The full reasons for the Inmet Board's recommendation that shareholders reject the First Quantum Offer are detailed in the Directors' Circular. The Board's recommendation is supported by inadequacy opinions received from CIBC World Markets and Scotia Capital. Inmet encourages shareholders to read the Directors' Circular in its entirety, to join our open conference call and webcast (details below) and to reject the First Quantum Offer by not tendering their shares to the First Quantum Offer.
Additional Details: First Quantum's Track Record and Lack of Relevant Experience
As part of its evaluation of the First Quantum Offer, the Inmet Board, the Special Committee and its advisors performed a thorough analysis of First Quantum's development and production track record and noted that, among other things, First Quantum has repeatedly underestimated capital costs of its larger projects. For example, capital expenditures at First Quantum's Ravensthorpe project in Western Australia and its Kevitsa project in Finland exceeded estimates by 109% and 18%, respectively. First Quantum has also overestimated its anticipated copper production: the company's 2011 production targets for 2013 and 2014 were revised downwards in December 2012 by 27% and 52%, respectively.
Additionally, the Inmet Board noted that the average size of First Quantum's past projects has been significantly smaller, with the majority having a capital cost of less than US$500 million and a material difference in scale and complexity compared to Cobre Panama. First Quantum's only project in Latin America, Haquira, is experiencing permitting delays and First Quantum has not been able to advance the project as it intended when it acquired it in 2010.
The existing capital cost estimates for Cobre Panama have been developed with the assistance of leading global engineering firms who conducted substantial due diligence during an exclusive and competitive procurement process. Sophisticated industry participants and investors, including Franco-Nevada, KORES (a consortium member in KPMC) and LS-Nikko (a consortium member in KPMC), have committed to invest approximately US$2.4 billion into the project on the basis of their respective due diligence and confidence in the quality of the development plan and the resulting cost estimates.
In all, this track record represents unnecessary risk to the development of Cobre Panama and undermines any claims on First Quantum's part of being able to deliver substantial cost savings at Cobre Panama.
Jochen Tilk, President and CEO of Inmet, said, "First Quantum says its track record speaks for itself, but the reality is that its track record raises more questions than it answers. Despite its claims of unrivalled engineering expertise, it has never developed a project of the scale, complexity or capital intensity of Cobre Panama, nor has it operated in Panama or earned the social license to operate there. First Quantum's opportunistic offer introduces additional risk without adequate compensation while depriving our shareholders of the value they would receive by retaining their control over this extraordinary asset."
Exploration of Strategic Alternatives
The Board of Directors, through its Special Committee and with the assistance of their respective financial and legal advisors, together with Inmet's management, is actively engaged in evaluating a range of additional strategic alternatives aimed at enhancing shareholder value. Inmet has approached a number of third parties who have expressed an interest in considering alternative transactions involving Inmet or its assets. Inmet has entered into confidentiality and standstill agreements with a number of interested parties, several of which are examining confidential financial, operating and other relevant information. Discussions are ongoing with several of these third parties and others in order to generate value-enhancing alternatives.
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