This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Inmet Mining Owners Face Dilemma As First Quantum Dangles Third Bid

In May, Inmet increased the cost estimate for Cobre Panama by 43 percent, according to The Globe and Mail. Inmet's share of the $6.2 billion development cost will be $4.8 billion. Korea Panama Mining, which owns 20 percent of the mine, will put down the rest. Inmet had nearly fully funded the project at the end of September, with the exception of $371 million, and in December, it raised $500 million by selling senior notes, part of which will be used to fund Cobre Panama.

Inmet said it “recognizes the industry trend of escalating costs as a significant risk” and to limit cost escalation it has so far contracted out $4.1 billion of the total $6.2 billion costs. But the costs may be on the high side, and shareholders may want to consider what another owner could do to limit them.

Inmet's cost estimate is at about $23,000 per tonne of copper produced, according to Nomura analysts cited by Reuters. That's well above the $18,500 sector average, and almost four times the $6,000 per tonne that First Quantum expects to spend to develop its Sentinel copper mine in Zambia. First Quantum did not respond to requests for a detailed cost overview for Sentinel.

For First Quantum, acquiring Inmet is an opportunity to establish itself as one of the five biggest copper producers in the world amid a continued global supply shortage. It is also confident that it can build Cobre Panama more cheaply. “We tend to build [mines] at somewhere between a third and half the costs of anybody else,” President Clive Newall told The Globe and Mail.

Having already raised its bid twice, First Quantum might be amenable to raising it again. “Our clear preference remains to engage with Inmet, as we believe strongly in the compelling strategic and financial merit of the transaction,” Philip Pascall, CEO of First Quantum said in a statement. If Inmet continues to resist, and First Quantum or other bidders don't offer more, the company's shares may fall back to the C$40-something level they were trading at before the first bid.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs