Hudbay Minerals Is in Talks to Buy Chile's Mantos

(Bloomberg) -- Hudbay Minerals Inc. is in talks to buy Mantos Copper SA, a Chilean miner seeking a buyer to finance its expansion plans, people familiar with the matter said.

Mantos could fetch as much as C$1 billion ($780 million) in a sale, said two of the people, who asked to not be identified because the matter isn’t public. While talks are advanced, they could still fall apart and other bidders may emerge, they said.

Hudbay’s shares fell 6.1 percent to C$6.18 Thursday in Toronto, giving the company a market value of C$1.6 billion.

“While the company’s policy is to avoid comment on speculation and rumors, Hudbay emphasizes that it has had a consistent strategy of optimizing the value of its current operations and evaluating growth opportunities that are complementary to its current business,” the company said in a statement.

While the Toronto-based miner didn’t mention Mantos, it said its strategy may include acquisitions that fit its “stringent criteria, ranging from early stage exploration to producing mines, provided they are accretive to shareholder value.”

Moratorium Sought

News of the talks didn’t sit well with one of Hudbay’s largest shareholders, which called for a moratorium on any mergers and acquisitions. Canadian private equity firm Waterton Global Resource Management, which says it owns a 4.8 percent stake in Hudbay, urged the company to focus its energy on improving the operations of its existing assets rather than buying new ones.

“As a top-five shareholder in the company, we call on the board of directors of Hudbay to immediately terminate any discussions or plans to execute the Mantos transaction or any other material acquisitions in the near term,” Isser Elishis, Waterton chief investment officer, said in a letter to Hudbay’s board Thursday that was obtained by Bloomberg.

“We believe that as a result of a lack of strategic focus and inability to execute, the company’s shares are significantly and persistently undervalued,” he said, noting the company’s shares have fallen 44 percent this year while copper prices have declined 12 percent over the same period.

Waterton’s Warning

Elishis said he hoped the board recognized the urgency of the company’s issues and would heed Waterton’s calls to right the ship. “However, we must reserve our rights to take any and all actions that we may deem warranted in order to ensure the best interests of shareholders are paramount in the boardroom,” the letter concludes.

Mantos Copper, backed by Audley Capital Advisors and Orion Mine Finance, has been seeking a buyer for all or part of itself to raise $1 billion to dig for copper and gold in two of its mines in northern Chile. The company, based in the coastal city of Antofagasta, is working with Bank of Nova Scotia to evaluate “the full range of strategic alternatives,” according to a statement in May.

Mantos Copper didn’t respond to requests for comment.

Mantos has said its Mantoverde mine will require a $780 million investment and will produce an average of 106,000 metric tons of copper and 33,000 ounces of gold per year. Its Mantos Blancos expansion will extend the mine’s life through 2035 and will require a capital injection of $210 million, the company has said.

Hudbay mines for zinc and copper, primarily in Canada’s Manitoba province.

©2018 Bloomberg L.P.