Hudbay Minerals (HBM.TO)

(Market Call Minute) Will be a good winner when the metals recover.

Earnings come out on Wednesday. This ship has probably already sailed. Has been a 60%-70% upside on this in a year. If you got in down at the bottom, you made a lot of money. Mineral prices right now are tottering a little bit. He is not hot on any base metals with the exception of copper.

Copper is an interesting group. Thinks the TSX is going to run out of copper stocks, so pickings are slim. Because of this, he would favour it. Thinks the group is going to disappear through acquisitions. Support level is $8.92.

Very competent management. There has been a nice uplift very recently in a poor market resources stocks.

Has been shoring up their balance sheet lately. The big question has always been will they be able to finance their big projects on their own. Some of those worries have been offset to a large degree. They may have to bring in a joint venture partner on one of them.

Got nervous about the metals several months ago and switched from this to the much larger US company Freeport McMoran (CKFR-Q), which worked out for him. Likes what they are doing a lot. Have the Lalor mine coming on, which is copper/gold in the Flin Flon region. Peruvian project is financed. Doesn’t think the market is going to give it credit until the Constantion and Lalor are in production and then they’ll have a huge run at that point. You might be sitting and waiting for quite a while.

Economy is putting a damper on things. Copper prices are not at the highs they were at. Hudbay has gone through a period of time where they are spending money to build more mines. Have done a good job of keeping costs under control. He keeps an eye on it but is not buying yet.

Has it as an “Outperform” with a $13 target. Well managed and a good company.

Is at support. Materials have not participated recently. He has looked at it. It has so much overhead resistance over it from $19 down. He recommends to never average down. You should average up.

Current valuation is fairly compelling. You’ll have to look out a couple of years to see some of their projects come on stream. Recently tried to raise $400 million but pulled that because market was not where they wanted to be. This indicates good discipline on management’s part. Have had some positive drill results on some of their operations. Strong balance sheet.

Well cashed up. Just did a deal with Silver Wheaton (SLW-T) on one of the new Gastanzia (?) properties. Have got about $1.5 billion in new project financing required over the next 3 years. All the money is in place now. Sitting on $700 million in cash. 2.3% dividend.

About 55% of market cap is in cash. Don’t sell here. Trades at a reasonable balance sheet but they need to fund this project. They could sell some of their gold stream and not just use their cash. Wont be a lot of upside right now but it is a good defensive name.

Good management. Commands the space in Manitoba, a great mining territory, where 20-40 great mines have been developed. Expanding into Latin America, so you need patience.