Shares of Petaquilla Minerals Ltd. climbed more than 50 per cent Thursday after Inmet Mining Corp. made a $112-million takeover offer in a bid to consolidate the area around its Cobre Panama project.
Petaquilla's Molejon project neighbours Inmet's $6.2-billion (U.S.) Cobre Panama copper-gold porphyry project, Panama's largest-ever mine development.
Inmet president and chief executive Jochen Tilk said the company will reach out to Petaquilla shareholders over the coming weeks.
"We are neighbours in Panama and this is our offer to make our neighbour a stronger company financially and reputationally," Mr. Tilk told a conference call Thursday.
Petaquilla urged its shareholders to take no action while it reviewed the announcement.
"Petaquilla cautions its shareholders that Inmet has not made a formal offer and no action is required by Petaquilla shareholders at this time," the company said in a brief statement.
Petaquilla shares were up 29 cents at 54 cents at midday on the Toronto Stock Exchange, trading well above Inmet's offer. Volume was extremely heavy at more than 15 million shares, by far the most on Toronto's main board.
Inmet stock was up 95 cents, or 2.15 per cent, at $45.12 on below average volume of some 53,000 shares.
After the close of markets Wednesday, Inmet announced an offer of 48 cents per share in cash – or 0.0109 of an Inmet share for each Petaquilla share.
Inmet said it would also allow Petaquilla to proceed with a spin-out of Petaquilla's assets in Spain to Petaquilla shareholders.
RBC Capital Markets analyst Fraser Phillips called the deal a "a reasonable transaction" for Inmet.
"The cost is not material relative to its financial resources and the potential value of Cobre Panama," Mr. Phillips wrote in a note to clients.
"It will allow Inmet to control and operate the neighbouring Molejon gold mine to its advantage, eliminating any extraordinary environmental and government and community relations risks that might exist and helping to ensure the success of Cobre Panama."
However, BMO Capital Markets analyst Stephen Bonnyman noted that while the deal may not appear expensive and may be of strategic value, "the timing and use of funds will likely not sit well with investors, given the large existing capex commitment to Cobre Panama."
Questions were raised early in 2011 about the future of the Cobre Panama project when Lundin Mining Corp. walked away from a planned merger with Inmet.
The project has since received government approval for an environmental and social impact assessment required for the building of a mine, port facility and coal-fired power plant.
However, environmental groups continue to oppose the project, contending it will destroy 5,700 hectares of forest and affect local wildlife, including a large number of protected animal species.
In January, Korea Panama Mining Corp. decided to exercise its option to take a 20-per-cent interest in Cobre Panama copper mine, leaving Inmet with an 80-per-cent stake in the development-stage project. It will fund 20 per cent of development costs.
In addition to Cobre Panama, Inmet produces copper and zinc at its operations in Turkey, Spain and Finland.