Lundin Mining Corporation · TSX:LUN
Lundin Mining — Merger or Acquisition (March 2011)
19 slides from Lundin Mining's merger presentation, Mar 21, 2011
Slide 1: REJECT
REJECT Inadequate – Opportunistic – Dilutive – $3.2B Bridge Debt – Lenders over Shareholders TSX:LUN / OMX:LUMI Phil Wright – Chief Executive March 21, 2011
Slide 2: Cautionary Statements
2 Cautionary Statements Caution Regarding Forward Looking Statements This presentation contains forward-looking statements including information concerning the Equinox offer, business, operations, prospects and the financial performance of Lundin Mining. These forward-looking statements are based on
Slide 3: The Lundin Board unanimously recommends rejecting the Equinox Offer
3 The Lundin Board unanimously recommends: Shareholders REJECT the Equinox Offer; and Shareholders DO NOT TENDER their shares to the Equinox Offer Lundin Shareholders are being asked to grant Equinox and its backers an option: exercisable at Equinox discretion exercisable at Goldman Sachs/Cr
Slide 4: 1. The Equinox Offer Is Inadequate
4 1. The Equinox Offer Is Inadequate The Equinox Offer is dilutive on a proforma NAV per share basis The bid was never $8.10 or the 26% quoted by Equinox Using the 20-day VWAP ending February 25, 2011 ($6.99), the current value of the Equinox Offer represents a 6% premium Since 2004, the ave
Slide 5: 2. The Equinox Offer Entails Significant Financial Risk
5 2. The Equinox Offer Entails Significant Financial Risk The pro-forma debt-to-equity ratio of combined Equinox/Lundin will increase financial risk and is more highly leveraged than peers The lenders to Equinox will have considerable influence over the business decisions of a combined Equinox/L
Slide 6: 3. Most Of The Cash Goes To Lenders
6 3. Most Of The Cash Goes To Lenders Substantially all of existing cash balances and projected near-term cash flow will be utilised to pay for: lenders’ fees ($48M); interest charges ($320M in year 1 on $3.2B bridge debt); and the principal repayments of the debt incurred. This Jeopardises grow
Slide 7: 4. Geopolitical and Asset Portfolio Risks Increased
7 4. Geopolitical and Asset Portfolio Risks Increased Lundin Equinox + Lundin Europe Africa 27% 37% Africa / Europe Middle 63% East 73% The Board believes the Equinox Offer does not adequately compensate Shareholders for the increase in political risk and portfolio risk Note: NPV by geography based
Slide 8: 5. Equinox Offer Highly Opportunistic + Project Risks
8 5. Equinox Offer Highly Opportunistic + Project Risks Offer is highly opportunistic: while preparing to bid, Equinox releases its strategy to expand the Lumwana project and uses this to forecast 500kt of copper by 2016 as part of Offer document. The Lumwana expansion is not supported by mineral
Slide 9: 6. No Strategic Benefits For Lundin; 7. Equinox's Management Expertise
9 6. No Strategic Benefits For Lundin Acquisition results in an African/Middle East concentration with no synergies 7. Equinox’s Management Expertise From a single mine in Zambia to projects or mines in 7 different countries and NO evidence of European experience The Lundin Board sees no strateg
Slide 10: 8. The Equinox Offer Is Highly Conditional
10 8. The Equinox Offer Is Highly Conditional 18 conditions must be satisfied or waived before Equinox is obliged to pay for any shares deposited A number of conditions have no materiality threshold and are in Equinox’s ‘sole judgment’ Conditions are subject to Equinox’s lenders discretion – E
Slide 11: 9. Possible Violation of U.S. Securities Act
11 9. Possible Violation of U.S. Securities Act Equinox, and its advisors, have used an exemption from SEC registration that is only available if Lundin has <10% U.S. Shareholders Lundin believes U.S. Shareholders hold around 20% of Lundin and believes it possible that Equinox or its backers had
Slide 12: 10. Lundin Directors/Officers/Certain Shareholders will not tender their Shares
12 10. Lundin Directors/Officers/Certain Shareholders will not tender their Shares All Lundin Directors and officers intend to reject the Equinox offer Key officers and shareholders have agreed to vote their shares in favour of the Symterra Business Combination Reasons for Rejection
Slide 13: The Lundin Board unanimously recommends rejecting the Equinox Offer
13 The Lundin Board unanimously recommends: Shareholders REJECT the Equinox Offer; and Shareholders DO NOT TENDER their shares to the Equinox Offer REJECT THE EQUINOX OFFER AND DO NOT TENDER
Slide 14: Appendix
14 Appendix Additional Information
Slide 15: Highly Conditional Offer
15 Highly Conditional Offer The Equinox Offer contains the following 18 conditions: Minimum Tender Condition of 66 2/3% of Lundin common shares on a fully-diluted basis Termination of the Symterra Arrangement Agreement Lundin shall not have taken any actions which may result in a Material Adve
Slide 16: Lundin Share Price Performance
16 Lundin Share Price Performance C$9.00 Symterra Offer (12-Jan) Equinox Offer (28-Feb) LUN Share Price EQN Offer Price C$8.50 Recent LUN Trading Range Above the EQN Offer Price C$8.00 Lundin Share Price (C$/s) Current Value of the EQN Offer C$7.50 C$7.44 C$7.00 C$6.50 C$6.00 Dec-10 Jan-11 Feb-11 Ma
Slide 17: Debt to Equity Profile
17 Debt to Equity Profile Debt to (1) (2) Debt Equity Equity Financials Date Freeport-McMoRan US$4,755M US$14,560M 32.7% As at 31-Dec-10 Teck Resources C$4,948M C$16,176M 30.6% As at 31-Dec-10 Antofagasta US$2,197M US$7,526M 29.2% As at 31-Dec-10 Kazakhmys US$1,684M US$7,330M 23.0% As at 30-Jun-10 F
Slide 18: Debt to Equity Profile
18 Debt to Equity Profile 0.900 77.8% 0.800 0.700 0.600 Debt / Equity Ratio 0.500 0.400 32.7% 30.6% 29.2% 0.300 25.5% 25.4% 24.7% 23.0% 19.6% 17.8% 0.200 0.100 1.3% 0.6% 0.0% 0.0% 0.0% 0.000 N ay ys . ck x t g. et X a AB um s in vg r no st LU FN l po Av m nd Te ra dB m eA ga nt en ui In ne ee kh + L
Slide 19: Precedent Hostile Mining Transactions
19 Precedent Hostile Mining Transactions Announce Final Date Target Unsolicited Bidder White Knight / Friendly Bidder Premium (1) Apr-10 Lihir Gold Newcrest Mining -- 38% Dec-09 International Royalty Franco-Nevada Royal Gold 70% Oct-09 Freewest Resources Noront Resources Cliffs Natural Resources 144