UPDATE: Copper Mountain disputes Taseko claim over merger response

Vancouver – Bad blood is fomenting between Taseko Mines (TKO-T, TGB-X) and Copper Mountain Mining (CUM-T, CPPMF-O) over a proposed merger and financing.

A war of words began heating up after Copper Mountain’s board of directors rejected a merger proposal it received from Taseko Sept. 15. Instead of the merger the board of directors concluded it would be better for Copper Mountain to go ahead with a $50 million private placement it announced the day after receiving Taseko’s proposal.

Copper Mountain’s decision is not sitting well with Taseko, however. In response Taseko says it is planning to take legal action against Copper Mountain in order to stymie the $50 million financing. Taseko is hoping to put the proposed financing to a shareholder vote.

Taseko argues its proposed merger values Copper Mountain at a “large premium” to the private placement and notes that the private placement would “only net Copper Mountain less than $1.10 per share” and would lead to 130% dilution.

Though neither company released the exact details of the proposed merger, Copper Mountain reports that Taseko offered it a $10 million private placement at $2.20 per share as part of a proposed merger which would ultimately see Taseko shareholders get 88% of a combined company.

Copper Mountain argues that the merger plan, as an unconditional offer, does not satisfy its immediate financing needs.

“It (the proposed merger) would jeopardize the company’s current financing and (it) fails to give credible value to the company’s growth potential,” states Copper Mountain CEO James O’Rourke. O’Rourke adds that Taseko’s planned interference with the financing “could deprive our shareholders of substantial benefit that could result from the development program which is under way.”

But Taseko argues just the opposite, that it is the proposed $50 million financing which will deprave shareholders.

“We believe the $1.15 brokered financing badly undervalues Copper Mountain and we were astonished that our offer was not properly responded to before the brokered deal was priced,” states Taseko president and CEO Russell Hallbauer. “We see this as a large loss of value for the current Copper Mountain shareholders and we intend to do what we can to allow Copper Mountain shareholders to have a voice in this.”

In an interview with The Northern Miner, however, O’Rourke disputes Taseko’s claim that Copper Mountain did not respond properly to the merger offer, saying that at Copper Mountain board meeting directors told Taseko the company was not necessarily opposed to the merger.

“They did attend the board meeting,” O’Rourke says. “They explained their position (on the merger). We explained that (the merger) had to be clearly non-conditional.”

O’Rourke says that he could not risk a guaranteed $50 million from the financing for a conditional merger that might in the end fall through.

Taseko did not respond to a request for further details on its proposed merger.

The Copper Mountain project, near Princeton, B.C., is a past producing mine that Copper Mountain is looking to get restarted.

Last year Copper Mountain enlisted the support of Mitsubishi Materials which made a $29 million investment in Copper Mountain in exchange for a 25% interest in the flagship project.

Copper Mountain reports that between 1972 and 1996 the open-pit copper porphyry mine produced 1.74 billion lbs. copper, 9.1 million oz. silver and 730,000 oz. gold.
At last count Copper Mountain had outlined proven and probable reserves of 211 million tonnes grading 0.361% copper.

The plan is to expand three historic open-pits and mine at a rate of 35,000 tonnes per day. Over a 17-year mine life Copper Mountain estimates it will produce about 1.5 billion lbs. copper, 450,000 oz. gold and 4.5 million oz. silver.

Taseko’s interest in Copper Mountain does not come as a surprise given that it is already a significant producer of copper and molybdenum in southeastern B.C. where, at the Gibraltar mine, it annually produces 100 million lbs. copper and 1.1 million lbs. moly.

Copper Mountain’s share price had gained 26¢ to $1.65 on news that it had rejected Taseko’s proposed merger. Copper Mountain has just shy of 32 million shares outstanding compared to Taseko’s nearly 214 million.