Scotia write up todayHudBay Minerals Scenario Analysis: Rosemont JV Partner Likely to Surface More Value: Scotiabank Senior Base Metals Analyst Orest Wowkodaw has updated his estimates to reflect HudBays (HBM-CN/HBM-US, SO, C$11.50, Orest Wowkodaw) new ~70%/30% targeted JV partnership structure for the company's Rosemont Cu project in Arizona. Orest believes a 30% JV stake in Rosemont could generate buy-in proceeds in the range of $286M- $428M. His overall HBM 8% NAVPS increased by 5% based on an anticipated buy-in of $371M. Orests revised 12-month target of C$11.50/share (from C$11.00) is based on a 50/50 mix of 5.5x his average 2019E-2020E EV/EBITDA and 1.2x his updated 8% NAVPS. With the recent removal of the Rosemont permitting overhang, he believes HBM could be a takeover target given the company's attractive Americas-based Cu exposure. Moreover, he can't help but wonder if the new JV sale process motivates a larger miner to make an acquisition attempt sooner rather than later in order to retain 100% of Rosemont. In this case, Orest believes HBM could fetch ~C$12.50/share in a take-out scenario. 1) Ownership restructuring likely to be accretive. HBM recently announced a $75M agreement to purchase the 7.95% minority stake in Rosemont. Following the initial ownership consolidation, HBM plans to launch a formal process to find a new ~30% JV partner. Based on the attractiveness of Rosemont and TECK.B-T's recent 30% JV process at QB2, Orest believes a 30% stake in Rosemont is likely to be sold above his attributable 8% NAV (he values Rosemont at $952M on a 100% basis). While the 30% stake in QB2 sold for $800M represented an eye-popping 2.0x his 8% NAV, he believes a 30% stake in Rosemont with attributable off-take rights is likely to fetch more modest proceeds in the range of $286M-$428M based on 1.0x-1.5x his 8% NAV. Orests base case now assumes buy-in proceeds of $371M (or 1.3x his 8% NAV). 2) Rosemont funding risk? Nope. While not required under Scotias base case Cu price deck, Orest has now assumed $500M of new debt financing for Rosemont (equal to 26% of the project's $1.9B capex) to better insulate the balance sheet through potential Cu price volatility during the project build. In his report, Orest presents 12 different scenarios based on various 30% JV buy-in amounts and Cu prices (see link below, a couple of base case examples provided below). In his view, $500M of new debt appears more than sufficient to comfortably develop Rosemont even at $2.75/lb Cu.