Inmet digs in its heels on Cobre Panama’s value – by Pav Jordan (Globe and Mail – January 23, 2013)

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A $5.1-billion takeover bid for Inmet Mining Corp. does not begin to capture the value of its star copper asset in Panama, said chief executive officer Jochen Tilk, and the project may be even bigger than currently proposed.

“[The bid amount] is simply too low,” Mr. Tilk said in an interview after the Toronto mining company filed a circular on Tuesday that recommended shareholders vote against a hostile, $72-a-share bid from rival First Quantum Minerals Ltd.

Citing the conclusions of a special committee of independent directors as well as input from financial and legal advisers, the Inmet board also said it is talking to a number of third parties regarding strategic alternatives to the hostile bid, and has signed confidentiality and standstill agreements with “a number” of those.

Cobre Panama is due to come on stream in 2016, which would add, under the current design, 300,000 tonnes of copper to global production at a time when demand is expected to rise and there will be scant new supply.

The $6.2-billion project will be the largest mining development in Central America and Mr. Tilk said that by adding another one or two milling lines on top of what is already contemplated, there is the potential for a mine with annual output of as much as 500,000 tonnes.

To put that in perspective, copper mines can range in size from tens of thousands of tonnes to hundreds of thousands of tonnes. The Escondida mine in northern Chile can produce up to a million tonnes, with the next-largest producing in the 500,000 tonnes range. After that the numbers fall quickly, to the 300,000 tonnes and 100,000 tonnes level and below.

“The point being, it’s incredibly large,” Mr. Tilk said. “So if I were to predict the future of Cobre Panama through a couple of evolutions, I would definitely see it ending up there at some point in time.”

Cobre Panama has gone from being a little known prospect a few years ago to a massive mine in construction which Mr. Tilk said painstakingly earned the social licence to operate in the country best known for the Panama Canal. Part of that, he said, came after working with anthropologists embedded in local communities to negotiate details of relocation that even went down to the design of new homes.

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