Why the MOD share price soared 48% this morning

MOD Resources (ASX:MOD) has returned from a trading halt this morning for the first time after news of a takeover offer from Sandfire Resources (ASX:SFR).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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'.

Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

A businessman stacks building blocks.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares hit a new record high today.

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Auckland Airport, Australian Ethical, Breville, and Clarity shares are charging higher

These shares are having a better day than most on Thursday. But why?

Read more »

A man sits on a bench atop a mountain with a laptop, making investments with a green ESG mind.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors endured a day to forget this hump day.

Read more »