TORONTO, ONTARIO--(Marketwire - March 19,
2009) -
For full details of HudBay Minerals' position on the proposal to
replace the current Board of Directors, please visit www.hudbayminerals.com/strongfuture.
HudBay Minerals Inc. ("HudBay", "the company")
(TSX:HBM) urges shareholders to vote the BLUE proxy, AGAINST the
resolution to remove the current board and replace them with SRM's
nominees. HudBay's current Board of Directors has the right strategy to
guide the company through challenging economic times and into a strong
future.
HudBay Minerals has posted to its website (www.hudbayminerals.com/strongfuture) a
letter to its shareholders, appended to this news release, from the interim
CEO, Colin K. Benner and HudBay's Board of Directors. The letter
reviews the serious concerns HudBay, along with leading independent
proxy firms Glass Lewis & Co. and Riskmetrics, have raised about
the slate nominated by SRM Global Master Fund ("SRM"). Glass
Lewis has recommended that shareholders vote AGAINST SRM's resolution.
HudBay's directors continue to believe that SRM is choosing to hide its
true intent, which is to take control of HudBay and distribute cash
through a share buyback, a strategy that would weaken HudBay's
financial strength and jeopardize the company's organic growth
opportunities.
HudBay's current Board of Directors has the right strategy to build
long-term value for all shareholders. That is why management and the
Board have steadfastly refused to alter their strategy to accommodate
SRM's short-term objectives. Notwithstanding SRM's narrow views, many
HudBay shareholders, including large institutional shareholders, have
expressed strong support for the HudBay strategy, which is to preserve
its competitive financial strength and increase shareholder value
through efficient operations, organic growth and accretive
acquisitions.
"We have a good strategy that's well considered," said Mr.
Benner. "My objective, and that of the Board, is to steer the
company through these challenging times and ensure a prosperous future
for HudBay. The company needs a CEO who has the best possible
qualifications, and will look ahead to the future rather than returning
to the past. As interim CEO, I look forward to working with HudBay's
Board of Directors to find that successor."
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.
(HBM - P) (HBM - G)
Appendix: Letter to Shareholders
Dear HudBay Shareholder:
Make no mistake: SRM Global Master Fund ("SRM") does not
represent the best interests of all shareholders. This foreign hedge fund
is agitating to replace your experienced and qualified Board of
Directors with its own less experienced and conflicted slate of
nominees (the "SRM Nominees"). The SRM Nominees have no
strategy for HudBay, a critical failure identified by two leading independent
proxy advisory firms, Glass Lewis & Co. and Riskmetrics. Peter R.
Jones, SRM's candidate to become CEO, has only a hastily concocted plan
that does not stand up to scrutiny. Your Board of Directors continues
to believe that SRM is choosing to hide its true intent, which is to
take control of HudBay and distribute cash through a share buyback, a
strategy that would weaken HudBay's financial strength and jeopardize
the company's organic growth opportunities.
The Glass Lewis and Riskmetrics reports
In recommending that HudBay shareholders vote AGAINST SRM's resolution,
the Glass Lewis report issued March 12, 2009 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 R.) 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."
In a report dated March 13, 2009, Riskmetrics noted that G. Wesley
Voorheis, SRM's intended chairman, is a paid consultant to SRM. 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.
Like Glass Lewis, Riskmetrics pointed out that the SRM Nominees
"lack...a detailed business plan" and have failed to present
a "more detailed strategy" for HudBay, notwithstanding the
policy of Riskmetrics that dissidents proposing to replace a majority
of a Board, let alone the entire Board, must provide a well-reasoned
and detailed business plan.
(i) Permission to quote from the Riskmetrics and Glass Lewis reports
was neither sought nor obtained.
HudBay has the Right Strategy
Our strategy is the right one to build long-term value for all
shareholders. That is why management and the Board have steadfastly
refused to alter their strategy to accommodate SRM's short-term
objectives. Notwithstanding SRM's narrow views, many HudBay
shareholders, including large institutional shareholders, have
expressed strong support for the HudBay strategy, which is to preserve
its competitive financial strength and increase shareholder value
through efficient operations, organic growth and accretive
acquisitions.
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 as
well as in a later press release.
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 record of completing 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
following such a review. Such a strategy would leave HudBay
undercapitalized and unable to pursue its organic growth opportunities.
At current prices, HudBay's operating cash flow is positive. However,
if current prices and foreign exchange rates persist or even
deteriorate, we do not expect operating cash flow to be sufficient to
fund our capital programs in 2009. Consequently HudBay needs to retain
sufficient funding to weather a cash drain for three to as long as five
years, while retaining the substantial capital required to develop
Lalor. If a major share buyback is conducted today, in five years
HudBay could face declining production with a weak balance sheet that
is unable to support needed investment. This would be the worst
possible outcome for HudBay and its shareholders.
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 Truth about Peter R. Jones' Track Record
Your Board of Directors also takes serious issue with SRM's claim that
Mr. Jones was responsible for HudBay's share price increase during his
time with HudBay. The reality is that he simply had the good fortune to
be in charge of a highly leveraged mining company just before a
dramatic rise in metal prices. Indeed, it was under his watch that the
company accumulated over $600 million in operating losses prior to
2005, which substantially sheltered HudBay's taxable income once metal
prices increased.
By the end of 2006, the benefit of rising metal prices and extensive
tax losses were fully reflected in HudBay's share price. During 2007,
HudBay's share price underperformed its peer index on the TSX by more
than 25%.
SRM supported the Skye Transaction
SRM criticizes HudBay's acquisition of Skye Resources Inc.
("Skye"), even though SRM supported the transaction when it
was announced. In fact, SRM went so far as to advocate for support of
the transaction on management's behalf, as noted in correspondence
between SRM and HudBay:
- "Our line is that the (Skye acquisition) is a good move for the
company and we support the growth strategy." (A June 24, 2008
email from SRM to HudBay)
- "We fully support the Company's highly accretive actions in the
development of Laylor (sic) Lake, further exploration in the Flin Flon
belt and the acquisition of Skye's Fenix Nickel Project in
Guatemala." (A July 30, 2008 letter from SRM to HudBay.)
SRM's True Intentions Unveiled
HudBay believes SRM still has not been forthright and transparent about
its true intentions for the company. SRM rejected HudBay's compromise
offer of two board seats, which is completely reasonable for a 10%
shareholder. HudBay's only condition in making this offer was that SRM
would effectively agree to cease its hostilities towards HudBay.
HudBay's current Board of Directors continues to believe SRM's
objective is to gain control of HudBay without compensating the
company's shareholders.
Conclusion
The most implausible statement in the dissident's circular, however, is
that SRM is not seeking control of HudBay, but that its intent is to
remain a passive shareholder.
SRM claims its motivation is a purely altruistic desire to improve
HudBay's governance, a statement that would be more believable if SRM's
track record demonstrated altruism rather than activism, but that's not
the case.
SRM has an extensive history as an activist investor. It brought claims
against the Government of England with respect to its investment in
Northern Rock, and has threatened to litigate against news
organizations, such as The Wall Street Journal, that have simply
questioned SRM's performance or disclosure. Given this behaviour, it is
not credible to suggest that SRM will be merely a passive shareholder,
and will refrain from exercising its obvious influence over its
hand-picked nominees upon their installation.
We believe SRM's only objective is to seize control of HudBay by
installing its own slate of inexperienced nominees to further its
short-term agenda. HudBay's current board and management team, on the
other hand, will work for all shareholders to create long-term value.
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.
Regards,
M. Norman Anderson, Chairman
Colin K. Benner, Interim Chief Executive Officer
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