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Lundin's Zinkgruvan zinc, lead and silver mine in Sweden. Lundin has gone so far as to force Equinox to retract its estimate for copper reserves in its prized Lumwana mine in Zambia. (Petter Koubek/Bloomberg News/Petter Koubek/Bloomberg News)
Lundin's Zinkgruvan zinc, lead and silver mine in Sweden. Lundin has gone so far as to force Equinox to retract its estimate for copper reserves in its prized Lumwana mine in Zambia. (Petter Koubek/Bloomberg News/Petter Koubek/Bloomberg News)

Mining

Lundin stock rides wave on takeover saga, rising metals prices Add to ...

There's nothing like a takeover battle to accelerate a stock, and few have gone up as quickly in recent months as diversified metals player Lundin Mining Corp.

Lundin shares have climbed more than 200 per cent since hitting a 52-week-low of $2.91 last summer, and rising metal prices are only part of the story.

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In just three months, Lundin has had a friendly merger fall through, a hostile takeover fall away and is now in intense discussions to possibly sell all or parts of the company.

Lundin shares surged in late February after Equinox Minerals Ltd. made a hostile $4.8-billion bid that valued the copper-nickel-zinc company at $8.10 per share. The unsolicited offer, which Lundin rejected as too cheap and filled with risk, was dropped last month after Equinox struck a deal to sell itself to Barrick Gold Corp. for $7.3-billion.

Meanwhile, Lundin executives have been crisscrossing the globe talking to potential buyers for part or all of its assets, including a Chinese-backed consortium drawn to Lundin's coveted 24-per-cent stake in the massive Tenke Fungurume mine in the Democratic Republic of the Congo.

Lundin stock hit $9.31 on takeover speculation late last month, its highest level since the commodities run-up in mid-2007, as investors bet a sale is likely.

"The alternative … seems unlikely given the general state of balance sheets in the mining industry paired with the appetite to grow or replace existing or depleting asset bases," analysts at Swedish-based Handelsbanken Capital Markets said in a note to clients late last week.

Despite a recent cooling off of commodity prices on fears of stalled global growth, demand for copper and other metals Lundin produces is expected to remain steady as China's construction frenzy continues.

The run-up in metal prices so far this year is also expected boost Lundin's first-quarter financial results, set for release on Tuesday.

Analysts surveyed by Thomson One forecast Lundin will report earnings per share of 21 cents for the January-to-March quarter. Revenues are forecast to be $253-million, an increase of 78 per cent from $142-million last year.

About two-thirds of Lundin's revenues come from copper, which hit a record $4.60 (U.S.) per pound in February. The company also produces zinc, nickel and lead.

As for a possible sale, Lundin executives are quick to point out that it may not happen if the price isn't right.

TD Securities analyst Greg Barnes has split the odds; a one-third chance that Lundin is sold, one-third that it's broken up and its Tenke stake sold, and one-third that it continues on as is.

Alone, the company is worth $9.50, according to TD. If broken up would be worth $10.32 a share, and $11.70 if sold in one piece.

Lundin shares closed at $8.99 on Friday which, compared to last summer's level below $3, has shareholders happy to have held on for the ride.

Follow on Twitter: @BrendaBouw

 
Security Price Change
LUN-T Lundin Mining 6.11 0.02
0.328 %
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