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Heavy equipment prepares a road at Inmet’s massive Cobre Panama project. Industry experts say Inmet has essentially put itself up for sale, and expect it to start an auction process to attract a bid higher than the $72 per share on offer from First Quantum.

Inmet Mining

If it's a white knight Inmet Mining Corp. is looking for, there's no shortage of candidates it might lure to its massive world class copper project in Panama.

Inmet has yet to comment on the merits of a $5.1-billion hostile takeover offer from rival First Quantum Minerals, the Canadian copper miner that wants to combine the companies and become a top five producer. Late last month Inmet rejected an informal approach from First Quantum that valued it at $4.9-billion, saying it was highly conditional.

Industry experts say Inmet has essentially put itself up for sale, and expect it to start an auction process to attract a bid higher than the $72 per share on offer from First Quantum.

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"The next question is who, because so often a bidder comes out of the woodwork and you say, 'Oh, I didn't think of them,' " said Raymond Goldie, an analyst with Salman Partners in Toronto, pointing to Teck Resources Ltd., Canada's largest diversified miner, as a potential candidate.

Teck declined comment on Tuesday, saying it does not respond to takeover speculation.

Vancouver-based Teck already knows Cobre Panama well, having operated the project until it walked away from it in 2008 when commodity markets briefly crashed at a time when the company was under duress following a major acquisition. Soon afterward, copper prices rebounded and, while off record highs of a year ago, remain healthy.

"The main thing that's changed is the price of copper has sustained itself at a remarkably high level," said Mr. Goldie, pointing at prices near $3.60 a pound and which compare to average costs of production at $1.60 a pound.

Industry sources estimate that up to a dozen companies – First Quantum is not one of them – have visited Inmet's massive Cobre Panama copper project in the past three years as it tried to attract a joint venture partner to help shoulder some $6.2-billion in development costs.

It backed off of those efforts in the summer as the project became fully financed, including a $1-billion gold-streaming agreement with Franco Nevada Corp. that investors applauded as an endorsement of a project that will become the largest base metals mine ever in Central America.

If Inmet were to put itself up for auction it would likely attract most of the world's major copper producers, all of them eager for a peek at confidential data surrounding Cobre Panama, even if they have no plan to submit bids.

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Cobre Panama will be the largest investment in Panama since the building of the Panama Canal. Once built, the mine will produce close to 300,000 tonnes of copper per year for 40 years. It will be one of the world's largest, long-life copper assets to come on-stream at a time when copper prices have sustained nearly a decade of high prices.

Analysts also mention KGHM Polska Miedz SA, which last year bought Toronto-listed Quadra FNX Mining, as a firm that might be drawn by the Inmet assets. Antofagasta PLC, Xstrata PLC, Freeport-McMoRan Copper & Gold Inc. and China Minmetals are other names bandied about.

Lawyers involved in the mining industry say Chinese state-owned enterprises have started poking around the world's copper assets after having taken a pause in recent months.

If a bid were to arise from an SOE, lawyers say, it might meet some turbulence given the changes announced by Ottawa this month to takeover rules where SOEs are involved, but would likely get through because all of Inmet's assets are outside of Canada.

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