LONDON First Quantum Minerals Ltd., which recently placed a bid for Inmet Mining Corp., expressed concern over suggestions that Inmet could sell a further minority interest in its flagship Cobre Panama project.
First Quantum said in a letter addressed to Inmet chairman David Beatty that it had been approached both directly and indirectly by Inmet shareholders saying that they were concerned about the possible stake sale.
"It is a condition of First Quantums offer that Inmet and its subsidiaries not take any action which might have the effect of materially diminishing the economic value to First Quantum of the acquisition of Inmet shares," First Quantum chairman and chief executive officer Philip Pascall said in the letter. "We are, therefore, very concerned that the special committee could be contemplating steps which could deprive Inmet shareholders the opportunity to consider our offer."
Inmets special committee was set up to advise on the potential risks of accepting the Canadian $5.1-billion ($5.2-billion) takeover bid by First Quantum (amm.com, Jan. 10).
Toronto-based Inmet has said that the special committee and its financial advisers will look into potential strategic alternatives to enhance shareholder value, some of which predate the offer.
Vancouver, British Columbia-based First Quantum is "troubled" by the possibility that this could relate to the sale of another minority stake in Cobre Panama, Pascall said.
"We consider that any attempt to complete such a transaction during the currency of our offer would be inappropriate in the circumstances and constitute an improper short-term defensive tactic in response to our long-term strategic proposal," Pascall said. "It risks being value destroying, further reducing the flexibility of developing Cobre Panama without in any way diminishing the execution risk."
Inmet has already sold off a 20-percent minority stake in Cobre Panama, as well as part of its anticipated precious metals stream.
In a response, Beatty said that Inmets board of directors "is well aware" of its duties and responsibilities with respect to the First Quantum offer. "The board and its advisers are engaged in a thorough and rigorous process to evaluate First Quantums offer and to explore the full range of all potential alternatives that may provide greater value to Inmet shareholders," he said, noting that Inmets board is now considering whether the First Quantum bid adequately compensates its shareholders.
Beatty also confirmed that Inmets board is looking at the possible risks associated with accepting First Quantum shares as consideration.
"Inmet is very proud of its track record of building long-term shareholder value, and we are very comfortable that the decisions we have made regarding Cobre Panama," Beatty said. "We have positioned it to become one of the worlds largest and lowest-cost copper mines."
The Inmet board will file a directors circular and will make a formal recommendation to shareholders by Jan. 24. Until then, Inmet shareholders have been advised not to take any action or tender to the takeover offer.
A version of this article was first published by AMM sister publication Metal Bulletin.