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HudBay to sell Lundin stake for C$236 million

11/05/09

TORONTO (Reuters) - HudBay Minerals will sell its 16.7 percent stake in Lundin Mining for C$236 million ($203 million), it said on Monday, pocketing a tidy gain on shares it bought as part of its ill-fated attempt to acquire Lundin last year.

HudBay will sell the stake to GMP Securities for cash and will pocket a pre-tax gain of about C$100 million due to the recent appreciation of Lundin's shares, HudBay said in a statement.

Those shares weakened nearly 10 percent on Monday, but it was unclear whether that was connected to the sale.

HudBay agreed to buy the stake last November as part of its friendly bid to take over Lundin. The share buy was meant to keep cash-strapped Lundin comfortably afloat while the two sides worked to close the deal.

However, the deal fell apart under pressure from HudBay shareholders, who objected to a 153 million share issue buy HudBay that was to be used to fund the acquisition.

"We believe this brings the HudBay arrangements to a final satisfactory conclusion," Lundin Chief Executive Phil Wright said in a separate statement.

Lundin's shares were down 9.6 percent at C$2.65 on the Toronto Stock Exchange, easily the weakest performer among mining stocks. The shares were weak before the news was released.

HudBay stock was up 3 Canadian cents at C$8.10.

Lundin's stock has more than tripled since the deal collapsed in February, as the company has worked to solve liquidity problems, while rebounding prices of copper, zinc, and nickel have burnished the appeal of its base metal assets in Europe and Africa.

($1=$1.16 Canadian)

(Reporting by Cameron French; editing by Rob Wilson)