VANCOUVER

BREND BOUW
RTGAM



VANCOUVER - Equinox Minerals Ltd. is stepping up its fight to buy Lundin Mining Corp. by criticizing the copper-focused miner's ability to find another bidder after the failure of its friendly merger with Inmet Mining Corp.

Toronto-based Equinox said Wednesday that Lundin spent several weeks last fall looking at potential options for its assets in Europe and Africa, and came up with the merger with Inmet, which then fell apart.

The company, which trades on the Toronto and Australian stock exchanges, also played down the shareholder rights plan Lundin adopted Tuesday as it seeks potential buyers as a "delay tactic."

"Equinox believes that Lundin has already had every opportunity to do just this in the months leading up to the execution of its agreement with Inmet," Equinox stated.

Now that the Lundin-Inmet agreement is over, Equinox claims its unsolicited $4.8-billion offer is chance for Lundin investors to gain.

"Our offer has always been and remains the clear and compelling choice for Lundin shareholders," Equinox chief executive officer Craig Williams said in a statement. "It provides them with the flexibility to receive significant value in cash now or to benefit over the long term by participating in the potential of a leading pure-play copper company with a portfolio of world-class assets and a strong growth profile."

Lundin and Inmet Mining Corp. announced late Tuesday that they have called off a friendly merger aimed at creating a Canadian-based copper giant amid mounting concerns over changes to a flagship Inmet project in Panama that was key to the deal.

The decision opens the door for Equinox's $8.10 cash-and-share offer for Lundin, which Lundin has rejected for being too cheap. It also criticized the offer as being highly leveraged with $3.2-billion (U.S.) in debt and fraught with increased geopolitical risk tied to mines in Africa and Saudi Arabia.

"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," Lundin chairman Lukas Lundin said in a statement Tuesday evening. "I am not against selling if it achieves an excellent financial return to shareholders but I will not support selling at bargain prices."

Lundin's shareholder rights plan, also known as a "poison pill" gives it until the end of May to seek other options for the company's assets. That could include selling off the company as a whole, or in parts.

Equinox could legally challenge the last minute rights plan, or extend its offer to early June to comply with Lundin's terms, UBS analyst Onno Rutten said in a note to clients on Wednesday.

UBS said it sees a 40 per cent probability of Lundin attracting multiple offers.

"Lundin did not appear to have conducted a thorough auction prior to committing to [Inmet], so there may be interested bidders," Mr. Rutten said, estimating a takeover value of $10.40 per share.

Lundin has copper, nickel and zinc assets in Europe and a 25-per-cent stake in the promising Tenke Fungurume copper-cobalt project in the Democratic Republic of the Congo.

Lundin and Inmet said they agreed to "mutually terminate" their merger announced in January, "on the grounds that we could not reach a position that we thought would be supported by both companies' shareholders."

The companies added that, "We continue to think very highly of each other's assets and wish each other well."

The deal breakup marks a major turn in an unusual takeover battle, where a friendly merger was upset by an unexpected setback at a key project. The market has been signalling a breakup of the merger in recent days, with Lundin shares trading at a significant premium relative to Inmet. That suggested investors expected Equinox's bid had a better chance.

While the Equinox bid has been a threat to the Inmet-Lundin deal since it was launched last month, the merger started to fall apart last week after changes were revealed for Inmet's $4.3-billion Cobre Panama project, a 250,000 tonne-per-year mine set to begin production in 2016.

Top government officials in Panama told Inmet and Lundin they wanted the mine's power source switched from coal-fired power to natural gas, which analysts predicted would mean delays and higher costs. Lundin last week characterized the change as a "material departure" from the original merger agreement and said it would conduct a review. Inmet maintains the change is not material to the timing or economics of the project.

Lundin and Inmet have been in intense discussions over the past week, and ended their agreement Tuesday without offering specifics. Inmet has a right to a break-fee of $120-million if Equinox succeeds in its bid for Lundin.

It's the second time in more than two years that Lundin has failed in its merger attempt with another Canadian-based base metals company. The last time was in early 2009 when its proposed merger with HudBay Minerals Ltd. was cancelled. The decision followed a revolt by HudBay shareholders who felt a merger with a then-cash-strapped Lundin would have diluted their stock.

Lundin and Inmet were proposing a share-swap combination to create a Canadian copper powerhouse called Symterra Corp., with a market capitalization of about $9-billion.

In late February, Equinox came along with its unsolicited cash-and-shares offer for Lundin, touting a 26-per-cent premium and the creation of a diverse copper player with assets across Africa, Europe and Saudi Arabia. Lundin immediately criticized the potential combination as having financial and geopolitical risk, and said Equinox management didn't have the experience to run a larger mining company.

Meanwhile, Equinox criticized the Lundin-Inmet combination as having no premium for Lundin shareholders. It also warned that Inmet's Cobre Panama project would be difficult to finance in a country with untested mining laws. Equinox's concerns were bolstered by a Panamanian government move to repeal the country's mining code allowing investments from foreign governments. That raised questions about Cobre Panama's investments from sovereign wealth funds in South Korea and Singapore. Inmet maintains the changes don't impact existing projects such as Cobre Panama.