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Hudbay Mineral - A $6 stock priced at $18



May 11, 2008 – Comments (4)

I first looked at Hudbay Mineral when I contrasted it to Blue Note just over a year ago.  I saw nothing but downside to it, although I wasn't overly critical, yet.  Blue Note that I liked has yet to perform, and with the retraction of zinc price it is unlikely to perform. 

I anticipated a retraction of zinc prices, but simply not to the degree that they have retracted.  Zinc was at $1.53/lb and the Canadian US dollar means that was about $$1.80 Canadian.  It was $1.18 for the last quarter and it is now down to $0.96. 

I made a prediction on Hudbay in the fall, and I specifically said the problems would not show up until this quarter. 

Hudbay minerals looked to be valued at about 2-3x the valuation of Blue Note when I looked at them together. Today Hudbay's earning look to me like they are heading to the 50c/share for a full year range, and that won't show up on the next quarter, but Q1 2008 would have earnings in the 10-13c/share range based on today's metal prices and exchange rates. Q4 already has some better metal prices rounded into the quarter. I saw some serious reasons to see earnings declines when I reported on this stock and they have shown up and further declines will likely happen.

I missed on my prediction as they came in at 17c/share.  It looks like they did well on their silver, "silver production increased 24.0% owing to higher silver content in the purchased concentrates processed in Q1 2008."  That would account for about 2c that I'm out.  They also produced 23,000 ounces of gold and an extra say $200/oz is an extra $4.6 million, so the gold and silver holdings off set the reductions I predicted.

So, gold, silver and zinc are all down right now compared to Q1, so expect earnings to go lower.  Just to give some reference for how far Hudbay has fallen, nsew on the 4th quarter showed:

Canada's third-biggest zinc and copper producer earned C$28.5 million, or 22 Canadian cents a share, in the quarter ended Dec. 31, down from C$165.8 million, or C$1.29 a share, a year earlier.

4 Comments – Post Your Own

#1) On May 11, 2008 at 10:25 PM, abitare (30.15) wrote:


Why don't you write for fool/TMF?

Why don't you do company analysis for extra money?  

Just curious?

Sorry for arguing with lordz on your previous post. I will grow out of it someday.  

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#2) On May 11, 2008 at 11:13 PM, dwot (29.15) wrote:

abitarecatania, I am not going back to school for the specific piece of paper they say you need to do this.  I looked at it in Canada and I was checking out the web site and I guess a sample exam on the site and they didn't know what they were doing on a couple of the questions.  I am simply past having to explain to the "experts" that would evaluate me why you can't do math like that or whatever.  I corrected a prof on his bad math when I was doing my first degree and what an a$$ he was about it.  If they can have mistakes on a sample exam I figure I know what I am doing way better then those who would make me jump through hoops.

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#3) On May 12, 2008 at 12:16 AM, Tastylunch (28.69) wrote:

heh nice write up, nice call Dwot.

I certainly could see why you wouldn't want to work for the fool or anyone else for that matter Dwot, you've got way more than enough skills that you could start your own service or firm if so inclined. Why work for someone who is less intelligent, less willing to think critically and less willing to work as hard as you do? Or even somebody that's equivalent?

At any rate after reading this I realized that I have an unconscious nickname that I've been using for the type of dd you do. I subconsciously call what you do the "Dwot Drilldown". I don't know if I read it somewhere in one of your blogs or if it just came to me since you really dig deep into companies especially the miners (like GG). At any rate thought you might get a kick out of it :)

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#4) On May 12, 2008 at 4:59 AM, DemonDoug (31.22) wrote:

abitar, there's also something about being not paid to do something, it gives you the freedom to write or not write about anything you want.  I have considered doing some paid freelance writing myself, but to this point have decided I prefer to be just doing my own thing.

Now if someone wants me to start up a mutual fund based on my stellar caps picking, I might be enticed to actually do a bit of work for money in that case... :)

I've actually wondered about that.  Would a hedge fund or mutual fund or investment bank offer consulting gigs to those of us here on CAPS that have proven ourselves to be successful market predictors?

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