First Quantum and Inmet Argue Takeover Bid

Aerial view of coastal facilities serving the $6.1-billion Cobre Panama mine project, scheduled to begin production in late
2015, with a mine life estimated at more than 30 years. (Photo courtesy Inmet Mining)
Inmet Mining’s board of directors recom-mended on January 22, 2013, that its shareholders reject an unsolicited offer from First Quantum that valued Inmet at about C$5.1 billion in cash and First Quantum shares. Central to Inmet’s argu-ment was its conviction that the First Quantum offer did not adequately compen-sate Inmet shareholders for the company’s low-risk asset base and its strong prospects for growth and value creation at its 80%-owned Cobre Panama project in Panama.

The Inmet statement included some disparaging comments regarding First Quantum, including, “First Quantum has no experience developing projects the size of Cobre Panama and no relevant experi-ence in Latin America,”...“First Quantum has a track record of repeatedly underesti-mating development costs and overesti-mating production expectations,” and... “The First Quantum Offer does not com-pensate Inmet shareholders for the inher-ent risks in First Quantum shares.”

On January 24, First Quantum re-sponded with some disparaging comments of its own regarding the Inmet Director’s Circular, including, “It does not identify any compelling alternative to our proposal,”...“It presents generic and rehearsed arguments to support its case but ignores the overriding commercial logic of a combination,” and...“It discloses that Inmet has estab-lished an electronic data room and granted due diligence access to chosen parties after having repeatedly denied to First Quantum the opportunity to conduct even the most cursory due diligence review. This, in spite of the fact that First Quantum is the only party to have placed a firm strategic alternative on the table by making the commitment of a definitive public offer for the company, with compelling benefits for all shareholders.”

The First Quantum offer was due to expire February 14, 2013, unless extended or withdrawn.

Inmet said it was looking for value-enhancing alternatives to the First Quantum offer.

Cobre Panama is a $6.1-billion, open-pit project currently in the early stages of construction, with startup scheduled for late 2015. Production of metal in concen-trates over a mine life of more than 30 years is scheduled to average 266,000 mt/y cop-per, 2,900 mt/y molybdenum, 87,000 oz/y gold, and 1.5 million oz/y silver.

Inmet has three active mining opera-tions: the Çayeli underground copper and zinc mine in northeastern Turkey, the Las Cruces open-pit copper mine in southern Spain, and the Pyhäsalmi underground copper and zinc mine in central Finland.

First Quantum’s operating mines are the Ravensthorpe laterite nickel mine in Western Australia, the Kansanshi open-pit copper-gold mine in Zambia, the Guelb Moghrein open-pit copper-gold mine in Mauritania, and the Kevista open-pit nick-el-copper-precious metals mine in Finland. Its development projects include the Sentinel copper project in Zambia and the Haquira copper project in Peru.

As featured in Womp 2013 Vol 02 -