Hudbay Minerals: Analyst Cuts Price Target on Lower Zinc Prices

Lower zinc prices combined with the acquisition of Skye Resources Inc. (SKRZF.PK), will reduce HudBay Minerals Inc.'s (HBMFF.PK) cash flow and earnings this year by 39% and 58% respectively, says Wellington West analyst Catherine Gignac.

The analyst lowered her price target on HudBay stock from C$18.50 to C$14.75 yet maintained her "buy" recommendation.

Mr. Gignac is forecasting weaker zinc prices over the next couple of years, lowering her estimates from C$1.15 to C$0.90 in 2008 and from C$1.10 to C$0.85 in 2009. Eventually, she said zinc will rebound, increasing her long-term forecast from C$0.80 to C$1.20.

As a result, she told clients in a note that she expects HudBay will suspend operations at its Balmat zinc mine in the upcoming third quarter.

That combined with the likely completion of its all-stock purchase of Skye  for roughly C$460-million sometime later this year, will sink 2008 cash flow per share from C$3.38 to $C2.05, wrote Ms. Gignac.

She added that Skye's Fenix nickel project in Guatemala will give HudBay a much improved growth profile offset by greater development and political risk.

Comments

[speculator:]

New CEO Allen Palmere 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 11:47 AM