Petaquilla Copper accepts sweetened Inmet offer

(In U.S. dollars, unless noted)

TORONTO, Aug 26 (Reuters) - Petaquilla Copper PTC.TO has accepted a sweetened C$350 million ($336 million) takeover offer from Inmet Mining (IMN.TO), clearing the way for Inmet to acquire the majority of the massive Petaquilla project in Panama, the companies said.

Inmet will pay C$2.20 in cash for each Petaquilla share, up from its previous offer of C$2 a share, which was launched in July. Based on Reuters data, the takeover values Petaquilla at about C$350 million.

By mid-morning, Petaquilla shares were up 15 percent at C$2.18 on the Toronto Stock Exchange, while Inmet was down 2.1 percent at C$60.45.

Toronto-based Inmet already owns 48 percent of the Petaquilla copper project, while Petaquilla owns 26 percent and has been disputing a 26 percent stake held by Teck Cominco. (TCKb.TO).

As part of the agreement, Petaquilla will drop its challenge of the Teck stake, the companies said in a statement.

Teck has said it will decide by late next year whether to fund the project or sell its stake to Inmet.

Petaquilla Copper and Teck are based in Vancouver, British Columbia.

The project is expected to produce 223,000 tonnes of copper, 2,680 tonnes of molybdenum and 87,000 ounces of gold a year once its starts operating, which is expected in 2013.

Costs projections for the project have soared to $3.5 billion, which has raised doubts that it will be developed.

Petaquilla said shareholders holding about 25 percent of the company's stock have agreed to enter lock-up agreements supporting the deal.

Shares of Teck Cominco were down 4 Canadian cents at C$41.42.

($1=$1.04 Canadian) (Reporting by Cameron French; editing by Rob Wilson)