The acquisition of Reservoir Minerals Inc. by Nevsun
Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) has been completed, after the
latter added a CA$2 cash bonus to its two-for-one share offer.
Nevsun Resources is a cash-rich, operationally strong company, and the
combination with Reservoir produces a solid mid-tier base metals company. The
cash flow from its mine in Eritrea (shifting to a zinc-heavy part of the
deposit) plus the potential from the developmental copper and gold project
acquired from Reservoir, gives good diversification. The stock pays a decent
dividend. Over the longer term, it is potentially an acquisition target in
its own right.
Reservoir shareholders received two Nevsun shares plus CA$2 for each
Reservoir share.
A cloud hangs over the party
The great conclusion to this story is somewhat marred by the tax treatment
for U.S. shareholders. Nevsun obtained an opinion indicating that the
acquisition would be a taxable event on all shares received (plus the cash of
course), and they filed with the IRS to that effect. Given this, most
custodians are likely to report the share exchange as fully taxable, and
unless a Reservoir shareholder has a particularly knowledgeable and assertive
CPA, that's the way it will be.
Lastly, we wish to express our thanks to Miles Thompson, Reservoir's
founder and chairman; Simon Ingram, CEO; Chris MacIntyre, corporate
development; and the exploration team, all of whom made Reservoir the
tremendous success it was.
Disclosure:
1) Adrian Day: I or my family own shares of the following companies mentioned
in this article: Reservoir Minerals shares that have now become Nevsun
Resources shares with the completion of the acquisition. I personally am or
my family is paid by the following companies mentioned in this article: None.
My company has a financial relationship with the following companies
mentioned in this article: None. Clients of Adrian Day Asset Management own
shares of the following companies mentioned in this article: Reservoir
Minerals shares that have now become Nevsun Resources shares with the
completion of the acquisition. Clients of Adrian Day Asset Management owned
over 5% of the shares outstanding of Reservoir Minerals. I determined which
companies would be included in this article based on my research and
understanding of the sector. Statement and opinions expressed are the
opinions of the author and not of Streetwise Reports or its officers. The author
is wholly responsible for the validity of the statements. The author was not
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