Hudbay's Recent Disappointing Actions and
Desperate Unprofessional Tactics Show that Adult Supervision is
Urgently Needed
Current Board Ignored Settlement Proposal
Supported by Approximately 35% of Shareholders, Demonstrating Deep
Entrenchment
Hudbay is at a Strategic Inflection Point and
Desperately Requires Effective Strategic Thinking and Fresh
Perspectives on the Board to Create Real Value for Shareholders
Company’s Attempts to Mislead Shareholders and
then Cover Up Falsehoods Reveals Crisis of Judgment at the Board
Level
Shareholders are urged to Elect Five
Independent, Highly-Qualified Director Candidates to the Board:
A.E. Michael Anglin, Peter Kukielski, Richard Nesbitt, Daniel Muñiz
Quintanilla and David Smith
Vote on the BLUE Proxy and Submit Prior to 5:00 p.m.
(Eastern time) on Thursday May 2, 2019
Waterton Precious Metals Fund II Cayman, LP ("Waterton Mining
LP") and Waterton Mining Parallel Fund Offshore Master, LP
("Waterton Fund II"), each of which are managed by Waterton
Global Resource Management, Inc. ("WGRM", and collectively
with Waterton Mining LP and Waterton Fund II, "Waterton"),
owning in the aggregate 12.09% of the issued and outstanding common
shares (the "Shares") of Hudbay Minerals Inc.
("Hudbay" or the "Company") (TSX: HBM) (NYSE: HBM),
today filed an information circular (the "Waterton
Circular") and issued a letter to shareholders of the Company
(the “Shareholders”) in connection with its nomination of
independent, highly-qualified director candidates for election to
the Company's Board of Directors (the "Board") at the Annual
and Special Meeting of Shareholders scheduled for Tuesday, May 7,
2019 at 10:00 a.m. (Eastern time) (the "Meeting").
Waterton's slate of director candidates now includes five
individuals, who, if elected, would constitute a minority of the
post- Meeting Board: A.E. Michael Anglin, Peter Kukielski, Richard
Nesbitt, Daniel Muñiz Quintanilla and David Smith.
The full text of Waterton's open letter to Shareholders
follows:
April 15, 2019
Dear Hudbay Shareholders,
Waterton Global Resource Management, Inc. on behalf of itself
and each of Waterton Mining Parallel Fund Offshore Master, LP and
Waterton Precious Metals Fund II Cayman, LP (collectively,
“Waterton”, “we” or “our”), owns 12.09% of the
issued and outstanding common shares of Hudbay Minerals Inc.
(“Hudbay” or the “Company”) (TSX: HBM) (NYSE: HBM),
making us the Company’s second largest shareholder. Waterton is
seeking your support to elect a minority slate of five
highly-qualified and experienced independent director candidates
(the “Waterton Nominees”) to the Company’s board of
directors (the “Board”) at the Company’s Annual and Special
Meeting of Shareholders to be held on Tuesday, May 7, 2019 at 10:00
a.m. (the “Meeting”).
The Waterton Nominees are fully independent of Waterton, have
impeccable credentials and possess the relevant, diverse and global
experience to help fix the broken culture of Hudbay’s current Board
by providing much-needed oversight of strategy and capital
allocation in order to create long-term shareholder value at the
Company.
Throughout our public engagement with Hudbay, Waterton has
sought to keep the campaign focused on the facts. We have not made
things personal. Consistently, we have backed up our assertions
with data and clearly stated our intentions – which are to drive
long-term share price appreciation for all Hudbay shareholders.
In contrast, the approach taken by the Company in its recent
Management Information Circular dated April 5, 2019 (the “Hudbay
Circular”) clearly falls short of even the most basic standards
of professionalism. Waterton is shocked and disappointed that a
Chairman and Board of a ~$2 billion market capitalization company
would conduct themselves in such a childish manner, including by
spending shareholder money on creating such a document.
The approach taken by the Company in the Hudbay Circular
confirms for us what we previously believed: adult supervision from
serious professionals is required at Hudbay. Evidently, the Company
is on the wrong side of the facts, and so certain factions of the
Board have resorted to desperate measures, vitriol and scattershot
arguments to maintain their entrenchment. We will continue to focus
on the facts.
