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- HudBay
Minerals Inc. ("HudBay")
(TSX:HBM)(NYSE:HBM) and Norsemont Mining Inc.
("Norsemont") (TSX:NOM)(BVLAC:NOM)
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Editors Note: All amounts listed are in Canadian dollars unless
otherwise indicated
Highlights
-- Norsemont shareholders will receive 0.2617 HudBay shares and $0.001 in cash, or $4.50 in cash, subject to a maximum aggregate cash consideration of $130 million. -- HudBay's offer represents a premium of 33%(1), based on the volume weighted average trading prices of HudBay and Norsemont on the TSX for the 20 trading days ended January 7, 2011 of $17.76 and $3.49, respectively. -- Norsemont's Constancia copper project has excellent infrastructure in an established mining district in Peru. -- HudBay's future combined copper production is expected to grow by approximately 145% between 2011 and 2016, as a result of bringing Constancia into full production. Constancia will also contribute to HudBay's gold equivalent production, which is expected to increase 130% during the same period(2). -- The Norsemont acquisition is expected to increase HudBay's mineral exposure on a per share basis and is expected to deliver per share growth in HudBay's net asset value and long term earnings and cash flow. -- The transaction is consistent with HudBay's strategy of acquiring porphyry or VMS deposits with exploration upside in mining-friendly jurisdictions in the Americas, with the opportunity to add value through exploration, mine development and operational expertise. -- With $1.2 billion of available cash and credit lines, and strong cash flow from existing operations, HudBay is in an excellent position to finance construction of the Constancia project. (1) Assuming holders of Norsemont's outstanding common shares elect to receive the maximum number of HudBay shares issuable in connection with the bid. (2) Anticipated production for 2011 based on midpoint of forecasted production released on December 13, 2010. Anticipated production for 2016 is based on existing mines together with Constancia, Lalor (including, for gold equivalent production, inferred resources and conceptual gold and copper- gold zones) and the 777 North expansion. Constancia 2016 expected production sourced from preliminary results of the optimization study released by Norsemont on December 30, 2010. Silver converted to gold equivalent at 60:1 ratio.
HudBay
Minerals Inc. ("HudBay")
(TSX:HBM)(NYSE:HBM) and Norsemont Mining Inc.
("Norsemont") (TSX:NOM)(BVLAC:NOM)
announced today that they have entered into an agreement pursuant to
which HudBay has agreed to acquire all of the
outstanding common shares of Norsemont
("Norsemont Shares") that HudBay does not already own by way of formal
take-over bid. The transaction values the equity of Norsemont
at approximately $520 million, on a fully-diluted basis.
Terms of the Transaction
-- Pursuant to the take-over bid, holders of Norsemont Shares who tender their shares to the bid and elect to receive the maximum equity consideration will receive consideration with a value of $4.65 per share, based on the volume weighted average trading price on the Toronto Stock Exchange ("TSX") for the 20 trading days ended January 7, 2011 of $17.76 per HudBay common share ("HudBay Share"). -- The consideration to be paid pursuant to HudBay's bid represents a premium of 33% (assuming election of maximum equity consideration), based on the volume weighted average trading price of the Norsemont Shares on the TSX for the 20 trading days ended January 7, 2011 of $3.49 per share. -- Under HudBay's bid, holders of Norsemont Shares will have the ability to elect, on an individual basis, to receive 0.2617 HudBay Shares and $0.001 in cash, $4.50 in cash, or a combination of cash and HudBay Shares (with the share consideration based on a price per HudBay Share of $17.19), subject to proration necessary to effect maximum aggregate cash consideration of $130 million. This will provide an opportunity for Canadian holders of Norsemont Shares to defer Canadian tax that otherwise might be payable as a result of their acceptance of the bid. -- The election mechanism benefits Norsemont shareholders by providing an embedded option between the announcement and shortly before the closing date of the transaction that effectively underpins the value of the share consideration while providing upside potential. -- Assuming HudBay acquires all of the Norsemont Shares pursuant to the bid (and assuming holders of Norsemont Shares elect to receive the maximum number of HudBay Shares issuable in connection with the bid) current holders of HudBay Shares will represent approximately 83% of the outstanding HudBay Shares and the former holders of Norsemont Shares will represent approximately 17% of the outstanding HudBay Shares. -- The boards of directors of Norsemont, upon the recommendation of a Special Committee of the board, and HudBay have approved HudBay's acquisition of Norsemont pursuant to the bid. The board of directors of Norsemont is recommending that holders of Norsemont Shares tender their Norsemont Shares to HudBay's bid. -- Officers, directors and other shareholders of Norsemont holding approximately 34.4% of the Norsemont Shares, on a fully-diluted basis, have entered into lock-up agreements with HudBay under which they have agreed to tender their Norsemont Shares to the bid. Together with HudBay's 1.1% interest, these shares represent approximately 35.6% of the fully-diluted Norsemont Shares.
