With copper prices trading near record highs and supplies short, the sector is hot, and there has even been speculation that Australian- and Canadian-listed Equinox itself might make a good takeover target for global miner Rio Tinto .
Lundin, valued at $3.8 billion, said on Sunday it had been advised that Equinox plans to make an unsolicited takeover bid before markets in Canada open on Monday.
Equinox is a Zambia-focused copper miner, while Lundin operates copper, zinc and nickel mines in Europe and has a 24.75 percent stake in Freeport-McMoRan's massive Tenke-Fungurume copper-cobalt mine in the Democratic Republic of Congo.
The proposed bid comes just over a month after Lundin and Inmet Mining Corp , a copper miner with operations in Spain, Turkey and Finland, agreed to combine and create a new Canadian copper mining major called Symterra, worth about C$9 billion ($9.2 billion).
Analysts said at the time of the merger announcement that Lundin was essentially putting itself in play, and Equinox's move on Monday came as no surprise.
'Given that the proposed merger between Lundin and Inmet was billed as a 'merger of equals' with no premium equated to either company and no anticipated future cost savings from the merger, another bidder which could demonstrate better synergies and cost rationalizations was bound to appear,' said Darryl Levitt, a mergers and acquisitions lawyer with Macleod Dixon in Toronto.
'I do not think that the bidding process will stop here,' he said.
Global demand for copper and other base metals is rising worldwide, driven largely by China's growing need for imported metal to supplement its own supplies.
London Metal Exchange (LME) copper for three-month delivery shot up $245 or 2.6 percent to close at $9,750 a tonne on Friday, trading just short of a record high hit earlier this month at $10,190. It has risen more than a third in the past year.
Toronto-based Lundin was part of one of the most notable failed Canadian mining transactions in recent years, when HudBay Minerals unsuccessfully tried to acquire it in the midst of the resource market crash in late 2008.
HudBay shareholders bristled at the deal, and eventually overthrew its management after a proxy battle.
'Lundin is not aware of the terms of the (Equinox) bid. Until Lundin Mining completes its review of the bid, it will not comment on the proposal,' the miner said in a brief statement.
Lundin urged its shareholders not to take any action on the expected bid until its board had been able to study the offer.
Equinox Minerals halted its shares on the Australian Securities Exchange, pending the release of an announcement.
Efforts to reach Equinox, Inmet and Lundin officials for comment were not immediately successful.
Shareholders of both Lundin and Inmet were scheduled to vote on the proposed merger between the two companies on March 14. Lundin and Inmet have both agreed to a C$120 million break-up fee if the deal falls apart.
Lundin's shares in Toronto closed on Friday at C$6.45.
Equinox late last year expanded with the A$1.23 billion takeover of Citadel Resources, with operations in Saudi Arabia.
Following Rio Tinto's results this month, its copper chief indicated the company was looking at copper prospects in Africa.
That prompted RBS analyst Lyndon Fagan to speculate that Equinox would be a good fit for Rio Tinto, which is on the hunt for small- to mid-size acquisitions.
'I do expect to see M&A activity to pick up in the mid-tier mining space given the tight supplies and shortage of supply especially in the copper space,' Levitt said.
($1=$0.98 Canadian)
(Reporting by Euan Rocha, Allan Dowd and Sonali Paul; Editing by Ed Davies and Lincoln Feast) Keywords: LUNDIN EQUINOX/ (jeffrey.hodgson@thomsonreuters.com; 416 941 8099; Reuters Messaging: jeffrey.hodgson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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