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Inmet CEO Jochen Tilk speaks at the shareholders meeting in Toronto on April 27, 2010. (MARK BLINCH/Mark Blinch/Reuters)
Inmet CEO Jochen Tilk speaks at the shareholders meeting in Toronto on April 27, 2010. (MARK BLINCH/Mark Blinch/Reuters)

Hot metal prices spur Inmet-Lundin deal Add to ...

Canadian miners Inmet and Lundin are combining to create a copper powerhouse, in the latest deal that signals how the mining sector is quickly consolidating to capitalize on surging metal prices.

The company, to be called Symterra Corp., will be among the largest base metals producers in Canada, focused largely on copper , as well as zinc and nickel.

Structured as a "merger of equals," the deal creates a company with a combined market capitalization of about $9-billion. It comes amid a flurry of mergers of Canadian mining companies in recent months as companies flush with cash from surging commodity prices push to expand their operations as part of a global scramble to secure attractive mineral reserves.

The creation of a major copper producer also comes as the price of the widely used metal is on a record run, as a result of tight supply and strong demand. The metal, used in everything from power to construction, is sought by rapidly industrializing countries such as China as they build out their infrastructure.

The metal has also benefited from increased investor demand, with the launch of new copper-backed, exchange-traded funds in recent weeks.

In a conference call with analysts on Thursday, Inmet president and chief executive officer Jochen Tilk said the deal will create a larger company with more financial strength, something he said "will be more important than ever" in the mining industry in future.

"It's not only very logical for both of us ... but important for the long-term ability to survive and thrive in the copper business," Mr. Tilk said. "This is a very exciting and necessary transaction for Lundin and Inmet."

He said the merger will create a new senior base metals firm, which he argued Canada needs after losing such companies as Inco and Falconbridge to foreign buyers in a merger frenzy a few years ago.

The companies said there is no value attached to the deal, saying the deal was pursued to combine operations and not to achieve cost savings. There was no premium attached to the share combination.

Lundin Mining chairman Lukas Lundin said the merger will create "a new mining powerhouse" and an alternative senior copper company for investors.

"There aren't that many out there," Mr. Lundin said on the call Thursday.

Symterra's production profile is expected to be about 80 per cent copper, followed by zinc and nickel.

The name Symterra, comes from a combination of "symmetry" and "terra" according to a Lundin spokeswoman. Symmetry is meant to signal the alignment between Inmet and Lundin, and terra represents the earth.

Toronto-based Inmet produces copper, zinc and gold through its interests in four mining operations; Cayeli in Turkey, Las Cruces in Spain, Pyhasalmi in Finland and Ok Tedi in Papua New Guinea. It also has a 100-per-cent interest in Cobre Panama, a development property in Panama.

Vancouver-based Lundin has operations in Portugal, Spain and Sweden that produce copper, nickel, lead and zinc. It also has expansion projects at its Zinkgruvan operation in Sweden and its Neves Corvo mine in Portugal, along with an equity stake in the Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo.

Mr. Tilk will be president and CEO of the new company, while Mr. Lundin will be non-executive chairman.

"We view this as a brilliant transaction as it would create a sizable copper producer with a meaningful pipeline of growth," said Tom Meyer, an analyst at Raymond James Ltd.

The expansion of Tenke expansion combined with the Cobre Panama development project is "an ideal combination in a robust commodity price environment," Mr. Meyer said.

"In our view, the new entity combines balance sheet and management strength for the benefit of all shareholders. Benefits, in our opinion, that could not necessarily be realized by owning the companies independently."

Other analysts were mixed on the news of the merger, which was announced after markets closed Wednesday. While the merger creates a large base metals producer it "appears to be combining simply for size," said BMO Nesbitt Burns analyst David Cotterell. "Similar recent mergers have not been well received by the market," Mr. Cotterell noted.



Inmet Mining Corp.

Explores and mines in Turkey, Spain, Finland and Papau New Guinea. Also developing an open-pit copper mine in Panama.

Main products: Copper, gold, zinc, pyrite.

Market value: $4.19-billion.

Annual revenue (2009): $983-million.

Annual profit: $269-million

Lundin Mining Corp.

Explores and mines in Sweden and Ireland.

Main products: Copper, zinc, nickel, lead.

Market value: $4.58-billion.

Annual revenue (2009): $745-million.

Annual profit: $73-million (U.S.)

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