Debt carefully considered in Lundin bid, Equinox saysTIM KILADZE...

Debt carefully considered in Lundin bid, Equinox says
TIM KILADZE
TORONTO? From Friday's Globe and Mail
Published Thursday, Mar. 03, 2011 6:52PM ESTLast updated Thursday, Mar. 03, 2011 7:07PM EST

Equinox chief executive officer Craig Williams has answers to the burning questions about his hostile bid for Lundin Mining, but first he wants to deal with the criticism levelled by counter-bidder Inmet Mining.

?It will be fairly interesting to see how they?re going to finance a$5.5-billion development project without taking on debt,? Mr. Williamssaid in an interview in Toronto on Thursday. ?Good luck.?

His remarks came after Inmet CEO Jochen Tilk said earlier this week thathe is averse to debt, and implied that Equinox was taking on far toomuch through a bank facility.To prove that the debt level was carefully considered, Mr. Williams madeit clear that Goldman Sachs and Credit Suisse stress-tested allpossible outcomes for Equinox. ?You can be assured that they didn?t giveus $3.2-billion (U.S.) on a whim.?

He also shot back at HudBay CEO David Garofalo, who said Equinox?sproposed deal could be ?very value-destructive? and chastised Equinoxfor bidding as if there is a commodity super cycle. ?There?s no frenzyof activity here,? said Mr. Williams, who is based in Australia. ?Idon?t think it?s top-of-a-cycle action.?

As proof, he cited the premium being offered: ?It?s not a 40- or50-per-cent premium that might indicate top-of-the-market pressure onthe deal.?

As for copper prices, he believes they are fairly valued despite hittingan all-time high of $4.65 (U.S.) a few weeks ago. He attributes currentlevels to supply constraints and doesn?t see any reason for them tochange much in the near future because some of the biggest developmentprojects, such as Inmet?s Cobre Panama, will take at least five years tobuild.

?I?m not saying there won?t be bumps along the road,? Mr. Williams added, ?but I think the fundamentals will continue.?

As for the pressing questions, many investors want to know why Equinoxdidn?t bid for Lundin a few months ago, when corporate valuations weremuch less pricey and the Inmet deal wasn?t on the table. Mr. Williamssaid he was focused on his Citadel acquisition at the time, which addedthe Jabal Sayid project in Saudi Arabia.

He said he wanted to get the Citadel deal completely settled, and thenassess where Equinox might next turn its sights. ?But matters were takenout of our hands,? with the Lundin-Inmet proposed merger, and he wasforced to act.

There has also been speculation that Equinox only bid for Lundin out offear that Equinox itself would become prey for the merged Inmet-Lundincompany. ?Our action wasn?t triggered because of that,? Mr. Williamssaid, noting that since 2007, when First Quantum acquired an interest inEquinox, ?there?s been continuous speculation of them taking us over ?You can?t run your business worried about that.?

The fact that Equinox has registered only one annual profit since itbegan in 1994, with a second likely to come this year, also fuelsspeculation that its bid for Lundin is brash.

?If you want to build a company, you have to be prepared to respondquickly to opportunities as they arise,? Mr. Williams said. ?People onthe outside might think we were a bit hasty, but I can assure you, wewent through a quite rigorous process.?

His evaluation included weighing the strategic sense of a combinedEquinox-Lundin, versus a combined Lundin-Inmet. Mr. Williams saidlooking just five years out made it all clear. In that time frame hesaid his merger would produce about 500,000 tonnes more copper.

?I don?t know what the copper price is going to be in 2017,? he said,but he isn?t interested in waiting. ?I?d rather be making copper now.?

And it is copper that he is focused on, although Lundin produces otherminerals, such as zinc. Although he said he isn?t looking to sell thoseassets, ?if the right deal was on the table, we would give it seriousconsideration.?