HudBay Minerals Inc. (TSX:HBM) (NYSE:HBM) today announced that it intends to commence an offer to acquire all of the issued and outstanding common shares of Augusta Resource Corporation not already owned by Hudbay.
Under the terms of the Offer, Augusta shareholders will be entitled to receive 0.315 of a Hudbay common share for each Augusta common share held, representing approximately C$2.96 per Augusta common share (based on Hudbay’s closing share price on the TSX on February 7, 2014). The Offer represents a premium of 62% to Augusta’s 20-day volume-weighted average price on the TSX for the period ending February 7, 2014, and a premium of 18% to Augusta’s closing share price on the TSX on February 7, 2014 in addition to Augusta’s 26% share price increase during the two trading days preceding the Offer. The Offer values Augusta at an enterprise value of approximately C$540 million on a fully diluted in-the-money basis.
-- Addition of Augusta's Rosemont project to Hudbay's portfolio of low-
cost, long-life assets will enhance Hudbay's position as a leading
intermediate base metals mining company with world-class copper
-- Acquisition of the Rosemont project is an ideal fit with Hudbay's
disciplined growth strategy of acquiring high quality development-stage
assets in mining friendly jurisdictions in the Americas.
-- Hudbay has the technical and operational expertise and financial
capacity to efficiently develop and operate the Rosemont project to the
benefit of all stakeholders.
“Since our initial investment in Augusta in 2010, we have been excited about the potential of the Rosemont project. We view the Rosemont project as an attractive complement to our existing portfolio of high quality, long-life assets that fits well with our construction timeline at Constancia,” said David Garofalo, president and chief executive officer. “The transaction will be accretive to Hudbay shareholders on key per share metrics and both Hudbay and Augusta shareholders will benefit from our ability to leverage our 87 year history of successful project execution and operations.”
Benefits to Augusta Shareholders
Hudbay believes that the Offer will be attractive to Augusta shareholders for the following reasons:
-- Significant Premium: Based on the 20-day volume-weighted average share
prices of Hudbay and Augusta on the TSX for the period ending February
7, 2014, the Offer represents a premium of 62%. Based on the closing
share prices of Hudbay and Augusta on the TSX on February 7, 2014, the
Offer represents a premium of 18%, in addition to Augusta's 26% share
price increase during the two trading days preceding the Offer.
-- Participation in a Leading Intermediate Base Metals Mining Company:
Augusta shareholders will participate in Hudbay's low-cost, long-life
portfolio of producing and fully funded construction-stage assets, and
its robust growth profile, which includes forecasted copper production
growth of approximately 570% between 2013 and 2015 as Hudbay's current
development projects reach commercial production; the Rosemont project
will contribute to the next phase of growth and enhance Hudbay's
position as a leading intermediate base metals mining company with
world-class copper production growth.
-- Continued Participation in Rosemont without Single Asset Risk: As
shareholders of Hudbay, Augusta shareholders will continue to benefit
from future increases in value associated with the permitting and
development of the Rosemont project without the significant single asset
permitting, development and financing risk to which Augusta shareholders
are currently exposed.
-- Proven Experience in Project Development: Hudbay has extensive
experience in bringing new projects into production over its 87 year
history, including its recently completed Lalor and Reed mines in
Manitoba, and its Constancia project in Peru, which is over 56%
complete. Hudbay would apply this expertise to the development of
Rosemont to the benefit of all stakeholders.
-- Greater Capacity to Advance Rosemont to Production: Hudbay is confident
the Rosemont project will receive all necessary permits. However, based
on its extensive due diligence independent of Augusta, Hudbay believes
Augusta's management continues to be overly optimistic about the
permitting timeline and Augusta's ability to complete the required
engineering and raise the necessary financing to construct the Rosemont
project. With Hudbay's significant technical expertise and superior
financial capacity, Hudbay believes it is better positioned than Augusta
to advance the Rosemont project through the final stages of permitting
and into construction without the risk currently facing Augusta that
further delays may result in liquidity shortfalls or require dilutive
financings which would materially impair the value of Augusta
-- Stronger Financial Capacity to Build Rosemont: The Rosemont project is
anticipated by Augusta management to have initial capital costs of
approximately $1.2 billion. Having already sold a joint venture
interest, streamed 100% of the precious metals production and committed
the majority of its offtake, in a challenging capital markets
environment Augusta has few remaining financing options, other than a
highly uncertain project financing and the prospect of materially
diluting its shareholders' equity. Hudbay is well capitalized and has
sufficient liquidity to complete the construction of Constancia and to
commence work on Rosemont. Hudbay expects its producing and development
assets will provide considerable operating cash flow to assist in
funding the construction of Rosemont, and Hudbay has demonstrated its
ability to raise the financing necessary to fund significant development
projects with minimal dilution to its shareholders.