Focus on the Facts: The Coverup is
Always Worse than the Crime
The manner in which Hudbay has elected to conduct itself in this
proxy contest has been increasingly unprofessional and
disappointing. However, there is a stark difference between running
an aggressive campaign and running a deceitful one. It’s a bright
line. And it’s a line that Hudbay has crossed.
The Hudbay Circular and accompanying materials were rife with
misleading statements, inaccuracies and blatant mistruths. But
there was one accusation made against Waterton that stood out, both
for its seriousness and the fact that it was such a galling lie. On
page 32 of the investor presentation Hudbay released concurrently
with the Hudbay Circular, the Company argues that Waterton has had
a negative impact on Hudbay’s share price. The page states that
“WATERTON MADE ~60% OF ITS PURCHASES AFTER DRIVING HUDBAY’S SHARE
PRICE DOWN.” Hudbay then stated that a “Bloomberg Article Seeded by
Waterton” artificially manipulated Hudbay’s share price in order
for Waterton to purchase shares at a discount and increase
Waterton’s ownership position. The article in question was the
October 4, 2018 Bloomberg article regarding Hudbay’s deal talks
with Mantos Copper.
Just to summarize: Hudbay and its Board accused its second
largest shareholder of market manipulation – a serious allegation
against any institutional investor.
Note that in our description we used the past tense of the word
“accused.” That is because at some point last week Hudbay
surreptitiously updated its presentation. In the new version, the
words “seeded by Waterton” have been removed from the sentence
referring to the Bloomberg report. Even though this alleged action
by Waterton had been positioned in the previous version as the
smoking gun for the entire argument that Waterton had manipulated
Hudbay’s share price, the rest of the page remains unchanged.
It is not surprising that investors would not have been aware of
this highly significant alteration to Hudbay’s materials, as there
was no refiling, noted correction, or any other form of disclosure
around the event.
Clearly Hudbay lied. The fact that the Company and the Board
then tried to sweep their baseless accusation under the rug without
any public disclosure, well after virtually all its investors would
have reviewed Hudbay’s proxy materials, demonstrates an utter lack
of integrity or regard for honest communication with shareholders.
In our view, all of Hudbay’s current directors are responsible for
this error in judgement and the subsequent coverup. Waterton
intends to immediately take the necessary legal steps to ensure
that shareholders are given the truth.
In addition to this surreptitious conduct, Hudbay also attempted
to discredit Mr. Nesbitt, Mr. Kukielski and Mr. Muñiz in their
proxy materials through patently false and grossly misleading
information.
Focus on the Facts: Hibben, Stowe and
Gonzales are requesting to be in the Boardroom, Waterton is
not
In the Hudbay Circular, the Company makes a number of
irresponsible and misleading statements about Waterton’s investment
track record and specific investments. Waterton is a top performing
private equity fund with an institutional, multi-disciplinary,
platform and it is widely accepted in the market that we are one of
the most successful investment firms in the mining sector. To be
clear, we are a private investment firm and the Company does not
have visibility into our complete investment portfolio.
Hudbay seemingly spent copious amounts of time on Google
gathering inaccurate, fragmented and largely irrelevant data points
in an effort to mislead shareholders about our investment track
record. Hudbay conveniently forgot to mention that our return on
our Hudbay investment is 61% and that ~$750 million of value has
been created for our fellow shareholders. While we are proud of
this performance, we would once again like to reiterate that
Waterton’s track record is not relevant to this campaign. All of
the Waterton Nominees are entirely independent of Waterton and
Waterton will not be in the boardroom.
Chairman Alan R. Hibben, Kenneth G. Stowe and Igor A. Gonzales,
however, are requesting to be in the Boardroom and their judgement
and track record is relevant. Let’s consider each of their
performance: Chairman Hibben and Mr. Stowe have served on the Board
in conjunction with the current CEO, CFO and COO being in senior
management roles for nearly a decade and Mr. Gonzales has done the
same for more than half a decade, during which time an incredible
amount of shareholder value has been destroyed. Total shareholder
returns (“TSR”) relative to its peers (“Peers”)1
during the tenures of Chairman Hibben, Mr. Stowe, and Mr. Gonzales,
prior to our public involvement, were -131%, -88% and -75%,
respectively. There is no hiding or explaining away this fact. For
Board refreshment to be meaningful and effective, Hudbay’s
nomination of three new directors out of an 11-person Board
slate is not enough in light of the level of entrenchment, poor
judgement and value destruction that has occurred under this
Board.
