As copper prices hit record highs, Canadian miners Inmet Mining (TSX:IMN) and Lundin Mining (TSX:LUN)(OMX:LUMI) announced today that the two companies will merge to create a new copper force in the industry.
The C$9 billion deal promises to create Symterra Corporation, a new company that will have the potential to produce over 500,000 tonnes of copper annually by 2017. The merged entity will have five low-cost, long-life mines in Europe under its belt and two copper development properties, as well as a cash balance of $1.3 billion and no debt.
Consolidation has become a popular trend in the mining industry, as commodity prices have surged recently and companies scramble to attain new mineral properties.
Toronto-based Inmet produces copper, zinc and gold and has interests in four mining operations: Çayeli in Turkey, Las Cruces in Spain, Pyhäsalmi in Finland and Ok Tedi in Papua New Guinea. It also has a 100% stake in Cobre Panama, a copper development property in Panama.
Lundin, based in Vancouver, produces copper, nickel, lead and zinc and holds expansion projects at its Zinkgruvan mine in Sweden and Neves Corvo project in Portugal, along with its stake in the Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo.
Under the terms of the deal that has already been approved by both companies' boards, each Inmet shareholder will receive 3.4918 shares of Symterra, and each Lundin shareholder will receive 0.3333 shares of the new company, for each share held.
The exchange ratio represents no premium to either party based on the 30-day volume-weighted average price of both Inmet and Lundin to January 11, 2011, the companies said.
Symterra will be listed on both the TSX and OMX Nordic exchange, with chairman of Lundin Lukas Lundin as the new non-exec chairman, and head of Inmet Jochen Tilk as the new president and CEO.
"The long-term fundamentals for copper are compelling. With solid operating assets and the ability to fund its world class growth projects, Symterra provides one of the best growth profiles for copper amongst major mining companies, combined with attractive exposure to zinc and other metals," said Lundin.
The merger transaction has a break fee of C$120 million, should the deal not complete under certain circumstances. The transaction is conditional on the approval of Inmet and Lundin shareholders, as well as regulatory and other approvals, with the shareholder meeting due to take place in mid-March.
The largest shareholder of both companies have already agreed to vote in favour of the merger, including Leucadia, which represents 17.94% of Inmet shares, and Lundin, representing 12.32% of Lundin shares.