The MOD Resources Ltd (ASX: MOD) share price has rocketed 48% higher to $0.32 in its first stint of trading after news of a takeover offer from Sandfire Resources NL (ASX: SFR).
MOD came back from a trading halt this morning with the release of an announcement that addressed the offer as well as a successful $15 million capital raise.
Sandfire confirmed to the market yesterday that it had approached MOD with a $0.38 per share takeover offer after media reports leaked the news over the weekend. In today's announcement, MOD shed some light on its belief that the proposal undervalues the 'unique and extensive' assets of MOD.
A summary of MOD's reasoning is found below:
- MOD holds a strong position in an attractive location (i.e. the Kalahari Copper belt) within an appealing jurisdiction (i.e. Botswana).
- MOD's T3 Copper Project is a high-quality asset. MOD's pre-feasibility study estimate for the net present value (NPV) of the project is $370m under a 'base case' scenario.
- Brokers forecast the acquisition would be highly accretive to Sandfire, implying there is room for a higher offer.
- MOD's share price (compared to the Sandfire share price and on a standalone basis) is at a 2.5-year low. MOD's last placement in March 2018 was at $0.47 per share.
Although MOD has deemed the initial offer insufficient, the company has said that it is willing to engage with Sandfire if a 'compelling' offer is made. The proposal made by Sandfire was subject to unanimous recommendation from the MOD board.
$15 million capital raise
MOD also shed light on a successful $15 million capital raise which will largely go towards funding working capital for the T3 Copper Project.
The capital raise was comprised of a $10 million institutional placement at $0.30 per share as well as a $5 million rights issue at $0.24 per share.
MOD says that the success of the capital raising 'confirms shareholder confidence in the Company and the quality of the T3 Copper Project'.
