HudBay Minerals Inc., the third-best- performing Canadian mining stock this year, is willing to spend about C$400 million ($402 million) on deals to replenish its development pipeline.
The copper and zinc producer, which expects to more than quadruple copper output by 2015, will capitalize on a “buyers’ market” for mining assets as small companies struggle to raise funds and larger competitors consider sales, Chief Executive Officer David Garofalo said yesterday. HudBay would be comfortable spending about 20 percent of its C$1.99 billion market value, he said.
“We’re looking at a lot of things and I’m hoping that we can tuck something in this year,” Garofalo, 47, said in an interview at Bloomberg’s office in Toronto, where HudBay is based. “We’ve never been busier looking at opportunities.”
Exploration and development companies face funding shortfalls after mining-industry equity sales dropped for a third straight year as valuations declined and bank lending fell. At the same time, mining companies including BHP Billiton Ltd. and Rio Tinto Group, the two largest, have been looking to sell less-profitable assets.
The majors are very interested in simplifying their balance sheets, said John Hughes, an analyst at Desjardins Securities Inc. in Toronto.
“Any asset that is not deemed material could be available to a smaller company where it could be material,” Hughes, who rates HudBay a buy, said yesterday in a phone interview. “The process is really just getting under way.”
There are opportunities across the mining industry, from new projects to fully developed assets, Garofalo said.
HudBay, which rose 2.3 percent to C$11.57 at the close in Toronto, is the best-performing mining stock in the Standard & Poor’s/TSX Composite Index this year after Aurizon Mines Ltd. and Uranium One Inc., which both received takeover offers last month. Thirteen analysts have a buy rating on HudBay and four recommend holding the shares, according to data compiled by Bloomberg.
Lundin Mining Corp., another Canadian metals producer, also is studying copper acquisitions and can fund a deal of as much as $700 million, Chief Executive Officer Paul Conibear said yesterday in an interview in Cape Town. Lundin has looked at assets in Eastern Europe, he said.
HudBay acquired the Constancia project in Peru when it bought Norsemont Mining Inc. in 2011 for C$305 million. The mine, which is expected to cost $1.5 billion, is scheduled to start production next year.
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