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UPDATE 1-Inmet shares drop as Panama mining law repeal weighs
March 5, 2011 / 1:35 AM / 7 years ago

UPDATE 1-Inmet shares drop as Panama mining law repeal weighs

* Inmet CEO says it could explore other financing options

* Inmet shares close down 7.4 pct on TSX on Friday (Adds details from interview with CEO, alters dateline)

By Euan Rocha and Sean Mattson

TORONTO/PANAMA CITY, March 4 (Reuters) - Shares of Inmet were the biggest losers on the Toronto Stock Exchange on Friday, after the government of Panama announced plans to repeal a recent law that allows foreign government investment in mines within the Central American country. [ID:nN04106429]

The law, passed less than a month ago, is crucial to Inmet Mining IMN.TO, as the company plans to partner with Singapore’s state investor Temasek and with Korea Resources Corp to finance and build its $4.3 billion Cobre Panama copper-gold project in the country.

Shares of Inmet closed down 7.4 percent, or C$5.12 at C$64, as the repeal of the law could impact Inmet’s plans to finance the project.

Panamanian President Ricardo Martinelli, who originally championed the new law, made the surprise announcement that he plans to repeal the law on Thursday at a meeting with an indigenous community in Western Panama. The group has strongly protested against the legislation. [ID:nN10276147]

The country’s legislature is expected to approve the repeal when it reconvenes in the coming days. Lawmakers now plan to meet with indigenous groups and other stakeholders to discuss possible reforms.

However, a spokeswoman for Martinelli’s office said there was no word on whether another reform of the original 1960s-era mining law that had blocked foreign government investment in the sector would be presented to lawmakers.

In an interview with Reuters on Friday, Inmet’s Chief Executive Jochen Tilk said it was still unclear whether the company would be a part of the consultation process that the government plans to initiate.

Tilk stressed that the government’s move does not block the development of the project, but he conceded that Inmet may have to look at other alternatives for financing the project.

Inmet could use the strength of its balance sheet to fund more of the project than it could have in the past said Tilk, as it is currently in a stronger position due to the surge in metal prices. He said the company may also look at taking on debt to help develop the project.

“We also see that partnerships with companies like us that have strong balance sheet, strong cash flows, are very possible,” said Tilk.

M&A PLANS HURT

Toronto-based Inmet, which owns copper mines spread across Turkey, Finland and Spain, is trying to acquire rival Lundin Mining (LUN.TO).

However a C$4.8 billion counter offer from Equinox Minerals EQN.AX could derail Inmet’s friendly deal with Lundin. Many analysts doubt that Inmet will join a bidding war for Lundin, as it needs to build a war chest to finance Cobre Panama. [ID:nN27203451]

BMO analyst David Cotterell said he views the development of Cobre Panama as a key part of Inmet’s future growth.

“The funding options for the Cobre Panama Project could potentially place constraints on offering more attractive terms for Lundin,” he said, in a note to clients. (Reporting by Euan Rocha; editing by Janet Guttsman, Bernard Orr)

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