Zinc

[Lone Clone]

HudBay price target, rating cut by Blackmont

Leonard Zehr

00:00 EDT Monday, March 12, 2007

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The Street isn't putting much faith in HudBay Minerals Inc. becoming a takeover target or merger partner, even though management raised the possibility on a conference call last week.

The stock dropped 80 cents to $20.80 on the Toronto Stock Exchange Friday after Blackmont Capital analyst Lawrence Smith cut HudBay to "hold" from "buy" and lowered his 12-month price target to $22.50 from $26.

Fourth-quarter profit was below expectations on lower zinc production and higher-than-expected costs. Mr. Smith also cut per-share profit and cash-flow estimates for 2007 and 2008, citing higher costs at two mines and the likelihood of higher taxes in 2007 and 2008.

Mr. Smith hadn't figured on any provision for taxes this year and said that "we believed the effective tax rate in 2008 would be lower than the 34 per cent management has indicated is appropriate."

On the other hand, HudBay might be able to defuse negative sentiment by pulling off an acquisition of its own, and the company is keen on zinc, copper and nickel producers or assets.