Hudbay Seeks Order to Cease Trade Augusta's Poison Pill; Offer to
Expire May 5, 2014
TORONTO, ONTARIO--(Marketwired - Apr 14, 2014) - HudBay Minerals
Inc. ("Hudbay" or the "company") (TSX:HBM) (NYSE:HBM) announced
today that it has applied to the British Columbia Securities
Commission to cease trade the shareholder rights plan (the "Augusta
Poison Pill") of Augusta Resource Corporation ("Augusta") prior to
the expiry of Hudbay's offer to acquire all of the outstanding
Augusta common shares not already owned by Hudbay for consideration
per Augusta share of 0.315 of a Hudbay common share (the "Offer").
The Offer expires at 5:00 p.m. (Toronto time) on May 5, 2014 and
will not be extended unless, at or by that time, the remaining
conditions to the Offer have been satisfied or waived, including
the Augusta Poison Pill being waived, terminated or
cease-traded.
"The time for Augusta shareholders to support our Offer is now,"
said David Garofalo, president and chief executive officer of
Hudbay. "64 days have passed since we announced our Offer and
Augusta has failed to produce any alternative transactions.
Meanwhile, Augusta continues to make unachievable promises with
respect to permitting, financing and project construction."
The Offer represents the only compelling alternative available
to Augusta shareholders. Augusta's stand-alone plan is not viable
given Augusta's financial position, and no superior proposals have
been made to Augusta shareholders. As long as Augusta continues as
a stand-alone entity, its shareholders face significant risk of
value erosion and dilution.
- No Superior Proposals: Augusta has failed to present its
shareholders with any alternative transactions to the Offer despite
conducting a "robust" auction process for over two months since the
Offer was announced. This is more than enough time for any other
party seeing greater value in Augusta to make an offer, and longer
than the time contemplated for a permitted bid under the Augusta
Poison Pill. If any other party was intending to make a superior
proposal to acquire Augusta, they would have likely acted already,
but none has done so. It is clear that they, like Hudbay, have more
realistic views on the development timeline and project economics
for Rosemont than Augusta.
- Augusta's Stand-Alone Plan is Not Viable; Rosemont Construction
is Not Imminent: Augusta's stand-alone plan carries significant
risk given its financial situation and its history of misleading
shareholders by being overly optimistic about its achievement of
significant milestones. Augusta is four years delayed on its
original permitting guidance and has revised this guidance no less
than 11 times, suggesting that there is no basis for any confidence
in Augusta's current guidance regarding the timing for the receipt
of permits, let alone the completion of related legal challenges.
Additional funding from Silver Wheaton and the Korean joint venture
partners is contingent on all other project financing and all
permits being in place without challenge or appeal, which will
almost certainly make it impossible for Augusta to meet its stated
timeline of mid-2014 to commence project construction. As Augusta
itself has disclosed, "[t]he Company's current financial position
indicates the existence of a material uncertainty that raises
substantial doubt about the Company's ability to continue as a
going concern and is dependent on the Company receiving the permits
necessary for the construction of the Rosemont Project and raising
additional debt or equity financing to meet its obligations as they
become due. The Company must obtain additional funding in the third
quarter of 2014 in order to continue development and construction
of the Rosemont Project…However, there is no assurance that such
additional funding and/or project financing will be obtained or
obtained on commercially favourable terms."
- The Offer Reflects Full and Fair Value for Rosemont: The Offer
represents a 62% premium to Augusta's unaffected share price(1) and
represents full and fair value, reflecting both the potential
upside in Rosemont and the risks and timeline associated with
realizing that potential. Notwithstanding that Augusta has been
pursuing strategic initiatives in respect of Rosemont for more than
four years and more than two months have passed since the Offer was
announced, no other party has stepped forward to suggest that it
sees greater value in Augusta than is represented by the Offer,
even with the benefit of access to Augusta's data room and
permitting correspondence.