-- Enhanced Financial and Capital Markets Profile: Augusta shareholders
will benefit from the enhanced capital markets profile of Hudbay, which
has a large public float, greater trading liquidity and a more extensive
presence in the capital markets than Augusta.
“The Offer presents a unique opportunity for Augusta shareholders to receive a substantial premium and participate in Hudbay’s low-cost, long-life assets in mining friendly jurisdictions with world-class copper production growth,” said Mr. Garofalo. “We strongly believe in the merits of this transaction and the benefits to both companies’ shareholders. We look forward to creating long-lasting, mutually-beneficial relationships with local stakeholders in Arizona.”
About the Offer
The Offer will be made for all of the issued and outstanding common shares of Augusta not already owned by Hudbay. Hudbay currently owns 23,058,585 shares of Augusta, representing approximately 16% of Augusta’s issued and outstanding shares.
The Offer will be open for acceptance until 5:00 p.m. EST on March 19, 2014, unless extended or withdrawn. The Offer will be subject to customary conditions, including the deposit under the Offer of Augusta common shares that together with the Augusta common shares held by Hudbay and its affiliates, represent not less than 66 2/3% of Augusta common shares on a fully-diluted basis, receipt of all necessary regulatory approvals, no material adverse change in Augusta and Augusta’s shareholder rights plan being waived, invalidated or cease-traded. The Offer will not be subject to the approval of Hudbay’s shareholders and is not subject to any financing or due diligence conditions.
The full details of the Offer will be set out in the takeover bid circular and accompanying offer documents which Hudbay expects to file with the Canadian securities regulatory authorities. Concurrently, Hudbay expects to file with the Securities and Exchange Commission a registration statement on Form F-10 which contains a prospectus relating to the Offer and a tender offer statement on Schedule TO. This news release is not a substitute for the Offer Documents, the Prospectus, the Registration Statement or the Schedule TO. AUGUSTA SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE DOCUMENTS, ALL DOCUMENTS INCORPORATED BY REFERENCE, ALL OTHER APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE EACH WILL CONTAIN IMPORTANT INFORMATION ABOUT HUDBAY, AUGUSTA AND THE OFFER. Materials filed with the Canadian securities regulatory authorities are available electronically without charge at www.sedar.com. Materials filed with the SEC are available electronically without charge at the SEC's website at www.sec.gov. All such materials may also be obtained without charge at Hudbay's website, www.hudbayminerals.com or by directing a written or oral request to the Information Agent for the Offer, Kingsdale Shareholder Services Inc. at 1-866-229-8874 (North American Toll Free Number) or 1-416-867-2272 (outside North America), or by email at firstname.lastname@example.org or to the Vice President, Legal and Corporate Secretary of Hudbay at 25 York Street, Suite 800, Toronto, Ontario, telephone (416) 362-8181.
Advisors, Counsel and Information Agent
BMO Capital Markets and GMP Securities L.P. are acting as financial advisors to Hudbay and Goodmans LLP and Milbank, Tweed, Hadley & McCloy LLP are acting as legal counsel.
Kingsdale Shareholder Services Inc. has been retained as information agent for the Offer. For additional information including assistance in depositing Augusta Shares to the Offer, Augusta shareholders should contact Kingsdale at 1-866-229-8874 (North American Toll Free Number) or 1-416-867-2272 (outside North America), or by email at email@example.com.
This news release does not constitute an offer to buy or the solicitation of an offer to sell any of the securities of Hudbay or Augusta. The securities registered pursuant to the Registration Statement are not offered for sale in any jurisdiction in which such offer or sale is not permitted.
Information Concerning Augusta
Except as otherwise expressly indicated herein, the information concerning Augusta contained in this news release has been taken from and is based solely upon Augusta’s public disclosure on file with the relevant securities regulatory authorities. Augusta has not reviewed this document and has not confirmed the accuracy and completeness of the information in respect of Augusta contained in this news release. Although Hudbay has no knowledge that would indicate that any information or statements contained in this news release concerning Augusta taken from, or based upon, such public disclosure contain any untrue statement of a material fact or omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made, neither Hudbay nor any of its respective directors or officers has verified, nor do they assume any responsibility for, the accuracy or completeness of such information or statements or for any failure by Augusta to disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information or statements but which are unknown to Hudbay. Hudbay has no means of verifying the accuracy or completeness of any of the information contained herein that is derived from Augusta’s publicly available documents or records or whether there has been any failure by Augusta to disclose events that may have occurred or may affect the significance or accuracy of any information. Except as otherwise indicated, information concerning Augusta is given based on information in Augusta’s public disclosure available as of the date hereof.
Hudbay (TSX:HBM)(NYSE:HBM) is a Canadian integrated mining company with assets in North and South America principally focused on the discovery, production and marketing of base and precious metals. Hudbay’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.
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