Adastra spurns First Quantum advance

» Adastra ponders First Quantum takeover bid

Click here to find out more about how to use this button

Adastra spurns First Quantum advance
Allan Seccombe
Posted: Tue, 24 Jan 2006

[miningmx.com] -- Adastra Minerals, owner of one of the world’s largest cobalt projects, spurned the hostile advances of fellow Canadian miner First Quantum, calling it an opportunistic approach that undervalues its business.

On January 18, First Quantum, which has copper and cobalt operations in Zambia and the Democratic Republic of Congo (DRC), launched an unsolicited all-share bid for Adastra, offering one of its shares for every 17.5 of Adastra’s, valuing the deal at C$189m.

Adastra said on Tuesday First Quantum first approached it in November, suggesting a share exchange offer of one First Quantum share for 15 Adastra shares.

“The exchange ratio proposed by First Quantum in its 18 January press release is significantly inferior to that proposed in November, which at that time the board rejected as undervaluing the company and its prospects,” Adastra said in a statement.

After hearing about last week’s offer Adastra set up a special committee to evaluate the new terms. First Quantum has yet to make the offer formal.

“The initial view of the board of directors of Adastra and its financial advisors is that this opportunistic offer significantly undervalues the company,” Adastra said.

this opportunistic offer significantly undervalues the company

Adastra told its shareholder to wait until its special committee and advisors had taken a look at a formal offer from First Quantum and the board made a recommendation to shareholders.

Adastra owns 65% of the Kolwezi tailings project in the DRC. The project is one of the world’s largest cobalt sources. Adastra last year raised C$10m to fund a definitive feasibility study, which will be completed in early March.

“We surmise that Adastra may wish to accelerate this timetable in order that the findings can be available to shareholders when they evaluate First Quantum’s formal offer,” said John Meyer, an analyst at Numis Securities, which is First Quantum’s UK broker and advisor.

Adastra has said it will spend $300m to bring the project into production. It said it will initially produce 30,000 tonnes of copper and 5,000 to 5,500 tonnes of cobalt a year, giving the project a 50-year life.

First Quantum has said it would increase production levels of both metals, potentially doubling them, if it succeeded in taking over Adastra.

Meyer said First Quantum had the skills and experience in tailings projects to ensure success at Kolwezi.

“First Quantum has operating experience in the DRC which could prove difficult to replicate as well as an established record of expeditious project development in Africa and the financial strength to implement development,” he said.

Clive Newall, First Quantum president told analysts last week his company could finance the development of Kolwezi internally.

First Quantum has projects in the DRC and Zambian copperbelts. It is finalising plans for its Frontier copper/cobalt mine in DRC, where it also owns the Lonshi copper mine.

Free news alerts: click here to subscribe

In Zambia, it has an 80% stake in the Kanshanshi copper/gold mine, which produces 120,000 tonnes/year of copper.

It also owns the Bwana Mkubwa solvent extraction and electro-winning plant in Zambia, which treats ore from Lonshi.

Kolwezi is 13 times the size and twice the grade of First Quantum’s Bwana Mkubwa tailings reclamation project.