194 (10.05.18)


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M&A

Globetrotter Lukas Lundin Bounces Copper Rivals Into Deals

Lundin's bankers weighing options over Nevsun and First Quantum

For several months, Swedish mining investor Lukas Lundin has been flying in and out of meetings in hotels around the world, lining-up deals for his C$6bn ($5bn) copper company, Lundin Mining.
   Then on Monday he lobbed a grenade into the copper market, bringing one of those deals to the surface: Lundin Mining has repeatedly approached Vancouver-based Nevsun Resources about its Timok discovery in Serbia, tabling four proposals that value Nevsun at around C$1.5bn, but each proposal has been “rejected”, Lundin announced to the market.
   The two companies have held stop-start talks since February, first reported by Global Mining Observer two months ago, but Lundin's decision to go public threw Nevsun's chief executive Peter Kukielski, a former insider at steel giant ArcelorMittal, onto the back foot.
   Nevsun said its board had “unanimously rejected” the overtures, describing Lundin's move as “merely a non-binding proposal” with a “problematic structure”, but Nevsun's investors came out in support of a deal and Kukielski told Reuters that he had engaged “totally” with Lundin and was open to transactions.
   Lukas Lundin, however, who has scooped-up mines in recent years from Rio Tinto and US-based Freeport, is keeping other options on the table, including copper giant First Quantum and its huge Cobre Panama project.
   Lundin has long coveted Cobre Panama, which is due to enter production in the next few months and will be the largest new mine to open for several years. He has toured Panama's key copper assets with Lundin Mining's CEO Paul Conibear and first bid for First Quantum seven years ago.
   First Quantum produced $885m of

copper and gold last year and its C$15bn market cap looked out of Lundin's reach at the start of 2018, but its shares have been weighed down by its copper hedging book, plus an unexpected $8bn tax bill in Zambia, knocking $1bn off its shares in recent months. The company is also spending over $400m per quarter at Cobre Panama, where progress has been slowed down by strikes.
   First Quantum is open to a transaction, say sources close to its chairman Philip Pascall, who will soon turn 70. Having built the company into a multi-billion dollar copper powerhouse with mines on three continents, he is now planning to retire and is actively looking for a deal.
   Lukas Lundin, who has climbed Mount Kilimanjaro and raced the Dakar Rally, would be happy to take on First Quantum's operations in Zambia, according to bankers involved in the process. “Lukas has never shied away from Africa.”
   An equity transaction would have tax advantages and Lundin Mining is one of only two Canadian base metals groups that could plausibly put a large stock offer to First Quantum's board. The other is coal-copper group Teck, valued at C$19.6bn, which has zero interest in First Quantum's African assets, but could team-up with Lundin on a joint bid.
   One other part of the jigsaw puzzle that is yet to fall into place is Freeport: it co-owns Nevsun's key Timok project and Freeport's longstanding chief executive, Richard Adkerson, is close to Paul Conibear.
   Whilst Lukas Lundin has quickly bounced Nevsun into play, on First Quantum, he is being more cautious. Any public offer could instigate a bidding battle, so “there's a first-mover disadvantage,” one banker says. “It's a stalemate right now.”

 

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