First Quantum Minerals Ltd. has extended the deadline on its hostile bid for Inmet Mining Corp. by almost two weeks, citing regulatory concerns.
The extension may be welcomed by shareholders weighing the value of Inmet's massive Cobre Panama copper asset in the context of a global copper market outlook that is more uncertain today than it was two months ago, when First Quantum tabled the $5.1-billion offer.
It also keeps the door open for another bid for Inmet and the jewel in its crown, Cobre Panama, a project in Central America that is already under construction and is one of the world's largest undeveloped copper reserves.
A mine will cost more than $6-billion to build, but once in production Cobre Panama – meaning Panama Copper – would add about 300,000 pounds of the industrial metal a year to global production, worth about $1-billion at current prices.
"I'm surprised there hasn't been a counterbid for Inmet, so, once again, it [the extension] increases the chance there could be one," said Raymond Goldie, an analyst with Salman Partners Inc.
First Quantum made its $72-a-share offer directly to Inmet shareholders on Dec. 16, after the Inmet board rejected earlier proposals at $62.50 a share and $70 a share in October and November.
Inmet says the bid is too low, pointing out the recent deterioration in First Quantum's share price. At current levels, the cash-and-stock bid is valued at less than $68 a share.
First Quantum chief executive officer Philip Pascall reiterated the cash-and-stock offer for Toronto-based Inmet on Wednesday, surprising some who had expected a bump in the price after he got access to confidential data on Cobre Panama last week.
"We valued the opportunity provided to us by the Inmet board for a Cobre Panama site tour and to conduct a detailed due diligence review, including having full access to key personnel and to Inmet's virtual data room," Mr. Pascall said in a statement.
"Following such access and having largely concluded our detailed review of Inmet's business, we have reconfirmed our offer to the Inmet Board," he said.
Analysts say Vancouver-based First Quantum might be hard pressed to justify a higher bid to shareholders after a spate of multibillion-dollar writedowns in the mining industry took much of the wind out of mergers-and-acquisitions activity in general.
Inmet shares have fallen more than 10 per cent for the year to date and First Quantum shares are down slightly more, mirroring copper prices that slipped on global markets in recent months and ended a trajectory that was only interrupted seriously for a few brief months at the onset of the global financial crisis.
Prices were near $3.57 a pound on Wednesday, nearly six times the lows hit a decade ago but well below record levels of more than $4.50 a pound in 2011. Prices have been largely sustained by voracious demand out of China, but there has been concern of late that prices could ebb further.
The new deadline on the First Quantum offer, originally set for Wednesday at 5 p.m., is March 11 at midnight. That may actually turn out to be a blessing to Inmet, which has recommended shareholders reject the bid, giving other players two more weeks to mull a counteroffer.
First Quantum extended the bid as it awaits regulatory approvals under the Investment Canada Act, triggered because less than two-thirds of the company's directors are Canadian or permanent Canadian residents.
First Quantum (FM)
Inmet Mining (IMN)