OZ Minerals (OZL) has made an off-market takeover offer for Avanco Resources (AVB, not covered) comprising 8.5¢/sh cash and 0.009 OZL shares for every AVB share (50:50 cash/scrip). This values AVB at 17¢/sh or $418m which is a 119% premium to the company’s 1-month VWAP. While this represents a significant premium to the last price of 7.7¢/sh, OZL is buying a large portfolio of complementary copper/gold assets and will attain a foothold in a proven IOCG district of Carajás in northern Brazil. Our modelling indicates that OZL can fund the acquisition from existing cash whilst still funding the remaining $808m for the Carrapateena project and maintaining dividends. BUY recommendation.
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