In breaking news Friday, HudBay Minerals (TSX: T.HBM, Stock Forum) and Lundin Mining Corporation (TSX: T.LUN, Stock Forum ) announced that they have agreed to a business combination.
The companies say that after the transaction is completed, each Lundin common share will be automatically exchanged for 0.3919 HudBay common shares, and Lundin will become a wholly-owned subsidiary of HudBay.
HudBay’s CEO Allen J. Palmiere will be chief executive of the resulting company.
The combined profile of the companies includes 2007 actual metal production of 187,115 tonnes of copper, 278,289 tonnes of zinc, 44,560 tonnes of lead, 3,270 tonnes of nickel, 102,587 ounces of gold, and 4,184,536 ounces of silver. The company’s cash on hand is approximately $900 million and total debt is around $240 million as at September 30.
HudBay and Lundin have also entered into a share purchase agreement, where HudBay will acquire 97 million common shares of Lundin, or 19.9% of Lundin's outstanding common shares, at $1.40 per share in a private placement for total gross proceeds to Lundin of approximately $135.8 million.
The transaction is expected to close before May 30, 2009.
After the combination, HudBay says it is expected to be the second largest base metals company in Canada by market capitalization, and will have a portfolio of producing assets in Canada, Portugal, Sweden, Spain, and Ireland, along with a “strong growth pipeline” that includes the Tenke Fungurume and Fenix projects, in the Democratic Republic of Congo and Guatemala.
"The combination of HudBay and Lundin creates a company that is financially strong, has excellent internal growth projects, and has the size and strength to take advantage of opportunities over the next 18 months," said Phil J. Wright, president and chief executive officer of Lundin.
Shares of HudBay and Lundin were halted Friday. When trading resumed, shares of Lundin climbed 7.9% to $1.09, while HudBay tumbled 44.2% to $2.92.
On the Lundin Bullboard Friday, CalifDreaming said:
“So much for the premium for LUN. But in all honesty, getting $1+ for LUN's carcass was a coup by management. In a few weeks, LUN was destined to see valuations in the pennies as the market realized they were out of cash and options. Hitching LUN's wagon to HBM (and it's cash) was a great strategic move for LUN - If I were a HBM shareholder, I'd be furious[sic].”
superman4 added: “how can this be bad for Lundin. Wow....[sic]”
