Copper-focused Lundin Mining Corporation has recommended that its shareholders reject the hostile takeover bid from Equinox Minerals

Copper-focused Lundin Mining Corporation has recommended that its shareholders reject the hostile takeover bid from Equinox Minerals citing "extensive conditions" and an "inadequate price" as reasons for concern.

Last month, Equinox offered to buy Vancouver-based Lundin in a deal valued at 4.8 billion Canadian dollars, or C$8.10 per share, threatening the previously announced merger between Lundin and Inmet Mining in January.

Lundin said the deal price is too low, as it offers just a 6% premium to the 20-day volume weighted average share price of the company ending the day before the bid was announced, a premium that is "substantially below premiums paid in other unsolicited metals and mining transactions".

Equinox also proposed to finance its bid with a US$3.2 billion bridge facility, led by Goldman Sachs and Credit Suisse, which Lundin believes to be risky.

Under the terms of the Equinox offer, Lundin shareholders would receive either $8.10 in cash or 1.2903 Equinox shares plus one cent for each Lundin share. Equinox would shell out a maximum of 2.4 billion Canadian billion in cash, and issue as much as 380 million shares.

Lundin Chief Executive Officer Phil Wright said that taking on US$3.2 billion in debt on "partially undisclosed" terms is of particular concern, as Equinox plans on repaying the loan over four years based on copper price forecasts for that period - a strategy that could go terribly wrong if the economic climate warrants, and could lead to distressed asset sales.

Lundin, based in Vancouver, produces copper, nickel, lead and zinc and holds expansion projects at its Zinkgruvan mine in Sweden and Neves Corvo project in Portugal, along with its stake in the Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo.

Equinox, with offices in Toronto and Perth, Australia, is said to be particularly interested in Lundin's 24% holding in the DRC property.

Aside from Equinox's Saudi Arabia project currently under construction, the combination of Equinox and Lundin would consist of five producing operations by mid 2012, including Equinox’s Lumwana mine in Zambia.

But Lundin said in its statement that the offer would result in a company with "increased exposure to geopolitical risks due to the location of Equinox assets in Zambia and Saudi Arabia.

Lundin also cited reservations regarding the experience of Equinox's management, which the company does not believe is sufficient to operate a multi-mine entity with projects spread across seven countries.

"Equinox is essentially asking shareholders to grant them an option to acquire Lundin Mining, at their discretion, and their lenders discretion, at a price that is inadequate and containing substantial risks if implemented," said Wright.

As mineral prices reach all-time highs, especially copper, consolidation has become an ever-increasing trend in the industry as companies scramble to attain new mineral properties and more importantly, added resources.

Lundin's rejection of Equinox's offer was based on opinions received from advisors Haywood Securities and Scotia Capital.

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