Combined Equinox/Lundin would be top ten copper producer: CEO
Washington (Platts)--28Feb2011/526 pm EST/2226 GMT
The combination of Equinox Minerals and Lundin Mining will result in one
of the top 10 copper miners over the next few years, Equinox President and
CEO Craig Williams said in a conference call with investors and analysts
Equinox offered Lundin shareholders a total of C$4.8 billion ($4.9
billion) in cash and equity shares. Under the terms of the offer, Lundin
shareholders would be receive C$8.10 for each share or 1.2903 Equinox shares,
plus 1 cent for each Lundin share.
The maximum offer will not exceed C$2.4 billion cash and a maximum of 380
million Equinox shares. The offer represents a 26% premium to the closing
Lundin share price of C$6.45/share last Friday, and a "superior offer" to that
of Inment Mining, Williams said during the call.
When the acquisition is completed, the combined Equinox/Lundin entity
will be the 16th largest copper producer in 2011. But as production ramps up
over the next few years, especially at the giant Tenke Fungurume mine in the
Democratic Republic of Congo, the entity will become one of the top 10 copper
producers in the world, he said.
Though Tenke, whose development is being overseen by Freeport-McMoRan
Copper & Gold, currently produces about 130,000 mt/year of copper, it has the
expansion capacity to produce 400,000 mt/year, Williams said.
"The combination will be one of the world's largest pure-play copper
companies, with approximately 500,000 mt/year of production by 2016," Williams
added. "This will be delivered from a geographically diverse portfolio of
world-class assets, with a growth profile driven by lower risk, expansion of
existing operations and construction-base projects."
Those assets include the Neves-Corvo copper-zinc mine in Portugal, the
Lumwana copper mine in Zambia, a minority share in the Tenke Fungurume mine,
the Jabal Sayid copper-gold project in Saudia Arabia, and the Zinkgruvan
silver-lead-zinc mine in Sweden.
LUNDIN COMMITTED TO SYMTERRA: CEO
In a statement, Lundin said its board of directors would update
shareholders on developments related to the Equinox offer. "The arrangement
agreement between Lundin Mining and Inmet Mining Corp., will remain in effect
unless terminated by either party in accordance with its terms," it said.
Inmet Mining in mid-January said it had agreed to merge with Lundin to
form a new company, Symterra Corp., in a transaction valued at $C9 billion.
Symterra would have five mines in Europe, and two projects: in Cobre Panama in
Panama and Tenke Fungurume in the DRC. It will have the potential to produce
more than 500,000 mt/year of copper by 2017, the companies said.
In a webcast presentation from the BMO Capital Markets Metals & Mining
Conference in Florida, Lundin CEO Phil Wright said a special committee has
been looking at the Equinox offer since Sunday.
But for now, Lundin "is committed to Symterra. This combination with
Inmet makes the greatest sense," he said. "Let me be clear, Equinox operates
in the same part of world. We have... in the last three years... looked at
Equinox but I don't like the combination. It has not made any sense to me in
terms of portfolio construction," Wright said.
With Symterra, nearly 40% of Lundin's portfolio will be in Europe, 40% in
Panama, and 20% in Africa. "As far as portfolio construction goes, that is a
much more satisfactory one from my point of view."
Wright said the Equinox offer raised several issues for shareholders. "We
will be a very high relative value on a single asset," Wright said, referring
to copper. "Will our company endure once it becomes part of a much larger
portfolio? Our markets remain volatile, we still live in very volatile
times.... Do we want to recommend to shareholders that we recommend bulking up
on African risk?"
Wright said that for now, the Lundin/Inmet combination presented a
"vastly superior" portfolio to a Lundin/Equinox combination.
-- Nick Jonson, email@example.com
-- Meghann McDonnell, Meghann_mcdonnell@platts.com
Similar stories appear in Metals Week.
See more information at http://bit.ly/MetalsWeek