HudBay Minerals offers safe harbour: analysts

Posted by Andrew Bell on November 5, 2008

Investors in mining stocks know how easy it is to slip on some slimy mud at the edge of a pit and end up in a chasm.

But analysts are arguing this morning that base-metal specialist HudBay Minerals Inc. (HBM-T) offers a safety net.

The debt-free company’s stock, which has slid nearly 70% this year to trade at around $6.20, is now changing hands "near working capital of $915-million or $5.98 per share," Wellington West analyst Catherine Gignac says in a note.

Gignac, who has a $9 target on the stock, says HudBay’s decision to defer development of its newly-acquired Fenix nickel project in Guatemala is "positive and could expose the company to takeover."

Meanwhile, that huge cash position means investors are assigning almost no value to HudBay’s existing zinc and copper operations in Manitoba and Saskatchewan, where it has been in business for more than 80 years. These properties include four mines, three concentrators, plus copper smelters and zinc plants. 

Fenix was the company's growth play: Gignac said it was set to account for half of HudBay’s revenues by 2014.
 
"Postponing the construction of Fenix is the right decision and aligns the company's risk profile with that currently desired by investors," Blackmont Capital analyst George Topping says. He has a $12.60 target on the shares.

Topping also says HudBay is a "potential acquisition target," adding that Quadra Mining Ltd. (QUA – T) is rumoured to have acquired a small position in HBM.

Desjardins analyst John Hughes calls HudBay a "top pick," with a target of $9.70. The company "has a track record of discovering and developing deposits" in Manitoba's Flin Flon region and its strong balance sheet is a "key" advantage amid financial turmoil, he says.

 

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