Lundin Mining is once again the target of takeover speculation, after the Daily Telegraph fed the rumour mill with talk of JP Morgan advising BHP Billiton and Belgian zinc miner Nyrstar on a joint bid for Lundin.
The market reacted favourably to the speculation on Tuesday, bidding up the stock by 14.5% on the TSX, but seasoned investors in Australia say a takeover by BHP is likely not in the cards.
“It sounds like a spurious rumour on a day of high volatility,” Tim Barker, a portfolio manager at BT Investment Management, which owns BHP shares, told Reuters.
While BHP could be interested in Lundin’s minority stake in the large Tenke Fungurume copper mine in the DRC, Reuters said investors and analysts see that as unlikely considering BHP’s plans to expand its Olympic Dam copper-gold-uranium mine in Australia, and its Escondida copper mine in Chile:
“They have plenty of good quality assets in their existing portfolio,” said Neil Boyd-Clark, a partner at Arnhem Investment Management, another BHP shareholder.
Lundin jumped into the headlines back in January when it was announced that the company, which owns copper and zinc mines in Portugal, Spain, Ireland, Sweden, and a 24% stake in Tenke, could merge with Symterra in a $9 billion transaction.
The deal came unglued, however, when Equinox Minerals announced a hostile takeover bid for Lundin. Equinox later withdrew the offer and agreed to be taken over by Barrick Gold Corp. Lundin then said it was abandoning plans to sell the company, a decision that coincided with the departure of CEO Phil Wright. The stock sputtered in the $6-7 dollar range, and lost about $2 in the last couple of weeks after the company said it was hit by higher production problems and higher costs in Portugal. This despite Q2 net income of $57.7 million, up 36% over the same period last year.
The numbers were below management expectations as a result of lower than expected metal production and higher unit costs at its flagship Neves-Corvo copper mine in Portugal north of the city of Faro, Lundin said the Tenke Fungurume mine in the Democratic Republic of Congo, its first venture beyond Europe, should start contributing to cash flows in the third quarter.