Equinox Minerals has found another Canadian company as its white knight to fight off the hostile bid from one of China’s largest mining and metals groups.
The world’s biggest gold miner, Barrick Gold Corp, emerged on Monday to overbid the offer from China’s Minmetals Resources.
Barrick revealed Monday night, our time, an offer for Equinox worth about $C7.3 billion (or around $A7 billion).
Barrick has offered C$8.15 cash a share for Equinox, or 16.4% more than Minmetals’ C$7 per share (around $C6.3 billion).
The news and size of the Barrick offer caused Minmetals Resources to drop its bid last night.
That will take the heat out of Equinox shares which were expected to jump to more than $8 this morning in Australia on the news of the agreed higher offer. They closed at $7.34 in Australia on Thursday, down 6c on the day.
Equinox shares jumped nearly 12% in Toronto after the announcement on Monday, signalling that some are expecting a counter-bid from the Chinese metals giant.
Barrick shares lost more than 6% as some investors wondered about the cost of the counter bid, which seems dependent on the current high price for copper continuing.
Craig Williams, Equinox’s chief executive, said in a statement that Barrick’s offer “is superior to the public proposal made by Minmetals in terms of certainty and value”.
And, Peter Munk, Barrick’s chairman, told the Financial Times that Minmetals has a “much better chance to expand their access to minerals by co-operating with companies like us”. He added, “Having an auction is not in the interests of anybody”.
Barrick is pitching the bid as a way of improving its position in copper.
In fact its stake in the copper market will double with the acquisition, reducing its take in gold to 80% from 90%, with copper rising to 20%.
In doing that it will match the business profile of major rivals such as Newcrest of Australia, Freeport and Newmont, both of the US.
Equinox is listed in Toronto and Sydney, and owns the Lumwana copper mine in Africa’s rich Zambian copper belt and most of the Jabal Sayid project in Saudi Arabia.
Barrick says it expects to produce about 7.8 million ounces of gold this year and 300 million pounds of copper, mainly from the Zaldivar mine in northern Chile.
Mr Munk said its copper output could potentially quadruple with the help of the Equinox acquisition.
Equinox has agreed to pay a $C250m termination fee if it accepts a superior proposal from another bidder. Barrick said that it has acquired a stake of about 2% in Equinox.
In its statement, Barrick listed the attractions of Equinox as:
attractive supply and demand fundamentals for copper for the foreseeable future.
5.7 billion pounds of copper reserves, including 4.5 billion pounds of copper reserves at Lumwana and 1.2 billion pounds of copper reserves at Jabal Sayid, plus an additional 5.5 billion pounds of inferred copper resources at Lumwana.
scarcity of opportunities of this size and quality.
maintains gold exposure per share and enhances copper leverage per share.
financial flexibility remains to fund internal growth projects.
As part of the Barrick agreement, Equinox will pull its unsolicited bid for Lundin Mining.
Equinox had been trying to take over the rival copper miner since February but conceded on Monday that its own shareholders would not likely have supported the deal.
Barrick is due to report its first quarter earnings tomorrow night, our time.
