Saturday, June 20, 2009

HudBay Considering Acquisitions

HudBay Minerals Inc. is considering "a series of significant" acquisition and joint-venture opportunities as part of its new strategic plan, according to CEO Peter Jones.

Jones said the slump in base metals prices has created excellent acquisition opportunities for companies with healthy balance sheets, and HudBay has made completing one or more deals a "high priority" this year.

"Hopefully we're not talking about a single acquisition, hopefully we're talking about a series of significant and hopefully to go with that some lesser acquisitions, joint ventures, et cetera," Jones said after the company's annual meeting Friday,

"The opportunities are definitely out there, there's no question about it. People are talking, they want to talk and this is very, very different from a year or two ago."

HudBay will focus on copper, zinc and nickel assets with low operating costs and "lower risk opportunities, with higher returns required in exchange for projects with higher risk."

Despite reporting a $4-million loss in the first quarter, the company is still sitting on cash and cash equivalents of approximately $700 million.

HudBay is primarily interested in advanced-stage development projects, but will also target longer-term development and exploration projects if "they have the potential to become significant assets," Jones said.

He added that HudBay is particularly interested in assets in Central and South America.

The company is willing to spend up to $1 billion on developing a project, and could finance this through "corporate debt, precious metal credits, project financing and partnerships with others," Jones said.

"At the same time, however, we must be prudent with the use of debt financing, as we have seen in the past year how excessive leverage can bring otherwise strong mining companies to their knees."

He said the company isn't in talks to put itself up for sale, despite rumours to the contrary, although he wouldn't rule that out as an option.

HudBay is also focused on internal growth, particularly through the "aggressive" development of the Lalor zinc project in the Flin Flon Greenstone Belt of northern Manitoba.

Jones said the zinc mineralization at Lalor also contains significant amounts of gold and silver, and the company will spend $13 million this year on developing the project.

"We are hopeful that we will have a firm direction for Lalor no later than the end of this year," he said.

Although HudBay is actively pursuing global acquisition opportunities, Jones said its northern Manitoba operations will remain the "cornerstone" of the company.

HudBay announced Thursday that it will close its copper smelter in Flin Flon next year, putting 225 people out of work, due to the age of the plant and the expense that would be required to keep up with emissions regulations.

But Jones said the company has already begun building a $30-million filtration plant - used to reduce the moisture in copper concentrate so it can be shipped at a lighter weight - in the community, which will employ 200 to 210 people once it's completed.

Jones said there are four potential smelters HudBay could use to process its copper concentrate once the Flin Flon operation closes - in Timmins, Ont., Rouyn-Noranda, Que., Salt Lake City or Hayden, Ariz. If these smelters don't work, the company will consider selling its copper concentrate overseas to be processed in Korea, Japan or China.

HudBay's other Flin Flon operations are in flux. Jones said the Chisel North zinc mine and Snow Lake concentrator, which were suspended in 2008 in response to slumping zinc prices, will remain shuttered until the metal stabilizes at prices 10 to 15 per cent higher than the current 70 cents U.S. per pound.

The company also operates the 777 and Trout Lake mines, a zinc and copper concentrator and a zinc plant in the region.

Its other projects include the Fenix nickel project in Guatemala and the Balmat mine in New York.

Development of Fenix was suspended in 2008, and Jones said HudBay is currently looking at ways to cut the project's power costs through hydroelectric or coal-powered thermal plants.

Source : Winnipeg Free Press

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