TORONTO (miningweekly.com) - Lundin Mining and Inmet Mining have broken off plans to combine their companies, because they did not expect shareholders would support the deal, the firms announced on Tuesday evening.

Lundin said separately that it has adopted a shareholder rights plan and will consider its strategic alternatives, but that it continues to recommend against an unsolicited takeover bid from Equinox Minerals, which it still views as "low-ball".

The rights plan was put in place "to ensure that we have adequate time to explore all alternatives to bring value to Lundin shareholders," CEO Phil Wright said.

"Our exploration of alternatives starts immediately and we will be actively and aggressively looking for the best value transaction."

The January agreement between Lundin and Inmet, which would have created a new C$9-billion Canadian copper producer called Symterra, was "mutually terminated" the firms said.

The companies agreed that Inmet's right to a C$120-million break fee would remain in place in connection with the Equinox offer.

There has been speculation that the deal was in jeopardy since Equinox first made its offer, but rumours intensified after Lundin's Wright said last week that the government of Panama may not approve plans for a coal-fired power station for Inmet's big Cobre Panama copper project.

The news represented a potentially "material" change, he said at the time.

Lundin's share price has also suggested that investors were giving the Equinox transaction a better chance of success.

WISH EACH OTHER WELL

Shareholders meetings at which Inmet and Lundin investors were to have considered the merger on April 4 have been cancelled, the companies said on Tuesday.

Lundin has mines in Portugal, Sweden and Spain and owns a minority interest in Freeport-McMoRan Copper & Gold's Tenke Fungurume copper/cobalt mine, in the Democratic Republic of Congo.

The company has criticised the Equinox offer for being debt laden, after Equinox arranged a $3,2-billion bridge facility to finance the cash portion of the acquisition, but which it will need to refinance down the road.

Lundin also said last week that the Equinox offer premium was too low for an unsolicited bid, and that Equinox's assets in Zambia and Saudi Arabia would increase the geopolitical risk exposure of the combined company.

"Inmet and Lundin believe that this merger would have created a leading copper producer with benefits for both companies' shareholders," Inmet CEO Jochen Tilk and Lundin's Wright said in a joint statement.

"We have however agreed to mutually terminate the agreement on the grounds that we could not reach a position that we thought would be supported by both companies' shareholders.

"We continue to think very highly of each other's assets and wish each other well."

Equinox has offered C$8,10 a share in cash or 1,2903 Equinox shares plus $0,01, and its bid will be open until April 14.

Under the deal with Inmet, each Lundin shareholder would have received 0,3333 shares of the new company, Symterra, and Inmet investors would get 3,4918 Symterra shares per Inmet share.

The firms said when announcing the deal that the exchange ratio represented no premium to either party, based on the 30-day volume-weighted average prices up to January 11 on the TSX.

Edited by: Creamer Media Reporter Inmet deal called off

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