Copper wars: Barrick outbids Minmetals for Equinox
“Barrick Gold Corporation announced today that it has entered into a support agreement with Equinox Minerals Limited for Barrick to acquire, through an all-cash offer, all of the issued and outstanding common shares of Equinox (including the shares represented by Equinox’s CHESS Depositary Interests) by way of a friendly take-over offer. The Offer is for C$8.15 per Equinox share in cash, or a total of approximately C$7.3 billion. The Offer represents a 30% premium based on Equinox’s closing share price on the Toronto Stock Exchange on February 25, 2011 (the last trading day before Equinox announced its intention to make a take-over bid for the common shares of Lundin Mining Corporation). The Offer also represents a 16% premium over the per share price under the offer for Equinox proposed by Minmetals Resources Ltd. on April 3, 2011 (which offer has not yet commenced).”
- Barrick’s appearance as a white knight is a surprising turn in the copper wars, which started in January when Inmet and Lundin announced plans to merge into Symterra
- Minmetals dropped its bid for Equinox the day after Barrick’s offer, saying that entering into a bidding war would destruct value for its shareholders.
The bid by Barrick has two interesting implications: a continued uncertainty about consolidation in the copper industry; and changing dynamics in the relationship between gold and copper miners.
- Consolidation in the copper industry: although Minmetals appears not to enter into a bidding war, other offers for Equinox might follow. The incentive to keep Barrick out of the copper industry might trigger players like Freeport-McMoran and Xstrata/Glencore to make an offer. Furthermore the players that started the copper wars, Inmet and Lundin, are available as takeover or merger targets again.
- Copper vs. Gold dynamics: Barrick’s entrance into the copper arena is a significant change of strategy for the gold miner. Its Chilean copper operations did not account for more than 10% of revenue until now, but the copper output will be doubled by adding Equinox’ capacity. Operational synergies with Equinox’ assets in Zambia and Saudi Arabia will not be achieved, thus the acquisition is purely a move for increased diversification. Other gold miners, sitting on piles of cash, might follow Barrick’s strategy.
©2011 | Wilfred Visser | thebusinessofmining.com
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