Timok has emerged as a globally significant asset since its discovery four years ago, as mining groups manoeuvre for top-tier copper deposits. Rio could “do a drafts move,” one analyst said in private, “try and take out Reservoir and then have a tug of war over Timok.” It could also team-up with Reservoir and take Lundin’s share of the deal.
Lundin Mining, backed by billionaire Lukas Lundin, has made a bold $263m move onto Serbia’s fast emerging copper belt, threatening to kick-off a takeover tussle, as interest in the district hots up writes globalminingobserver.
Copper giant Freeport-McMoRan, which is trying to pay down its debt pile of $20bn, has sold Lundin Mining part of its massive Timok discovery, seen as the world’s largest new copper discovery for several decades. Timok is co-owned by explorer Reservoir Minerals, which shot up 16 per cent on news of the deal.
Reservoir has 60 days to exercise a right-of-first-refusal and has $33m in cash, putting a counter-bid out of reach, but its exercise rights are “very strategic to other global players”, said brokers at Canaccord Genuity, as companies elbow in on the asset.
Rio Tinto made a surprise move into the district late last year, striking a separate copper joint-venture with Reservoir. Rio has also been linked by analysts in London to a possible bid for Lundin Mining, as it chases an expansion of its copper business, whilst Reservoir has strategic backing from deep-pocketed funds and a Chinese smelter.
“Drafts Move”
Timok has emerged as a globally significant asset since its discovery four years ago, as mining groups manoeuvre for top-tier copper deposits. Rio could “do a drafts move,” one analyst said in private, “try and take out Reservoir and then have a tug of war over Timok.” It could also team-up with Reservoir and take Lundin’s share of the deal.
Insiders declined to comment, but Reservoir is understood to be actively weighing its options. The company released a statement to the stock exchange saying it has been “in discussions with Freeport and several other parties” for “the past few months.” It has until early May to decide if it will exercise its rights and will “update the market in due course.”
On a conference call, Lundin Mining’s chief executive Paul Conibear said he had been monitoring Timok since 2013 and has been in discussions with Freeport for over a year. Lundin Mining, which co-owns a cobalt refinery with Freeport in Finland, provided Reservoir with notice of the terms of its deal last week. “The clock has started ticking” on Reservoir’s exercise rights, Conibear said. “We’ve got a couple of months to go here, I hope it concludes.”
Lundin Mining is only paying $135m upfront, with the balance staggered over project milestones, including a decision to mine high-grade ore. Brokers linked to the Lundin group said the upfront payment was equal to 5 cents per lb, a cheap deal on a coveted asset, suggesting the cash-rich Lundin group is “taking advantage” of Freeport’s efforts to pay down debt. The deal is “easy on our balance sheet,” Conibear told analysts. “This is an ideal fit for us.”
Lundin Mining, which has operations in Spain, Portugal and Sweden, has already used the current downturn to buy Freeport’s Candelaria copper mine in Chile for $1.8bn and Rio Tinto’s Eagle nickel mine in Michigan for $325m. Lukas Lundin’s gold vehicle, Lundin Gold, has similarly snapped-up the Fruta del Norte gold project in Ecaudor, paying $240m for an asset that changed hands in 2008 for $1.2bn.
The group’s latest move into Serbia values Timok at $1.5bn, according to analysts at Scotiabank. Reservoir currently owns 25 to 45 per cent of the project, implying a market cap of at least $375m, way above its current value of C$258m ($194m).
Reservoir last traded at C$5.25, up 25 per cent in two trading days. Freeport and Lundin Mining have also bounced with the copper price, up 16 per cent since January to $5,037 per tonne.
