EQN Equinox Resources Limited

Minmetals Resources Ltd. (1208.HK) launched China's biggest takeover bid for an Australian resources company Monday, saying it intends to make a C$6.3 billion (US$6.5 billion) offer for Zambia-focused copper miner Equinox Minerals Ltd. (EQN.AU).

The C$7-a-share cash offer by the Hong Kong-listed company complicates Equinox's hostile bid for Lundin Mining Corp. (LUN.T), with MMR making abandonment of the offer a condition of its own deal going ahead.

Copper mining companies have been engaging in a wave of mergers and acquisitions activity in recent months against the backdrop of record prices of the commodity. Copper is used in applications such as electricity lines and air conditioners, which are heavily in demand in China due to the country's rapid urbanization and upgrade of its infrastructure.

China has aggressively pursued deals for Australian resources companies as it seeks guaranteed sources of supply. MMR's offer for Equinox represents China's largest full takeover bid for an Australia-listed mining company, eclipsing Yanzhou Coal Mining Co.'s (1171.HK) A$3.54 billion acquisition of Felix Resources Ltd. in late 2009.

However, the rush of deals for Australian resources in recent years has alarmed many federal politicians who are sensitive to the country's main generator of export revenues increasingly falling into foreign hands. Topping the concerns are resources investments by companies closely tied to overseas governments, because of concerns they may be able to influence commodity prices.

It's unclear whether foreign takeover offers for Australian companies whose assets are mainly overseas, such as copper mines in Africa, will provoke a similar response by politicians.

Andrew Michelmore, MMR chief executive, said the company had been looking at a takeover of Equinox for well over a year and already owned 4.2% of Equinox. It was moving now because it thought the Lundin takeover would be detrimental to Equinox.

"Timing is never ideal," he said. "We needed to go out today to give Equinox shareholders an alternative."

Equinox's main assets are the Lumwana copper mine in Zambia and the Jabal Sayid copper-gold project in Saudi Arabia, the latter acquired through Equinox's takeover of Citadel Resource Group Ltd in January.

The company last month offered C$4.8 billion to take over Lundin, with Lundin shareholders offered either cash or a cash-and-share option. Lundin has a stake in a copper mine in the Democratic Republic of Congo as well as lead and zinc operations in Europe.

That offer--which some analysts saw as a defensive attempt to put off a potential takeover bidder for Equinox--would be financed through a US$3.2 billion bridging loan. Equinox shares have fallen more than 8% since it was announced Feb. 28, with a closing date of April 14.

Noting the offer, Equinox said: "The board of directors of Equinox will be meeting to consider this unsolicited proposal, and will comment further following careful consideration of the terms and implied value for Equinox."

Michelmore said MMR's acquisition of Equinox would create a company that is the 14th largest copper producer in the world, based on forecasts for production in 2013.

"This creates a globally-significant copper producer, it extends our mine lives and extends MMR into two new regions of the world," said Michelmore.

MMR is 75% owned by China Minmetals Corp., a state-owned company with interests in base metals, iron ore, steel and shipping. MMR said the offer had the support of Minmetals and would be financed using cash, credit facilities from Chinese banks, and equity investments in MMR by Chinese companies.

Equinox is headquartered in Australia and Canada, and the deal will require approval from regulators in both countries.

Michelmore said an application was lodged with Australia's Foreign Investment Review Board Mar. 11, and he expected no problems in winning the backing of Investment Canada.

Applications with China's regulators, including the National Development and Reform Commission, were also underway. They were not expected to complicate MMR's ambition to complete the deal by the middle of this year, Michelmore said.

MMR's assets include the Century mine in Queensland state, which is Australia's largest open-pit zinc mine and produces around 500,000 tons of zinc annually. It also owns the Sepon copper and gold operations in Laos.

-By David Fickling and David Winning, Dow Jones Newswires; +61-2-82724688; david.winning@dowjones.com

-Edward Welsch in Ottawa contributed to this article.

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