- Augusta's Share Price will Likely Decline in the Absence of
Hudbay's Offer: Since the Offer, Augusta's share price has
increased by approximately 90%, while its peers have declined by
approximately 13%(2). In the absence of the Offer or a superior
proposal, Augusta's share price will likely decline to the
significantly lower trading range seen prior to the announcement of
the Offer. Furthermore, any Augusta shareholder wishing to sell a
substantial number of Augusta shares at Augusta's current
bid-affected share price would be constrained by the limited market
liquidity in Augusta shares.
- Augusta's Poison Pill is an Attempt to Deny Shareholder Choice:
The Augusta Poison Pill is unusual in many respects and in October
2013, the proxy advisory firm Institutional Shareholder Services
(ISS) recommended that shareholders vote against it. At 64 days
into the Offer with no superior proposal, the Augusta Poison Pill's
sole effect is to prevent Augusta shareholders from exercising
their right to choose to accept the Offer. Any legitimate purpose
that it may have served in allowing Augusta to search for
alternative transactions has been fulfilled. If left in place, the
Augusta Poison Pill will further entrench this management team that
has repeatedly misled shareholders and destroyed shareholder value
with short-term, high-cost financings, including lucrative insider
financings. The time has come to allow Augusta shareholders to
exercise their right to accept the Offer, and there is no reason to
permit the Augusta Poison Pill to prevent them from doing so.
"Hudbay will not extend the Offer beyond May 5, 2014 unless all
conditions are satisfied or waived," said Mr. Garofalo. "If Augusta
shareholders want to accept the Offer, it is time for them to act
and show that they do not want the Augusta Poison Pill to prevent
them from exercising their right to do so."
An updated investor presentation is available on Hudbay's
website at www.hudbayminerals.com.
(1) |
Based
on the 20-day volume weighted average share prices of Hudbay and
Augusta for the period ending February 7, 2014, the last trading
day before Hudbay's announcement of its intention to make the
Offer |
(2) |
Based
on the 20-day volume weighted average share price performance of
Augusta and the median of its peers (comprised of Candente, CuDECO,
Duluth, Hot Chili, Lumina Copper, Metminco, Nevada Copper, NGEx,
Northern Dynasty, Panoro, Polymet, Redhawk, Western Copper &
Gold) over the active trading days between February 7, 2014 (the
last trading day before Hudbay's announcement of its intention to
make the Offer) and April 11, 2014 |
How to Tender
If you have already deposited your Augusta shares to the Offer
you should not withdraw your shares. Hudbay encourages Augusta
shareholders to read the full details of the Offer set forth in the
takeover bid circular and accompanying offer documents, as amended,
including the notices of extension and variation mailed to Augusta
shareholders in accordance with applicable securities laws
(collectively, the "Offer Documents"), which contain detailed
instructions on how Augusta shareholders can tender their Augusta
common shares to the Offer. The Offer Documents have been filed
with the Canadian and U.S. securities regulatory authorities and
are available for review on their respective websites at
www.sedar.com and www.sec.org.
For assistance in depositing Augusta common shares to the Offer,
Augusta shareholders should contact the depositary for the Offer,
Equity Financial Trust Company at 1-866-393-4891 (North American
Toll Free) or 416-361-0930 ext. 205 (outside North America), or by
email at corporateactions@equityfinancialtrust.com or the
Information Agent for the Offer, Kingsdale Shareholder Services at
1-866-229-8874 (North American Toll Free Number) or 1-416-867-2272
(outside North America), or by email at
contactus@kingsdaleshareholder.com.
