Inmet looking for buyer for Antamina — Expansion planned for Troilus; Teck shares on block

Pressured by a September deadline to commit to the huge Antamina copper project in Chile, Inmet Mining (IMN-T) recently began talks with ten large base metal producers regarding a possible sale of its half-interest.

At the company’s annual meeting in late April, President William James said the feasibility study on Antamina pegged the total cost of the project, including financing, working capital and penalties, at US$2.2 billion. As equal partner with Rio Algom (ROM-T), Inmet would be required to raise US$1.1 billion. Pointing out that Inmet’s market capitalization is only US$400 million, James — who is famed for his directness — resorted to understatement, saying, “We have a little problem bridging that shortfall.” Inmet had started 1997 with a share issue that netted US$192 million, and hammered out a deal with Homestake Mining (HM-N) and Prime Resources (PRU-T) that would have seen Inmet’s Troilus gold mine in northern Quebec sold for US$110 million. Homestake and Prime, alleging that Inmet had failed to make full disclosures before the purchase, walked away from the deal in December.

James believes that Troilus could not now be sold for a similar price.

“If we continue with an interest in Antamina,” said James, “it’s going to take all our focus, all our money, everything.” With no other options, Inmet announced in March that it would consider offers for all or part of its Antamina interest, or for the whole company. Ten of the twelve companies that Inmet approached have looked at the project and at Inmet, and each one concluded that it would rather have an interest in the project.

Asked if the buyer might be a company with smelting capacity, James replied, “a smelter would be good, but not necessary.” The obvious candidate with a smelter is Noranda (NOR-T), which recently bought out its partners in the Refimet smelter in northern Chile. Noranda had earlier bid unsuccessfully for an interest in Antamina.

Inmet’s board approved a $6-million program to upgrade the front end of the mill at the Troilus open pit. The principal modification planned is the addition of

a cone crusher immediately be-

fore the semi-autogenous grinder. The change would boost the mill’s capacity to 15,000 tonnes per day, up from the current 11,000. James also said there was little likelihood of an out-of-court settlement of its suit against Homestake and Prime over the aborted sale of Troilus.

Some cash may be generated through the sale of Inmet’s 31.8% interest in Teck (TEK-T), which is on offer at $22 per share. A potential buyer is to reply before the end of May.

Legal wrangles and public protests over the development of the Ovacik gold deposit in Turkey have delayed production, James said, adding that “We don’t know if this turkey is going to fly.”