun Buyout

Context

Nevsun’s Bisha Mine in Eritrea, which is entering the copper and zinc mining portions of its life, is currently sitting on over 1.5 billion pounds of copper and 6.63 billion pounds of zinc (not a typo).

Nevsun just announced it will self-finance an extension to the Bisha mine from its own cash flows that will extend operations through the full year 2022, resulting in additional payable production of 470 million pounds of zinc and 52 millions pounds of copper.

It also had the Timook project in Serbia.

Lower Timook had an initial inferred resource of 1.1 billion tonnes grading 0.86% copper and 0.18 grams per tonne gold.

The Upper Zone at Timook has an after-tax net asset value (NAV) of US$1.82 billion and an internal rate of return (IRR) of 80%.

So when Lundin came in with a C$1.5 billion offer in May of this year, Nevsun essentially told it to piss off.

There has been a back and forth ever since, culminating today with China’s Zijin Mining coming in with a C$1.85 billion bid for the company.

That values shares at C$6.00/US$4.55 — a 65% premium to when I got my readers in.

The Next Target

I keep a list of buyout targets like this for readers of Wall Street’s Underground Profits.

For a while now, I’ve been telling you about a very large gold mine here in the U.S. One I expect could become the largest gold mine in the country.

It is on this buyout list.

And as it goes through permitting, the buyout is inching ever-closer.

Several big mining deals have gone on in the past few weeks.

Quality projects with low costs are still being rewarded with significant premiums.

I nailed it with Nevsun.

And I think this one could be next.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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