First Quantum Tells Inmet Any Stake Sale Is Inappropriate

First Quantum Minerals Ltd., in a letter to Inmet Mining Corp., told the company “it’s not the time” to sell a stake in its Cobre Panama copper project to thwart First Quantum’s C$5.1 billion ($5.2 billion) hostile bid.

Some Inmet shareholders have expressed concern that the Toronto-based copper producer is proposing to complete a sale of a further minority interest in the Cobre Panama project, First Quantum said in the letter released yesterday. The concerns are “apparently based upon discussions with a senior executive officer of Inmet,” it said. Neither the potential buyers nor the executive were identified.

“We consider that any attempt to complete such a transaction during the currency of our offer would be inappropriate in the circumstances and constitute an improper short term defensive tactic in response to our long term strategic proposal,” First Quantum Chief Executive Officer Philip Pascall said in the letter to Inmet’s Chairman David Beatty.

Inmet’s board is “well aware of its duties and responsibilities” concerning the offer, the company said in a statement following First Quantum’s disclosure of the letter.

The correspondence “is plainly hostile and counterproductive,” Inmet said in its statement. Inmet said its board and advisers are evaluating the offer as well other alternatives, without detailing them.


A recommendation will be made to Inmet shareholders on or before Jan. 24, the company said, and advised holders to take no action nor tender shares to First Quantum.

Vancouver-based First Quantum on Jan. 9 took its C$72-a-share offer in cash and stock to Inmet investors after twice being snubbed by Inmet’s board. It’s seeking to gain control of Inmet’s copper project in Panama to create one of the world’s five largest producers of the metal.

Inmet Chief Executive Officer Jochen Tilk said on a July 31 conference call that it was looking at selling a 10 percent to 20 percent minority interest in Cobre Panama.

The First Quantum offer requires acceptance by holders of 66 percent of Inmet shares. Leucadia National Corp., which owns a 16 percent stake in Inmet, said on Jan. 10 it plans to tender its shares in support of First Quantum’s takeover proposal.

Cobre Panama is the second-largest copper venture under construction, after Rio Tinto Group’s Oyu Tolgoi mine in Mongolia, according to a November presentation posted on Inmet’s website. The project will cost about $6.2 billion and produce an average of 266,000 metric tons a year of the metal, which has more than quadrupled in price in the past 10 years in New York.

A stake sale “risks being value destroying, further reducing the flexibility of developing Cobre Panama without in any way diminishing the execution risk,” First Quantum said in its statement yesterday.

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