Lundin Mining Corporation
TSX : LUN
OMX : LUMI

Lundin Mining Corporation

March 20, 2011 16:38 ET

Lundin Board Recommends Shareholders Reject Unsolicited Equinox Offer

TORONTO, ONTARIO--(Marketwire - March 20, 2011) - Lundin Mining Corporation ("Lundin Mining" or the "Company") (TSX:LUN)(OMX:LUMI) today announced that its Board of Directors, after careful consideration with the assistance of its Special Committee, financial advisors and legal advisors, unanimously recommend that Lundin Mining shareholders REJECT the unsolicited offer (the "Unsolicited Offer") from Equinox Minerals Limited ("Equinox") to acquire all of the outstanding common shares of Lundin Mining.

Commenting on the offer, Mr. Lukas Lundin, Chairman of Lundin Mining said, "The offer has such extensive conditions that even if the amount of the offer was not so financially inadequate, the Board would not recommend that shareholders accept the offer because we have no confidence that it would ever close." 

In forming this view, the Board of Directors received the unanimous recommendation of the Special Committee of Lundin Mining. The Special Committee, with the assistance of its legal and financial advisors, carefully considered and reviewed the terms and conditions of the Unsolicited Offer and unanimously concluded that it is not in the best interests of Lundin Mining shareholders or Lundin Mining. In making its recommendation to the Board, the Special Committee considered a number of factors, including an inadequacy opinion received from Haywood Securities Inc., its financial advisors. In addition, the Board received an inadequacy opinion from the Board's own financial advisor, Scotia Capital Inc.

Mr. Phil Wright, Chief Executive and a Director of Lundin Mining noted, "Shareholders should be very wary of this offer and carefully review the information supporting it, or indeed the lack thereof.

"Taking on US$3.2 billion in debt on partially undisclosed terms, and the basis of their production forecasts are two things in particular to reflect on.

"Equinox is essentially asking shareholders to grant them an option to acquire Lundin Mining, at their discretion, and their lenders discretion, at a price that is inadequate and containing substantial risks if implemented", Mr. Wright said.

The Board recommends to Lundin Mining shareholders that they REJECT the Unsolicited Offer and DO NOT TENDER their Lundin Mining shares for the following reasons:

  • The Unsolicited Offer is inadequate from a financial point of view to Lundin Mining shareholders, based upon the following factors, among others:
    1. it undervalues the assets owned by your company in that it is dilutive on a net asset value per share basis;
    2. the Unsolicited Offer, based on the closing price on the TSX on March 18, 2011, represented a value of $7.44 per common share assuming full pro-ration of the offer consideration. This is a 6% premium to the 20-day volume weighted average share price of the Lundin Mining common share ending February 25, 2011 of $6.99 when the offer by Equinox was announced;
    3. Equinox is seeking to acquire control of Lundin Mining without paying an adequate premium for that control. The premium represented by the Unsolicited Offer is inadequate and is substantially below premiums paid in other unsolicited metals and mining transactions, which have averaged 64% since 2004 on completed transactions over $100 million;
    4. there is substantial concern that the risk factors involved with the Unsolicited Offer and risk factors inherent in the Equinox operations will affect the ability of the common shares of Equinox to continue to trade at their current levels and multiple to net asset value for any sustained period;
    5. the Unsolicited Offer consists of a substantial amount of stock and any decline in Equinox's share price, or, if the Unsolicited Offer were successful, a decline in the combined company's valuation multiples, could result in a reduction in the value of the Unsolicited Offer to shareholders of Lundin Mining. Equinox has also raised the possibility of a convertible debt issuance thereby potentially diluting existing shareholders further; and
    6. Scotia Capital Inc. and Haywood Securities Inc. have delivered written opinions to the Board of Directors and Special Committee, respectively, that the consideration proposed to be paid to the shareholders is inadequate from a financial point of view to such holders.
  • The pro-forma debt-to-equity ratio of the combined Equinox and Lundin Mining is excessive and will present increased financial risk and a more highly leveraged capital structure than Lundin Mining and peer group companies. In addition, the lenders to Equinox will have considerable influence over the business decisions of a combined Equinox and Lundin Mining.
  • Substantially all of Equinox's and Lundin Mining's existing cash balances and projected near-term cash flow will be utilized to pay for: lenders' fees; interest charges; and the principal repayments of the debt incurred to fund the cash portion of the consideration payable under the Unsolicited Offer. This:
    1. jeopardizes capital expenditures and growth of the combined Equinox and Lundin Mining for the foreseeable future and results in a weaker balance sheet than peers and diminished financial capacity;
    2. transfers the economic benefits of the operations from shareholders to lenders;
    3. risks dilution of Lundin Mining's investment in Tenke Fungurume should Equinox not be able to, or not be permitted by its lenders to, contribute its share of development expenditures;
    4. may result in asset sales at distressed levels due to the time pressure of having to repay bridge debt financing. This pressure increases substantially over a short period of time as the combined company can be locked into high-rate term debt that cannot be repaid without significant penalty. (If it were to choose to do so, Lundin Mining should be able to liquidate assets at higher negotiated values without this time pressure).
  • The Unsolicited Offer would result in a company with increased exposure to geopolitical risks due to the location of Equinox assets in Zambia and Saudi Arabia. 
  • The Unsolicited Offer is highly opportunistic. Equinox's shares were trading at or near the all-time high share price when Equinox announced the Unsolicited Offer, which followed a news release made earlier in February 2011 on its strategy to expand the Lumwana project. The proposed Lumwana expansion plan is not supported by mineral reserves or mineral resources and is not based on pre-feasibility or feasibility studies. To date the Lumwana mine has significantly under-performed original feasibility study projections disclosed by Equinox.
  • There are no strategic benefits for Lundin Mining shareholders under the Unsolicited Offer. The acquisition results in a company with high Africa and Middle East concentration and few, if any synergies with Lundin Mining's business.
  • The Board has reservations about the experience of the management of Equinox to operate a multi-mine company with projects and mines spread across seven countries.
  • The Unsolicited Offer is highly conditional and has a substantial risk regarding completion without additional compensation for such risk. Conditions are subject to Equinox's lenders discretion resulting in Equinox, in many instances, not being the ultimate decision-maker.
  • The Unsolicited Offer may be a violation of Section 5 of the U.S. Securities Act of 1933, as amended.
  • Lundin Mining's directors, officers and certain shareholders have confirmed that they will not tender their Common Shares to the Unsolicited Offer.

