Reservoir Minerals (RMC:TSXV) has become the most valuable, by market cap, company on the TSX Venture. Its shares crested above $10 today as its market cap swelled to over $590 million.
The wealth created by this company alone has dragged the TSX Venture to new highs as the recapitalization of the junior resource market comes to fruition after years of contraction and despair. Take a look at Reservoir’s 1-year chart to see the wealth creation:
Many things have to work in concert to create hundreds of millions of dollars. Reservoir’s rise in value has come about following a strategic US$1.1 billion combination between it and Nevsun Resources Ltd. On June 13th, Reservoir Minerals’ management reminded its shareholders to vote FOR the combination.
The Arrangement with Nevsun was determined to be in the best interest of Reservoir’s shareholders as it:
- Combines Nevsun’s $300 million of cash with Reservoir’s high-grade Timok Copper-Gold project
- Benefits from Nevsun’s track record of building and operating a similar size project, the Bisha mine
- Provides diversification for on-going shareholders
- Offers significant exploration exposure in two prolific mining districts
- Continues partnerships with Freeport and Rio Tinto
Click here to read the entire press release.
The company also reported that, “In order for the transaction to be successful, a 2/3 majority of the votes cast by Reservoir’s shareholders must be in favour of the US$1.1 billion transaction.”
The takeover began a few months ago, when Reservoir reported in late-April that:
“Concurrently, the two companies have also entered into a funding transaction comprised of a private placement for 19.99% of Reservoir’s outstanding common shares and a loan transaction. Nevsun has subscribed for 12,174,928 common shares of Reservoir at a price of C$9.40 per share, for a total subscription price of CAD$114,444,323 (US$90,296,571), increasing Reservoir’s total shares outstanding to 60,905,093, and provided an unsecured cash loan of US$44,703,429 to Reservoir.”
Click here to read the company’s press release titled Nevsun Resources and Reservoir Minerals Combine and Consolidate Timok Copper Project Ownership.
Reservoir traded for $3.25 in January of this year.
Reservoir Minerals’ Shareholders Decide
As tension built towards the vote that took place today, investors all over, Canada wondered if it would be approved.
Just when it seemed things couldn’t get much better for Reservoir Minerals shareholders, Nevsun Resources and Reservoir announced this morning (at 12:28 AM EST) that Nevsun and Reservoir had agreed to increase the consideration to be paid to holders of Reservoir’s common shares by adding a cash payment of $C2.00 per Reservoir Share.
This will increase the consideration to be paid to holders of Reservoir’s common shares by approximately US$75 million. In hindsight, this may have played a critical role in tipping the balance…
The company reiterated its strong stance on voting for the arrangement:
“THE BOARD OF DIRECTORS OF RESERVOIR HAS UNANIMOUSLY DETERMINED THAT THE INCREASED CONSIDERATION TO BE RECEIVED BY THE RESERVOIR SHAREHOLDERS IS FAIR TO SUCH HOLDERS AND THAT THE ARRANGEMENT IS IN THE BEST INTEREST OF RESERVOIR.”
Click here to read this morning’s press release.
Again, the press release crossed the wire at 12:28 AM EST. 10 hours later, at 2:04 PM EST, the company announced the securityholder approval of Plan of Arrangement with Nevsun Resources.
To say it was close, would be an understatement.
“The special resolution approving the Arrangement was approved by: (i) 68.24% of the votes cast by Reservoir shareholders present in person or represented by proxy at the meeting; (ii) 69.15% of the votes cast by Reservoir shareholders and optionholders voting as a single class present in person or represented by proxy at the meeting; and (iii) 66.56% of the votes cast by “minority” Reservoir shareholders in accordance with Part 8 of Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions. Nevsun shareholders approved the issuance of the Consideration Shares by approximately 98.95% of the votes cast at Nevsun’s special meeting of shareholders that was also held today.”
source: http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=546414998…
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Reservoir shareholders take stake in Nevsun
Going forward, shareholders of Reservoir Minerals will own approximately one-third of Nevsun’s outstanding shares and will therefore benefit from Nevsun’s ability to advance Timok to production, from Nevsun’s solid, ongoing Bisha operations and from continued exploration and reserve opportunities across the combined portfolio of resource properties.
Reservoir Minerals has not struggled the way many junior resource stocks have over the past five years. It hung below $1 for its first six months or so before taking off and, despite trading sideways for all of 2015, put together one of the great moves on the TSX Venture thus far in 2016.
Reservoir Minerals – 5 Year Chart
Stocks such as Reservoir Minerals are leading the recapitalization of the TSX Venture and junior resource investors in Canada.
This article represents solely the opinions of Alexander Smith. Alexander Smith is not an investment advisor and any reference to specific securities in the list referred to in the article does not constitute a recommendation thereof. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.
