This article today is right up there with your comments on Hudbay.

http://network.nationalpost.com/np/b...

According to RBC Capital Markets analyst Adam Schatzker, HudBay Minerals Inc.'s proposed acquisition of Lundin Mining Corp. will turn the company into "a solid mid-tier producer, with a strong balance sheet, that is well positioned to develop its pipeline of high-quality projects and/or make strategic, accretive acquisitions."

Why is this interesting? BECAUSE EVERYONE ELSE HATES IT. Virtually every other analyst is of the opinion that this deal hurts current shareholders and is horribly timed for HudBay, a company that is well-positioned to ride out the commodity downturn. That is in stark contrast to Lundin, which is saddled with unprofitable mines and a dreadful balance sheet.

"We believe today's [HudBay] shareholders are far more concerned with cash preservation than potential long-term value or future cash flow accretion," Canaccord Adams analyst Gary Lampard wrote, summing up the opinion of most analysts.

Mr. Lampard referred to this deal as "Skye II," a pointed reference to the acquisition of Skye Resources Inc. where HudBay acquired a project that does not work at current nickel prices. As a result of the Lundin deal, he downgraded the stock to "hold" and cut his target to $4.50 a share — a discount to its cash position.

"We have never discounted cash before, but we cannot predict 'Skye III,' and we are concerned that a previously safe balance sheet would become more exposed to a not-yet bottom-of-cycle copper price," he wrote.

UBS Securities analyst Onno Rutten is also concerned about dilution from even more M&A activity. He noted that HudBay is paying a 32% premium for Lundin, even though Lundin has genuine liquidity concerns and its own chief executive said it was "looking for a cash injection sooner rather than later." He also wrote that there are no significant synergies and HudBay will take on marginal zinc mines and $470-million in pro-forma debt with this acquisition.

Over at Blackmont Capital, analyst George Topping called it an "awful deal," noting that a proxy battle and/or legal action is possible. The only silver lining for him is that he thinks there is a "strong likelihood" that a third party such as Quadra Mining Ltd. swoops in with a premium takeover bid for HudBay (he revealed that Quadra apparently already owns 3.7% of the stock).

Merchant bank Jaguar Financial Corp. has already proposed a takeover of HudBay. Mr. Rutten wrote that it has a low probability of success because HudBay shareholders have no vote on the Lundin transaction, and that deal would have to be canceled for Jaguar's to proceed. On the other hand, Catherine Gignac of Wellington West Capital Markets thinks the "odds are good" that Jaguar could acquire more than 50% of the stock, and that the Jaguar bid is preferable to the Lundin merger.

"We believe the HudBay-Lundin merger has poor odds of success, will entrench the board, and will not provide a return to shareholders for at least three years," she wrote.

Peter Koven