Brenda Bouw Vancouver
RTGAM



Lundin Mining Corp. is officially rejecting a $4.8-billion hostile takeover bid by Equinox Minerals Ltd. , condemning the offer as too low and fraught with debt and geopolitical risk.

"The offer has such extensive conditions that even if the amount of the offer was not so financially inadequate, the board would not recommend that shareholders accept the offer because we have no confidence that it would ever close," Lundin Mining chairman Lukas Lundin said in a statemen on Sunday.

Vancouver-based Lundin said it will continue to pursue its "merger of equals" with Toronto-based Inmet Mining Corp., which shareholders on both sides are scheduled to vote on later this month.

Equinox, which is listed on both the Toronto and Australian stock exchanges, launched an unsolicited bid for Lundin last month for $8.10 per share.

Equinox said buying Lundin would help it create one of the world's top 10 copper companies with a projected compounded annual growth rate of 23 per cent, which would give it 500,000 tonnes of production each year by 2016.

Lundin has copper, nickel and zinc assets in Europe and a 24.75-per-cent stake in the Tenke Fungurume copper and cobalt project in the Democratic Republic of Congo, the latter of which is considered one of its most prized assets. Equinox has a copper mine in Zambia and is nearing production at a project in Saudi Arabia picked up in its recent $1.26-billion purchase of Citadel Resource Group Ltd.

Equinox's bid for Lundin has drawn criticism as being debt-heavy, particularly in a volatile commodities market. The concerns are that a sharp downturn copper prices, now trading near record highs of about $4.30 a pound (U.S.) could leave Equinox struggling to pay off that debt.

Equinox maintains the $3.2-billion (U.S.) loan it needs to buy Lundin, will be paid off in four years, based on a steady forecast for the price of its main metal, with consideration of any drops in price.

Still, Lundin is convinced the Equinox offer is too risky and recommended its shareholders reject it.

"Taking on US$3.2 billion in debt on partially undisclosed terms, and the basis of their production forecasts are two things in particular to reflect on," Lundin chief executive officer Phil Wright stated. "Equinox is essentially asking shareholders to grant them an option to acquire Lundin Mining, at their discretion, and their lenders discretion, at a price that is inadequate and containing substantial risks if implemented."

Lundin also said there were no strategic benefits for the combination with Equinox. "The acquisition results in a company with high Africa and Middle East concentration and few, if any synergies with Lundin Mining's business," the company stated.

Equinox officials could not immediately be reached for comment.