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Anvil head feels some regret at having to sell firm Add to ...

Darryll Castle, Anvil Mining Ltd.’s chief executive officer, wishes he didn’t have to sell his company.

A day after publicly announcing a friendly $1.3-billion takeover bid from China’s Minmetals Resources Ltd., Mr. Castle expressed remorse for putting his firm on the auction block. He and his employees worked hard to develop the company’s Kinsevere copper mine in the Democratic Republic of Congo, and had hoped to see it through to full production.

“There’s no doubt that a lot of managers have been through tough times and done the hard jobs in terms of building the company and building the mine,” he said in an interview Friday, “so there’s an element of disappointment around that.”

But Anvil had no choice. Its largest shareholder and 40-per-cent owner, Trafigura Beheer BV, informed the company that it no longer considered its stake a core asset and therefore wanted to cash out. Rather than see the shares sold at market prices, Anvil announced a strategic review – often code for an auction – in early August in hopes of attracting a premium price.

Minmetals came forward, and on Thursday the two publicly agreed to the $1.3-billion cash deal at $8 a share – 40-per-cent higher than the closing price at the time. The high price could be an attempt to discourage other companies from bidding: Minmetals made a hostile $6.3-billion bid in the spring for another miner, Toronto-based Equinox Minerals Ltd., but was beat out by Barrick Gold Corp.

Although copper prices have plummeted from over $4.50 (U.S.) per pound in April down to $3.11 on Friday, the cost of construction means few new mines are expected to start producing over the next few years, which will restrict supply.

The deal must still be approved by shareholders. Typically a merger agreement will include a break fee, which the target – in this case, Anvil – has to pay if it agrees to merge with a second company after signing an agreement with another. But in this deal, a reverse break fee applies: If Minmetals walks away from the deal, it will have to pay Anvil $20-million.

“We want to make sure that we’re not just giving the buyer a free option” to back away if markets turn sour, Mr. Castle said.

While he had nothing bad to say about his suitor, he acknowledged being forced into a corner. Before Trafigura’s declaration, “We weren’t out there … looking actively at doing a transaction,” he said.

“If anything, we would have been focused on bringing the operations into full production and then looking at how to deal with the risk levels of the company.”

Mr. Castle would not say whether Minmetals was the only company to put in a bid. “This wasn’t the only buyer in the world,” he said, “but in our minds it was the best offer in many respects.”

He didn’t close the door on other suitors, however. “It’s possible and we’ll have to see, but it’s not a high likelihood, though,” he said.

“At the end of the day, this was the best thing for shareholders,” he added. “That’s ultimately why we’re all here.”

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