Focus on the Facts: This Entrenched
Board is Yet Again Ignoring the Views of Holders of Approximately
30% of Its Shares
On the morning of April 3, 2019, Waterton submitted what was its
second term sheet (the “April Term Sheet”) to Chairman
Hibben that set forth a settlement proposal supported by holders of
approximately 30% of Hudbay’s shares. Waterton and the Company had
a meeting scheduled for April 4, 2019. Our intentions were to
discuss the supported settlement proposal with Chairman Hibben and
director Sarah Kavanaugh at the meeting and progress negotiations
on the April Term Sheet in the days following, as the Company had
until mid-April to issue its circular.
During this meeting, once again, we found Chairman Hibben to be
dismissive. Chairman Hibben conveyed that he would discuss the
proposal with the remainder of the Board and revert with feedback.
We took his words at face value.
The very next day, Mr. Hibben requested a call with Waterton at
10:45 a.m. and on that call indicated that the Company would be
rejecting the supported settlement. Mr. Hibben did not provide any
feedback or a counter proposal. Less than two hours after the call
ended, the Company issued the Hudbay Circular and other
proxy-related materials.
From Waterton’s perspective, we believe the April 4 meeting was
merely a charade on the part of Hudbay to create the optics of
engagement. The fact that the Company had a press release,
presentation, and its circular ready to go – replete with over the
top attacks and false accusations against Waterton and our Waterton
Nominees – in our minds demonstrates that they had no interest in a
true negotiation. In fact, the Board’s bad faith approach to
negotiations has been a consistent theme. In November 2018, when
Waterton first engaged in settlement discussions with the Company
and owned approximately 8% of the Company, Chairman Hibben offered
Waterton 2 of 10 Board seats. In April 2019, despite Waterton now
owning approximately 12% of the Company and having ~30% Shareholder
support for a settlement proposal, Chairman Hibben offered us 2 of
11 seats, a nonsensical downgrade from his original position.
Ultimately, the Board, under the leadership
of Chairman Hibben, has shown itself much more adept at
entrenchment maneuvers and gamesmanship than at doing what’s right
for shareholders.
Focus on the Facts: Hudbay is at a
Critical Inflection Point
Hudbay is at a strategic inflection point and the upcoming
quarters for the Company will not be about picking low-hanging
operational fruit – which is the extent of what the Company has
done to date. In fact, we believe that the current Hudbay simply
builds for the sake of building – without regard for the critical
issue of how shareholder returns are impacted by its operational
decisions. Put another way, the Company’s focus on operational
issues is tantamount to seeing only the tip of the iceberg. The
Board does not have the experience or the skillset needed to see
the issues which constitute the rest of the iceberg below the
surface – issues which could sink the Company and destroy even more
shareholder value, similar to the Company nearing insolvency and
almost defaulting on debt covenants in 2016 after building
Constancia. And this is the fundamental difference between the
“strategy” of the incumbent Board and the meaningful strategy that
the Waterton Nominees would implement: the incumbent Board just
takes the next operational step because it’s there, the Waterton
Nominees would keenly consider long-term shareholder value before
taking any step.
At this critical moment, the Company must resolve key strategic
issues and make transformational decisions. These include:
- The appropriate mix of assets from a
portfolio construction perspective;
- The future of its Manitoba Business
Unit;
- The construction of the Rosemont
project which Hudbay estimates has a capex of $1.9 billion;
- The appropriate joint venture partner
and ownership structure for Rosemont;
- The appropriate financing strategy for
Rosemont; and
- Land and community matters at
Constancia.
Hudbay now requires a significant change at the Board level to
ensure that once the pressure is off, the value that has been
created since Waterton’s involvement continues to grow over the
long-term. We believe if meaningful change is not made immediately,
Hudbay will revert to its characteristic myopic short-term thinking
and poor capital allocation decision-making, something it can ill
afford to do at this critical moment.
