The new chief executive of HudBay Minerals Inc. says he intends to acquire new development projects outside the miner’s Manitoba base, indicating a shift in strategy from the company’s previous CEO, who was criticized for focusing too much on internal growth instead of acquisitions.
“We recognize that we do need to diversify out of Flin Flon and look at opportunities in other parts of the world where we can apply our skill set to create value,” David Garofalo said Thursday in an interview with The Canadian Press.
The former chief financial officer of Agnico-Eagle Mines Ltd. (TSX:AEM) was hired as HudBay’s (TSX:HBM) new president and CEO earlier this week.
The base metals miner has traditionally focused on the Americas, and poured most of its resources into developing the Lalor deposit near Flin Flon, Man., and the Fenix project in Guatemala. Former CEO Peter Jones, who left the company in November after less than eight months at the helm, was considered an excellent mine manager but was less experienced at conducting mergers and acquisitions.
Garofalo indicated the company will take on a broader, more acquisitive focus when he takes the reins July 12.
“I think we can broaden our horizons beyond the Americas,” he said. “It’s our firm belief that to create value in the mining business you have to drill and you have to build, and we have the skill set to do that, so it makes sense for us to look at those projects at various stages of development, from grassroots exploration right through to feasibility.”
However, Garofalo made it clear that HudBay will not be pursuing any large-scale mergers or acquisitions.
“Acquiring something mature that’s already fully valued in the marketplace and then paying a premium on top of that does tend to destroy per-share value, so we’re going to avoid those types of transactions,” he said.
“There are a lot of development-stage assets out there that we’re going to be kicking the tires of,” he added. “We do hope to act relatively quickly on a number of them.”
In 2008, HudBay made a failed bid to acquire Lundin Mining Corp. (TSX:LUN). The deal was eventually quashed when shareholders revolted over HudBay’s plan to issue 157.6 million new common shares as part of the agreement, more than doubling its share base without holding a shareholder vote.
This resulted in the ousting of CEO Allen Palmiere after just over a year in the job. Jones, who was CEO from 2002 to 2008, was brought back by a new board of directors to help turn the company around and revive its stock price, but left abruptly in November. Executive vice-chairman Warren Holmes has held the chief executive position on an interim basis since then.
Garofalo will be HudBay’s fifth CEO in two years, and said he hopes to bring “stable leadership” to the company.
“I only change jobs it seems every 12 or 13 years, so I’m not looking to make another change any time soon,” he said.
Earlier Thursday, Holmes told HudBay’s annual meeting that after one of the most turbulent years in the company’s history, it is refocused on boosting value for shareholders and growing its business.
While the miner has several ventures with other partners in its core northern Manitoba area, “they will not be enough to realize HudBay’s full potential,” Holmes said in a speech to shareholders.
“The second component of our strategy is to seek out other opportunities beyond our Manitoba base. In so doing we aim to create shareholder value and achieve both geographic and operational diversification.”
HudBay is developing the Fenix nickel project in Guatemala and the Back Forty project in Michigan, which it is currently advancing with Aquila Resources Inc. (TSX:AQA) under a 2009 joint venture.
“An additional growth opportunity outside of Manitoba is mergers and acquisitions, and in this area we have very focused criteria,” Holmes said. “Our strategy seeks opportunities that are too big for junior mining companies but too small for the majors.
Shares in HudBay lost 60 cents or nearly five per cent to $12.16 amid a broader decline in the base metals sector Thursday on the Toronto Stock Exchange.