Indian mining giant Vedanta Resources Plc (VED.L: Quote) has bought a stake of nearly 10 percent in Canada's HudBay Minerals Inc (HBM.TO: Quote), whose shares continued to drive higher on Monday on takeover speculation.

HudBay stock jumped 8.6 percent on Monday, adding to a gain of 9.1 percent on Friday, while Blackmont Capital raised its price target on the company on expectations of a bid.

Vedanta, India's largest base metals miner, confirmed a newspaper story that it had purchased a stake in HudBay through a subsidiary.

The Globe and Mail said Lakomasko BV, a privately held company headquartered in Amsterdam, now owns 14.5 million HudBay shares -- about 9.5 percent.

We don't comment on market speculation, but I can say that they do control that stake. It (Lakomasko) is an organization that is controlled by Vedanta Resources, spokesman Robin Walker said in London, declining further comment.

HudBay shares, were up 65 Canadian cents at C$8.23 on Monday afternoon. The stock price have more than doubled in 2009 since finishing last year at C$3.06.

The Globe identified K. Coimbatore Venkatakrishnan as the principal and top executive of Lakomasko. He was the chief executive of Vedanta's Konkola Copper Mines in 2006. KCM is Zambia's largest copper producer.

Vedanta, which has been aggressively expanding outside its home base in India, got approval last week from a U.S. bankruptcy judge to go ahead with a plan for its Sterlite (STRL.BO: Quote) unit to buy copper miner Asarco LLC for $1.7 billion.

In a research note, Blackmont analyst George Topping boosted his HudBay price target to C$9.50 from C$8.30.

We believe a premium bid for HudBay is likely, he said, predicting it could value the miner at between 80 or 90 percent of its net asset value of C$11.90 per share. That suggests a bid of between C$9.52 and C$10.71 a share.

The takeover speculation comes barely two months after HudBay abandoned a takeover attempt of fellow Canadian miner Lundin Mining (LUN.TO: Quote), due to shareholder opposition.

That bid triggered a proxy battle led by top HudBay shareholder SRM Global Master Fund, which prompted the company's board and senior management to step down last month.

Peter Jones, who was forced out as CEO in early 2008 for not seeking acquisitions aggressively enough, is now back in the top job. He said in March that HudBay would try to expand through takeovers, and may be open to overtures from larger players.

The miner said in March that it had had discussion with third parties concerning a possible sale of the company, but no discussions were under way at that time. According to the Globe, sources say Vedanta was among the companies that held talks with HudBay.

($1=$1.22 Canadian) (Reporting by Eric Onstad in London, and Andrea Hopkins and Cameron French in Toronto)

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