VANCOUVER — As its future hangs in the balance, Canadian base metals producer Inmet Mining (IMN-T) increased its value with a global resource update on Feb. 11, which was highlighted by a 22% jump in proven-and-probable copper reserves.
The Toronto-based company is staring down the barrel of a US$5.1-billion hostile takeover bid from diversified miner First Quantum Minerals (FM-T), with Inmet’s shareholders set to decide its fate by 2 p.m. on Feb. 27.
First Quantum took its offer straight to investors in January after Inmet’s board rejected two earlier takeover attempts, although the company’s largest shareholder, Leucadia National, announced it would tender its 16% stake in support of First Quantum’s bid.
Though Inmet operates three base metal mines in Europe and Turkey, First Quantum’s main target is the huge, low-grade Cobre Panama copper-gold porphyry deposit, located 120 km west of Panama City. And Cobre Panama is showing expansion potential, with the project accounting for the largest slice of Inmet’s sizeable copper-reserve increase.
The jump in copper reserves at Cobre Panama largely owed to the Balboa, Brazo and Botija-Abajo deposits, with total estimated in-situ copper jumping 27% and total gold reserves jumping 43%.
Proven and probable reserves at Cobre Panama clock in at 3.1 billion tonnes grading 0.38% copper and 0.07 gram gold per tonne, assuming a US$2.25 per lb. copper price. Under Inmet’s 80% stake, that equates to 9.45 million tonnes contained copper and 5.84 million contained oz. gold, which extends Cobre Panama’s mine life by a decade to 40 years.
Inmet saw incremental increases at its operating mines, though the numbers are dwarfed by Cobre Panama’s raw size.
At the company’s Las Cruces copper mine in Spain, reserves jumped by 43,000 tonnes copper after 2012 infill drilling, and now total 14 million tonnes averaging 5.44% copper for 768,000 contained lb. Las Cruces is expected to operate through 2022 under current reserve numbers, though Inmet is studying potential underground expansion vis-à-vis 38 million tonnes of primary sulphide inferred resources grading 1.1% copper, 2.6% zinc, 1.3% lead and 27 grams silver.
Reserve increases at Inmet’s Cayeli copper-zinc operation in northeastern Turkey and Pyhasalmi copper-zinc mine in Finland were predominantly driven by rising copper prices.
By hiking copper prices to US$2.75 per lb., Inmet added 6,000 tonnes copper and 24,000 tonnes zinc at Cayeli, and 5,000 tonnes copper and 2,000 tonnes zinc at Pyhasalmi. Cayeli holds 7 million tonnes grading 3.06% copper and 3.64% zinc, while Pyhasalmi hosts 8.5 million tonnes averaging 1.07% copper and 1.85% zinc. Both mines are expected to operate through 2019 at current reserve levels.
Inmet’s operations had strong results in 2012, producing 111,700 tonnes copper and 66,300 tonnes zinc. The company expects similar production in 2013, with guidance falling to between 108,000 and 116,000 tonnes copper and between 56,000 and 62,000 tonnes zinc, at cash costs of 95¢ per lb. copper.
On Feb. 25, the Ontario Securities Commission will hold a hearing to determine whether to impose a cease trade on Inmet’s shareholder rights plan, which remains a condition of First Quantum’s offer.
Inmet is also dealing with mining-rights complications in Panama arising from a dispute with junior gold producer Petaquilla Minerals (PTQ-T), which operates the Molejon gold mine next to Cobre Panama.
Inmet tried consolidating its land position by attempting to acquire Petaquilla in late 2012, though the smaller company stymied Inmet, claiming its co-operation was required for Cobre Panama’s full development.
On Feb. 12 Petaquilla announced it had secured a legal victory over Inmet in Panama’s Supreme Court, which rejected a constitutional challenge to nullify Petaquilla’s exploration and extraction rights in five areas of Panama’s Donoso district. The main contention between the companies involves the location off Cobre Panama’s proposed tailings facility.
Inmet’s shares have hovered around First Quantum’s offer range of $72 per share since the bid was announced in late 2012, which seems to indicate market skepticism regarding whether Inmet can find a superior offer before the deadline on Feb. 27.
The company maintains 69.4 million shares outstanding and closed at $70.30 at press time for a $4.87-billion press-time market capitalization. Inmet’s top-five investors control 53% of its outstanding shares.
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