Analysts called into question Lundin Mining Corp.'s choice to work with Euro Sun Mining Inc. in a proposed C$1.5 billion joint bid for Nevsun Resources Ltd.

Through the rejected proposal, Lundin would buy Nevsun's copper-gold development assets in Serbia, which it has long coveted, while Euro Sun would acquire Nevsun's operating Bisha zinc mine in Eritrea.

At issue is Euro Sun's ability to run a mining company in Eritrea. The country is a thorny jurisdiction that is subject to United Nations sanctions and, as a totalitarian regime is often criticized for human rights abuses.

"I don't know why they couldn't find a little bit more of a legitimate partner," Paradigm Capital mining analyst David Davidson told S&P Global Market Intelligence.

Part of the problem, as some analysts see it, is that Euro Sun is not a mine-operating junior. Its main asset is a large copper-gold deposit in Romania, which some consider unprofitable at current metal prices.

"Compounding the below-market offer for Bisha is the concern that Euro Sun Mining may not have the capacity to operate a base metal mine in a remote part of Eritrea, with the local government as a 40% partner, while employing its newly acquired cash position to advance a large but marginal copper-gold project in Romania," Joe Mazumdar and Brent Cook, independent analysts with Exploration Insights, said in a May 13 note.

Euro Sun President and CEO Scott Moore and a Lundin Mining spokesperson could not immediately be reached for comment.

Exacerbating the issue for investors would also be the illiquidity of Euro Sun's stock, Cook and Mazumdar said.

Bidding war?

Cook has downplayed the potential for a bidding war, pointing to Timok's modest project size for a larger diversified miner. Others see more room to maneuver. John Tumazos, with John Tumazos Very Independent Research, has said he expects others to bid.

Davidson agreed, saying he did not think Nevsun got a lot of value in the proposed offer. He thinks that others will chase Nevsun and its assets.

"They have options," he said. "The Chinese will probably be quite interested."

The main interest in Nevsun is related to its Timok project, which is notable for a zone of very high-grade copper and gold. Nevsun has estimated the higher-grade reserves, which are part of a broader deposit, at 27.1 million tonnes grading 3.3% copper and 2.1 g/t of gold. Initial production is targeted for 2022.