TORONTO, ONTARIO and VANCOUVER, BRITISH COLUMBIA, Jun 23, 2008
(Marketwire via COMTEX News Network) --
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,
2008.
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
20.3%.
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 will include:
- 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 house."
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."
Private Placement
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.
Board Recommendation
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.
Closing
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.
Conference Call
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.
1-800-594-3615
Replay: 1-416-640-1917 or Toll Free in Canada and the U.S.
1-877-289-8525
Replay Passcode: 21275950#
About 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.
(HBM-G)
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 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.
SOURCE: HudBay Minerals Inc.
HudBay Minerals Inc.
Brad Woods
Director, Investor Relations
(204) 949-4272
Email: brad.woods@hbms.ca
Website: www.hudbayminerals.com
Skye Resources Inc.
Cindy Burnett
Vice President, Investor Relations
(604) 648-4133
Email: cburnett@skyeresources.com
Website: www.skyeresources.com
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