Inmet rejects offer CUU value is....?

"TORONTO — First Quantum Minerals Ltd. has offered $4.9-billion for Inmet Mining Corp. in a bold attempt to get its hands on Cobre Panama, one of the largest mining development projects underway anywhere in the world."

A side by side comparison to Inmet's 80% owned Panama deposit is a little difficult. On an eq basis they are pretty close. Some of the side issues like capex involving the building of a coal fired power plant are what causes the blur. For example, CUU's Schaft Creek will run on cleaner power that's being provided by the grid. The capex will be lower for that reason and the plant size is less. But without going into fine detail let me say that CUU has the better product in a better country.

At roughly $6 billion for the whole deposit in Panama you get the idea that Schaft Creek has a much higher value than the share price would indicate. It translates into $1.5 billion before the extras like the 4 times expenses and the Port facilities. Just having you development costs carried by Teck is a huge burden off your back. Then add in the original Area of Interest Royalty. To top it off, Schaft Creek has been hardly touched with a drill. We know the deposit in the main area does beyond what the drill proved up. How deep? The Titan done on the main area suggests there's a deposit under the deposit. How that will be mined won't be known for a decade or two.

The scope for increasing the deposit resource and reserves at SC rivals any major deposit out there. This year the drill were halted then called back and then suddenly halted again. We can only assume that Teck decided they had enough evidence to make a confident offer. While the media cites Teck as being a potential buyer for Inmet we have to ask why would they? They have Relincho and SC. Together, these two properties are enough to keep them with a healthy supply while reducing the cost per pound for decades to come. It is true that the last of the giants are being gobbled up but Teck also has Galore.

At about .58% average grade and a negative cost per pound SC will be hard to beat by any deposit. Ivenplats takeover of the stolen deposit is an example of the lengths companies will go to to secure supply. I do not think such properties are secure at all. Given the long life spans I think we are bound to see more M&A in safe havens like Canada.

As for low grade low IRR. SC has high grade starter pits that will take a decade to deplete. The IRR in terms of jumbo sized deposits is very respectable. I'm looking forward to reading the BFS due out next week.