Home > Mergers & Acquisitions > Symterra: Inmet, Lundin Merger to Forge Copper Mining Giant

Symterra: Inmet, Lundin Merger to Forge Copper Mining Giant

January 19, 2011

“Inmet Mining Corp.’s planned merger with Lundin Mining Corp. will catapult the combined 9 billion Canadian dollars (US $9.1 billion) miner among the world’s biggest copper producers as demand for the widely used industrial metal shows no signs of easing.

The combined company, to be known as Symterra Corp., will generate annual production of around 500,000 metric tons of copper starting in 2017, up from around an estimated 205,000 metric tons this year, ranking it among world’s top five senior copper producers. Chile’s Antofagasta PLC is the biggest copper producer, with output of more than 600,000 metric tons estimated for this year.

Inmet and Lundin, both based in Toronto, will combine five copper mines in Portugal, Spain, Turkey, Sweden and Finland with two huge copper projects—Inmet’s 80%-owned Cobre Panama operation, one of the world’s largest undeveloped copper projects with a mine life exceeding 30 years, and Lundin’s 24.8% stake in the Tenke Fungurume mine in the Democratic Republic of Congo. The initial phase of that project calls for a 40-year mine.”

Source: Wall Street Journal, January 13 2011

Observations:

  • Although both headquartered in Toronto, Lundin and Inmet don’t have operations in North America. Most of the current production takes place in Europe, with focus of production in the future shifting to Asia, Africa and potentially Latin America.
  • The market capitalization of both firms is roughly equal at $4.4bln. Inmet has demonstrated a stable performance over the past years with profit margin in the range of 25-50%. Lundin has not been as profitable yet, but has access to the promising Tenke Fungurume project.

Implications:

  • The main driver for the merger is combined spending power for the development of Cobre Panama and Fungurume and the dilution of political risk associated with operation in Papua New Guinea and Congo.
  • Analysts point to the difference in corporate cultures of the two companies as a potential obstacle for smooth integration. The composition of the new board, with Inmet’s Jochen Tilk as president & CEO, indicates that Inmet’s ‘corporate citizenship’ culture might become dominant.

©2011 | Wilfred Visser | thebusinessofmining.com

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