Falconbridge lone bidder for Diamond Fields

In the absence of a rival bid for Diamond Fields Resources’ (TSE) stake in the Voisey’s Bay nickel-copper-cobalt deposit in Labrador, the wheels have been set in motion for the takeover of the company by Falconbridge (TSE).

Nickel giant Inco (TSE) was given an informal deadline of Feb. 14 by Diamond Fields to submit a purchase offer for the Vancouver-based company’s 75% stake in the deposit. Inco remained silent, however, and the proposed deal will be put to a vote by the shareholders of both Diamond Fields and Falconbridge on April 12.

A successful merger would result in a $4-billion cash and share payment from Falconbridge for Diamond Fields.

While Inco, which owns the remaining 25% of the deposit, is expected to make a counter-offer before the April shareholders’ meetings, bids from other companies remain a distinct possibility until April 12.

“It’s business as usual,” until that time, says Diamond Fields Executive Vice-President Rick Gill. “The ongoing efforts with the feasibility study continue as well.”

Although Gill considers an offer from Inco or another company a possibility, “we don’t know what to expect,” he says. “There is nothing that we’re aware of, formally, or informally, for that matter. We’re just waiting.” In addition to the analysis of legal matters pertaining to the merger, Diamond Fields has hired an independent consulting firm to evaluate the deal.

Analysts have named British mining giant RTZ, which visited Voisey’s Bay in 1995, as another company with the means to acquire Diamond Fields, but RTZ spokesman Fraser Hardie says it was his company’s policy not to comment on market speculation, “which is what this is.”

Under the terms of Falconbridge’s merger proposal, Diamond Fields shareholders will exchange each common share for the following: one Falconbridge subordinate voting share or $31.12 per share, or a combination of both; one participating equity share of Falconbridge; and a Falconbridge note good for one common share of a new company which will be set up to hold Diamond Fields’ diamond properties.

The maximum amount of cash payable to Diamond Fields’ shareholders on the share exchange will be limited to 15% of the total consideration.

Each Falconbridge subordinate voting share will have one-tenth the voting power of a Falconbridge common share, except in certain circumstances. The subordinate shares will be converted automatically into common shares after five years.

Each Falconbridge participating equity share will be converted automatically, after five years, into a fraction of a Falconbridge common share at an exchange rate of 0.05 of a Falconbridge share for every additional 10 million tonnes of massive sulphide ore grading 3% nickel or better found on the Voisey’s Bay property (outside the area of most of the known resource at the time of the merger). The maximum share exchange ratio will be 0.3 of a Falconbridge common share and the minimum will be 0.15.

The deal will see the number of directors on Falconbridge’s board increase to 15. The holder of Falconbridge subordinate voting shares will be entitled, as a class, to elect four directors, and the holders of participating equity shares will be entitled to elect one.