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Friday, March 22 2019 @ 08:09 PM UTC

Inmet Panama mine setback is 'material change': Lundin

Gold & MiningBy Christopher Donville (Bloomberg) Lundin Mining Corp., which agreed in January to be acquired by Inmet Mining Corp. for $3.47-billion (US$3.55-billion), said Panama’s opposition to part of a proposed Inmet copper project represents “a material change.” Lundin Chief Executive Officer Phil Wright said he first learned that Panama’s government doesn’t favor construction of a coal-fired power plant to supply electricity to the Cobre Panama mine last week. “That is quite a material change for us,” Mr. Wright said in a telephone interview yesterday from London. Lundin, which like Inmet is based in Toronto, is fending off an unsolicited $4.28-billion cash-or-stock bid from Australia’s Equinox Minerals Ltd. The Inmet deal is “dead,” Equinox CEO Craig Williams told the Globe & Mail March 22. Lundin won’t consider scrapping the takeover until it has assessed the viability of alternative power sources for Cobre Panama, Mr. Wright said. “Inmet are saying there are alternatives and that those alternatives would not delay the project,” Mr. Wright said. “I see nothing that would enable me to draw that conclusion.” (more)

Mr. Wright’s comments have fueled speculation that Lundin may be preparing to back out of its deal with Inmet, citing “material adverse change” in relation to the Cobre Panama project, Peter Campbell, a Toronto-based analyst at Jennings Capital Inc., said Wednesday in a telephone interview.

‘Telegraphing’ - “Lundin seems to be telegraphing that this is potentially the case,” Mr. Campbell said.

The company’s shareholders will probably vote against the tie-up with Inmet at a special meeting in Toronto on April 4, David Davidson, a Toronto-based analyst at Paradigm Capital Inc., said in a telephone interview. Inmet shareholders are scheduled to vote the same day.

“One of the big attractions in the deal was Inmet’s impressive pipeline of mining projects, especially Cobre Panama,” Mr. Davidson said. “The situation in Panama as it relates to Cobre Panama is a concern.”

Lundin rose 20 cents, or 2.7%, to $7.58 at 4:15 p.m. in Toronto Stock Exchange trading. Inmet gained 11 cents to $64.55, while Equinox’s Canadian shares advanced 11 cents, or 2.1 percent, to $5.45.

Alternative Power Sources - Panamanian President Ricardo Martinelli told Inmet CEO Jochen Tilk he’s not in favor of the coal-fired plant, Tilk said yesterday in a telephone interview from Panama. The mine wouldn’t face delays if the plant isn’t built because Cobre Panama could rely on power from the national grid in the first few years of operation, Mr. Tilk said.

Lundin said March 20 its shareholders should reject Equinox’s offer partly because the bid represents an inadequate takeover premium and the Perth-based company would take on too much debt to finance the deal.

“I see no strategic benefit in terms of us getting involved with Equinox’s assets,” Mr. Wright said.

Mr. Martinelli said this month the government would repeal a law allowing investment by foreign governments in its mining industry.

Inmet said today in a statement it received a letter from Roberto Henriquez, Panama’s minister of industry and commerce, asserting the repeal of changes to a mining law “does not affect the contracts or concessions that have already been granted to companies.”

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