Hudbay Minerals' move into nickel makes the mid-tier mining company a more attractive takeover target.
Hudbay got on the diversification bandwagon Monday by striking an all-share purchase of Skye Resources, owner of a promising nickel mine in Guatemala. The takeover is worth $450-million, and also sees Hudbay buy $92.5-million of Skye shares in a private placement to help fund mine construction in Guatemala.
This deal was a long time coming for Skye, which disappointed investors by going through a strategic review in 2006 and failing to find a partner or buyer that could help bring the Central American mine on stream.
There's talk that Skye may garner another bid, and the stock price is soaring Monday on this speculation and news of the Hudbay offer. However, sources close to company said this auction is likely over.
Skye's minority shareholders include nickel giant Companhia Vale do Rio Doce, which has board representation that reflects a 12-per-cent stake once owned by Inco. CVRD-nominated directors have voted in favour of this deal, which includes the promise of $14-million break fee and right to match any competing offer for Skye.
The more interesting line of speculation is what this might mean for Hudbay, which sports a $1.7-billion market capitalization. Adding another base metal to zinc and copper properties keeps the company in step with the largest global mining plays, which all strive to be market leaders in a number of base metals. Diversity may gather more industry interest in a company that's snack-size by global standards.
Hudbay has been the subject of low-level takeover chatter for months, with any one of a number of Chinese or Indian metals companies seen as likely suitors. Both those nations are big buyers of nickel, so buying Skye adds to Hudbay's lustre.
TD Securities and Morgan Stanley were across the table advising Skye. Cassels Brock & Blackwell lawyers were on for Hudbay, while it was Fasken Martineau Dumoulin stepping up as legal advisor to Skye.