FQM.L Regulatory News (FQM)

24 Feb 2006 07:01

First Quantum Minerals Ld24 February 2006 Not for release, publication or distribution in whole or in part in or into Australia or Japan. NEWS RELEASE 06-04 February 23, 2006 www.first-quantum.com FIRST QUANTUM MINERALS RESPONDS to ADASTRA MINERALS' DIRECTORS' CIRCULAR AND ENCOURAGES ADASTRA SHAREHOLDERS TO TENDER TO FIRST QUANTUM'S PREMIUM OFFER First Quantum Minerals Ltd. ("First Quantum", TSX Symbol "FM", LSE Symbol "FQM")replied today to the directors' circular filed by Adastra Minerals Inc. ("Adastra") in response to First Quantum's offer to purchase all of theoutstanding shares of Adastra at an exchange ratio of 1 First Quantum commonshare for each 17.5 Adastra common shares held. Unless otherwise noted, alldollar amounts referred to in this press release are in Canadian dollars. "We believe that our premium offer represents and remains the best opportunityfor Adastra shareholders. Ours is a fair and reasonable offer. Adastra, on theother hand, has failed to maximize value for shareholders both over the lastseveral years and since First Quantum's initial approach to Adastra. FirstQuantum, by comparison, has achieved significant share price appreciation andsubstantial growth since our company was formed in 1996" said Mr. PhilipPascall, Chairman and CEO of First Quantum. "First Quantum has had extensiveexperience in successfully developing, financing and operating major mines andtailing deposits in the Copperbelt region of Zambia and the Democratic Republicof Congo ("DRC"). This experience should significantly reduce the executionrisk of Adastra's Kolwezi project and maximize value for Adastra shareholders." In deciding whether to tender to the First Quantum offer, Adastra shareholdersare encouraged to consider the following: 1. First Quantum has displayed superior project development and operational performance and produced superior returns for its shareholders than has Adastra for its shareholders • Since 1996 First Quantum has acquired or discovered seven projects, has brought three into production, is currently constructing the fourth and is preparing to construct a fifth • Adastra has yet to complete a definitive feasibility study on Kolwezi, which was acquired in April 1997 • Based on the information provided by Adastra in its directors' circular, financing for the Kolwezi project is highly conditional and it is not apparent that it is at a level sufficient to commence the project. To finalize project loan agreements, raise the required additional equity and complete final engineering design before the end of 2006 is extremely aggressive and may prove unachievable 2. In its efforts to finance Kolwezi, Adastra has substantially diluted its interest in the project without creating any meaningful value for shareholders • Over the past two years Adastra's interest in Kolwezi has declined from 82.5% to 65% and, if the Mitsubishi transaction closes, will further decline to 50.1% while Adastra's shareholders meanwhile have not received any cash benefit or meaningful share price appreciation. The only material gain in the share price has followed from First Quantum's offer announcement - The sale by Adastra of a 17.5% interest in the Kolwezi project to the Industrial Development Corporation of South Africa Limited ("IDC") and the International Finance Corporation ("IFC") for approximately US$12 million essentially represented a recovery of costs with zero premium to Adastra shareholders. In light of what Adastra are now claiming, this appears to be a significantly undervalued sale price. Additionally, Adastra has awarded the IDC and IFC, combined, warrants to acquire shares at an exercise price of $0.75 per share, which as at February 12, 2003 (the date awarded), represented 5% of Adastra's fully diluted shares outstanding - The potential sale by Adastra of a 14.9% interest in the Kolwezi project to Mitsubishi for US$37.5 million implies a value of approximately $190 million for Adastra and is not superior in value to First Quantum's offer. In fact, the 15 year exclusive off-take contract, to be awarded to Mitsubishi as part of the potential sale transaction, is an unusually long exclusive off-take which will be of considerable value to Mitsubishi, which should be discounted from the consideration offered, thus reducing the implied value further. In First Quantum's view this transaction taken as a whole represents a dilution in Adastra's value and would not be pursued if First Quantum's offer were to succeed 3. First Quantum is offering a significant premium with upside potential in First Quantum shares • First Quantum's offer currently values Adastra at $2.21 per Adastra share, which represents: - 63% premium to the 20 day average price before discussions occurred on November 3, 2005; - 64% premium to the $1.35 exercise price of options issued to management in October 2005 after First Quantum had expressed interest in a merger; and - 30% premium to the $1.70 equity issue that Adastra completed in December 2005. • First Quantum's shares provide a significantly lower risk profile and better liquidity for Adastra shareholders. Adastra shareholders stand to benefit from First Quantum's strong cash flow and growth • It is likely that First Quantum's board will declare its final dividend for 2005 and determine the record date for that dividend under its dividend policy after the closing date for First Quantum's offer. Adastra shareholders who have tendered their shares prior to or on the closing date (and assuming all conditions under First Quantum's offer have been satisfied or waived by First Quantum) would be entitled to receive, as shareholders of record of First Quantum, their pro rata share of the declared dividend 4. Adastra has not been willing to discuss shareholder value maximization with First Quantum • First Quantum has attempted on multiple occasions to negotiate with Adastra but these efforts have been rejected in each instance • After First Quantum's first approach in October 2005 Adastra issued a 1,885,209 options to directors, management and employees at an exercise price of $1.35 and 6,000,000 shares from treasury at $1.70 5. Adastra has had sufficient time to investigate value maximization options - it is time to remove the shareholder rights plan ("SRP") and let the shareholders decide • Adastra has