Adrian Day - Mon, Jul 11, 2016

Reservoir Minerals Goes Out in Glory

Adrian DayMoney manager Adrian Day updates the conclusion of the saga of Nevsun Resources' acquisition of Reservoir Minerals.

The acquisition of Reservoir Minerals Inc. (RMC:TSX.V) 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.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."

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 paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation or editing so the expert could comment independently about the sector. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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