http://www.businessweek.com/news/2013-01-22/inmet-in-talks-with-parties-after-rejecting-first-quantum-bid

Bloomberg News

Inmet in Talks With Parties After Rejecting First Quantum

January 22, 2013

Inmet in Talks With Parties After Rejecting First Quantum Bid

Inmet has approached other parties who have “expressed an interest in considering alternative transactions involving Inmet or its assets,” the company said today in a statement. Photographer: Norm Betts/Bloomberg

Inmet Mining Corp. (IMN) said it’s in talks with several parties about other deals after recommending shareholders reject a C$5.1 billion ($5.1 billion) hostile takeover bid from First Quantum Minerals Ltd. (FM)

Inmet has approached third parties who have “expressed an interest in considering alternative transactions involving Inmet or its assets,” the Toronto-based company said today in a statement. Inmet said shareholders should reject First Quantum’s C$72-a-share offer because it undervalues the company and because the potential buyer has no experience developing a mine the size of Inmet’s Cobre Panama project.

“Our shareholders can do significantly better and we urge them to reject First Quantum’s offer,” Inmet Chairman David R. Beatty said in the statement. “The board is engaged in a thorough and rigorous process aimed at investigating all potential strategic alternatives to maximize shareholder value.”

First Quantum took its cash and stock bid directly to Inmet investors Jan. 9 after Inmet’s board rejected two earlier offers. Vancouver-based First Quantum is seeking to gain control of the Cobre Panama project to create one of the world’s five largest producers of the metal.

Inmet rejected the bid even though its biggest investor, Leucadia National Corp. (LUK:US), said Jan. 10 it would tender its 16 percent stake in support of First Quantum’s bid “in the absence of changed circumstances or new information.”

Temasek Stake

Inmet rose 0.5 percent to close at C$71.29 in Toronto. The shares have closed below First Quantum’s C$72 offer price every day since Jan. 9, when the company made its formal offer. First Quantum declined 1.9 percent to C$20.92.

Cobre Panama is the second-largest copper project under construction, after Rio Tinto Group’s Oyu Tolgoi mine in Mongolia, according to a November presentation posted on Inmet’s website. The mine will cost about $6.2 billion and produce an average of 266,000 tons a year of the metal, which has more than quadrupled in price in the past 10 years.

Buying Inmet, which also operates mines in Finland, Spain and Turkey, would help First Quantum diversify geographically and increase its output, First Quantum President Clive Newall said on a Dec. 17 conference call. First Quantum can develop projects more cheaply than its peers and would use its expertise to cut the cost of building Cobre Panama, Newall said.

‘Underestimating’ Costs

Inmet said it disputes First Quantum’s claims that it could achieve substantial savings in developing the project.

“First Quantum has a track record of repeatedly underestimating development costs and overestimating anticipated copper production on projects that are much smaller and simpler than Cobre Panama,” Beatty said in a letter to shareholders.

A First Quantum spokesman declined to comment on Inmet’s statement today.

Temasek Holdings Pte Ltd., Singapore’s state investment company, is Inmet’s second-biggest shareholder, with 11 percent, according to data compiled by Bloomberg.

Goldman Sachs Group Inc., Jefferies Group Inc. and Royal Bank of Canada are advising First Quantum.

Canadian Imperial Bank of Commerce and law firm Torys LLP are advising Inmet. Scotiabank is financial adviser to the special committee of the Inmet board and Osler, Hoskin & Harcourt LLP is its legal counsel.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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