... <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:1; mso-generic-font-family:roman; mso-font-format:other; mso-font-pitch:variable; mso-font-signature:0 0 0 0 0 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman","serif"; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin;} p {mso-style-noshow:yes; mso-style-priority:99; mso-margin-top-alt:auto; margin-right:0in; mso-margin-bottom-alt:auto; margin-left:0in; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman","serif"; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> compared with C$800.3 million based on yesterday's closing price.

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HudBay Plunges on Agreement to Acquire Lundin Mining (Update2)

HudBay Plunges on Agreement to Acquire Lundin Mining (Update2)

By Christopher Donville

Nov. 21 (Bloomberg) -- HudBay Minerals Inc. plunged the most in more than six years in Toronto after agreeing to acquire Lundin Mining Corp. to gain operations in Europe and Africa.

HudBay declined C$2.07, or 40 percent, to C$3.16 at 4:17 p.m. in Toronto Stock Exchange trading, the biggest drop since Aug. 21, 2002. The Winnipeg, Manitoba-based miner's shares have dropped 84 percent this year.

``This deal is absolute shareholder-value destruction,'' David Taylor, a fund manager at Goodman & Co. Investment Counsel in Toronto, who holds 9 million HudBay shares, said today by phone. ``We're going to do everything in our power to get proper value for our shares.''

The acquisition isn't in the best interests of HudBay shareholders because it undervalues the company's financial position, compared with Lundin's, jeopardizing cash that HudBay could use to buy assets at lower prices in the future, Taylor said.

HudBay and Toronto-based Lundin have been stung by falling prices for metals including zinc and copper as the U.S. financial crisis deepened. At today's closing price, the transaction is valued at about C$483.5 million ($380.2 million), compared with C$800.3 million based on yesterday's closing price.

Lundin agreed to be acquired because it's operating at a ``loss at current depressed metal prices,'' Greg Barnes, a Toronto-based analyst at TD Newcrest, said today in a note to clients. ``We were expecting Lundin to need to utilize its line of credit for working-capital requirements during the fourth quarter and into 2009.''

HudBay Defends Deal

HudBay Chief Executive Officer Allen J. Palmiere today defended the deal on a conference call with investors and analysts.

``Any time you enter into a transaction like this, it's a matter of when it's available, and when the time is right for it,'' Palmiere said on the call. ``This particular transaction wasn't available earlier, is available today and might not have been available six months from now.''

HudBay shareholders will not be allowed to vote on the transaction, Palmiere said.

``This is outright shareholder oppression,'' Goodman's Taylor said.

Late today, Toronto-based Jaguar Financial Corp. unveiled its intention to make an offer for HudBay, conditional on cancellation of HudBay's plan to acquire Lundin.

Under HudBay's agreement with Lundin, each Lundin common share will be exchanged for 0.3919 of a HudBay share, the companies said today in a statement.

`Strength to Survive'

``What we have now is a company of sufficient size and strength to survive in these markets,'' Lundin Chief Executive Officer Phil J. Wright said today on a conference call with analysts and investors. ``Our expectation is 2009 will be pretty tough.''

The terms of the deal include a C$135.8 million loan by HudBay to Lundin, the companies said.

The combined entity will have operations in Canada, Portugal, Sweden, Spain, and Ireland as well as stakes in projects being developed in the Democratic Republic of Congo and Guatemala.

The transaction, which may create the third-largest Canadian mining company by market value after Cameco Corp. and Teck Cominco Ltd., is expected to close before May 30, the companies said in the statement.

In June, HudBay agreed to buy Skye Resources Inc. in a transaction valued at about C$276.6 million to add the Fenix nickel project in Guatemala.

Toronto-based Lundin Mining rose 4 cents, or 4 percent, to C$1.05 on the Toronto exchange.