Companies: AAA    FQM   

Copper star First Quantum Minerals says it will make a £94 million all-share offer for fellow Congo copper play Adastra Minerals.

Toronto and AIM-quoted First Quantum, whose shares have soared from 2001's 145.5p float to more than £18, has notified Adastra that it intends to make an offer of one First Quantum share for every 17.5 Adastra shares, to create a company with a combined market value of £2 billion. Adastra shares have jumped 35p to 125p in response and First Quantum’s have slipped 50p to 1807.5p, which means the intended bid is 17.5 per cent below Adastra's current market price.

Clive Newall, First Quantum's president, says the company is 'very reluctant to change' the value of its bid at this stage but 'would not rule out tweaking' its offer by introducing a cash element. But whether First Quantum, advised by RBC Capital Markets, will ultimately raise its bid depends on what response Adastra, with Rothschild at its elbow, makes and whether a rival bid emerges.

First Quantum's offer comes on the eve of a crucial feasibility study of Adastra's key Kolwezi copper tailings project in Congo. Chief executive Tim Read, himself an old Rothschild hand, and his fellow directors have appointed a 'special committee' to consider First Quantum's bid and suggest shareholders await its conclusions before taking any action.

First Quantum is producing 120,000 tonnes of copper a year from Kansanshi in Zambia and has tailings experience in Congo, where it also operates the Lonshi open-pit copper mine and plans to develop a major new mine, called Frontier. Newall says First Quantum would 're-engineer' the Kolwezi project if it bought Adastra, 'optimising costs and scale' and accelerate returns by significantly shortening the project's currently planned 53-year life.

'We have other fish to fry,' insists Newall. 'We are not going to over-pay.'

Adastra's price, however, suggests somebody at least thinks an improved offer or a rival bid is on the cards. Shareholders should hold on for now.