After recently obtaining shareholder approval to go ahead with the acquisition of Reservoir Minerals, Nevsun Resources (USA) (NYSEMKT: NSU) hopes to close the transaction this week. Although the management of Nevsun is seeing the opportunity to diversify their asset base in the deal, a recent amendment to the deal didn’t go down well with everyone. That can be seen in the downward trend in the stock as the close of the transaction nears.
Nevsun Resources (USA) (NYSEMKT: NSU) raised the cash component of the amount it is paying to bring Reservoir under its armpit. Originally, the deal called for Reservoir shareholders to receive two shares of Nevsun for every share of Reservoir they own. Then there was cash payment of a tenth of cent per share. But the amended deal raised the cash component of the transaction to C$2 per share.
The increase in cash portion of the transaction amount led some to say that Nevsun was overpaying for Reservoir. However, that is not how the management of NSU sees it.
Boosting value for shareholders
According to Nevsun Resources (USA) (NYSEMKT: NSU), the acquisition of Reservoir will significantly boost value for shareholders. Besides the diversification of the asset base, Nevsun also sees the opportunity to use the acquisition of Reservoir to accelerate the development of its various projects.
Nevsun’s CEO, Cliff Davis, said Reservoir was an opportunity for the company to put its cash flow into a potentially high return investment that will unlock significant value for shareholders.
Riding the wave of appetite for safe-havens?
Perhaps Nevsun Resources (USA) (NYSEMKT: NSU) is also looking at the opportunity to capitalize on the high demand for so-called safe-haven assets such as gold. The tepid global economic growth that has also held the Fed from raising interest rates has created a considerable amount of investors uncertainty in stocks and other typically high-yield and high-risk assets. As such, worried investors are taking cover in gold.
Nevsun Resources (USA) (NYSEMKT: NSU) dividend payout
Nevsun Resources (USA) (NYSEMKT: NSU) declared quarterly dividend of $0.04 per share that will be distributed to shareholders on July 8. The stock started trading ex-dividend on June 16. Only shareholders who acquired the stock before the ex-dividend date are eligible for the dividend payout.