About the Offer
The Offer is for all of the issued and outstanding common shares
of Augusta not already owned by Hudbay, including any common shares
of Augusta that may become issued and outstanding after the date of
the Offer but before 5:00 p.m. (Toronto time) on May 5, 2014 upon
the exercise, exchange or conversion of any securities of Augusta
exercisable or exchangeable for, convertible into or otherwise
conferring a right to acquire, any common shares of Augusta or
other securities of Augusta, together with the associated rights
issued under Augusta's shareholder rights plan agreement dated as
of April 18, 2013 between Augusta and Computershare Investor
Services Inc. Hudbay currently owns 23,058,585 common shares of
Augusta, representing approximately 16% of the issued and
outstanding common shares of Augusta. The Offer is open for
acceptance until 5:00 p.m. (Toronto time) on May 5, 2014. The Offer
is subject to customary conditions, including no material adverse
change in Augusta and Augusta's shareholder rights plan being
waived, invalidated or cease-traded. The Offer is not subject to
the approval of Hudbay's shareholders, is not subject to any
financing or due diligence conditions and is not subject to a
minimum number of shares having been deposited and not withdrawn.
Hudbay has received early termination of the waiting period under
the Hart-Scott-Rodino Act in the United States, and conditional TSX
and NYSE approvals. No Augusta shares can be taken up under the
Offer until the remaining conditions have been satisfied or
waived.
The full details of the Offer are set out in the Offer
Documents, which Hudbay has filed with the Canadian securities
regulatory authorities. Hudbay has also filed a registration
statement on Form F-10 (as amended, the "Registration Statement"),
which contains a prospectus relating to the Offer (the
"Prospectus"), and a tender offer statement on Schedule TO (as
amended, the "Schedule TO") with the Securities and Exchange
Commission (the "SEC"). This news release is not a substitute for
the Offer Documents, the Prospectus, the Registration Statement or
the Schedule TO. AUGUSTA SHAREHOLDERS AND OTHER INTERESTED PARTIES
ARE URGED TO READ THESE DOCUMENTS, ALL DOCUMENTS INCORPORATED BY
REFERENCE, ALL OTHER APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR
SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN THEY BECOME AVAILABLE,
BECAUSE EACH WILL CONTAIN IMPORTANT INFORMATION ABOUT HUDBAY,
AUGUSTA AND THE OFFER. Materials filed with the Canadian securities
regulatory authorities are available electronically without charge
at www.sedar.com. Materials filed with the SEC are available
electronically without charge at the SEC's website at www.sec.gov.
All such materials may also be obtained without charge at Hudbay's
website, www.hudbayminerals.com or by directing a written or oral
request to the Information Agent for the Offer, Kingsdale
Shareholder Services at 1-866-229-8874 (North American Toll Free
Number) or 1-416-867-2272 (outside North America), or by email at
contactus@kingsdaleshareholder.com or to the Vice President, Legal
and Corporate Secretary of Hudbay at 25 York Street, Suite 800,
Toronto, Ontario, telephone (416) 362-8181.
Important Notice
This news release does not constitute an offer to buy or the
solicitation of an offer to sell any of the securities of Hudbay or
Augusta.
Cautionary Note Regarding Forward Looking Statements
This news release contains "forward-looking statements" and
"forward-looking information" (collectively, "forward-looking
information") within the meaning of applicable Canadian and United
States securities legislation. Forward-looking information includes
information that relates to, among other things, our statements
with respect to the anticipated timing, mechanics, completion and
settlement of the Offer, including the hearing by the British
Columbia Securities Commission of our application to cease trade
Augusta's Poison Pill, the prospects of Augusta's strategic review
process, the value of the common shares of Hudbay received as
consideration under the Offer, the value of Augusta common shares
if the Offer is not successful, the permitting, development and
financing of the Rosemont Project and the future financial
performance and prospects of Augusta. Forward-looking information
is not, and cannot be, a guarantee of future results or events.
Forward-looking information is based on, among other things,
opinions, assumptions, estimates and analyses that, while
considered reasonable by us at the date the forward-looking
information is provided, inherently are subject to significant
risks, uncertainties, contingencies and other factors that may
cause actual results and events to be materially different from
those expressed or implied by the forward-looking information. The
material factors or assumptions that we identified and were applied
by us in drawing conclusions or making forecasts or projections set
out in the forward looking information include, but are not limited
to, the accuracy of Augusta's public disclosure; the execution of
our business and growth strategies, including the success of our
strategic investments and initiatives; the availability of
financing for our (and Augusta's) exploration and development
projects and activities; the ability to complete project targets on
time and on budget and other events that may affect our ability to
develop our projects; no significant and continuing adverse changes
in general economic conditions or conditions in the financial
markets; and that all conditions to completion of the Offer will be
satisfied or waived, including the waiver, termination or cease
trading of the Augusta Poison Pill.