Norsemont
owns 100% of the Constancia copper project in
southern Peru. As of September 2009, the Constancia
project had proven and probable mineral reserves containing 277 million
tonnes grading 0.43% copper, 0.012%
molybdenum, 0.05 g/t gold and 3.7 g/t silver. Based on the preliminary
results of the optimization study released on December 30, 2010, the
proposed Constancia project is expected to
produce annually 172 million pounds of copper and 2 million pounds of
molybdenum in concentrate at attractive cash costs over a 15 year mine
life.
"This transaction helps solidify HudBay's
position as one of the leading mid-tier mining companies with an
enhanced growth pipeline in stable, mining-friendly
jurisdictions," said David Garofalo,
President and Chief Executive Officer of HudBay.
"Our reliable operations in low-risk jurisdictions combined with
our strong financial position complement our ability to execute a
focused growth strategy of acquiring porphyry and VMS deposits with
exploration upside in the Americas."
"Bringing Constancia into operation will
significantly increase HudBay's copper
production and contribute to HudBay's
precious metals production growth. In addition, this acquisition is
expected to increase our mineral exposure on a per share basis, and
deliver per share growth in net asset value and long term earnings and
cash flow," added Mr. Garofalo.
"Our offer permits Norsemont's
shareholders to continue to participate in the development of the Constancia project with the added benefit of exposure
to HudBay's profitable operations and world
class Lalor development project."
"HudBay is a highly respected mining
company with a long record of more than 80 years of successful base
metals mining and processing operations in Canada," said Patrick
Evans, Chief Executive Officer of Norsemont.
"With its strong balance sheet and exceptional technical expertise
HudBay is well placed to accelerate the
development of the Constancia project far
sooner than Norsemont could have achieved
independently. The HudBay offer provides Norsemont shareholders with an attractive
opportunity to continue to participate in Constancia's
success without the dilution that the independent funding of Constancia's development would have required."
"Besides presenting Norsemont
shareholders with an exciting diversification and growth opportunity,
Peru will benefit significantly through HudBay's
participation in that country's well-established and rapidly growing
mining industry," added Mr. Evans.
Benefits to HudBay Shareholders
The transaction is expected to provide the following benefits to the
holders of HudBay Shares:
-- Constancia is an attractive copper project with excellent infrastructure in an established mining district. HudBay's future combined copper production is expected to grow by approximately 145% between 2011 and 2016, as a result of bringing the project into full production. -- The transaction will increase HudBay's mineral exposure on a per share basis and is expected to be accretive to HudBay's net asset value per share as well as long-term earnings and cash flow per share; -- The transaction will enhance HudBay's position as a leading mid-tier mining company with increasing leverage to both base and precious metals for its shareholders; -- The combined company will have a robust portfolio of long-life assets with low cash costs and significant copper, gold and zinc production growth; -- HudBay has significant financial resources to finance the strong development pipeline of the combined companies, including highly prospective projects such as Constancia and HudBay's Lalor project in northern Manitoba; and, -- The transaction is consistent with HudBay's strategy, which includes a focus on porphyry and VMS deposits with exploration upside in the Americas, with the opportunity to add value through technical expertise and financial capacity.