The Company needs sufficient additional bench-strength in the
Boardroom that will:
- Make strategic decisions with a view
toward creating long-term shareholder value;
- Allocate capital based on predefined
hurdles and as a part of a holistic strategy; and
- End the culture of entrenchment and
introduce meaningful accountability.
Lack of Strategic Thinking and Poor Capital Allocation: The
Constancia Precedent
The Company’s current Board has a terrible track record when it
comes to analyzing and executing on key strategic matters. Note
that Constancia was built under the oversight of a significant
proportion of the current Board. To this day, the Board and C-Suite
repeatedly reference building Constancia as their biggest “win”.
Let’s factually review what happened to this Company when
Constancia was built under this Board’s oversight.
Yes, the Company built a mine. But, in the process the Board
turned a company with a market capitalization of close to $2
billion into a $380 million dollar company, loaded its balance sheet
with debt and took Hudbay to the brink of insolvency, as it was in
jeopardy of breaching its debt covenants. As noted by sell-side
analysts, “Hudbay [faced] potential debt covenant breaches”2 and
they were “basically betting their market cap on one mine.” 3
After Hudbay built Constancia, the Company’s debt-to-equity
ratio was approximately three times greater than its Peers.4 It was
the Board’s judgement on when to build, how to finance and other
key strategic factors that took Hudbay to the brink of insolvency.
We now have a strikingly similar situation to that of 2012. In
recent months and weeks, Hudbay has made it abundantly clear to the
market that its intention is to construct Rosemont, and it has
initiated preliminary construction activities. But Hudbay today is
in a far worse cash and debt position relative to April 2012, with
a similar market capitalization and facing a greater capex
requirement.
It is time to rein in this Company’s reckless behaviour. The
reality is the Company is in “build for the sake of building” mode
and there’s little long-term strategic foresight dictating the
decisions around Rosemont.
Lack of Strategic Thinking and Poor Capital Allocation: The
Mantos Deception
On October 4, 2018, Bloomberg reported that Hudbay was in talks
to buy Mantos Copper SA for ~$780 million, a project with a ~$990
million follow-on capital requirement, according to Bloomberg.
Following the report, Hudbay’s share price fell 7.9% intraday.
Waterton vocally opposed the acquisition because of the Company’s
existing capital requirements, its then discounted valuation and
its need to focus on its own operational issues. To put this into
perspective, according to the Bloomberg article, Hudbay was
pursuing a transaction that could have resulted in ~$4.2 billion of
existing debt obligations and potential capital requirements, while
the Company’s market capitalization was only $1.25 billion.
In the months following the Bloomberg article, Hudbay has been
evasive with respect to its statements on Mantos and has not
categorically denied that it was in the late stages of pursuing the
transaction. Was it one of the last parties left in the process?
Was it negotiating with the seller in late stage exclusive
negotiations? Were purchase agreements going back and forth? Was
the proposed purchase price ~$780 million? The Company will not say
– and that is problematic in light of the alarming deterioration of
Hudbay’s share price resulting from this article and the chorus of
Shareholder concern about the potential acquisition.
Never mind the issue of dealing with the Company’s shareholders
truthfully and transparently, the issue of whether the Company was
in the late stages of a Mantos deal is critical because it goes to
a key question: does this Board have the strategic judgement to
create long-term shareholder value? If the Company was indeed
pursuing the Mantos transaction, a deal that would have massively
destroyed shareholder value, shareholders should know that before
they cast their vote at the Meeting.
Focus on the Facts: More Change is
Needed
Hudbay is speaking out of both sides of its mouth. On the one
hand it is impugning Waterton’s motives, judgment and slate of
nominees, while on the other hand effectively endorsing our
judgment by selecting two of our nominees to add to its slate of
director candidates. As we have stated all along, A.E. Michael
Anglin and David Smith would be remarkable additions to the Hudbay
Boardroom.
