Little Frontera Copper Corp. has lined up one of the world's largest copper producers as a white knight in its battle to better an unsolicited takeover bid launched for it late last year by Invecture Group SA de CV of Mexico.
The Toronto mining company said yesterday that it has agreed to support a competing cash offer from Invecture Group SA de CV of Phoenix worth about $42-million or 65 cents a share, 6 cents a share more than Invecture's offer.
Southern Copper's bid comes at a premium of 38 per cent over the closing price for Frontera shares on the trading day before Invecture unveiled its takeover bid. It is also 12 per cent above the 58 cents a share at which Frontera shares closed on the Toronto Stock Exchange yesterday.
The stock jumped on the news yesterday, climbing 15 per cent, to beyond the 65-cent offer price, although it remains a shadow of the 52-week high of $5.70 it hit last February.
Southern Copper, which has a market cap of about $12.5-billion (U.S.) and mining operations in Mexico and Peru, bills itself as the world's second-largest copper miner. It is controlled by Grupo Mexico, which owns a 79.1-per-cent stake.
Frontera said yesterday that its board of directors is unanimously recommending that shareholders accept the Southern Copper offer and withdraw any stock they may have tendered to the bid Invecture launched in December.
Invecture's move put Frontera in play at a time when the price of copper - like that of most metals - had plunged after surging to record highs. Copper futures are currently trading at $3,231 a tonne on the London Metals Exchange, down from a peak of $8,812 last July.
It also came as Frontera's financial results took a fall. Frontera's profit for the nine months ended Sept. 30 was $6.3-million (U.S.) or 10 cents a share, down from $25.1-million or 39 cents a year earlier, as revenue fell to $93.3-million from nearly $130-million.
Last month Frontera reduced its estimate of the amount of recoverable copper contained in inventories of already mined ore, and wrote down the carrying value of the current, but not long-term, portion of its copper inventory.
The company was launched in 2002 to bring into production the Piedras Verdes copper project in Sonora, Mexico.
FRONTERA COPPER (FCC)
Close: 67¢, up 9¢
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