owned its interest in the Kolwezi project since April 1997 • Adastra has been in discussions with Mitsubishi since April 2005 • Adastra and First Quantum had initial discussions in October 2005 • Adastra formed a special committee of their board of directors and hired NM Rothschild & Sons Limited on December 2, 2005 • First Quantum believes that the potential Mitsubishi sale likely signals the end to any auction process as potential purchasers (if any) are most unlikely to want to be bound by a 15 year exclusive off-take contract and the further reduced equity ownership in the project • The benefit to shareholders of Adastra's SRP, adopted by the board of Adastra in December 2005, is therefore questionable as the Mitsubishi arrangement discourages any further value maximization process By tendering to the First Quantum offer Adastra shareholders will receive sharesin a growing, profitable company with an established dividend policy. They willbenefit from the experience of First Quantum management who have successfullyfinanced and developed similar projects in this region and in particular theDRC. They will have an interest in a copper and gold producing company with anumber of operations in 3 different countries rather than a company whose soledevelopment project is vulnerable to the vagaries of the cobalt market. About First Quantum Minerals First Quantum is a growing mining and metals company whose principal activitiesinclude mineral exploration, development and mining. The Company produces LMEgrade "A" copper cathode, copper in concentrate, gold and sulphuric acid. TheCompany's operations in Zambia include the 100% owned Bwana Mkubwa SX/EWfacility and sulphuric acid plants and the 80% owned Kansanshi open pitcopper-gold deposit. In the Democratic Republic of Congo, First Quantum operatesthe 100% owned Lonshi open pit copper mine which provides oxide copper ore forprocessing at Bwana Mkubwa, a 100% interest in the newly discovered Frontiercopper-cobalt deposit, and 11,000 sq/km of exploration rights. In Mauritania,First Quantum is developing the 80% owned Guelb Moghrein copper gold deposit. Important Notice The content of this press release, which has been prepared by and is theresponsibility of First Quantum, has been approved by Numis Securities Limited,Cheapside House, 138 Cheapside, London England EC2V 6LH, solely for the purposesof section 21 of the United Kingdom's Financial Services and Markets Act 2000.Numis Securities Limited is acting exclusively for First Quantum in connectionwith the Offer and no one else and will not be responsible to anyone other thanFirst Quantum for providing the protections afforded to clients of NumisSecurities Limited nor for providing advice in relation to the Offer or anyother matter referred to in this press release. This announcement does not constitute or form part of any offer to sell orinvitation to purchase any securities or solicitation of an offer to buy anysecurities, pursuant to the Offer or otherwise. The Offer has been made solelyby the formal offer and take-over bid circular, which contains the full termsand conditions of the Offer, including details of how the Offer may be accepted. This press release contains forward-looking statements. The words "expect","will", "intend", "estimate" and similar expressions identify forward-lookingstatements. Forward-looking statements are necessarily based upon a number ofestimates and assumptions that, while considered reasonable by management, areinherently subject to significant business, economic and competitiveuncertainties and contingencies which could cause actual results to differmaterially from the future results expressed or implied by the forward-lookingstatements. Such statements are qualified in their entirety by the inherentrisks and uncertainties surrounding future expectations. These risk factorsinclude, but are not limited to: realization of operational synergies, relianceon Adastra's publicly available information which may not fully identify allrisks related to their performance, success in integrating the retaildistribution systems, and the integration of supply chain management processes,as well as other risk factors listed from time to time in First Quantum'sreports, comprehensive public disclosure documents including the AnnualInformation Form, and in other filings with securities commissions in Canada (onSEDAR at www.sedar.com) and the United States (on EDGAR at www.sec.gov). On Behalf of the Board of Directors 12g3-2b-82-4461of First Quantum Minerals Ltd. Listed in Standard and Poor'Sedar Profile #00006237Philip PascallChairman & CEO For further information visit our web site at www.first-quantum.com North American contact: Geoff Chater or Bill Iversen 8th Floor, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8 Tel: (604) 688-6577 Fax: (604) 688-3818 Toll Free: 1 (888) 688-6577 E-Mail: info@first-quantum.com United Kingdom contact: Clive Newall, President1st Floor, Mill House Mill Bay Lane Horsham West Sussex RH12 1TQ United Kingdom Tel: +44 140 327 3484 Fax: +44 140 327 3494 E-Mail: clive.newall@first-quantum.com. or Carina Corbett, 4C-Burvale, Tel: + 44 20 7907 4761 The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. Certain of the information contained in this news release constitute "forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements, including butnot limited to those with respect to the prices of gold, copper and sulphuricacid, estimated future production, estimated costs of future production, theCompany's hedging policy and permitting time lines, involve known and unknownrisks, uncertainties, and other factors which may cause the actual results,performance or achievements of the Company to be materially different from anyfuture results, performance or achievements expressed or implied by suchforward-looking statements. Such factors include, among others, the actualprices of copper, gold and sulphuric acid, the factual results of currentexploration, development and mining activities, changes in project parameters asplans continue to be evaluated, as well as those factors disclosed in theCompany's documents filed from time to time with the British Columbia SecuritiesCommission and the United States Securities and Exchange Commission. ENDS This information is provided by RNS The company news service from the London Stock Exchange