The reality is, however, that changing over two director seats,
mitigated by the expansion of the Board to 11 members and the
addition of another Hudbay-selected director, does not constitute
the level of change that is desperately needed. This amount of
change is dangerously insufficient for three reasons: (1) the
entrenchment in the Hudbay Boardroom and C-Suite goes back nearly a
decade, (2) the Board would still be lacking key skills and
expertise that are necessary to create long-term shareholder value,
and (3) there is a systemic lack of accountability at the Board, as
evidenced by, among other things, Hudbay’s 2018 Corporate Scorecard
where the Board awarded management a score of 93.5/100 despite
Shareholders having lost 42% on their investment.
Waterton believes that substantial changes must still be made to
the Hudbay Board to give shareholders the comfort that the change
and proper oversight needed at Hudbay can be effective. That is why
we continue to advocate for the election of three additional
director nominees, beyond Mr. Anglin and Mr. Smith. We believe that
the addition – in total – of five of our nominees will effect a
marked change in the dynamics in the Boardroom at the Company and
help drive improvements in strategy and to end the current culture
of entrenchment. By refreshing the Board with five Waterton
Nominees, we believe the Company will have the necessary strategic
oversight, capital allocation discipline, accountability to hold
management to account and, importantly, institutional-grade
professionalism. In these specific circumstances, we are willing to
provide the current CEO with a full and fair opportunity to
demonstrate his capabilities. We also note that five directors
would constitute a minority of what will be an 11-member Board. To
be clear, we are no longer asking for control of the Board.
Hudbay’s shareholders should not be deprived of this unique
opportunity to materially upgrade its Boardroom with
institutional-grade talent. In addition to our nominees A.E.
Michael Anglin and David Smith who have been included on Hudbay’s
Board slate, our nominees Richard Nesbitt, Peter Kukielski and
Daniel Muñiz Quintanilla, on objective measure of merit and
experience, are just that – a material upgrade. Why shouldn’t our
Company have the best of the best in the Boardroom, particularly
now that each of these professionals are ready and willing to
engage?
Waterton’s Highly-Qualified,
Independent Nominees – Upgraded and Needed Oversight
The Waterton Nominees have the required skills, fresh
perspectives, and expertise the Company’s Board and management team
sorely need. As highlighted below, each Waterton Nominee fulfills
the immediate experience sorely needed at the current, flawed and
entrenched Board. The Waterton Nominees’ backgrounds and
credentials can be found in Waterton’s information circular
accompanying this letter under “Matters to be Acted Upon at the
Meeting – Waterton Nominee Profiles” and on our website at
www.NewHudbay.com.
Director
Proposed Role Expertise Requirement
A.E. Michael Anglin Independent Director
- Construction & Operation of Large-Scale Copper
Projects
Peter Kukielski Independent Director
- Proven Leadership & Relevant Track Record with Strategic
Partnerships
Richard Nesbitt Independent Director
- Corporate Governance & Accountability
Daniel Muñiz Quintanilla Independent Director
- Board & C-Suite Experience at South America’s largest
mining projects
David Smith Independent Director
- Capital Allocation & Project Finance Expertise
The Waterton Nominees not only have the experience to move
Hudbay forward, they also have a strategy to deliver long-term
shareholder value. If elected, the Waterton Nominees are in a
position to help execute this strategy starting immediately after
the Meeting, including:
- Accountability: Ensure management is held to
account and fully aligned with shareholders.
- Corporate
Governance: Implement best governance standards and
practices based on a culture of transparency and
professionalism.
- Portfolio
Optimization: Require a holistic portfolio review and a
strategic optimization plan for the assets to maximize long-term
shareholder value.
- Capital
Allocation & Balance Sheet: Demand a comprehensive
capital allocation strategy with a focus on return on invested
capital.
- Performance: Ensure management delivers on
transparent and value accretive performance objectives.
A Simple Choice:
We believe that stacking up the experience and expertise of the
Waterton Nominees against those of Hudbay’s incumbent directors
paints an incredibly clear picture. Hudbay can grasp at straws all
it wants to try to portray its directors as experienced leaders,
but shareholders will not be fooled. The bottom line is that
incumbent directors Alan R. Hibben, Kenneth G. Stowe and Igor A.
