HudBay posts letter to shareholders to website
TORONTO, ONTARIO, Mar 19, 2009 (Marketwire via COMTEX News
Network) -- 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
SOURCE: HudBay Minerals Inc.
Investor Relations contact:
HudBay Minerals Inc.
Annemarie Brissenden, Manager, Investor Relations
(416) 362 0615
Email: annemarie.brissenden@hudbayminerals.com
Website: www.hudbayminerals.com
Media contact:
Barnes McInerney Inc.
John Vincic, Executive Vice President
(416) 367-5000 ext. 249
Email: jvincic@barnesmcinerney.com
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