For those who might be hoping for a takeover bid from HudBay.....

Allen Palmiere has all the tools he needs to build the next great Canadian mining company. But there is a rather large hold-up: In the midst of the worst crisis to hit the financial markets in decades, many of the investors of the company he heads, HudBay Minerals Inc., are spooked. Instead of backing Palmiere's plan to spend the company's hefty reserves of cash to expand the company, they want him to sit on his money and do absolutely nothing.

The difference of opinion came to a head in November, when Palmiere struck a deal to buy HudBay's troubled rival, Lundin Mining Corp. Now, Palmiere is facing a full-scale shareholder revolt that will ultimately decide the future of the company - and possibly his future as HudBay's CEO. "The majority of the market just wants you to stand pat," Palmiere says. "The problem is that when the market turns, you're criticized for sitting on your cash."

HudBay only recently started making headlines, but it's hardly a new company: It has quietly mined zinc and copper around Flin Flon, Man., for 81 years. And for the first 80, it showed little desire to do much else. But then Palmiere took the reins and put HudBay on a path of growth. That's when all hell broke loose.

Palmiere, 56, embodies that old cliché, the "mining veteran." He has been in the industry since the early 1970s, survived multiple boom and bust cycles, and accumulated vast management experience with companies like Breakwater Resources Ltd. and Zemex Resources Corp. It made him an ideal choice to join the company as chairman when HudBay was taken public in 2004, just after Ontzinc Corp. bought it from Anglo American PLC.

The company had come through a brutal decade of low metal prices, and the lesson for the board was an obvious one: They needed to diversify and increase cash flow before they hit another down-cycle. The newly public HudBay started looking at acquisitions as commodity prices turned around and the company's cash flow dramatically improved, but the board was not pleased with the glacial progress under former CEO Peter Jones. Before long, Jones was out and Palmiere was in.

From his first conference call in January 2008, Palmiere made it abundantly clear that his plan was to make over the company by pursuing acquisitions. "I don't think any of our investors should be surprised when we do what we said we're going to do," he says.

With Inco, Falconbridge and Alcan all long gone, there is certainly room for a new large-cap Canadian mining champion. And today there is no company better positioned to take that mantle than HudBay. It has zero long-term debt, secure and profitable operations, a board with plenty of M&A experience, and most famously, a mammoth cash balance of more than $800 million that is the envy of its peers.

Palmiere's first acquisition as CEO was Skye Resources Inc. last August, which gave HudBay the Fenix nickel project in Guatemala. But the timing was bad, as the financial crisis was just starting, causing metal prices to collapse. Fenix was shelved. Shareholders complained that it was a mistake to leave Flin Flon in the first place.

As the crisis continued and panicked investors watched their portfolios disintegrate, HudBay became something new: a safe haven. The company's huge cash position created an apparent price floor for its shares during a period where the floor for most mining companies was precisely zero. Put another way, investors wanted to own HudBay for the cash and almost nothing else. In the often Orwellian world of mining, this is the current reality: Companies are supposed to protect their balance sheets and not worry about the whole "mining" thing.

Palmiere saw things differently. With valuations collapsing all around him, he decided the time was right to make acquisitions. In November he struck, reaching the $488-million all-stock deal to buy Lundin Mining. Lundin has profitable mines in Western Europe and a promising development in Central Africa, but a debt-laden balance sheet and solvency concerns made it ripe for the picking.

However, the deal prompted an immediate burst of outrage from HudBay's shareholders, who were appalled that the company was increasing its risk, diluting its shares, and potentially spending some of its precious cash to clean up Lundin's financial woes. They drove HudBay shares down 40% within seconds of the deal hitting the wires. Before long, shareholders were fighting HudBay in court, leaving the deal in serious question.

The situation has been extremely frustrating for Palmiere. Lundin's assets were worth billions a few months ago, and he knows that he will never get another chance to buy high-quality mines likes these at such dirt-cheap prices. "The reality is that if you want to run a mining company and create long-term value, you have to look at putting your balance sheet to work," he says.

Now Palmiere is on the ropes as well. Dissident shareholders such as the merchant bank Jaguar Financial and hedge funds SRM Global and Corriente Master Fund are attempting to replace Palmiere and the entire board. Investors are scheduled to vote on the board's future at the end of March. "I do believe that this management team and this board is history," says Vic Alboini of Jaguar Financial. "We believe that people will vote massively to oust this board."

Even though there's a good chance the deal may fall apart, Palmiere isn't backing down. And despite the very vocal protests against him, Palmiere maintains that a large (but quieter) group of shareholders is supportive of his strategy. Just like him, they would love to see a new Canadian mining champion emerge that can replace the Incos and Alcans of the past. The question is whether that vision wins out in the end, or whether HudBay retreats to reliable old Flin Flon for another 80 years.