May 27, 2009 / 1:30 PM / in 9 years

UPDATE 3-First Quantum raises bond issue; acquisition seen

* To offer up to $500 mln in convertible bonds

* To use proceeds to repay debt, fund acquisitions

* Shares fall, possible target Equinox Minerals rises (Adds details of higher bond issue and Equinox response. In U.S. dollars unless noted)

TORONTO, May 27 (Reuters) - First Quantum Minerals (FM.TO) raised its bond issue to as much as $500 million from $400 million on Wednesday, and markets speculated the company could use the funds to try to acquire oft-rumored target Equinox Minerals EQN.TO.

By midday, shares of Equinox — which like First Quantum mines copper and operates in Africa — were up 6.3 percent at C$2.54, while First Quantum stock was down 4.5 percent at C$46.80.

First Quantum, which has built up a near-20 percent stake in Equinox, started out on Wednesday by saying it would issue $350 million in bonds with an overallotment option of $50 million. The Vancouver-based company then raised that to about $450 million, with another $50 overallotment, which was subsequently exercised.

It cited “significant investor demand”.

The company said it would use the funds to strengthen its financial position, and said the money would give it flexibility to make acquisitions.

“Everybody knows they own almost 20 percent of Equinox and there are a lot of synergies between the two (of them), so the market’s surmising that First Quantum is thinking of making an acquisition of Equinox,” said George Topping, an analyst at Blackmont Capital in Toronto.

First Quantum, which raised C$345 million ($310 million) in an April equity sale, has long been seen as a logical buyer for Equinox, but Equinox has said it would not welcome a bid, meaning any offer would likely have to be hostile.

Topping said he doubted there would be an offer in the immediate future.

“I think they’d probably want to wait and see how (the second quarter) comes along,” he said.


First Quantum operates in Mauritania, Zambia, and the Democratic Republic of Congo, while Equinox operates the Lumwana mine in Zambia.

The two companies enjoy obvious geographic synergies, while First Quantum also owns a stake in the Mufulira smelter in Zambia, which has processed Equinox’s concentrates.

Equinox has been embroiled in a dispute with the smelter’s management, which has refused to process concentrates, saying they do not meet contract specifications. Equinox has said its concentrates do meet the specifications and has redirected shipments to international traders.

The smelter is majority-owned by Swiss commodities trader Glencore International.

An Equinox spokesman said the company had no comment.

The closing and settlement of First Quantum’s debt offering is expected on or around June 18.

Nomura International (8604.T) is global co-ordinator and joint bookrunner for the offering. Morgan Stanley (MS.N) is joint bookrunner and RBC Capital Markets (RY.TO) is a co-manager for the offering. (Reporting by Euan Rocha and Cameron French; editing by Peter Galloway)

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