Richard Blackwell

Friday, November 21, 2008

HudBay Minerals Inc. has agreed to buy troubled Lundin Mining Corp. in an $814-million deal that will create the second-biggest base metals company in Canada.

Each Lundin share will be exchanged for 0.3919 HudBay share, and Lundin will become a wholly-owned subsidiary of HudBay.

The exchange represents a 32 per cent premium to the price of Lundin shares, on a weighted basis over the past 30 days.

HudBay stock dropped sharply after the deal was announced, and in early afternoon trading was down more than 40 per cent.

The new company will have producing assets in Canada, Portugal, Sweden, Spain and Ireland, mining copper, zinc, lead, nickel, gold and silver. It will also have development projects in Guatemala and the Democratic Republic of Congo.

Lundin CEO Phil Wright said in a statement that the deal “is in the best interest of Lundin shareholders, and I look forward to making a contribution toward building what has the potential to be a major new Canadian mining house.” The combined entity “creates a company that is financially strong, has excellent internal growth projects, and has the size and strength to take advantage of opportunities over the next 18 months,' he said.

HudBay CEO Allen Palmiere said the new company “will be a major presence on the world stage.” Mr. Palmiere will be the CEO of the new company.

Last week, Lundin reported a $199-million (U.S.) loss in its third quarter, and suspended zinc production at two Portuguese mines in response to plunging base-metal prices.

Mr. Wright said at the time that base metal prices were so low that production had become uneconomic.

The board of directors of Lundin have approved the deal, but two-thirds of shareholders must agree for it to be completed. The companies hope to have the transaction completed by May 30.

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