TORONTO — HudBay Minerals, which is facing a revolt from a key stakeholder, said on Tuesday that chief executive Allen Palmiere had resigned, sparking a rally in the company's shares.

He will be replaced on an interim basis by HudBay director and veteran mining executive Colin Benner.

Mr. Palmiere had run afoul of shareholders, including 11-per-cent holder SRM Global Master Fund, after trying to take over rival Lundin Mining last year.

The deal fell apart after opposition to the deal from HudBay stakeholders, and SRM launched a proxy battle that will see shareholders vote on a new slate of directors on March 25.

“I don't think this is a surprise,” John Hughes, an analyst at Desjardins Securities, said of Mr. Palmiere's departure.

Mr. Palmiere was named CEO of HudBay in January, 2008. The copper and zinc producer mines primarily in the Flin Flon, Man., area of Canada.

Under Mr. Palmiere, the company acquired Skye Resources last year for its Fenix nickel project in Guatemala. That project has been put on hold due to plunging nickel prices.

Mr. Benner, who served on both HudBay and Lundin boards, was seen as a key architect of the failed Lundin takeover.

“Colin is a good choice to manage any of the potential changes that are coming with the board,” said Hughes.

HudBay's shares jumped after the news of Mr. Palmiere's departure and were up 3.7 per cent at $5.92 on the Toronto Stock Exchange.

A spokesman for SRM was not immediately available, and both Palmiere and Benner were unavailable for comment.

The proposed slate of directors by SRM is led by former HudBay CEO Peter Jones, who left the company in January, 2008.