First Quantum disputes claims of default under Inmet 8¾%, 7½% notes

By Marisa Wong

Madison, Wis., Nov. 27 - First Quantum Minerals Ltd. said its wholly owned subsidiary, FQM (Akubra) Inc., received a notice claiming a default from a limited group of holders of notes originally issued by Inmet Mining Corp., including CI Investments, Barometer Capital and funds managed by Capital Group. First Quantum strongly disputes that any default has occurred, according to a press release.

As a result of First Quantum's takeover of Inmet, FQM Akubra combined with Inmet, with the resulting entity continuing as a wholly owned subsidiary of First Quantum.

The noteholder group alleges that Inmet violated the terms of the indentures of its 8¾% senior notes due 2020 and 7½% senior notes due 2021 when Inmet merged with FQM Akubra and the resulting entity subsequently repaid the acquisition financing originally incurred by FQM Akubra.

First Quantum said it has considered carefully the arguments of the noteholder group and strongly disagrees that a default has occurred.

Moreover, the company believes based on legal advice that even if the transaction resulted in a breach of the indentures, the only remedy available to the noteholders under the indentures would be acceleration of the debt and repayment at par, which would reflect a significant discount to current trading prices.

The company said that throughout the transaction it has been advised by a New York-based law firm specialized in credit instruments. Since these allegations were first made, the company also confirmed the strength of its position with a second New York-based law firm.

According to the press release, the company retains very strong credit and a robust balance sheet, as demonstrated by the signed extension commitment with Standard Chartered Bank announced Oct. 30. This commitment extends FQM Akubra's revolving credit facility until June 30, 2014, with the full amount of the facility currently available.

The company said that its principal banks have been kept fully informed about the claims of the noteholder group.

Philip Pascall, First Quantum's chairman and chief executive, commented in the press release, "First Quantum strongly disputes the claims of the noteholder group in relation to the Inmet indentures. These claims are without legal foundation, highly opportunistic, and run the risk of destroying value for all Inmet noteholders, a large proportion of which are not part of the noteholder group.

"We remain very confident in the strength of our legal position, and we intend to take immediate legal action to enforce it. We will also remain open to reaching an amicable resolution."

First Quantum is an international mining company based in Vancouver, B.C.

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