Inmet Mining
Inmet Mining takes the initiative to consolidate the Petaquilla Copper Project
As the bear stalks the world’s stock markets a chance of a 100 per cent plus premium is a welcome boon for the stock holders that are in the right place at the right time. On Monday, July 7 the stock price of Vancouver, BC based resource development company Petaquilla Copper Ltd. (Petaquilla)
(PTC; www.petaquillacopper.com) surged north to $1.93 on the TSX. The reason for the sudden hike was the announcement that Inmet Mining Corp. (Inmet) (IMN; www.inmetmining.com) had made an all cash takeover offer for Petaquilla for $2.00 a share, valuing Petaquilla at around $345m; in early trading on July 10, 2008 Petaquilla stock was unchanged at $1.95. Inmet is a strong international mining company focusing on copper, zinc and gold; Inmet stock on July 10 was up $1.46 at $64.61. “The Petaquilla Copper project, which we already own 48 per cent of, is potentially the most important source of long-term growth of copper production for Inmet,” said Richard Ross, chairman and CEO of Inmet.
On the same day that the takeover bid was revealed, Petaquilla announced the signing of a memorandum of understanding with Columbian energy provider Isagen S.AE.S.P. to look at a potential power project for the Petaquilla mining concession. Following the study, the next step could be the forming of a joint venture between the companies to build and operate the power plant. It would be a logical step for this project to carry on after any potential takeover.
Copper is the name and copper is the game. In Petaquilla’s case the major play is its claimed 52 per cent ownership of the Petaquilla Mining District in Panama; the mine is thought to hold a copper deposit worth some $3.5bn. The ownership of the mine is complicated Petaquilla claims to own 52 per cent of the Panama mine, Inmet 48 per cent and Teck Cominco 26 per cent. That’s 126 per cent and clearly won’t work. Something has to give or happen. Teck Cominco had the option to take 50 per cent of Petaquilla’s stake in the mine through an agreement to fund around half of the cost of developing the mine. That was OK until Petaquilla stated in April 2008 that Teck Cominco had not met the conditions for the option and that the company was going down the route of arbitration.
If the arbitration is successful then Petaquilla will have its 52 per cent. In the meantime, it may well be that a desire to, “get on with things,” on the Panama mine has prompted Inmet’s takeover bid to secure at least another 26 per cent to bring its holding up to 74 per cent. “We continue to have excellent relations with Teck Cominco, as evidenced in the arrangements that we entered into prior to March 31st, where we took over funding and management of the (Petaquilla Mining District) project until we have spent $50 million,” said Ross at a conference call. “We also notified Tech of our intention to make this offer to Petaquilla Copper shareholders,” said Ross. Also speaking at the conference call, Inmet president and COO, Jochen Tilk, seems to confirm the, “get on with it theory,” “We can tell you that we have made numerous efforts in the past, of cooperation, including some prior approaches to Petaquilla Copper, and all of them have been unsuccessful. The transaction would certainly remove any of those uncertainties and would give us the opportunity to establish the control in the field,” said Tilk.
On the face of it some Petaquilla stock holders have a potentially good deal. However, it wasn’t so long ago that Petaquilla stock was trading at $3.00 (52wk high $4.20; 52wk low $0.83) some investors will be happy with the premium and for the Panama mine to get going, others, including, presumably the current Petaquilla management, may not be quite so thrilled.