Why First Quantum’s bid for Inmet likely won’t be its last – Bloomberg News (National Post – December 18, 2012)

The National Post is Canada’s second largest national paper.

The cheapest copper mining deal in five years has traders convinced that First Quantum Minerals Ltd.’s latest bid for Inmet Mining Corp. won’t be its last.

The C$5.1 billion ($5.2 billion) offer values Inmet, owner of the second-biggest copper mine under construction, at the lowest multiple of earnings before interest, taxes, depreciation and amortization for a deal of its size in the industry since 2007, according to data compiled by Bloomberg. Inmet shares climbed yesterday 1.2 percent above the C$72-a-share proposal — First Quantum’s third offer for the Toronto-based company since October — indicating arbitrageurs who bet on acquisitions expect another boost, the data show.

After Inmet last week raised estimates for the amount of copper contained at its Cobre Panama mine, Canaccord Financial Inc. said it would take a bid of at least C$80 a share to win over investors, particularly with the top shareholders controlling a majority of the stock. While Inmet could draw other suitors, Vancouver-based First Quantum’s desire for a friendly deal suggests it may be willing to pay more whether or not there are rival bidders, according to Bank of Montreal.

“The market is clearly saying that we are going to need a higher price to push this through,” Barry Schwartz, a Toronto-based fund manager at Baskin Financial Services Inc., which oversees about C$450 million including Inmet shares, said in a telephone interview.

Cobre Panama “is going to be one of the greatest mines that’s going to come on stream in the second half of the decade. We’re running out of quality finds of copper, and Inmet has one of them.”

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Potential suitors eye Inmet’s Panama project – by Pav Jordan (Globe and Mail – December 19, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

If it’s a white knight Inmet Mining Corp. is looking for, there’s no shortage of candidates it might lure to its massive world class copper project in Panama.

Inmet has yet to comment on the merits of a $5.1-billion hostile takeover offer from rival First Quantum Minerals, the Canadian copper miner that wants to combine the companies and become a top five producer. Late last month Inmet rejected an informal approach from First Quantum that valued it at $4.9-billion, saying it was highly conditional.

Industry experts say Inmet has essentially put itself up for sale, and expect it to start an auction process to attract a bid higher than the $72 per share on offer from First Quantum.

“The next question is who, because so often a bidder comes out of the woodwork and you say, ‘Oh, I didn’t think of them,’ ” said Raymond Goldie, an analyst with Salman Partners in Toronto, pointing to Teck Resources Ltd., Canada’s largest diversified miner, as a potential candidate.

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Inmet investors bet on a higher bid – by Pav Jordan – (Globe and Mail – December 18, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Inmet Mining Corp. shares rose more than 4 per cent Monday as investors in the Toronto miner bet that an ardent suitor has not played its last card with its $5.1-billion hostile takeover bid.

First Quantum Minerals Ltd. offered Inmet shareholders $72 a share over the weekend, sweetening for the second time its offer for the owner of a large copper asset in Panama. A first, informal approach on Oct. 28 valued the company at $62.50 a share and a Nov. 28 offer was for $70 a share, or $4.9-billion.

“We’re happy but, you know, not a lot has really changed,” said Terry Thib, a portfolio manager with Norrep Funds in Toronto that holds Inmet shares. “You could say it’s below where it should go out, given they are not working with a full set of data.”

Investors point out that the way the stock-and-cash offer is structured, it is worth about the same today as it was a few weeks ago because First Quantum shares have lost some of their value in the interim, including a 4-per-cent drop on Monday.

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Battle for Inmet Mining turns hostile – by Pav Jordan (Globe and Mail – December 17, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

First Quantum Minerals Ltd. has made a hostile, $5.1-billion takeover offer for Inmet Mining Corp., taking the bid directly to shareholders after two earlier offers were snubbed by the owner of one of the world’s largest undeveloped copper assets.

First Quantum, Canada’s largest pure-play copper producer, is offering $72 a share to Inmet, compared with an earlier approach of $70 a share, or $4.9-billion, which Inmet rejected on the grounds that it was “highly conditional” and not in shareholders’ interests. First Quantum’s initial offer, made in late November, was $62.50 a share.

The cash-and-stock offer comes a few days after Inmet raised its copper reserves estimate on its flagship copper project in Central America, Cobre Panama, by 27 per cent and extended the expected mine life by nine years.