Benefits to Norsemont Shareholders
The transaction is expected to provide the following benefits to the
holders of Norsemont Shares:
-- Delivery of an attractive and immediate premium; -- Tax-deferral opportunity for Canadian holders of Norsemont Shares, with the option to elect significant cash consideration; -- Realize Constancia's full production potential by leveraging HudBay's development expertise; -- Minimal dilution since HudBay can fund Constancia through existing financial resources; -- Diversification benefits through HudBay's portfolio of producing mines and development projects; and, -- Participation in a high-growth, mid-tier mining company.
The Special Committee of the
board of directors of Norsemont was advised
by Cutfield Freeman & Co. Ltd. ("Cutfield Freeman"), as financial advisor, and
Fraser Milner Casgrain LLP, as legal advisor.
Cutfield Freeman and Wellington West Capital
Markets Inc. have provided opinions to the Special Committee and board
of directors of Norsemont that, as of January
9, 2011, the consideration to be received by holders of Norsemont Shares under HudBay's
take-over bid is fair, from a financial point of view, to the holders
of Norsemont Shares (other than HudBay and its affiliates). A copy of each fairness
opinion, the factors considered by the board of directors and its
Special Committee in recommending that holders of Norsemont
Shares tender their Norsemont Shares to HudBay's bid, and other relevant background
information, will be included in the directors' circular that will be
sent to the holders of Norsemont Shares in
connection with the bid.
RBC Capital Markets is acting as financial advisor to HudBay in connection with the transaction. Goodmans LLP is legal counsel to HudBay and Minvisory
Corp. is acting as HudBay's strategic
advisor.
HudBay has retained Kingsdale
Shareholder Services Inc. to act as both its Information Agent and
Depositary in connection with the Offer.
The support agreement that has been entered into by Norsemont
and HudBay contains customary
"non-solicitation" provisions that permit the board of
directors of Norsemont to terminate the
support agreement and enter into an agreement in respect of an
unsolicited, superior proposal under certain circumstances, subject to,
among other things, "matching rights" in favour
of HudBay and payment of a termination
payment of $21.6 million.
Full details of the offer will be included in HudBay's
take-over bid circular, which is expected to be mailed to holders of Norsemont Shares before the end of the month. The
bid will be open for acceptance for a period of not less than 35 days
and will be subject to certain customary conditions (which may be
waived by HudBay in its discretion),
including there being deposited under the take-over bid and not
withdrawn at the expiry time of the take-over bid such number of Norsemont Shares that represent at least 50%
(calculated on a fully-diluted basis) plus one of the Norsemont Shares.
Copies of the support agreement, take-over bid circular, directors'
circular, and certain related documents will be filed with securities
regulators and will be available at the Canadian SEDAR website at www.sedar.com.
Investor Conference Call
HudBay and Norsemont
will hold a conference call and webcast for analysts and investors to
discuss the transaction.
Date: Monday, January 10, 2011 Time: 8:30 a.m. ET Webcast: www.hudbayminerals.com Dial in: 416-644-3414 or 1-800-814-4859 Replay: 416-640-1917 or 1-877-289-8525 Replay Passcode: 4400540#
Media Conference Call
Members of the media are invited to participate on a conference call
with HudBay management to discuss the
transaction.
Date: Monday, January 10, 2011 Time: 10:30 a.m. ET Dial in: 416-644-3415 or 1-877-974-0445 Replay: 416-640-1917 or 1-877-289-8525 Replay Passcode: 4400548#
HudBay
Minerals Inc.
HudBay Minerals Inc. (TSX:HBM)(NYSE:HBM)
is a Canadian integrated mining company with assets in North and
Central America principally focused on the discovery, production and
marketing of metals. The company'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.
Norsemont Mining Inc.
Norsemont Mining Inc. (TSX:NOM)(BVLAC:NOM)
is a Canadian mineral exploration and development company focused on
the 100 percent-controlled Constancia
Cu-Mo-Ag-Au deposit in southern Peru. Norsemont's
Constancia project is located approximately
100 kilometres south of Cusco, Peru. Results
of an independent definitive feasibility study on the Constancia deposit were announced in September
2009. Please refer to the Company's website for the full 43-101
Technical Report.
