Reservoir Minerals, a small mining company that is the target of a friendly takeover, said on Tuesday it has received an unsolicited $130 million financing proposal from Shandong Xiangguang Group, a China-based shareholder.
Reservoir said it has also been made aware that another China-based shareholder, Jing Bao, has publicly criticized its planned takeover by fellow Canadian miner Nevsun Resources Ltd .
Reservoir’s board “unanimously agreed that the arrangement with Nevsun was the preferred alternative”, Reservoir said in a statement on Tuesday.
In an agreed takeover, Nevsun on April 24 said it would buy Reservoir Minerals for about $365 million in cash and stock. Nevsun would also provide about $135 million in financing to Reservoir.
Reservoir last November contacted around 25 groups to consider potential strategic partners for its Timok project, a high-grade copper deposit in Serbia. Included in that group were financing proposals from Jing Bao and Shandong Xiangguang.
The financing proposal from Shandong Xiangguang requires Reservoir to make an $80 million private placement of shares with the Chinese group, as well as borrow $50 million from it secured against Reservoir’s stake in the Timok project.
If Reservoir should default on repaying or servicing the loan, which it could as the company has no current operations, Reservoir’s stake in the Timok project could revert to Shandong Xiangguang, it said.