HudBay Minerals Inc. (HBM), the 87-year-old company making a C$334 million ($301 million) hostile bid for a smaller Canadian copper-mine developer, is looking for more acquisitions even if it doesn’t pull off that deal.
HudBay made its all-stock offer on Feb. 9 for Augusta Resource Corp. (AZC), the owner of the Rosemont copper project in Arizona. The bid was 16 percent less than Augusta’s closing price yesterday in Toronto, indicating investors are anticipating a higher offer. That’s also the widest discount for any current Canadian takeover, data compiled by Bloomberg show.
While HudBay recently started up two Canadian mines and is close to completing a new Peruvian operation, it’s not yet clear where growth will come from further in the future, according to Chief Executive Officer David Garofalo. Hudbay is still a few years away from developing a sustainable pipeline, he said in a March 4 interview at Bloomberg’s Toronto office. “We’re ready to move onto other things whether or not we get Rosemont,” he said.
Garofalo, 48, a former chief financial officer at Canadian gold producer Agnico Eagle Mines Ltd., took up his current post in July 2010, more than a year after HudBay abandoned an agreement to buy Canadian competitor Lundin Mining Corp. Garofalo said that when he became CEO, he found the Toronto-based company’s project pipeline was empty, while two of its three mines were nearing the end of their lives.
Since then, HudBay has developed and started output at the Lalor mine in Manitoba, as well as the smaller Reed deposit in the province. The company also acquired the Constancia copper project in Peru by buying Norsemont Mining Inc. in 2011 for C$315 million. It expects to start production at the $1.7 billion mine later this year.
Garofalo “has been successful in really shifting the focus from just the smaller Manitoba business unit to more of a global diversified mining company,” Shane Nagle, a Toronto-based analyst at National Bank Financial Inc., said in a phone interview yesterday.
HudBay fell 2.9 percent yesterday to C$8.67 in Toronto. The shares have declined 14 percent in the past 12 months, while the S&P/TSX Materials Index has declined 11 percent. HudBay reported a fourth-quarter net loss of C$55.5 million and sales of C$136.1 million.
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