The decision last week by HudBay Minerals Inc. (HMBFF.PK) to buy back stock highlighted the fact that base metal miners are accumulating cash at an unprecedented rate. With that in mind, analysts at UBS have broken down the anticipated net cash positions for the base metal producers at the end of 2008 and 2009.
UBS is assuming a general decline in metal prices through the next two years, but it still expects that the miners will have staggering amounts of cash. HudBay, for instance, is expected to have $1.1-billion of net cash at the end of 2008 and almost $1.4-billion at the end of 2009, which works out to 51.3% of its market cap. Inmet Mining Corp. (OTC:IEMMF) is forecast to have $989-million at the end of 2008 and $1.5-billion at the end of 2009. Also singled out for their huge cash balances are Anvil Mining Ltd. (OTC:AVNMF) which is forecast to have $443-million in 2008, and $461-million in 2009, and Breakwater Resources Ltd. (OTC:BWLRF) which is forecast to have $332-million in 2008, and $464-million in 2009.
Excess cash can be a problem for mining companies because it makes them more vulnerable to hostile takeovers. HudBay is hoping to use much of its cash to make an acquisition, but has not done a big deal to date.