Leading shareholders of Inmet Mining Corp., say the company is shopping a significant but minority stake in Cobre Panama, the $6.2-billion (U.S.) copper project it is developing in Central America, as it works to fend off a hostile takeover from Canadian rival First Quantum Minerals Ltd.
“First Quantum has been approached, directly and indirectly through its financial advisers, by a number of shareholders of Inmet who have expressed concern that Inmet is proposing to complete a sale of a further minority interest in the Cobre Panama project,” First Quantum said in a statement on Saturday, decrying the tactic as potentially diminishing the economic value of the acquisition of Inmet.
“These concerns are apparently based upon discussions with a senior executive officer of Inmet.”
Sources say the stake could be as large as 20 per cent and as small as 15 per cent and would be sold as a tactic to defend against a $5.1-billion hostile bid for all of Inmet from First Quantum, a Vancouver-based firm with key assets in Africa.
Inmet recognized on Saturday that it is seeking a potential minority partner at Cobre Panama, but declined to provide details. It suggested First Quantum’s complaints are disingenuous, because the intention to sell a further stake in Cobre Panama has long been on the table.
“The Board and its advisors are engaged in a thorough and rigorous process to evaluate First Quantum’s offer and to explore the full range of all potential alternatives that may provide greater value to Inmet shareholders, including those activities that have been commenced prior to First Quantum’s bid,” Inmet chairman David Beatty said in a statement.
To be sure, at least a dozen companies have visited the site in Panama over the past three years as Inmet tried to attract a joint venture partner to help it pay the huge development costs, but that search had been for the most part called off in recent months as it secured project financing for its 80 per cent-share of the project.
The bid for Inmet underscores growing belief that global copper markets could resume a powerful decade-old climb in coming years as the global economy starts to grow again after years in the doldrums.
Cobre Panama will produce some 300,000 tonnes of copper a year, making it one of the world’s largest undeveloped copper deposits, on par with mines in key copper geographies in Chile and Peru.
First Quantum has offered $72-a-share for Inmet, sweetening the offer twice and then making it hostile after Inmet rebuffed friendly approaches at $62.50 in October and $70 in November. The offer was made officially to shareholders this week, and Inmet has until Jan. 24 to respond.
The board had formed a special committee to review the offer and assess whether it compensates shareholders for the value of Cobre Panama now and once it is in production.
“As you know, it is a condition of First Quantum’s Offer that Inmet and its subsidiaries not take any action which might have the effect of materially diminishing the economic value to First Quantum of the acquisition of Inmet shares or make it inadvisable for First Quantum to proceed with the offer,” First Quantum said. “We are therefore very concerned that the Special Committee could be contemplating steps which could deprive Inmet shareholders the opportunity to consider our Offer.
Inmet largest shareholder, Leucadia National Corp., said Thursday it intends to tender to the offer. The miner’s stock is trading a few cents below the offer price.