VANCOUVER — State-controlled Polish copper producer KGHM Polska Miedz SA has struck a deal to buy Vancouver-based Quadra FNX Mining Ltd. in an all-cash deal valued at $3-billion.

Warsaw Stock Exchange-listed KGHM, the world’s ninth-largest producer of copper and third-largest producer of silver, is offering $15 per share for Quadra’s copper-focused assets in North and South America, including the promising Sierra Gorda copper project in Chile and mines in Sudbury, Ont.

The proposed deal is a 32-per-cent premium from Quadra last closing price of $11.35 on the Toronto Stock Exchange on Monday and 41-per-cent premium to its 20-day volume weighted average. The total transaction value is approximately $3.5-billion, including $500-million (U.S.) of outstanding gross debt. KGHM said it plans to finance the acquisition using existing cash.

Quadra chief executive officer Paul Blythe said the company wasn't planning for a sale.

“The offer was there, we had to deal with it. So we dealt with it,” Mr. Blythe told investors during a conference call on Tuesday.

“At the end of the day we felt this premium was significant enough we should evaluate it, and came to the conclusion we should recommend it to shareholders.”

If approved, the acquisition would be one of the largest in the copper sector since Barrick Gold Corp. bought Equinox Minerals Ltd. for $7.3-billion last spring. It’s also the latest in a growing list of foreign miners picking off Canadian-based companies across several resources in the race for what’s left of the world’s diminishing resources.

Other recent copper deals include China’s Minmetals Resources Ltd. $1.3-billion offer for Anvil Mining Ltd., a producer in the Democratic Republic of Congo. In coal, China’s Winsway Coking Coal Holdings Ltd. and Japan’s Marubeni Corp. are teaming up to buy Calgary’s Grande Cache Coal Corp. for $1-billion, and in uranium London-based Rio Tinto plc won a bidding war against Cameco Corp. with its $654-million offer for Hathor Exploration Ltd.

Miners that produce a range of metals are scrambling to find future growth prospects to meet an increasing demand from countries such as resource-hungry China, while at the same time satisfying a constant shareholder craving for higher returns. The deal activity continues despite volatile commodity markets and some concerns that China’s appetite for resources is waning.

The Quadra deal is being announced more than a month after KGHM told reporters in Poland that it planned to bid for a Canadian-based mining company. Since then, the company, 32-per-cent owned by the Polish government, has seen its share price dive after amid concerns a proposed new mining tax in Poland would squeeze profits.

Herbert Wirth, KGHM's chief executive officer, said the “carefully prepared transaction” fits with its strategy of “focused development and value creation.”

“KGHM will benefit greatly from Quadra FNX’s high quality management team and employees and we plan to make Canada our base for further growth in the Americas,” he said in a statement.

“Quadra FNX has a proven track-record and ambitious future development plans. Coupled with KGHM’s strong balance sheet and substantial positive cash flow, this transaction will provide a solid financial foundation and improve prospects for securing necessary financing for projects in Canada and abroad.”

KGHM said it will maintain a Canadian headquarters for the combined company that will oversee mining operations throughout the Americas, including the Sierra Gorda project in Chile.

“KGHM is committed to maintaining Quadra FNX’s existing plans for its operations and employment in Canada, as well as developing future growth projects, thereby improving the long-term employment prospects in Canada,” the company said.

“KGHM believes the transaction will provide employment stability for Quadra FNX employees through increased diversification, access to capital and financial strength.”

KGHM is also no stranger to Canada. Last year made its first acquisition by signing a joint-venture agreement with Vancouver-based Abacus Mining & Exploration Corp. to develop the Ajax copper-gold project, near Kamloops, B.C. The company said the deal marked its first step in reaching a goal to produce to 700,000 tonnes of copper by 2018, up from about 425,000 last year.

Lubin-based KGHM earned more than $5-billion (U.S.) in revenues last year, more than 80 per cent of which came from copper, and earned a profit of $1.4-billion.

Its offer for Quadra is an increase from its 52-week low of $7.69 reached in early October, as copper prices dove to around $3 (U.S.) per pound on worries about a global economic slowdown, that in turn would create less demand for copper, a widely used industrial metal.

Still, the price is down from a high of $17.55 reached in January, just before copper surged to an all-time high of $4.62 per pound, when the economy appeared more stable. Quadra shares traded at a record of just over $26 in 2008, prior to the global financial crisis.

Quadra's Mr. Blythe said KGHM participated in the process it ran earlier this year to find a joint venture partner for Sierra Gorda, and came forward a few weeks ago with a proposal to buy the company.

“This proposal represents a significant premium to the current share price and we are recommending that our security holders vote in favour of the transaction,” Mr. Blythe said in a statement.

Quadra is expected to produce around 220 million pounds of copper this year, which is on the lower end of its guidance.

In early November, the company said it would wind down its Podolsky Mine operations in Sudbury by the end of 2012 and close its Carlota mine in Arizona, to focus on its two flagship operations; the Robinson mine in Nevada and Morrison in Sudbury, Ont., together which contribute about 85 per cent of its operating income. It will also change the mining plan for its Franke operations in Chile.

Quadra also owns the McCreedy West, and Levack operations in Sudbury as well as a handful of advanced development projects, including the $2.9-billion Sierra Gorda copper-molybdenum project in Chile. Earlier this year, Quadra signed a joint-venture agreement to develop Sierra Gorda with partners Sumitomo Metal Mining, Japan’s second-largest copper producer, and trading house Sumitomo Corp.

That deal, which gave Quadra 55 per cent and the Sumitomo duo 45 per cent, was struck after a 2010 agreement Chinese utility State Grid, that included a joint venture on its Franke mine, fell through.

Quadra’s other developments projects include the Victoria Project in Sudbury, and the Malmbjerg molybdenum development project in Greenland.

The company merged with FNX Mining Company Inc. in the spring of 2010.

BMO Nesbitt Burns is acting as financial adviser for Quadra, and Blake, Cassels & Graydon LLP is acting as legal counsel.

GMP Securities LP is offering a fairness opinion to the independent committee of the company's board, while Cassels Brock & Blackwell LLP is acting as legal counsel to Quadra's independent committee.

KGHM's financial advisers are BNP Paribas and Rothschild and is legal representatives are Davies Ward Phillips & Vineberg LLP, and Gide Loyrette Nouel.