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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (30060)	12/8/2008 9:22:45 PM
From: LoneClone	Read Replies (1) \| Respond to of 192884

REFILE-HudBay CEO says needs Lundin assets for growth Mon Dec 8, 2008 5:20pm EST reuters.com (Refiles to add first name of HudBay's CEO in paragraph 4) By Cameron French TORONTO, Dec 8 (Reuters) - HudBay Minerals' (HBM.TO: Quote, Profile, Research, Stock Buzz) chief executive took the unusual step of criticizing his own company's assets on Monday, as he talked up the benefits of its unpopular takeover of Lundin Mining (LUN.TO: Quote, Profile, Research, Stock Buzz). Some investors and analysts have questioned the high premium offered for Lundin, and fretted about adding the risk of Lundin's sprawling assets and shaky balance sheet to HudBay's cash-positive mines and $850 million in the bank. The sour mood has knocked HudBay stock down 28 percent since it announced the all-stock takeover on Nov. 21. But CEO Allen Palmiere said HudBay's prospects without the Lundin deal were limited, due to the impact of weak metals prices and the prospect of declining production. HudBay mines copper and zinc from the 777, Trout Lake, and Chisel North mines near Flin Flon, Manitoba. It also owns a smelter and the highly-regarded Lalor Lake deposit. "Chisel... is on the bubble. It's struggling in this price environment," Palmiere said at a mining conference in Montreal. "And Trout in two years is just going to be scavenging. The current stopes will have been exhausted." Lalor Lake, which lies a kilometre below ground, would probably not get the construction go-ahead in the current environment of zinc prices around 50 cents a pound, he said. Zinc was trading around $1.20 a pound in March. "What we're looking at in the absence of a significant transaction is the potential for a declining production profile, just at the time we anticipate there is going to be a significant change in the commodities prices," Palmiere said. Lundin's main producing asset is the Neves-Corvo mine in Portugal, which produces copper at $1.08 a pound, well below current prices of $1.50 and has has vast zinc resources, said Palmiere. "The zinc at Neves-Corvo has the potential of exceeding everything that we've got in Flin Flon," he said. Lundin also operates the Zinkgruvan zinc mine in Sweden, and owns a 24.75 percent stake in Freeport-McMoRan's (FCX.N: Quote, Profile, Research, Stock Buzz) Tenke-Fungurume copper-cobalt deposit in the Democratic Republic of Congo, which Palmiere said should one day produce 500,000 tonnes of copper a year. "This 24.75 percent interest has the ability of being the cornerstone of a major company in and of itself," he said. HudBay offered 0.3919 of of a share for each Lundin share. This represented a 100 percent premium on the stock price on the day before the deal was announced. At current prices, the bid is valued at C$1.47 a share, or about C$570 million ($460 million). Lundin rose 9 Canadian cents to C$1.14, trailing the bid price because of doubts the deal will go through. HudBay rose 20 Canadian cents to C$3.75. Small merchant bank Jaguar Financial (JFC.TO: Quote, Profile, Research, Stock Buzz) is leading a group of shareholders trying to derail the deal by bidding for HudBay and calling for a shareholder meeting to oust the company's board. George Topping, an analyst at Blackmont Capital, said he expects shareholders will eventually force a meeting, but he expects the deal will go through because of HudBay's contractual obligations to Lundin. "Whether or not the deal can be broken or not depends on whether or not you can terminate the deal without incurring a lawsuit," he said. Palmiere, when asked if he saw any chance of shareholders being given a vote, said: "The quick answer is no." "We have a hard deal without a shareholders vote." ($1=$1.25 Canadian) (Reporting by Cameron French; editing by Rob Wilson)