Cobre Panama will be one of the few large-scale copper projects to be developed in coming years. It will produce some 300,000 tonnes of copper a year, worth about $1.1-billion (U.S) at current prices and putting it on a similar scale to giant mines in Chile and Peru. The project has had its challenges, among them sharply rising costs and concerns about how its owners will foot a development bill of $6.2-billion.

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Investors bid up Inmet as copper mine battle looms – by Pav Jordan (Globe and Mail – November 30, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Investors are betting on a battle for Inmet Mining Corp. to control the coveted Cobre Panama project in Central America, one of the world’s largest undeveloped copper plays.

Inmet shares have catapulted 23 per cent in the two tradings sessions since the company disclosed it received and promptly rejected two takeover offers in the past month from First Quantum Minerals Ltd., one of Canada’s largest copper miners.

Inmet also said it adopted a shareholder rights plan, known as a poison pill, but said that was not meant to prevent takeovers so much as give it time to consider options in the event of a hostile bid.

“I think they are effectively saying we’re probably for sale at the right price,” said Terry Thib, a portfolio manager with Norrep Funds in Toronto that holds Inmet shares. “From my perspective, I’m kind of thinking something north of $80 might get it done; shareholders might be happy with that.”

First Quantum’s latest cash-and-stock bid valued Inmet at $4.9-billion, or $70 a share. Its shares traded up nearly 6 per cent on Thursday to $65.50. Before the bids were made public, Inmet was trading at $52.80.

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Inmet rejects First Quantum takeover bid – by Peter Koven (National Post – November 29, 2012)

The National Post is Canada’s second largest national paper.

TORONTO — First Quantum Minerals Ltd. has offered $4.9-billion for Inmet Mining Corp. in a bold attempt to get its hands on Cobre Panama, one of the largest mining development projects underway anywhere in the world.

The move puts Inmet’s immediate future into question, as the company is now in play and senior copper miners are certain to take a closer look at Cobre Panama.

Toronto-based Inmet owns 80% of Cobre Panama, and it is a monster. The project holds 32 billion pounds of copper reserves and nine million ounces of gold reserves (along with huge inferred resources), and has a likely mine life of more than 30 years. It also comes with enormous risk: The current cost estimate is US$6.2-billion, and Panama has no history of large-scale mining.

Construction of Cobre Panama has just started, and analysts suggested that if First Quantum has its own development plan for the mine, it needs to get in quickly. First Quantum is recognized for having a strong technical team.

“I see a fit in the sense that [First Quantum] management has been very experienced in building four grassroots projects on time and within reasonable budgets, and also operating in what I would call politically sensitive areas in Central Africa,” said John Hughes, an analyst at Desjardins Securities.

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Inmet Mining snubs $4.9-billion takeover bid by First Quantum – by Pav Jordan and Tim Kiladze (Globe and Mail – November 29, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

First Quantum Minerals Ltd. offered $4.9-billion to acquire Inmet Mining Corp., a bold declaration from one of Canada’s largest copper miners that the commodities supercycle has room to run.

Inmet rejected the bid, describing it as “highly conditional” and not in shareholders’ interests, but analysts said First Quantum could return with a higher offer for one of the world’s largest copper projects in development.

Toronto-based Inmet is developing the $6.2-billion (U.S.) Cobre Panama project that will produce some 300,000 tonnes of copper a year for 30 years, putting it on a scale with major mines in Chile and Peru, the world’s largest producers of the metal.

Inmet revealed that it was the second offer from First Quantum in a month, underscoring global miners’ convictions that copper demand will remain strong into the future, despite slowing growth in China and other major markets. Copper has been one of the most in-demand commodities of the past decade, driven by breakneck development in China as it built power grids and entire cities in its urbanization drive.

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Copper Mountain Tempts With Canadian Stability: Real M&A – by Tara Lachapelle and Brooke Sutherland (Blomberg.com – November 26, 2012)


pper Mountain Mining Corp. (CUM) is offering buyers a potentially irresistible combination: the cheapest valuation in three years and the ability to extract metal without the threat of civil unrest in such places as Indonesia and Peru.

Lower-than-estimated copper production drove the company’s price-earnings ratio down to 16.7 in October, the cheapest since 2009, according to data compiled by Bloomberg. Copper Mountain has tumbled 43 percent since this year’s peak, giving the business the lowest price-sales multiple using estimated 2012 revenue among Canadian base metals stocks with a market value exceeding C$250 million ($252 million), the data show.