Questions and requests for assistance may be directed to the
Information Agent and Depositary for the Offer, Kingsdale
Shareholder Services Inc., at 1-800-775-3159 toll free in North
America, or at 416-867-2272 outside of North America, or by e-mail at contactus@kingsdaleshareholder.com.
Qualified Person
Robert. W. Baxter (MAusIMM), the President,
COO and a director of Norsemont is a
qualified person within the meaning of National Instrument 43-101, and
has reviewed and approved the scientific and technical information
referred to in this news release.
Forward-Looking Information
Certain of the statements made and information contained herein may
contain forward-looking statements or forward-looking information
within the meaning of applicable securities laws, including the
anticipated timing of the transaction and the anticipated impact of the
transaction on HudBay and Norsemont.
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).
Many of these assumptions are based on factors and events that are not
within the control of HudBay or Norsemont and there is no assurance they will prove
to be correct. The timing and completion of the proposed transaction is
subject to customary conditions, termination rights and other risks and
uncertainties. Accordingly, there can be no assurance that the proposed
transaction will occur, or that it will occur on the timetable or on
the terms and conditions contemplated. The proposed transaction could
be modified, restructured or terminated. There can also be no assurance
that the strategic benefits and competitive, operational and cost
efficiencies expected to result from the transaction will be fully
realized. 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 Norsemont
undertake no obligation to update forward-looking information except as
required by applicable securities laws, or to comment on analyses,
expectations or statements made by third parties. The reader is
cautioned not to place undue reliance on forward-looking information.
This press release does not constitute an offer to buy any securities
or a solicitation of any vote or approval or a solicitation of an offer
to sell any securities.
All amounts listed are in Canadian dollars unless otherwise indicated.
Note to U.S. Investors
Information concerning the mineral properties of HudBay
and Norsemont has been prepared in accordance
with the requirements of Canadian securities laws, which differ in
material respects from the requirements of SEC Industry Guide 7. Under
SEC Industry Guide 7, mineralization may not be classified as a
"reserve" unless the determination has been made that the
mineralization could be economically and legally produced or extracted
at the time of the reserve determination, and the SEC does not
recognize the reporting of mineral deposits which do not meet the SEC
Industry Guide 7 definition of "Reserve". In accordance with
National Instrument 43-101 - Standards of Disclosure for Mineral
Projects ("NI 43-101") of the Canadian Securities
Administrators, the terms "mineral reserve", "proven
mineral reserve", "probable mineral reserve",
"mineral resource", "measured mineral resource",
"indicated mineral resource" and "inferred mineral
resource" are defined in the Canadian Institute of Mining,
Metallurgy and Petroleum (the "CIM") Definition Standards for
Mineral Resources and Mineral Reserves adopted by the CIM Council on
December 11, 2005. While the terms "mineral resource",
"measured mineral resource", "indicated mineral resource"
and "inferred mineral resource" are recognized and required
by NI 43-101, the SEC does not recognize them. You are cautioned that,
except for that portion of mineral resources classified as mineral
reserves, mineral resources do not have demonstrated economic value.
Inferred mineral resources have a high degree of uncertainty as to
their existence and as to whether they can be economically or legally
mined. Under Canadian securities laws, estimates of inferred mineral
resources may not form the basis of an economic analysis. It cannot be
assumed that all or any part of an inferred mineral resource will ever
be upgraded to a higher category. Therefore, you are cautioned not to
assume that all or any part of an inferred mineral resource exists,
that it can be economically or legally mined, or that it will ever be
upgraded to a higher category. Likewise, you are cautioned not to
assume that all or any part of measured or indicated mineral resources
will ever be upgraded into mineral reserves. For more information on
the technical terms as they are used under NI 43-101, please see
Schedule A "Glossary of Mining Terms" of HudBay's
Annual Information Form for the fiscal year ended December 31, 2009,
available on SEDAR at www.sedar.com and
incorporated by reference as Exhibit 99.8 in HudBay's
Form 40-F filed on October 19, 2010 (File No. 001-34244).
(HBM-G)
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