TORONTO,
ONTARIO--(Marketwire - March 15, 2009) - SRM Global Master Fund LP
("SRM"), Peter R. Jones and the SRM nominees have failed to
present a strategy for the future of HudBay Minerals Inc. ("HudBay",
"the company") (TSX:HBM), said Riskmetrics, a proxy advisory
service, in its report dated March 13, 2009 that highlights the same
failing identified by Glass Lewis & Co., another leading
independent proxy advisory service. Riskmetrics also raised serious
concerns about SRM's plan to install G. Wesley Voorheis, a paid
consultant to SRM, as chairman of HudBay's Board of Directors.
Despite these concerns and its own policy that dissidents proposing to
replace a majority of a Board, let alone the entire Board, must provide
a well-reasoned and detailed business plan, Riskmetrics has not
supported HudBay's current Board of Directors in its recommendation. It
appears, however, that Riskmetrics' conclusion is based on an
incomplete understanding of the facts. In commenting that HudBay's
Board did not undertake sufficient efforts to renegotiate the proposed
acquisition of Lundin Mining Corporation ("Lundin") and that
it delayed holding a requisitioned meeting of shareholders, Riskmetrics
fails to consider that HudBay had a binding legal obligation to complete
the Lundin acquisition that did not permit HudBay to subject the
transaction to a shareholder vote absent regulatory intervention. Therefore,
Riskmetrics did not give any consideration to the substantial legal
liability that HudBay would have been exposed to had it acted
differently.
Replacing the entire HudBay Board would be disruptive and inappropriate
given SRM's 11% ownership interest in HudBay, said Glass Lewis, a
leading independent proxy service, as announced on March 13, 2009. HudBay
urges shareholders to vote their BLUE proxy AGAINST SRM's removal
resolution.
"HudBay has the right board and the right strategy to enhance
shareholder value," said Colin K. Benner, Interim CEO of HudBay
Minerals. "In contrast, SRM has proposed a less experienced and
conflicted board lacking a well thought out strategy, and is too much
of a risk for shareholders to take with HudBay's future. HudBay's
current directors have extensive experience in the mining industry,
with an average of 27 years of experience, and an average 11 years of
independent director experience."
Peter R. Jones and the SRM Nominees have no strategy for HudBay
In its dissident proxy circular dated March 2, 2009, SRM acknowledged
that the SRM Nominees have not developed a strategic plan for HudBay,
despite having had two months since the identification of the SRM
Nominees to do so, and despite SRM's assertion that Peter R. Jones is
"intimately familiar" with HudBay. However, in response to
criticism from HudBay shareholders and Glass Lewis, Mr. Jones hastily
assembled a strategy that appeared in the media on March 12, 2009 and
in a later press release, Mr. Jones outlined a number of initiatives as
part of his plans.
Balmat Mine and Chisel North Mine
Mr. Jones has suggested that he would like to restart the Balmat and
Chisel North mines, whose operations were suspended by HudBay in August
2008 and January 2009, respectively. Mr. Jones reopened the Balmat mine
based on overly optimistic production and cost assumptions; HudBay's
board had to close the Balmat mine following losses of more than $80
million. HudBay's
decision to suspend production at Chisel North is part of a strategy to
maximize the value of Chisel North's resources and the likely success
of a mine at Lalor. Not only would it be value-destructive to continue
to mine Chisel North at current low zinc prices, it would compromise
the viability of new opportunities, like Lalor. HudBay's strategy is to
reopen Chisel North in several years at what are expected to be higher
zinc prices, and eventually transition the Chisel North workforce at
the time to Lalor to facilitate a smooth ramp-up of Lalor. Similarly,
development of Lalor will support the addition of a copper recovery
circuit at the Snow Lake concentrator, thereby enhancing the economics
of mining at Chisel North.
Flin Flon Copper Smelter
Mr. Jones has suggested that he would try to keep the Flin Flon copper
smelter open. HudBay has not determined a date for closure of the
smelter, although closure will be necessary prior to 2015 when
government emission targets will make continued operations uneconomic.
Recent movements in energy prices, foreign exchange rates and market
treatment charges have mitigated the adverse economic impact of
operating the smelter. HudBay is, however, investing in the needed
infrastructure to ensure that the company is able to close the smelter
when it is in HudBay's best interests to do so.
