MOD Resources Limited’s [ASX:MOD] share price will be one to keep an eye on following media speculation about a potential takeover.
The company requested a trading halt this morning, following a statement regarding media reports of a takeover. Before the halt, MOD was trading at $0.22 per share and had seen a 66.63% decline in its share price over the past twelve months.
MOD Resources is an Australian-listed copper company, actively exploring in the Kalahari Copper Belt, Botswana. MOD owns 70% of a UK incorporated joint venture company, Metal Capital Limited, with AIM-listed Metal Tiger Plc (30%).
In a statement released by Sandfire Resources NL [ASX:SFR], Sandfire confirmed it had written to MOD to express its interest in exploring a potential combination of the two companies.
Sandfire is a mining company which explores and develops the DeGrussa Copper-Gold Project in Western Australia, as well as a portfolio of base metal, iron ore, manganese and gold projects.
According to the statement released this morning, any such transaction would be conditional upon satisfactory completion of due diligence, the recommendation of the MOD board and execution of binding documentation, among other things.
Given the non-binding nature of this approach, there can be no guarantee that a transaction will eventuate at this stage. However, both companies have entered into trading halts this morning which could suggest that the offer is being seriously considered.
An announcement is expected to be made before Wednesday, when regular trading will resume.
What’s next for MOD Resources?
In the case both companies agree to move forward with the merger it seems likely that Sandfire will purchase MOD’s common stock as it is the larger company. If this is the case, then we’ll see an acquisition of MOD by Sandfire.
MOD seems like an attractive prospect for Sandfire as it searches for a fresh copper venture. The DeGrussa copper-gold mine in Western Australia — Sandfire’s flagship mine — is set to run down by about 2022.
According to Reuters, Sandfire has valued MOD at about $88 million. Sandfire said the approach was made based on $0.38 per MOD share, which would represent a 73% premium to MOD’s current $0.22 per share.
For Money Morning
PS: If you’re looking for the next hot mining stocks for 2019 then check out this FREE report: ‘Australia’s Top 10 Mining Stocks’. Download your free report now.