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VANCOUVER (Reuters) - A tussle for control of a promising copper project in Serbia shows there is appetite for high quality mining assets in stable countries and may be a harbinger of further industry mergers and acquisitions, executives involved in the deal said on Monday.
Nevsun Resources Ltd (NSU.TO) said on Sunday it had agreed to buy fellow Canadian mining company Reservoir Minerals RMC.V for $365 million, getting its hands on the large, high-grade Timok copper-gold project in eastern Serbia.
Timok is jointly owned by Reservoir and Freeport, which is under pressure to sell assets to reduce its $20 billion debt pile. The Reservoir-Nevsun deal trumps the Lundin one as Reservoir has the right to make the first offer if Freeport wants to sell.
Nevsun was one of many companies interested in acquiring Reservoir and Timok, Reservoir Chief Executive Officer Simon Ingram said.
"There were lots of groups in the data room," he said in an interview.
A drop in copper prices to seven-year lows below $2 a pound in January has created opportunities for miners with strong cash balances to acquire assets, added Nevsun Chief Executive Cliff Davis.
The commodity price drop has forced many debt-laden miners to look at selling off choice assets.
"We should see more M&A in the marketplace.... There are various assets that are good quality that are financially burdened," Davis said in an interview.
With a goal of cutting its debt in half, Phoenix, Arizona-based Freeport said in January it would consider selling any mining assets if it got the right offer. That includes world-class assets in stable locations such as its Morenci operation in Arizona.
High price expectations among sellers are among factors that have inhibited mining acquisitions in recent years, but that may be changing, Davis said.
"They are getting more realistic and that will precipitate more M&A," he said.
Reservoir shares closed up nearly 20 percent at C$8.35 on the deal, while Nevsun shares slipped more than 10 percent to C$4.22. Lundin shares were little changed at C$4.38.
The loss of Timok is not a "significant" negative for Lundin as it has several internal growth opportunities and is expected to pursue other acquisitions, RBC Capital Markets analyst Fraser Phillips said in a note to clients.
Reporting by Nicole Mordant in Vancouver; Editing by David Gregorio