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Many copper miners are familiar with Inmet’s Cobre Panama project after the copper miner shopped around a stake to help it shoulder development costs.

Inmet Mining

Inmet Mining Corp. shares rose more than 4 per cent Monday as investors in the Toronto miner bet that an ardent suitor has not played its last card with its $5.1-billion hostile takeover bid.

First Quantum Minerals Ltd. offered Inmet shareholders $72 a share over the weekend, sweetening for the second time its offer for the owner of a large copper asset in Panama. A first, informal approach on Oct. 28 valued the company at $62.50 a share and a Nov. 28 offer was for $70 a share, or $4.9-billion.

"We're happy but, you know, not a lot has really changed," said Terry Thib, a portfolio manager with Norrep Funds in Toronto that holds Inmet shares. "You could say it's below where it should go out, given they are not working with a full set of data."

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Investors point out that the way the stock-and-cash offer is structured, it is worth about the same today as it was a few weeks ago because First Quantum shares have lost some of their value in the interim, including a 4-per-cent drop on Monday.

Inmet shares closed at $72.85 after trading even higher for most of Monday, suggesting shareholders expect a higher bid from First Quantum or a rival. Of 16 analysts following the company, only three have price targets below the First Quantum offer. Analyst Raymond Goldie of Salman Partners has a target price of $121 per share, according to Bloomberg data.

"I think the chance of a deal getting done at the current offer is relatively low," said Orest Wowkodaw, an analyst at Canaccord Genuity who raised his target price on Inmet to $82 a share from $69. "I think something close to $80 would be a convincing price for Inmet shareholders."

The hostile approach from First Quantum may drive Inmet to seek a white knight.

Many copper miners are familiar with the project after visits when Inmet was shopping around a stake in Cobre Panama to help shoulder development costs. First Quantum did not visit the site at the time because it is only interested in being a controlling partner.

First Quantum is a major builder of copper mines and Canada's largest pure-play copper producer.

Cobre Panama is one of the few large, long-life copper projects in development. The asset is the largest discovered in Central America and, with start-up costs of some $6.2-billion, is the most ambitious project in Panama since the Panama Canal.

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"I would like to emphasize, this combination of Inmet and First Quantum is an opportunity to create a new global leader," First Quantum president Clive Newall told analysts, emphasizing the company's track record for delivering value.

First Quantum has a history of building copper mines bigger, better and cheaper by leaning on in-house experts instead of external service providers. The company has not said what it would do at Cobre Panama, but analysts say it could cut building costs by billions of dollars.

First Quantum says it is open to sharing potential savings with shareholders if Inmet opens its books, suggesting the possibility of a higher bid.

"They think they can build Cobre Panama at a fraction of the cost, but the problem is that if Inmet has already let out $4-billion of contracts, clearly a number of those contracts are going to want to be terminated by First Quantum, but they can't really evaluate what the cost of that is without seeing the details," Mr. Wowkodaw said.

The ball appears to be in Inmet's court. The board must evaluate the new offer and shareholder reaction to it and decide whether to respond to it now or after the circular is filed in January.

First Quantum says it has the support of a significant number of shareholders, but has not said which. It does not mention the existence of any lock-up agreements.

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"First Quantum should sweeten the offer," said George Topping, an analyst with Stifel Nicolaus in Toronto. "I don't think by much, but enough to say, 'Give us access to the data and we'll pay you another 5 per cent or so,'" he said.

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