Watching a hotly contested takeover unfold is enough to make a person’s head spin. The Lundin-Inmet-Equinox-Minmetals-Barrick saga is a case in point. Now the end is near and the deal looks better since Barrick Gold of Toronto has made a friendly, all-cash offer of $8.15 per share for Equinox Minerals of Toronto and Australia. The Barrick offer is worth $7.3 billion, and is a billion more than the bid made by Minmetals Resources, a subsidiary of China Minmetals, less than three weeks ago.
But there is more to the story. In January 2011 Inmet Mining Corp. and Lundin Mining agreed to a friendly merger to create a new company with a market capitalization of $9 billion and annual production of over 600,000 tonnes of copper by 2017. That deal was derailed the next month when Equinox topped Inmet’s offer. Putting the Equinox name prominently in the news also attracted the interest of the Chinese subsidiary in Equinox.
Enter Barrick, and here the spinning should stop. Barrick has deep pockets and a desire to own one of the world’s large copper producers, Equinox’s Lumwana mine in Zambia. And face it – there aren’t too many world class copper mines owned by mid-sized companies on the market. Lumwana has a measured and indicated resource of 342.6 million tonnes grading 0.74% Cu, plus an inferred resource of 563.1 million tonnes at 0.63% Cu. In 2010 the operation produced 146,690 tonnes of copper, and a 25% expansion is in the works.
Barrick is the world’s largest gold producer, but it is also a significant producer of copper with a 2010 output of 166,925 tonnes. Scooping up Equinox will nearly double its copper production. As Barrick moves even more into copper, it doesn’t hurt that Equinox owns 70% (and is acquiring the remaining 30%) of the Jabal Sayid copper project under development in Saudi Arabia.
Barrick’s interest in copper will in no way tarnish its reputation as a gold producer. It will be at the head of that class for many more years. Rather the interest in copper is an expression of an exceptional management team that is taking the opportunity to create shareholder wealth with two, instead of a single, valuable metal.
Meanwhile, executives at both Equinox and Barrick are lauding the latest, friendly deal. Equinox has withdrawn its offer for Lundin, a move that may open the door for Inmet and Lundin to restart talks.
Details of the latest offer are available both at www.Barrick.com and www.EquinoxMinerals.com.