Growth by Acquisition
Mr. Jones has also suggested that he would like to grow HudBay through
acquisitions. A key part of HudBay's strategy during Mr. Jones'
previous tenure as CEO was to grow the company by acquisition, and the
HudBay Board's opinion is that Mr. Jones was unsuccessful in carrying
out the strategy that had been proposed by management and approved by
the Board. Mr. Jones has no experience in conducting mergers and
acquisitions, and there is no reason to believe that he would be any
more successful at this now than he was previously.
Mr. Jones and the SRM Nominees have indicated that they will not
conduct a share buyback until they have completed a review of HudBay's
strategy. This provides little comfort to HudBay's Board, given its
concerns that the SRM Nominees will be unable to act independently of
SRM when SRM pressures its hand-picked nominees to distribute HudBay's
cash through a major share buyback following such a review. Such a
strategy would leave HudBay undercapitalized and unable to pursue its
organic growth opportunities.
It is apparent that SRM and their nominees made no effort to develop a
strategy for HudBay in the two months following the announcement of the
SRM Nominees. HudBay believes this is because SRM does not intend to
grow HudBay, but rather intends to engage in a major share buyback that
would weaken HudBay financially and jeopardize HudBay's organic growth
opportunities. Facing criticism of their lack of strategy from HudBay
shareholders and independent observers, SRM and Mr. Jones have hastily
concocted a strategy that is not well considered and hides SRM's true
intent, which HudBay believes is to distribute the company's cash
through a share buyback.
The Riskmetrics and Glass Lewis reports
In its report, Riskmetrics noted that Mr. Voorheis is a paid consultant
to SRM, and has been proposed to be HudBay's chairman if the SRM
Nominees are installed. SRM's proxy circular does not state how much
Mr. Voorheis is being paid by SRM. According to Riskmetrics:
- "... we are not comfortable with Voorheis being appointed
Chairman. A consultant who is paid by the dissident should not be
automatically installed in such an influential leadership role. We
would expect a board of directors, after due consideration, to
independently appoint a chairman in the best interests of the company
and its shareholders." (i)
SRM's decision to appoint their paid consultant as HudBay's chairman is
entirely consistent with a strategy of obtaining control of HudBay.
HudBay is concerned that Riskmetrics has placed undue faith in the
ability of the SRM Nominees and Mr. Jones to withstand the pressure
that SRM, a well-known activist investor, will apply to them to pursue
strategies that benefit SRM but could be damaging to the interests of
HudBay and its other shareholders.
HudBay urges its shareholders to carefully consider the issues raised
in both the Riskmetrics report as well as Glass Lewis' report.
In recommending that HudBay shareholders vote AGAINST SRM's resolution,
Glass Lewis states that:
- "We are concerned that the replacement of the entire board is a
drastic step that could disrupt the board and/or management's operations,
depriving the Company of much-needed leadership amid a major financial
downturn." (i)
- "Further, we are concerned that the Dissident has failed to
outline a substantial strategic plan for improvement at the Company,
other than appointing Dissident nominee (Peter) Jones as CEO. Instead,
the Dissident reports that such a plan could only be finalized after
the Dissident nominees were elected to the board and provided with
access to requisite information regarding the Company. As such, we do
not believe the Dissident has provided any reason to believe that its
own strategy would yield better results for the company's performance
than management's current strategy."
- "In our view, giving the Dissident one or two seats on the board
(out of a total of eight board seats) would be more appropriately
aligned with the Dissident's equity interest in the Company."
- "We believe that incumbent management, with access to more and
better information regarding the company, should be given the benefit
of the doubt regarding strategic business directions."
Glass Lewis & Co. concluded that:
- "...the removal of the entire board at this time could
potentially disturb the Company's operations and have a detrimental
impact on shareholder value. Accordingly, we recommend that
shareholders vote AGAINST this proposal on the Company's BLUE proxy
card."
(i)Permission to quote from the Riskmetrics and Glass Lewis reports was
neither sought nor obtained.
HudBay believes that its Board has the experience and the strategy needed
to ensure that HudBay can prosper and maximize shareholder value.
HudBay urges shareholders to vote only the BLUE proxy AGAINST SRM's
removal resolution, and stop SRM from acquiring control of HudBay.
HudBay will host a conference call on Monday, March 16, 2009 at 10:00
a.m. ET in which Mr. Benner will review HudBay's corporate strategy and
answer questions about his interim appointment (please see details
below):
Conference Call and Webcast Date: Monday, March 16, 2009 Time: 10:00 a.m. (Eastern Time) Webcast: www.hudbayminerals.com Dial in: 416-644-3424 or 800-732-0232 Replay: 416-640-1917 or 877-289-8525 Replay Passcode: 21301062#
The
conference call replay will be available until midnight (Eastern Time)
on March 25, 2009. An archived audio webcast of the call also will be
available on HudBay Minerals' website.