The location of Copper Mountain’s main mining project in British Columbia may prove alluring to acquirers seeking assets where there’s low risk of social disorder, Laurentian Bank of Canada said. While initial copper production levels were disappointing after extraction began in 2011, the Vancouver- based company seems to have turned the situation around and a buyer should strike now before Copper Mountain’s shares rebound, according to Haywood Securities Inc. Jennings Capital Inc. said companies such as Teck Resources Ltd. (TCK/B) could offer C$8 a share in a deal, more than double yesterday’s close.

“There’s a lot of reasons why it would be attractive to potential acquirers,” Adam Low, a Toronto-based analyst at Raymond James Financial Inc., said in a telephone interview.

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Xstrata plea for ONTC – by Ron Grech (Timmins Daily Press – November 27, 2012)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – Xstrata Copper is seeking the city’s support in ensuring freight rail service to the mine is maintained in light of the province’s plan to sell the Ontario Northland Transportation Commission.

In a presentation to Timmins council Monday, Tom Semadeni, general manager of Kidd Operations, identified the divestiture of the ONTC and its potential impact on freight rail service as a possible challenge in the future. Semadeni said city council could “help us in term of lobby efforts … to make sure they maintain service.”

He said trucking the material would be more costly to the company and more damaging to the roads. Coun. Gary Scripnick said hearing these concerns directly from mine management should be helpful in any future discussions Mayor Tom Laughren has with provincial ministers.

He said it is important for the mayor to be able to report what mining officials are telling him. Other areas of concern expressed by Semadeni included high energy costs and the limited availability of housing in Timmins.

He said Xstrata Copper has hired close to 550 in the last five years and as a result has experienced the challenges associated with the housing shortage first-hand.

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Financing in place for Broken Hammer [Sudbury] project, says miner – by Star Staff (Sudbury Star – November 21, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Lively-based Wallbridge Mining Company Limited announced Tuesday it has secured financing to help develop its promising Broken Hammer Project, located north of Capreol.

The company said Callinan Royalties has agreed to provide Wallbridge with a line of credit for $2 million. In addition, Callinan will purchase 8,333,333 units of Wallbridge, at a price of $0.18 per unit, for gross proceeds of $1.5 million, subject to the approval of the Toronto Stock Exchange.

“We are pleased to have entered into this transaction with Callinan, a reputable royalty firm, for two reasons,” Marz Kord, president and CEO of Wallbridge, said in a release. “First, this new capital injection allows Wallbridge to accelerate the development plans for the Broken Hammer Project without significant equity dilution.

“Secondly, Callinan’s interest in financing the corporation at a premium to the current market in return for the option to purchase royalties on our 100%-owned Sudbury properties underscores the inherent value in these exploration assets, as well as broadening our already strong shareholder base.

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Teck makes cuts amid global tumult – by Pav Jordan and Carrie Tait (Globe and Mail – October 25, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

TORONTO, CALGARY – Canada’s largest diversified miner is cutting back in the face of a global economic slowdown.

Buffeted by volatile markets for the commodities it produces, Teck Resources Ltd. is deferring some $1.5-billion in capital spending over the next year or so, the latest in a string of Canadian resource companies to rewrite its plans in response to rising costs and an unpredictable outlook for the economy.

Among the casualties announced was Fort Hills, an oil sands joint venture in which Teck is a 20-per-cent partner along with Suncor Energy Inc. and Total SA. The project is not scheduled to begin producing oil until after 2017, but now some of the pre-production work will occur at a slower pace.

Canadian mining companies are increasingly joining the ranks of resource businesses that are being forced to rethink capital spending as the demand drops for key industrial commodities. The commodities cycle is sputtering along with the economies of the United States and Europe and as growth slows in China.

Suncor said in July that it was reevaluating tens of billions of dollars of planned spending, and pledged to apply “rigorous scrutiny” to the cost of three projects, including Fort Hills.

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Study finds [Sudbury’s Wallbridge Mining] Broken Hammer has potential to be viable – by Star Staff (Sudbury Star – October 23, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Wallbridge Mining Company Ltd. has released what it’s calling positive results on studies conducted on its Broken Hammer copper and platinum group metal project in Sudbury.

“We are very encouraged by the positive results of the pre-feasibility study,” Marz Kord, president and CEO of Wall-bridge Mining, said in a release.

