Inmet Mining said on Tuesday that it had rejected a $5.2 billion takeover bid by a rival, First Quantum Minerals, arguing that it was too cheap a price for the Canadian copper miner.
The response, more than one month after First Quantum unveiled its latest cash-and-stock offer, may set off a race for one of the world’s major copper miners.
Inmet said in its statement on Tuesday that it is considering “strategic alternatives,†usually code for a sale or joint venture, and has approached a number of unnamed third parties about possible transactions.
In the meantime, Inmet is urging shareholders to reject First Quantum’s tender offer, which is scheduled to expire at 5 p.m. on Feb. 14. The bid was valued at about $72.87 last month.
The mining sector is playing host to a round of consolidation, as companies seek greater scale to take advantage of a boom in the production of meals and minerals. Last year, Glencore agreed to buy Xstrata, in a $32 billion deal.
By merging with Inmet, First Quantum is aiming to become one of the world’s biggest copper producers, hauling some 1.3 million metric tons of the metal annually by 2018.
The board of Inmet said in its statement on Tuesday that First Quantum’s offer failed to take into account the expected yields at its Cobre Panama site in Latin America. The 13,600-hectare site, located west of Panama City, is one of the biggest untapped copper deposits left in the world, and Inmet expects the site to boost its production by 176 percent in about five years’ time.
The company added that a merger could yield significant risks to its shareholders. In part, Inmet cited First Quantum’s poorer development record and lack of experience in Latin America.
“The Inmet Board has concluded that the First Quantum Offer fails to adequately compensate shareholders for Inmet’s low risk asset base and its strong pros! pects for growth and value creation at Cobre Panama,†David R. Beatty, Inmet’s chairman, said in a statement.
“The board is engaged in a thorough and rigorous process aimed at investigating all potential strategic alternatives to maximize shareholder value.â€
Inmet is currently being advised by CIBC and the law firm Torys, while a special committee of its board has retained Scotia Capital.