Interim CEO Colin K. Benner to Appear on BNN TV
Colin K. Benner, HudBay's Interim Chief Executive Officer, will be
interviewed on the Canadian Business News Network's (BNN) national
television show "Trading Day" on Monday, March 16, 2009 at
2:20 p.m. ET. To listen and view this event online, please visit: www.bnn.ca.
Voting Instructions for BENEFICIAL (NON-REGISTERED) SHAREHOLDERS
If your common shares are held in a brokerage account a BLUE voting
instruction form or BLUE proxy was mailed to you. Only vote the BLUE
voting instruction form or BLUE proxy as follows:
Canadian Shareholders: Visit www.proxyvote.com and enter your 12 digit control
number or call 1-800-474-7493 or fax your BLUE proxy to (905) 507-7793
or toll free at 1-866-623-5305 to ensure it is received before the
deadline.
U.S. Shareholders: Visit www.proxyvote.com and enter your 12 digit control
number or call 1-800-454-8683.
Voting Instructions for REGISTERED SHAREHOLDERS
If the common shares are held in your own name, fax the BLUE proxy to
Equity Transfer & Trust Company at 416-595-9593 or Kingsdale at
416-867-2271 or 1-866-545-5580 or visit www.voteproxyonline.com
and enter your control number.
For assistance in voting your BLUE proxy, please contact HudBay's proxy
solicitation agent, Kingsdale Shareholder Services Inc., at toll-free
1-866-581-0508 or 1-416-867-2272.
HudBay Minerals Inc.: Strength to Build the Future
HudBay Minerals Inc. (TSX:HBM) is a Canadian integrated mining company
with assets in North and Central America principally focused on the
discovery, production and marketing of base metals. The company's
objective is to increase shareholder value through efficient
operations, organic growth and accretive acquisitions, all while
maintaining its financial strength. A member of the S&P/TSX
Composite Index and the S&P/TSX Global Mining Index, HudBay
Minerals is committed to high standards of corporate governance and
sustainability.
Forward Looking Information
This news release and its attachments contain "forward-looking
information" within the meaning of applicable securities laws.
Forward looking information includes but is not limited to information
concerning the shareholders' meeting scheduled for March 25, 2009, the
intentions of SRM, and the strategy and intentions of HudBay and its
board of directors. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as
"plans", "expects", or "does not expect",
"is expected", "budget", "scheduled",
"estimates", "forecasts", "intends",
"anticipates", "understands" or "does not
anticipate", or "believes" or variations of such words
and phrases or statements that certain actions, events or results
"will", "may", "could",
"would", "might", or "will be taken",
"occur", or "be achieved". Forward-looking
information is based on the views, opinions, intentions and estimates
of management at the date the information is made, and is based on a
number of assumptions and subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those anticipated or projected in the
forward-looking information (including the actions of other parties who
have agreed to do certain things and the approval of certain regulatory
bodies).
Many of these assumptions are based on factors and events that are not
within the control of HudBay and there is no assurance they will prove
to be correct. Factors that could cause actual results or events to
vary materially from results or events anticipated by such
forward-looking information include court and/or other regulatory
approval, action by an intervening party or parties, future agreements
reached with third parties, changes in market conditions, variations in
ore grade or recovery rates, risks relating to international
operations, fluctuating metal prices and currency exchange rates,
changes in project parameters, the possibility of project cost overruns
or unanticipated costs and expenses, labour disputes and other risks of
the mining industry, failure of plant, equipment or processes to
operate as anticipated as well as those risk factors discussed in the
Annual Information Form for the year ended December 31, 2007, and as
contained in the Management Discussion and Analysis for the three and
nine month period ended September 30, 2008, which risks may cause
actual results to differ materially from any forward-looking statement.
Although HudBay has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking information, there may be other factors
that cause actions, events or results not to be anticipated, estimated
or intended. There can be no assurance that forward-looking information
will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. HudBay
undertakes no obligation to update forward-looking information if
circumstances or management's estimates or opinions should change
except as required by applicable securities laws. The reader is
cautioned not to place undue reliance on forward-looking information.
This news release and the information contained herein does not
constitute an offer of securities for sale in the United States and
securities may not be offered or sold in the United States absent
registration or exemption from registration.
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