Equinox Minerals (ASX/TSX:EQN) is focused on the development of its 100% owned Lumwana Copper Project in Zambia. The Lumwana Copper Mine will produce an average of 172,000 tonnes per year of copper metal contained in concentrates for the first 6 years of its 37 year mine life. With construction largely complete, remediation of works following the transformer fire incident underway and commissioning continuing, the mine is expected to commence production by the end of 2008. Full production will be reached in 2009 at which time Lumwana will be Africa's largest copper mine.
Minmetals Resources goes after Equinox Minerals in $6.3bn takeover play
Hong Kong-based base metals company Minmetals Resources (HKSE:1208) launched a C$6.3 billion hostile bid for dual listed copper miner Equinox Minerals (ASX:EQN) (TSE:EQN).
The all-cash offer comes just before Equinox shareholders are due to meet on April 11 to determine whether or not to buy Lundin Mining (TSE:LUN) for $4.8 billion, after Lundin's planned merger with Inmet Mining (TSE:IMN) fell apart last week.
The C$7.00 Minmetals bid represents a 23% premium to Equinox's closing price of C$5.71 on Friday on the Toronto Stock Exchange.
Though based in Canada, Equinox's prime asset is the large-scale Lumwana copper mine in Zambia, which the company acquired in 1999, with current production of 145,000 tonnes per year and a stated mine life of 37 years. Its other asset is the recently acquired Jabal Sayid copper-gold project in Saudi Arabia, which has first production scheduled for 2012, with a forecast of 60,000 tonnes of copper per annum.
Still, as Equinox is headquartered in Toronto, the Minmetals deal could have political implications for Canada, coming in the midst of a federal election, and a year after Ottawa rejected BHP Billiton's $39 billion bid for Potash Corp last fall.
The offer also shows China's attempt to build its position as a growing global powerhouse, embarking on an acquisition spree as of late to secure long-term reserves and resources. Press reports suggest that Minmetals had been looking to buy Equinox for some time, but only decided to make its offer now in an effort to thwart the Canadian company's acquisition of Lundin Mining.
"Our Offer for Equinox aligns with MMR's strategy for growth, enhancing our global production portfolio," said Minmetals CEO Andrew Michelmore.
"In order to take advantage of MMR's forthcoming offer, Equinox shareholders should reject the Lundin acquisition at the shareholders' meeting on April 11 and tender their shares into MMR's offer."
Minmetals said in its statement that the purchase of Equinox will extend its production profile to beyond 2030, more than doubling the company's exposure to what it calls the "attractive fundamentals of the copper market".
The acquisition is expected to be financed through a combination of existing cash reserves, long term credit facilities from Chinese banks, and financial investments in Minmetals from Chinese instituitons.
In a response statement, Equinox confirmed receipt of the Minmetals offer and said it will be meeting to consider the unsolicited proposal, and will only comment further following "careful consideration of the terms and implied value for Equinox".
According to Minmetals, the proposed acquisition of Equinox marks its first investment into the African copper belt and the Middle East, and is consistent with the Chinese company's long term strategic growth plans. Minmetals' largest shareholder, China Minmetals Corp, has confirmed its support for the deal.
Minmetals already holds an existing 4.2% stake in Equinox. Equniox rallied more than 28% on Monday on the Australian Stock Exchange to close at A$7.35.
