economy

Merger battle may affect mine financing here
by Eric Jackson

We were already The Crossroads of The World, so trends driven by factors far away from Panama have long played significant roles in our economy. These are some of the economic trends and events playing themselves out far away that may soon be felt on the Costa Abajo of Colon:

• Despite the global economic woes, China is growing by leaps and bounds and its demand for copper has driven the price of that metal way up. (Did the bronze statues that the former first lady and possible Panama City mayoral candidate was supposed to be guarding end up in the wiring of a new Shanghai neighborhood? Surely there are a number of people who have worked very hard to make sure that we will never know.) In any case, the demand is way beyond scrap, to the point that there is tremendous pressure to mine previously marginal unexploited copper deposits worldwide. Some of them are in Panama.

• The concentration of wealth into ever fewer hands long ago made international boundaries superfluous and although there are individuals behind it, mostly this process continues in the form of mergers and acquisitions among multinational corporations.

• Loyalty? What's that? Shareholders are notoriously disloyal to companies, brand names, long-time employees, managers and nations. With shareholders sometimes armed with computers that have trading programs that emotionlessly make electronic decisions that mean layoff notices to some and capital gains to others --- lots of the former and fewer of the latter --- the trend is profit maximization by any means that will accomplish it.

So now we have two large multinational mining companies, the Canada-based Inmet Mining Corporation and Canadian-Australian Equinox Minerals Limited in a contest for which gets to acquire the Canadian-Swedish Lundin Mining Corporation. The plan had been for a $9 billion "merger of equals" between Inmet and Lundin, which would have given the proposed new company, the Symterra Corporation, Lundin's fabled Tenke Fungurume copper concession in the war-torn Democratic Republic of the Congo. The cash flow from that operation might have provided much or all of the capital that Inmet would need to develop its Panamanian subsidiary Minera Panama SA's huge Cobre Panama concession in western Colon's Donoso district.

Inmet has also negotiated an option agreement with a subsidiary of a subsidiary of the Korea Resources Corporation, a South Korean governmental entity, to participate in the Cobre Panama concession. By the plain language of the Panamanian Constitution, South Korea's ownership of a stake in such a concession is unconstitutional, but President Martinelli has purported to override the constitution with a statute, and he has a voting majority on the Supreme Court notwithstanding what the constitution or laws might say.

There have also been reports of a similar state-owned Singaporean corporation negotiating for a stake in Cobre Panama.

With votes on the Inmet-Lundin merger by both companies' boards of directors slated for March 14, Equinox launched a hostile $4.8-billion takeover bid for Lundin on February 28. The Lundin board may have its ideas, but the shareholders would make more money in the short term if they accepted the Equinox offer.

So will Inmet match or better the Equinox offer? That remains to be seen. Some industry analysts think that a fight over Lundin could deplete resources that Inmet would need to develop Cobre Panama. But it could just mean that to finance the development here they'd have to sell off a larger share to the Koreans and the Singaporeans.

There are many sorts of maneuvers that could happen in the struggle over Lundin, from Inmet throwing in the towel, to a three-way merger, to an old-fashioned corporate takeover brawl. It seems that the friendly merger that had been contemplated, while it still may happen, would have to be on different terms.

When all is said and done on the mergers and acquisitions front, environmentalists and local farmers who oppose the Cobre Panama mine will still be opposed and will still be facing an uphill battle, but they will at least know which languages they will have to use to look for allies in their corporate foes' home bases.

Also in this section:
Merger fight could affect Cobre Panama project
Coronado's relentless commercial expansion
Colon concessions left out of Martinelli's truce with Ngabe protesters
Chances for US free trade deals with Panama and Colombia improve
The law: Indigenous peoples' rights over their ancestral lands and natural resources
Food price volatility in Latin America and the Caribbean
Micro-enterprise
The battle over US government budget cuts
Council of the Americas meets here
Russian and Chinese arms exports to Latin America alarm some in Washington
Report: US Department of Defense contracting fraud

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