MOD Resources (LSE:MOD) soared 57.3pc to 22.5p yesterday after revealing an unsolicited takeover bid from a major copper miner. The ASX-listed resources firm, which dual listed in London last November, received the proposal from fellow Australian business Sandfire Resources. MOD’s largest shareholder Metal Tiger (LSE:MTR) also rose 27pc to 1.6p on the news.
Sandfire offered to acquire 100pc of MOD’s shares at $0.38 each, valuing the firm at $113m. However, MOD said it believed the indicative proposal undervalued its assets. Despite this, it said it would be ‘willing to engage’ with Sandfire if it presents a more compelling price.
MOD is the owner of the 60Mt T3 copper project in the centre of Botswana’s highly prospective Kalahari Copper Belt (KCB). The company is progressing a feasibility study for the project, which it expects to release by the end of Q1 2019. This is expected to help it reach a decision to mine within the first half of the year.
The firm believes that its flagship asset presents the potential for a long-life, high-margin, open-pit copper mine with significant exploration upside. Indeed, based on its pre-feasibility study, the asset has an NPV (pre-tax) of $370m under the base case and $529m under the expansion case.
In yesterday’s update, MOD gave many reasons for considering Sandfire’s initial offer insufficient.
First-of-all, the company highlighted its dominant position in the KCB, which comes in at around 11,700km2 in granted licences. It called the area ‘one of the last under-explored sediment-hosted copper belts’, adding that exploration results have already indicated the potential for additional copper mineralisation.
Elsewhere, the business pointed to T3’s prospectivity. It said it expects the project to produce a high-grade, high-quality concentrate that will attract keen interest from metal traders and smelter. It also claimed to have confidence in a range of alternative funding options for progressing T3 to production following third-party discussions.
Finally, MOD pointed to the fact that its share price and the MOD/SFR exchange ratio are at a 2.5-year low. Extending this point, it highlighted its most recent $0.47 per share placing price.
Managing director Julian Hanna said the proposal confirms the potential of the T3 Copper Project. However, he said ‘significantly undervalues’ the company’s assets.
Elsewhere in Monday’s update, MOD announced that it had carried out a $10m placement with institutional and sophisticated issued. It issued the shares at $0.30 each, a 36pc premium to its last closing share price on ASX. It will now follow the placing with a rights issue to raise c.$5m from eligible shareholders. This will be priced at $0.24 per share.
MOD said the funds would be used to complete a 2019 capital works programme. This will see it progress T3, purchase a farm on which the T3 open pit is based, complete underground mining studies, and carry out follow-up exploration work. It will also fund infill drilling to upgrade part of the early stages of T3 mine production to a JORC compliant Measured Resource category. Finally, MOD said the money would enable it to progress negotiations with numerous parties around funding T3’s future development.
Hanna added: ‘Funding from this capital raise will enable the Company to progress the T3 Copper Project towards a development decision and conduct further drilling for additional resources. With strong ongoing support of our shareholders through a placement and a fully underwritten rights issue, we believe that the Company will have sufficient working capital to achieve our objectives.’
Author: Daniel Flynn
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