First Quantum adopts poison pill

First Quantum’s Cobre Panama plant at night, Panama. Source: First Quantum Minerals Ltd.

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First Quantum Minerals Ltd. [FM-TSX] said Monday it has adopted a shareholders rights plan with a view to ensuring, to the extent possible, that all shareholders of the company are treated fairly in connection with any takeover bid for the company.

Under the terms of the rights plan, the rights become exercisable in the event that any person, together with any affiliates, associates or persons acting in concert, becomes a beneficial owner of 20% or more of First Quantum’s outstanding shares without complying with the permitted bid provision of the rights plan.

In such circumstances, holders of the rights plan (other than the acquiring person and its related parties) will be permitted to exercise their rights and purchase additional shares of the company at a substantial discount to the then market price of the shares.

First Quantum shares eased 1.64% or $0.205 to $12.22 on active volume of over 1.03 million. The shares are currently trading in a 52-week range of $7.83 and $16.63.

Back in September, 2019, the shares rallied after published reports said the company was assessing its options after drawing takeover interest from global miners.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania.

The company’s portfolio of assets includes the Kansanshi mine in Zambia, which ranks as the largest copper mine in Africa. It also has a 90% interest in the Cobre Panama project in Panama, which is currently the world’s largest new copper mine.

In an October, 2019 news release, First Quantum said it had been in discussions with Jiangxi Copper Co Ltd. regarding a possible investment in the Zambian assets of the company. However, First Quantum said there can be no certainty that any transaction will proceed. That was after Pangaea Investment Management, an associate of Jiangxi Copper, said it had increased its stake in First Quantum to 10.8% by acquiring another six million First Quantum shares for an average of $9.89 per share.

Orest Wowkodaw, a base metals analyst with Scotiabank, recently said a potential sale of the company does not make sense from First Quantum’s perspective. This is due to the near-term re-rating expected with the ramp-up of Cobre Panama, the current depressed copper environment and the resulting weak share price.

On Monday, First Quantum said that while the rights plan is effective immediately, it is subject to ratification by the company’s shareholders within six months of its adoption. The company said it will be seeking shareholder ratification of the rights plan at its upcoming annual general and special meeting of shareholders in the spring of 2020.

First Quantum said 2019 would be another pivotal year for the company as it continues with the ramp up of its huge Cobre Panama project were the first batch of concentrates were shipped in June, 2019. Commercial production was reached in September, 2019.

Cobre Panama is located in the Panama jungle, about 120 kilometres west of Panama City. The concession consists of four zones, covering 13,600 acres. First Quantum recently increased its stake in the open pit project to 90%.

The operation was expected to produce up to 175,000 tonnes of copper in 2019, rising to between 270,000 and 300,000 tonnes in 2020.

Rather than an outright sale of the company, Wowkodaw said a potential Zambian asset sale is more likely, a scenario that would improve the company’s balance sheet via a cash infusion that would be positively received by investors, he said.

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