ONTARIO and VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 23, 2008) -
HudBay Minerals Inc. ("HudBay") (TSX:HBM) and Skye Resources
Inc. ("Skye") (TSX:SKR) are pleased to announce they have
entered into a definitive agreement to combine their respective
businesses (the "Transaction"). Skye's principal asset is the
world class Fenix Nickel Project (the "Fenix Project") in
Guatemala, which includes 41.4 million tonnes of reserves.
The Transaction will be structured as a Plan of Arrangement under the
Business Corporations Act (British Columbia) between HudBay and Skye.
Highlights of the Transaction
On completion of the Transaction, all Skye common shares will be
automatically exchanged on the basis of 0.61 HudBay common shares for
each Skye common share. The consideration to Skye shareholders pursuant
to the Plan of Arrangement represents approximately a 35.0% premium
over Skye's 20 day volume weighted average trading price based on
HudBay's 20 day volume weighted average trading price on the TSX and
approximately a 17.0% premium over Skye's closing price as at June 20,
Upon completion of the Transaction, HudBay will have approximately
160.9 million common shares outstanding, of which current HudBay
shareholders will own 79.7% and former Skye shareholders will own
Compelling Base Metals Combination
Skye's Fenix Project will strategically expand HudBay's base metals
portfolio to include nickel and add significantly to HudBay's
development pipeline, with a world class project that is capable of
near term production, has a 30 year mine life and contains significant
opportunity for expansion.
Following completion of the Transaction the combined company's profile
- a large increase in reserves and resources;
- a diversified multi-metal resource base;
- an attractive mix of producing, development and exploration assets
that provides a solid platform for future growth; and
- a strong balance sheet with a pro-forma cash balance of approximately
C$861 million, no debt and solid operating cash flow going forward.
"We believe that this Transaction represents excellent value for
our shareholders," said Allen Palmiere, President and CEO of
HudBay. "Today's announcement reflects one of the key elements of
our strategy -building scale and scope through opportunistic
investments to complement HudBay's existing operations."
"This is a tremendous addition to HudBay's development pipeline
and provides important diversification to the company's existing
portfolio," added Mr. Palmiere. "Our balance sheet strength
together with the continuing strong cash flows from our current
operations place us in excellent position to bring to production the
Fenix Project and continue our aggressive exploration and development
activities in the prolific Flin Flon Greenstone Belt. At the same time,
we will continue to seek additional opportunities in support of further
growth and value creation for shareholders."
Vice Chairman and CEO of Skye, Colin K. Benner said, "The planned
combination is a great opportunity for Skye's shareholders and for
Guatemala. This agreement merges the world class ferro-nickel Fenix
Project with a company with the financial and technical capacity to
move it forward rapidly and I encourage Skye shareholders to vote in
favor of this transaction. HudBay is a large, exceptionally
well-managed and respected Canadian mining company with roots going
back over 80 years. We are very pleased to become a significant part of
this much larger and stronger enterprise and support their plans for
future growth in the pursuit of becoming an international mining
Mr. Benner will join HudBay's board as a director. Allen Palmiere said,
"We are extremely pleased that Colin will be joining the HudBay
board. His proven operating and management expertise will be of great
assistance to the company as we move forward to create the next major
Canadian base metal company. On a personal note, I have known Colin for
many years and am looking forward to working with him."
As part of the Transaction, HudBay will acquire approximately
12,679,266 common shares of Skye at a price of C$7.51 per share in a
private placement for total gross proceeds to Skye of approximately
C$95,221,285, representing approximately 19.9% of Skye's outstanding common
shares on a pro-forma basis. These proceeds will be used to immediately
ramp up the full engineering, procurement and construction activities
at the Fenix Project, including the purchasing of long lead time
equipment orders that are presently suspended. The private placement
financing is not conditional on the completion of the Plan of
Arrangement but is subject to the approval of the TSX.
Pursuant to the terms of a Share Purchase Master Agreement between Skye
and Vale Inco Ltd. ("Vale Inco"), Vale Inco has the right to
participate in the financing to maintain its current approximate 11.0%
equity interest in Skye. Vale Inco must exercise this right within 24
hours after the announcement of the financing. Should Vale Inco
exercise in whole its right to participate in this financing, HudBay's
holding in Skye would represent approximately 19.4% of its outstanding
common shares on a pro-forma basis.
The combination has been unanimously approved by the boards of
directors of HudBay and Skye and will be subject to customary
conditions, including a favourable vote of 66 2/3% of the Skye common
shares voted at a special meeting of shareholders called to approve the
transaction and the receipt of court and necessary regulatory
approvals. The board of directors of Skye and a special committee of
independent directors created by Skye to oversee this process, has
determined that the transaction is in the best interest of Skye's
shareholders and unanimously recommends that holders of Skye shares
vote in favour of the transaction.
The definitive agreement includes a commitment by Skye not to solicit
or initiate discussions concerning alternative transactions, including
the sale of material assets. Skye has agreed to pay a break fee of C$14
million to HudBay in certain circumstances and has granted HudBay the
right to match competing offers.
