DAVID EBNER
RTGAM
Equinox Minerals Ltd. says a "lowball" $6.3-billion takeover bid by China's Minmetals Resources Ltd. will not deter it from pursuing its own $4.8-billion hostile deal for Lundin Mining Corp .
The timing of MMR's proposed bid is "clearly opportunistic and seeks to frustrate Equinox's offer for Vancouver-based Lundin Mining Corp. which we believe can add significant value for shareholders," said Equinox chief executive officer Craig Williams.
MMR has indicated its offer would be conditional on Equinox dropping its bid for Lundin.
The three-way battle for global copper assets will be an acid test of China's efforts to establish itself as a heavyweight in the global mining game. MMR is backed by its state-controlled parent, China Minmetals Corp., and its all-cash play for Equinox would be the biggest international takeover by a mining company from China. In 2009, China Minmetals offered $1.7-billion (U.S.) for Australia's Oz Minerals.
MMR has revealed its bid publicly but has yet to submit an official offer, so Equinox's early "no" is likely just one of the first moves in a fight that could unfold over several months.
Investors seem to expect a multiround battle. The MMR bid for Equinox is for $7 a share. Equinox shares closed at $7.50 on the Toronto Stock Exchange on Thursday, indicating investors believe that MMR will bid even higher.
Mr. Williams, in a statement Thursday, noted the $7 offer is only a 9-per-cent premium to Equinox's share price in the runup to its own Lundin offer in late February. "Such a low premium is a fraction of the premiums paid in recent acquisitions of base metal mining companies," he said.
The jockeying for control of companies is about the future of copper, which is trading at record highs. The goal is to secure more copper assets, to capitalize on long-term bets that the commodity will remain far above its historical price (about $1.50 a pound). Copper futures for May delivery hit $4.25 (U.S.) a pound on Thursday, and while not everyone thinks copper will stay high, the proposed MMRs bid suggests it would stay above $1.50.
Equinox noted this on Wednesday. "We consider that the lowball price announced by MMR significantly understates our value and disregards the potential of this company, especially in light of the continuing strength in copper prices," said Equinox chairman Peter Tomsett in a statement.
Equinox is an Australian company that has a nominal office in Toronto and is listed on the TSX. Its main asset is a copper mine in Zambia, which opened in late 2008. The company says the mine has established itself as one of the world's top 20 copper producers. It is also building a copper-gold mine in Saudi Arabia, and hopes to open it next year.
Equinox has a shareholders' meeting scheduled for April 26 to approve the issuance of additional shares to finance its Lundin offer, which expires April 29.
Hong Kong-based MMR this week said it wants to begin talks with Equinox about its hostile bid. "That hasn't happened yet," Martin McFarlane, president of MMR's Canadian arm, said on Tuesday.
Equinox (EQN)
Close: $7.50, down 5cents
Lundin (LUN)
Close: $7.99, up 6cents
