Adastra formally snubs First Quantum

Following a day of examination, Adastra Minerals (AAA-T, AAA-L) has again rejected a now formal takeover bid from First Quantum Minerals (FM-T, FQM-L).

Adastra is sticking to its previous assertion that the bid “significantly undervalues the company.” This time, the rejection is backed up by M&G Investment Management, the company’s largest shareholder at 14.8%, company founder Jean-Raymond Boulle, with a 7.7% stake, and Merrill Lynch Investment Managers, which hold a 5.2% interest. Adastra says it also has the support of other major shareholders that together own more than half of its issued share capital.

N M Rothschild & Sons is acting as Adastra’s financial advisor in regards to the takeover offer.

Originally launched on Jan. 18, First Quantum’s bid remains unchanged at one of its own shares in exchange for every 17.5 Adastra shares tendered. It will remain open until Mar. 10. Adastra plans to mail its formal recommendation, along with its reasons, to shareholders by Feb. 17

First Quantum’s bid represents a 24% premium over Adastra’s closing share price in Toronto on Jan. 17 — the day before the offer. The implied offer price also represents a 31% premium over the $1.70-per-share equity financing completed by Adastra in December. IN all, the bid is valued at $189 million.

First Quantum chief executive Philip Pascall said Adastra’s financing was also priced well below the offer level suggested in failed merger talks held between the two sides in November.

He also said that his company would petition securities regulators to set aside Adastra’s recently adopted shareholders’ rights plan, calling it “an unnecessary delaying tactic.”

“Ours is a compelling offer at full and fair value and we will be asking securities regulators to set aside the shareholders’ rights plan,” concludes Pascall.

Key to the deal is Adastra’s 65% stake in the Kolwezi copper-cobalt tailings project in the Democratic Republic of the Congo. The project centres on two tailings dams containing a resource of 112.8 million tonnes of oxide tailings grading 1.49% copper and 0.32% cobalt. A definitive feasibility study is slated for delivery in the first quarter of 2006.

Adastra recently posted a net loss of US$2.6 million (or US4 per share) for the year ended Oct. 31, compared with a year earlier loss of US$4.2 million (US6 per share). At the end of Oct., it had cash and equivalents totalling US$5.6 million, down from the year-ago US$16.3 million.

Shares in Adastra were 21 better at $2.80 in late afternoon trading in Toronto following the news on Feb. 3; First Quantum was off $1.76 at $40.24.