News from The Globe and Mail

Rumours have HudBay open to offers

ANDY HOFFMAN

00:00 EDT Friday, April 25, 2008

Speculation that HudBay Minerals Inc. may finally be ready to make a move is fuelling plenty of chatter on trading desks these days.

Among a volley of rumours surrounding the Winnipeg company is the suggestion that it is once again garnering interest from potential buyers and this time it's listening.

On Wednesday, HudBay shares climbed 10 per cent on unusually heavy volume. But yesterday, the stock dropped 2.9 per cent in another active trading session that saw 4.5 million shares change hands.

HudBay president and chief executive officer Allen Palmiere, who took over the top job in late January, has vowed a more "pro-active" approach to merger and acquisition activity at the integrated zinc and copper producer. Industry sources said that under former CEO Peter Jones, HudBay was often reluctant to engage in discussions with possible buyers. Now that Mr. Palmiere, a chartered accountant by training with plenty of M&A experience under his belt, is running the show, sources say the company is much more open to discussions.

One industry source familiar with HudBay's situation said that while nothing is imminent, Mr. Palmiere has indicated he will at least entertain enquiries from possible suitors. HudBay is also actively seeking potential acquisitions itself.

Strong metals prices have furnished HudBay with a bulging balance sheet. The company had just over $757-million in cash at the end of 2007, an attractive asset for buyers or a hefty war chest for the company to finance its own deals.

Desjardins Securities analyst John Hughes rates HudBay a "top pick." Yesterday, he increased his share target price to $27.70 from $25.20 to reflect higher estimates for copper prices, which have helped offset softening zinc prices.