The Board's recommendation to Lundin Mining shareholders that they REJECT the Unsolicited Offer and DO NOT TENDER their Lundin Mining shares, as well as a more detailed discussion of the reasons for rejecting the Unsolicited Offer and the inadequacy opinions provided by Lundin Mining's financial advisors, is contained in the Directors' Circular that will be mailed to each of Lundin Mining's shareholders and filed with Canadian securities regulatory authorities. The Directors' Circular will be available on SEDAR at www.sedar.com and on the Lundin Mining website at www.lundinmining.com. Shareholders are advised to read the Directors' Circular carefully and in its entirety, as it contains important information regarding Lundin Mining, Equinox and the Unsolicited Offer. Scotia Capital is acting as financial advisor to Lundin Mining and Cassels Brock & Blackwell LLP is acting as its legal advisor.

The Board notes that further communication relating to Lundin Mining's proposed arrangement with Inmet Mining Corporation will be provided in due course.

How to Withdraw Tendered Shares

To reject the Unsolicited Offer, you should do nothing. The Unsolicited Offer is open for acceptance until April 14, 2011. Shareholders who have already tendered their shares to the Unsolicited Offer can withdraw them at any time before they have been taken up and accepted for payment by Equinox. Shareholders holding shares through a dealer, broker or other nominee should contact such dealer, broker or nominee to withdraw their Lundin Mining shares. Shareholders may also contact the information agent retained by Lundin Mining, Phoenix Advisory Partners, North America Toll-Free at 1-888-687-7513, or banks and brokers and collect calls outside North America at +1-647-426-4458 or via email at inquiries@phoenixadvisorypartners.com.

Conference Call and Webcast Information

The Company will hold a telephone conference call with an interactive presentation at 20:00 CET (15:00 PM EST, 12:00 PM PST) March 21, 2011 and at 06:00 (EST in Australia) March 22, 2011.

Please call in 10 to 15 minutes before the conference starts and stay on the line (an operator will be available to assist you).

PLEASE NOTE!! Confirmation Code to quote when dialling in: 7318454#

Call-in number, Canada: +1 514 315 1009
Call-in number, USA: +1 718 247 0879
Call-in number, Sweden: +46 (0)8 5352 6457
Call-in number, Australia: +61 (0)2 8223 9222

To take part in the interactive presentation, please log on using this direct link: http://www.livemeeting.com/cc/premconfeurope/join?id=7318454&role=attend&pw=pw5465

Or visit the website www.euvisioncast.com and login using the following:

Meeting ID: 7318454
Meeting Password: pw5465

A replay of the conference call will be available until March 28, 2011 at the following numbers:

Replay number in Europe is: +46 (0)8 5051 3897
North America: +1 347 366 9565
To access the recording, please enter access code: 7318454#

About Lundin Mining

Lundin Mining Corporation is a diversified base metals mining company with operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a development project pipeline which includes an expansion project at its Neves‐Corvo mine along with its equity stake in the world class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo.

On Behalf of the Board,

Phil Wright, President and CEO

Forward Looking Statements

Certain of the statements made and information contained herein is "forward-looking information" within the meaning of the Ontario Securities Act or "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 of the United States. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks and uncertainties relating to foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company's expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described under Risk Factors Relating to the Company's Business in the Company's Annual Information Form and in each management discussion and analysis. Forward-looking information is in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper, nickel, lead and zinc; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment where the Company operates will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements.

Contact Information

  • Lundin Mining Corporation
    Sophia Shane
    Investor Relations North America
    +1-604-689-7842
    or
    Lundin Mining Corporation
    John Miniotis
    Senior Business Analyst
    +1-416-342-5560
    +1-416-348-0303 (FAX)
    or
    Lundin Mining Corporation
    Robert Eriksson
    Investor Relations Sweden
    +46 8 545 015 50
    www.lundinmining.com