LONDON Inmet Mining
Corp.s board has encouraged shareholders to reject First
Quantum Minerals Ltd.s hostile takeover bid, Inmet said
Inmet has a solid portfolio of
low-cost operations in areas without significant political
risk, with major growth and upside potential at its flagship
copper development project, Cobre Panama, the board said.
"The board recommends that
shareholders reject the offer and do not tender their shares,"
Inmet president and chief executive officer Jochen Tilk said
during a conference call, adding that the board is still
considering potential alternative strategies and that "nothing
has been precluded," including a possible further stake sale in
Inmet has already entered into
confidentiality and standstill agreements with several parties
interested in offering alternatives to Vancouver, British
Columbia-based First Quantums takeover bid, the company
"Analysts and shareholders have
been vocal in criticizing the offer (of Canadian $72, or $73,
per Inmet share) is below what they consider to be fair value,"
The combined venture would also
be overextended on the projects it would be able to deliver,
Tilk said, and First Quantum is already busy with its own
The real premium offered by
First Quantum amounts to just 19 percent, which is unusually
low in a hostile takeover, he added.
Analysts covering Inmet also
view the value of the offer as too low to attract shareholders,
saying it wont offset the possible increased execution
risk presented by the combination, Tilk said during the
Cobre Panama is expected to
drive Inmets copper production up 176 percent by 2018,
David Beatty, chairman of Inmets board, said. As the
project moves closer to production, shareholders are expected
to benefit substantially from an increase in the companys
Inmets board also
concluded that the timing of the offer would mean that Inmet
shareholders wouldnt see the full value of taking Cobre
Panama to production and shareholders would be exposed to more
geopolitical and developmental risk from First Quantums
development projects, as well as higher cash costs and lower
The board also stated that First
Quantums past projects have had an average capital cost
of less than $500 million and referred to First Quantums
only project in Latin America, southern Perus Haquira
project, which is experiencing permitting delays.
Cobre Panama, on the other hand,
is considerably larger and hasnt experienced the same
delays, as the key permits were received at the end of 2011,
"This is a unique proposition:
Its one of the only advanced copper assets not in the
hands of a major company," he said. "We recognize
investors concerns over financing, but we have now
successfully demonstrated funding capability."
Inmet itself generated $2
billion in notes, with an additional $1 billion from its
Franco-Nevada Corp. precious metals stream, while the
companys South Korean partners have committed $1.4
"We also have $2 billion already
accumulated on our balance sheet in operational cash flow,"
Tilk said. "We have no requirement to dip into our future
operating cash flow or to issue dilutive equity. The single
biggest contributor to unexpected (capital expenditure)
inflation is the lapse of time between estimates and awarding
To avoid this, Toronto-based
Inmet has already awarded $4.1 billion worth of contracts, of
the estimated $6.2 billion required for the completion of
construction at Cobre Panama.
The First Quantum offer, which
is subject to a number of conditions, expires Feb.
A version of this article was
first published by AMM sister publication Metal