RE: $5.00 a share in cash.Hi Barber,
upon completion of the LUN acquisition, HBM will be issuing 153M shares for a total of 306M. Their cash position will reduce, depending on 4th Quarter results, to about $600M. So the cash per share has already been factored into the price, at roughly $1.96 cash per share. So remainder dollar plus is current market sentiment (not necessarily rational).
Projected earnings of the combined companies including share dilution on my estimates should yield stock prices of $6.70 in 2009, $9.70 in 2010 and $12.20 in 2011, assuming a non-forward thinking and fearful market, which is pretty much how the market is behaiving currently.
My feeling is that the Jaguar proposition is keeping the price down. Beware of these guys, and their supporters on this website - they have been giving changing plans of action that do not make sense with very little and sometimes directly incorrect and unresearched substance behind their rationale. I would question just who Jaguar plans to put on the board - perhaps Jaguar members, but they have been secretive and inconsistent, so my only fear for HBM would be if the corporate raiders succeed and destroy the company, though I give this a very low probability.
Both HBM and LUN have mines which are profitable at these price levels, and will bring in some capitol even now. Warehouse stores of Zn, Cu, and Pb are near 10 year lows, and while they have spiked recently, there are numerous mines shutting down which cannot compete at these prices, which should drive prices of Zinc, Copper and Lead up. Nickel may have a resurgence, support for this idea would be found in case examples such as that Norilsk Nickel buying back 7.5M of their own shares, though Ni is not at the same LME lows that the other three metals are. HBM will be positioned beautifully for future price increases in any of its base group. If Tenke comes on line in the next year or so, with low cost open mining, one of the worlds largest copper and cobalt mines will yield great returns for those who hold onto HBM. Of course if Jaguar succeeds, you can kiss this mine goodbye - Jaguar indicated in their original plans which have blown with the breeze that they would sell off HBM assets into this underperforming market - a fantastic strategy that would remove all future value at no benefit, and I would suggest is still in their plans. After all, Jaguar is not in a great position themselves, and would love the cash.
As to the argument that the LUN acquisition is overvalued: any acquisition price is at a premium, this is a fundamental tenet of share pricing, that owning shares is at a discount to purchasing the company outright. Secondly, there is the argument put forward on this bullboard that somehow HBM should have seen the direct future, which apparently very few in the financial and political world did and I am sure very few of the pro-Jaguar poster did either, and somehow timed, priced and bought LUN at their exact low point in stock price. Hindsight is always 20-20. It is forward sight which matters.
So ultimately, why HBM is at this current price is part due to share liquidation, part fear of Jaguar succeeding and ruining the company, and part complete broadbased irrationality of the market which has many quality stocks at oversold and depressed prices ignoring fundamentals. Short term and quick fix investing has taken a beating, and is likely not a good idea currently either. Longer term investing should yield excellent returns in many stocks, including HBM, whether we are at the bottom of the market cycle or not. I always found it interesting how many of Warren Buffet`s great buys were not at market bottom, just somewhere in the ballpark.