First Quantum Minerals Ltd. has made a hostile, $5.1-billion takeover offer for Inmet Mining Corp., taking the bid directly to shareholders after two earlier offers were snubbed by the owner of one of the world’s largest undeveloped copper assets.
First Quantum, Canada’s largest pure-play copper producer, is offering $72 a share to Inmet, compared with an earlier approach of $70 a share, or $4.9-billion, which Inmet rejected on the grounds that it was “highly conditional” and not in shareholders’ interests. First Quantum’s initial offer, made in late November, was $62.50 a share.
The cash-and-stock offer comes a few days after Inmet raised its copper reserves estimate on its flagship copper project in Central America, Cobre Panama, by 27 per cent and extended the expected mine life by nine years.
Cobre Panama will be one of the few large-scale copper projects to be developed in coming years. It will produce some 300,000 tonnes of copper a year, worth about $1.1-billion (U.S) at current prices and putting it on a similar scale to giant mines in Chile and Peru. The project has had its challenges, among them sharply rising costs and concerns about how its owners will foot a development bill of $6.2-billion.
First Quantum said a combination with Toronto-based Inmet would create one of the world’s leading and fastest-growing copper producers, with output of 1.3 million tonnes a year by 2018, ranking it as a Top Five producer.
First Quantum president Clive Newall said by telephone from London on Sunday that the company decided to make the bid hostile after repeated attempts to engage Inmet in discussions.
“After several weeks of endeavouring to engage Inmet on a friendly basis, we are making a formal offer to the shareholders,” Mr. Newall said. “We’ve been contacted by a fairly large proportion of the Inmet shareholder base.”
First Quantum is betting that the supercycle for copper demand is not yet over, confident that, as the world economy recovers, prices for the industrial metal will resume an upward trajectory. Driven mostly by nearly a decade of insatiable demand from China, copper prices are more than six times what they were in 2003.
Copper is an excellent conductor of heat and electricity that is used in everything from electrical wires to roofing and plumbing and industrial machinery.
The Cobre Panama mining project would be on a scale never before seen in Central America. It is the most ambitious project to be embarked upon in the country since the Panama Canal.
Inmet shareholders are being offered $72 in cash for each of their shares or 3.2962 First Quantum shares plus 1 cent, or a mix of $36 in cash plus 1.6484 First Quantum shares.
Executives at Inmet, which adopted a poison pill takeover defence when First Quantum’s earlier offers came to light, could not be reached for immediate comment on Sunday. First Quantum’s Mr. Newall said he had not yet heard from the Toronto-based company.
Vancouver-based First Quantum produces about 300,000 tonnes of copper a year, and is driving to triple that through growth of projects in Zambia, Peru and Finland.