Lundin and Inmet part ways

Lundin Mining (LUN-T, LUMI-O) and Inmet Mining (IMN-T) have broken off their proposed engagement on the grounds that they “could not reach a position that we thought would be supported by both companies’ shareholders.”

“We continue to think very highly of each other’s assets and wish each other well,” the two companies said in a joint statement after markets closed yesterday.

The Inmet-Lundin deal would have seen the two essentially merge as equals — with no premium paid — under the new name Symterra Corp. If the merger had gone ahead, Symterra would have had a $9-billion market capitalization based on five operating mines in Europe and Turkey and two copper development projects, including Lundin’s 24.75% stake in the Tenke copper mine in the Democratic Republic of the Congo.

Concerns about power supply for Inmet’s large but low-grade Cobre Panama copper-gold project in the jungles of Panama, however, have turned Lundin skittish in recent days.

In a separate statement issued twenty minutes after its joint statement with Inmet, Lundin said its board continued to recommend that shareholders reject a hostile takeover offer from Equinox Minerals (EQN-T, EQN-A) and announced a shareholder rights plan — or poison pill — to help buy it time to find alternatives. (Equinox is offering $8.10 in cash and shares for each Lundin share.)

“Our hands have been completely tied in defending against the low ball, risky Equinox bid because of the Inmet agreement,” Lukas Lundin, chairman of Lundin Mining, said in a prepared statement. “Having agreed to terminate with Inmet, we can now pursue new alternatives to significantly improve shareholder value and get a proper premium if we do a change of control transaction. I am not against selling if it achieves an excellent financial return to shareholders but I will not support selling at bargain prices.”

Onno Rutten, an analyst at UBS Investment Research, wrote in a note to clients that Lundin “did not appear to have conducted a thorough auction prior to committing to Inmet so there may be interested bidders.”

“Notwithstanding the tight deadline, we therefore assign a 40% probability towards the emergence of multiple offers for Lundin’s relatively scarce assets at an estimated takeover value of $10.40 per share.”