Blackmont Analyst Positive on HudBay Minerals' Offer for Skye Resources

Skye Resources Inc. (SKRZF.PK) shares were up more than 16% on Monday, after HudBay Minerals Inc. (HBMFF.PK) said it wants to buy Skye in a deal  worth more than C$400-million.

HudBay is offering to swap 0.61 of its shares for each share of Skye and the Fenix nickel project it is currently developing in Guatemala. Based on HudBay's closing price on Friday, the offer values Skye shares at $9.02 each. Yesterday, at just past 11 a.m. ET, Skye shares were trading at C$8.85, up C$1.13 on the day. 

HudBay investors appear less enthused with the deal, with shares in the miner dropping 5% to C$14.05.   

Blackmont Capital analyst George Topping said it is not surprising that HudBay is looking to diversify outside its copper and zinc portfolio, given management's previous nickel experience and the high transaction price for another copper project. 

In a note to clients, Mr. Topping said:

We view the acquisition positively given the low risks involved in bringing the project into production.

The analyst added that the capex requirements of the Fenix project should solve HudBay's "excess cash problem."

He maintained his "buy" rating and C$23.80 price target on HudBay shares.

Comments

[speculator:]

New CEO Allen Palmer must GO!!!!!
Bring someone in that will focus on the business at hand!!! HBM claims 70% of its income has come from its Flinn Flan, Callinan and 777 mines. That is where the fosuc should be. Settle with CAA!!! Make a deal for the WAR BABY and extend the life of the Flinn Flan project for many years of profitability!!!!

2008 Jul 25 10:55 AM