In addition to the 19.9% ownership to be acquired by HudBay pursuant to
the private placement, holders of approximately 27.0% of the
outstanding Skye shares before completion of the private placement,
including 2 institutional holders and all directors and officers of
Skye have agreed to vote in favour of the Transaction.
Advisors and Fairness Opinions
GMP Securities L.P. ("GMP") and CIBC World Markets Inc. are
acting as financial advisors to HudBay and GMP has provided an opinion
to the board of directors of HudBay that, subject to final
documentation, the proposed Transaction is fair, from a financial point
of view, to HudBay shareholders. TD Securities Inc. ("TD")
and Morgan Stanley & Co. Incorporated are acting as financial
advisors to Skye and TD has provided an opinion to the board of
directors of Skye that, subject to the assumptions and limitations set
out therein, the consideration to be received by the shareholders of
Skye (other than HudBay and its affiliates) in connection with the
Transaction is fair, from a financial point of view, to such
shareholders. Cassels Brock & Blackwell LLP is acting as external
legal counsel to HudBay and Fasken Martineau Dumoulin LLP is acting as
external legal counsel to Skye.
The Transaction is subject to Skye obtaining the required shareholder
approval at a special shareholders' meeting of Skye and to the receipt
of court and all necessary regulatory approvals.
An information circular for the special shareholders' meeting of Skye
is expected to be mailed by mid- July 2008 and Skye plans to hold the
special meeting to approve the Transaction prior to August 19, 2008.
The Transaction is expected to close by late August 2008.
A joint conference call will be hosted by Allen J. Palmiere, HudBay's
President and CEO and Colin K. Benner, Skye's Vice Chairman and CEO to
discuss this Transaction. Details are as follows:
Date: June 23, 2008
Time: 10:00 am EDT (7:00 am PDT)
Webcast: http://www.hudbayminerals.com or www.skyeresources.com
Dial in: 1-416-644-3418 or Toll Free in Canada and the U.S.
Replay: 1-416-640-1917 or Toll Free in Canada and the U.S.
Replay Passcode: 21275950#
HudBay Minerals Inc.
HudBay Minerals Inc. is a leading Canadian base metals mining company
with a focus on the discovery and production of zinc and copper metal.
The company is investing for the future in one of the most ambitious
exploration programs in Canada, targeting its 400,000 hectare
exploration territory in the Flin Flon Greenstone Belt. As an
integrated mining company, HudBay operates mines, concentrators and
metal production facilities in northern Manitoba and Saskatchewan, a
zinc oxide production facility in Ontario, the White Pine copper
refinery in Michigan, and the Balmat zinc mine in New York state.
HudBay is a member of the S&P/TSX Composite Index and the
S&P/TSX Global Mining Index.
About Skye Resources Inc.
Skye acquired the rights to the Fenix Project in December 2004 and has
completed a feasibility study for a ferro-nickel project using proven
conventional smelting technology. Environmental and construction
permits for the project have been received, basic engineering is
complete, detailed engineering is over 50% complete and Skye is
preparing to initiate construction.
The Fenix Ferro-Nickel Project is located in eastern Guatemala and is
98.2% owned by subsidiaries of Skye and 1.8% by the Government of
Guatemala. The Fenix Project consists of an exploitation license encompassing
248 square kilometres and an exploration license covering 32 square
kilometres, together with a pyrometallurgical nickel processing plant
and related facilities. Built at a cost of US$238 million in 1977, the
plant operated until it was closed in 1980. Since the plant shutdown,
no mining activity has taken place on the property, but the plant has
been on care and maintenance. Ferro-nickel production is now estimated
to commence in the last quarter of 2010.
Key assumptions, parameters and methods used to estimate the mineral
resources with respect to Skye and the Fenix Project are as set out in
the Technical Report on an Update to the Fenix Project, Izabal,
Guatemala, dated September 15, 2007 and its Addendum Report dated
October 25, 2007 filed at www.sedar.com on September 18, 2007 and October
26, 2007, respectively.
Cautionary Notice: This news release contains "forward-looking
information" within the meaning of applicable Canadian securities
legislation and United States securities laws. Forward-looking
information includes, but is not limited to, information concerning the
proposed business combination between HudBay and Skye and matters
relating thereto. 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", or "does not anticipate", or
"believes" or variations of such words and phrases or
statements that certain actions, events or results "may",
"could", "would", "might", or "will
be taken", "occur", or "be achieved".
Forward-looking information is based on the opinions 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 projected in the
forward-looking information. Assumptions upon which such
forward-looking information is based include, without limitation, that
the shareholders of Skye will approve the transaction, that all
required third party regulatory and governmental approvals to the
transaction will be obtained and all other conditions to completion of
the transaction will be satisfied or waived. Many of these assumptions
are based on factors and events that are not within the control of
HudBay or Skye and there is no assurance they will prove to be correct.
Factors that could cause actual results to vary materially from results
anticipated by such forward-looking information include 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, the business of the
companies not being integrated successfully or such integration proving
more difficult, time consuming or costly than expected as well as those
risk factors discussed in the Annual Information Form for the year ended
December 31, 2007 for each of HudBay and Skye available at www.sedar.com.
Although HudBay and Skye have 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 and Skye undertake 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
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.