UPDATE 1-Proxy firm asks HudBay holders to reject board ouster

March 13 (Reuters) - Base metals miner HudBay Minerals Inc (HBM.TO) said an independent proxy advisory firm recommended its shareholders to reject a resolution by a key shareholder SRM Global Master Fund LP to remove HudBay's board members.

Proxy firm Glass Lewis & Co, owned by Ontario Teachers Pension Plan, is concerned that the removal of the entire board at this time is a "drastic step" that could potentially disturb the company's operations and hurt on shareholder value, HudBay said in a statement.

An ouster of the current board will deprive the company of much-needed leadership amid a major financial downturn, Glass Lewis said.

Glass Lewis suggested that giving the dissident, who holds an 11 percent stake in the company, one or two seats on the board would be more appropriately aligned with the dissident's equity interest in the company, HudBay said.

HudBay faces a shareholder vote on March 25 to consider replacing the board of directors with a slate proposed by SRM.

On March 10, HudBay Chief Executive Allen Palmiere had resigned as he ran afoul of shareholders, including SRM, after trying to take over rival Lundin Mining (LUN.TO) last year.

HudBay had cancelled its all-stock takeover bid for Lundin following a regulatory ruling that it must seek shareholder approval to issue the shares it was using to buy Lundin.

Last month, HudBay had said its lenders refused to renew an C$80 million ($62.55 million) credit facility citing uncertainty regarding the future of HudBay after SRM's move.

SRM launched the proxy battle late last year and hopes to replace the board with a slate led by former HudBay CEO Peter Jones.

HudBay shares, which have lost more than 71 percent of their value from the year high in May last year, were down 13 Canadian cents at C$5.87 in late morning trade Friday on the Toronto Stock Exchange. ($1=1.279 Canadian dollar) (Reporting by Krishna Chaithanya in Bangalore; Editing by Gopakumar Warrier)