The risks, uncertainties, contingencies and other factors that
may cause actual results to differ materially from those expressed
or implied by the forward-looking information may include, but are
not limited to, the market value of the Hudbay shares received as
consideration under the Offer and the impact of such issuance on
the market price of the Hudbay shares, the development of the
Rosemont project not occurring as planned, the exercising of
dissent and appraisal rights by Augusta shareholders should a
compulsory acquisition or subsequent acquisition transaction be
undertaken, the reduced trading liquidity of Augusta shares not
deposited under the Offer, Augusta becoming a minority-owned or
majority-owned subsidiary of Hudbay after consummation of the
Offer, the possibility that Hudbay may remain a minority
shareholder of Augusta after consummation of the Offer without the
ability to control the management or direction of Augusta, the
inaccuracy of Augusta's public disclosure upon which the Offer is
predicated, the triggering of change of control provisions in
Augusta's agreements leading to adverse consequences, risks
generally associated with the mining industry, such as economic
factors (including future commodity prices, currency fluctuations,
energy prices and general cost escalation), uncertainties related
to the development and operation of Hudbay's projects (including
the impact on project cost and schedule of construction delays and
unforeseen risks and other factors beyond our control), depletion
of Hudbay's reserves, risks related to political or social unrest
or change and those in respect of aboriginal and community
relations, rights and title claims, operational risks and hazards,
including unanticipated environmental, industrial and geological
events and developments and the inability to insure against all
risks, failure of plant, equipment, processes, transportation and
other infrastructure to operate as anticipated, compliance with
government and environmental regulations, including permitting
requirements and anti-bribery legislation, dependence on key
personnel and employee relations, volatile financial markets that
may affect Hudbay's ability to obtain financing on acceptable
terms, uncertainties related to the geology, continuity, grade and
estimates of mineral reserves and resources and the potential for
variations in grade and recovery rates, uncertain costs of
reclamation activities, Hudbay's ability to comply with its pension
and other post-retirement obligations, Hudbay's ability to abide by
the covenants in its debt instruments or other material contracts,
tax refunds, hedging transactions, as well as the risks discussed
under the heading "Risk Factors" in the Offer Documents and other
documents filed with Canadian and U.S. securities regulatory
authorities. Should one or more risk, uncertainty, contingency or
other factor materialize or should any factor or assumption prove
incorrect, actual results could vary materially from those
expressed or implied in the forward-looking information.
Accordingly, the reader should not place undue reliance on
forward-looking information. Hudbay does not assume any obligation
to update or revise any forward-looking information after the date
of this news release or to explain any material difference between
subsequent actual events and any forward-looking information,
except as required by applicable law.
About Hudbay
Hudbay (TSX:HBM) (NYSE:HBM) is a Canadian integrated mining
company with assets in North and South America principally focused
on the discovery, production and marketing of base and precious
metals. Hudbay's objective is to maximize shareholder value through
efficient operations, organic growth and accretive acquisitions,
while maintaining its financial strength. A member of the
S&P/TSX Composite Index and the S&P/TSX Global Mining
Index, Hudbay is committed to high standards of corporate
governance and sustainability. Further information about Hudbay can
be found on www.hudbayminerals.com.
For shareholder inquiries, please contact:Kingsdale Shareholder
Services1-866-229-8874 (North American Toll Free
Number)1-416-867-2272 (Outside North
America)contactus@kingsdaleshareholder.comFor further information,
please contact:Candace BruleDirector, Investor Relations(416)
814-4387candace.brule@hudbayminerals.comFor media inquiries, please
contact:Scott BrubacherDirector, Corporate Communications(416)
814-4373scott.brubacher@hudbayminerals.comwww.hudbayminerals.com
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