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Inmet Mining Owners Face Dilemma As First Quantum Dangles Third Bid

Initially, First Quantum approached Inmet with a C$62.50 per share offer in October. The offer was subsequently raised to C$70 per share. Inmet rejected that offer and responded by adopting a plan that allows shareholders to buy Inmet shares at half the market price if anyone attempts to buy 20 percent of more of the company. Still, it said the plan “is not intended to prevent take-over bids,” but rather to give the company “adequate time to consider and evaluate any such take-over bid.”

That means the company might sell at the right price — an eventuality that could be dictated by four shareholders, including holding company Leucadia National and Temasek Holdings, a subsidiary of Singapore's sovereign wealth fund, which together own nearly 40 percent of the company.

“Given the highly concentrated nature of Inmet's shareholder base ... we believe that a markedly higher offer, likely in the range of C$80.00-90.00 per share, would be required to motivate Inmet shareholders to accept First Quantum's unsolicited offer,” Reuters cited Canaccord Genuity analyst Orest Wowkodaw as saying.

The price could be driven up to that level if more bidders enter the fray. In First Quantum CEO Philip Pascall's words, Inmet's Cobre Panama may be one of the few copper projects that is “developable,” meaning that it is highly attractive.

Analysts and fund managers cited by Bloomberg Businessweek, The Globe and Mail and Reuters note that other companies that might be interested in Inmet include Vale (NYSE:VALE); Teck Resources (NYSE:TCK,TSX:TCK.B), which operated the Cobre Panama project until it got into balance sheet difficulties in 2008; and Freeport McMoRan Copper & Gold (NYSE:FCX) — although Freeport may be a less likely candidate now that it has decided to spend $20 billion to buy McMoRan Exploration (NYSE:MMR) and Plains Exploration & Production (NYSE:PXP).

While Cobre Panama could be a future cash cow, shareholders may want to consider the cost of developing that mine as other companies have been putting mine development on hold. Earlier this year, BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) said it plans to look for an alternative to its “capital-intensive” $20-billion plan to expand its Olympic Dam copper and uranium mine.

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