first quantam minerals/ kolwezi

FirstQuantum Minerals Offers C$189.3M Worth of Shares for Adastra Minerals

By Craig Wong
18 Jan 2006 at 04:38 PM EST


VANCOUVER (CP) -- FirstQuantum Minerals Ltd. [TSX:FM] made a hostile takeover offer Wednesday for Adastra Minerals Inc. in an all-stock deal worth C$189.3 million that would see it acquire the junior miner's copper-based interests in Central Africa.

''The transaction is an opportunity for Adastra shareholders to reduce their risk through FirstQuantum's diversified portfolio,'' FirstQuantum president Clive Newall told a conference call with analysts.



''It combines FirstQuantum's proven strength and capabilities in mine development with Adastra's attractive project portfolio.''

The hostile offer followed talks aimed at a friendly deal late last year that failed after the two sides couldn't agree on price, Newall said.

Under the bid Wednesday, Adastra shareholders [TSX:AAA] would receive one FirstQuantum share for every 17.5 Adastra shares, representing a 24% premium over Adastra's Tuesday close, FirstQuantum said.

FirstQuantum's offer is the equivalent of C$2.23 a share, based on its Tuesday closing stock price on the Toronto Stock Exchange of C$38.94.

But Adastra shares traded well above the implied offer price as investors bet a richer bid might be in the works. Adastra shares rose up C79 cents to close at at C$2.59, a gain of nearly 44%, in trading on the Toronto Stock Exchange.

FirstQuantum shares fell C$1.29 to close at C$37.65, a drop of more than 3.3%, as investors worried about the dilution effects of the proposed deal on the company's share capital.

In addition to the usual regulatory approvals, FirstQuantum said the deal will also require approval of two-thirds of Adastra's shareholders.

Adastra said it has appointed a special committee to consider the unsolicited bid, and urged shareholders not to act on it until its board has responded. The company noted its shareholder rights plan allows it time to assess and evaluate takeover bids.

Newall said Adastra's Kolwezi copper-cobalt tailings project and the Kipushi copper-zinc mine in the Democratic Republic of Congo is key to the deal.

''We have the financial strength to develop this project on a very short timeline,'' Newall said.

FirstQuantum operates major mines and tailing deposits in the Congo and the Kansanshi copper mine in Zambia. Its shares fell C$1.53 to C$37.41 in morning trading on the Toronto Stock Exchange.

For the three months ended Sept. 30, FirstQuantum earned C$39.5 million or C63 cents per diluted share on revenue of C$143 million. That compared with a profit of C$7.9 million or C13 cents per share on revenue of C$31.2 million a year ago.

Copper production for the third quarter last year was 36,196 tonnes, up from 11,330 tonnes in the third quarter of 2004.

© The Canadian Press 2006