Inmet faces hard sell in snubbing First Quantum’s $5.1B hostile bid – by Peter Koven (National Post – January 8, 2013)

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For Inmet Mining Corp., the hard work is about to begin.

With First Quantum Minerals Ltd. expected to file its takeover circular imminently, the pressure will be on Inmet chief executive Jochen Tilk to explain why the $5.1-billion hostile offer for his company is inadequate. Inmet shares have jumped nearly 40% since news of a bid surfaced in November, and are trading roughly in line with the offer price of $72 a share.

It is understood Inmet hired CIBC World Markets as a financial advisor, and the Toronto-based miner is likely to argue the bid is far below fair value for Cobre Panama, one of the world’s largest copper deposits.

Analysts and investors generally agree the offer is low. However, they said Mr. Tilk could have a tough time fighting off First Quantum.

The central issue boils down to a question: Which company is better suited to build Cobre Panama? First Quantum has an outstanding track record of building large projects at lower cost than competitors, and has claimed it can do the same with this one. Mr. Tilk will try to prove Inmet can build the US$6.2-billion mine just as quickly and efficiently, and with no more of the cost inflation that has plagued this project and many others.

“I think it’s going to be a tough sell for Inmet, given that First Quantum has such a proven history of project development,” said John Hughes, an analyst at Desjardins Securities. John Stephenson, senior vice-president of First Asset Investment Management, praised Inmet’s management, but said it would be “virtually impossible” to argue Inmet’s project team is better than First Quantum’s.

Inmet will likely point out that has been involved with Cobre Panama for more than two decades, and has successfully moved it through permitting and into construction, proving itself to be a good custodian.

Inmet has locked in contracts worth US$4.1-billion related to Cobre Panama development, which shields the company from future cost inflation. And it has provided extensive disclosure to investors to prove the project is on time and on budget.

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