Any brokers - domestic or international - recommended their...

Any brokers - domestic or international - recommended their clients to take profits?


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First Quantum and Equinox: analysts weigh in on possibilities

Posted: December 07, 2007, 3:49 PM by Jonathan

Ratner

Mining, Takeovers

First Quantum Minerals Ltd. may have nearly doubled its stake in Equinox Minerals Ltd. to 17.3% this week, but it will likely be quite some time before it pursues a full takeover, analysts said Friday.

“We believe that it is likely [First Quantum] will want to buy the rest of [Equinox] shares at some point. However, this may not happen for quite some time given that he Zambian government plans to increase its royalty to 3% (from 0.6%) and corporate tax to 35% (from 25%),� wrote Blackmont Capital analyst George Topping. “Therefore, we advise investors to move on to the next takeover opportunity, such as Chariot.�

First Quantum has several operating copper mines in central Africa, while Equinox is currently building its first copper project in Zambia, and a takeover does make sense, given that First Quantum has a mine just 65 kilometres from Equinox’s Lumwana project, wrote UBS Investment Research analyst Tony Lesiak.

“We have long believed that consolidation in the copperbelt is logical from a synergy perspective. This acquisition may fast-track the process,� he wrote.

If First Quantum does pursue a takeover, Equinox shareholders could see a healthy premium to the $5.52 it closed at on Thursday, RBC Capital Markets analyst Fraser Phillips estimated.

“Using the metrics from Teck Cominco’s acquisition of Aur Resources … results in an implied valuation range of $6.15 to $6.71,� he wrote. “[But] First Quantum could potentially wait for [Lumwana] construction to be completed and for the project to be sufficiently derisked.�

Lumwana is expected to complete construction next year, although the analysts said potential construction delays constitute a key price target impediment.

The three analysts have widely divergent views on how well the stocks will perform. On Equinox, Blackmont’s target is $5.75 while RBC’s stands at $4.20. On First Quantum, UBS predicts $114, while RBC is targetting $95