“The pre-feasibility suggests that the Broken Hammer project has the potential to become economically viable and generate positive cash flow. What’s more encouraging is that the deposit remains open for expansion to the west and to depth.

“The footwall-style Broken Hammer project is in a large land package on the northern rim of the Sudbury basin within a 9 km strike length of very similar geology with extremely strong prospects.”

The Broken Hammer project, located north of Capreol, is planned to be an open pit operation used for the extraction of about 196,000 tonnes of copper, nickel and platinum group metals.

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Why the metal industry is getting harder – by By David Garofalo (Canadian Business Magazine – September 20, 2012)


David Garofalo is the President and CEO of HudBay Minerals Inc.

The recent conflicts at mines in developing nations—the violence erupting in South Africa, Guatemala, Panama and elsewhere this summer—are unsettling and deplorable. Yet they illustrate the new context for mining companies around the world, which often goes unexplored in mainstream coverage.

The new reality of the global mining industry is that most of the large, high-grade mine operations located in favourable jurisdictions are getting long in the tooth. As production at these mines inevitably declines with time, mining companies are forced to look farther afield for new supply. Since all of the near surface high-grade deposits have been discovered, companies are now looking at more geologically challenging deposits, usually with lower-grade ore. Often, this means considering development opportunities in areas that are not only more complex geologically, but also carry more social and political risks.

Among other things, this explains the chronic deficit in copper supply the world has experienced over the past four years. Average copper production grades have fallen dramatically over the past decade. Simply to maintain output, companies have to process much higher tonnages in order to sustain consistent production. Increased demand from developing economies has created a supply crisis—the term is not too strong.

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Anglo CEO [Cynthia Carroll] Doubles Down on New Mines Amid Falling Demand – by Jeremy Kahn (Bloomberg Markets Magazine – September 2012)


Driving northeast from Santiago, the road corkscrews toward the shark’s-grin skyline of the Andes Mountains. In winter, Santiago’s smart set plies this route, heading for virgin-powder days and pisco-sour nights at La Parva ski resort. Most have no inkling that in a high mountain valley just over the ridgeline, excavators the size of houses have sculpted the mountainside into a steeply terraced pit 1,800 feet deep, Bloomberg Markets magazine reports in its September issue.

This is Los Bronces, one of the world’s richest copper mines. Anglo American Plc (AAL), the London-based company that owns Los Bronces, spent $2.8 billion from 2007 to 2011 to double the size of the mine. And Los Bronces is just one of four megaprojects that Anglo Chief Executive Officer Cynthia Carroll has initiated or pushed through construction since she took over in 2007 — each representing a wager in excess of $1 billion on the continued rise of China, India and other emerging markets.

Los Bronces is also at the center of a legal battle between Anglo and Codelco, the Chilean state-owned mining company. The dispute — over whether Anglo can block Codelco from exercising an option to buy half of Anglo’s Chilean subsidiary — has spooked Anglo investors and weighed on the company’s share price, which dropped more than 15 percent from the time the controversy erupted in October to August 8.

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What Makes a Critical Metal “Critical” or a Strategic Element “Strategic”? – by Michael S. Fulp (The Mercenary Geologist – August 6, 2012)


I was a keynote speaker at the recent Murdock Capital Partners Critical Metals / Strategic Elements Symposium in New York City. This is my second gig at one of convener Tom Dean’s on-going series of symposia and I thank him for continuing support. Although the venue is small, intimate, and limited to 75 attendees, the investor quality is second to none, particularly in the amount of money represented and managed. In my presentation I categorized the metals critical to modern-day civilization and reviewed the minor metals that are increasingly used by society in new technological applications.

Recently a plethora of alternative names have been proposed and promoted for what were once known as the specialty or minor metals. These mostly obscure elements span the gamut from the lightest to the heaviest on the periodic table. In my opinion, analysts and investors alike have become confused by these newly-invented misnomers.

Much of the confusion can be blamed squarely on two recent reports from the United States government.

In December 2010, the US Department of Energy (DOE) produced a report entitled “Critical Metals Strategy”. It identified seven rare earth elements and three minor metals (lithium, indium, and tellurium) that are or could become in high demand and short supply from 2011-2025. The DOE list and analysis was predicated on future growth fueled by Obama’s proposed subsidies of the electric and hybrid vehicle, wind turbine, solar, and fluorescent lighting industries.

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