Gonzales, have had their chance to exercise responsible oversight
of Hudbay’s governance and strategy – and they have not been
effective in doing so. In contrast, our Waterton Nominees are
better positioned on every count to push for the change that is
desperately needed at the Company. We believe that shareholders
should not be deprived of this rare opportunity to have Board
members with such impressive and relevant experience and
expertise.
The facts speak for themselves:
Waterton Nominees Hudbay Nominees
Richard Nesbitt
Seasoned Leader
- Has led some of Canada’s largest and most important
institutions and has executed some of the country’s most seminal
corporate transactions
- Track record of creating immense shareholder value, as
demonstrated by his 487% TSR as President, CEO and board member of
the TSX Group and his 122% TSR as COO of CIBC, and Chairman and CEO
of CIBC World Markets
- During Mr. Nesbitt’s tenure as COO of CIBC and Chairman and CEO
of CIBC World Markets, CIBC’s share price increased from $67 to
$107, and the market capitalization increased by $12 billion
- Other leadership roles include President and CEO of HSBC
Securities (Canada) Inc. and President and CEO of the Global Risk
Institute
Alan Hibben
- Track record of destroying shareholder value, as demonstrated
by the abysmal TSRs at the majority of companies he’s served on the
board of, including Pinetree Capital -50%, DHX Media -53%,
Discovery Air -81%, Peace Arch -92% and Home Capital 169%
- Since 2009, he has collected approximately C$2 million in
compensation at Hudbay for his service on the Board, despite the
Company’s TSR of -131% relative to its Peers
- Primary board experience is serving on micro-cap and small-cap
company boards
- Hudbay is the largest company board that Mr. Hibben has served
on in his entire public company boardroom career, approximately
seven times larger than the average company size in Mr. Hibben’s
board history
- Has not held a C-Suite role in a publicly traded company
Peter Kukielski
Superior Mining Experience
- Track record of creating immense shareholder value, as
demonstrated by his 25% TSR while a board member of South32 (a ~$10
billion market capitalization mining company) and his 93% TSR at
Nevsun (a diversified mid-tier mining company as at the end of his
tenure) as the CEO and executive board member
- 30+ years of extensive global experience within the base
metals, precious metals and bulk materials sectors
- Oversaw global operations for companies such as BHP Billiton,
Teck Resources, ArcelorMittal, Falconbridge
- Named CEO of the Year at Mines and Money in 2018
- As CEO of ArcelorMittal’s mining division, grew that business
unit so much that it began being reported separately and came to
represent ~30% of the company’s EBITDA
Kenneth Stowe
- Track record of destroying shareholder value at the companies
where he served as an independent board member, including Klondex
-55%, Fire River -60%, Zenyatta Ventures-61%, Alamos -63% and
Centenario -78%
- Has gained the majority of his boardroom experience serving on
small-cap and micro-cap mining company boards
- Has not held a C-Suite position in a major mining company
- As a result of his limited experience serving on the Board of
or holding C-Suite positions at major mining companies, Mr. Stowe
brings a small company mentality to the Hudbay Boardroom
Daniel Muñiz Quintanilla
Superior South American Experience
- Has a track record of creating immense long-term shareholder
value, as demonstrated by his 376% TSR at Grupo Mexico (serving as
CFO and executive board member for ten years) and his 86% TSR at
Southern Copper (serving as Executive Vice President and executive
board member for ten years). Southern Copper’s operations are
significantly more complex, and its market cap (~$32 billion) is
significantly larger (>15x larger), than Hudbay’s
- Was critical in establishing a capital allocation and execution
strategy to increase production at Southern Copper and Grupo Mexico
by 81% and 86%, respectively, and increasing the market
capitalization by $3.3 billion and $11.0 billion, respectively
- Great addition to the Hudbay Board, bringing to bear his
executive experience in South America, prudent approach to capital
allocation, his focus on profitability and his knowledge and
track-record of community engagement in Peru
Igor Gonzales
- As CEO of Sierra Metals, a base metals company operating in
South America, he is extremely distracted by the following factors:
(i) Sierra Metals is undergoing an expansion at all three of its
core operating mines in 2019, (ii) Sierra Metals’ silver operation
is projected to operate at a loss in 2019, (iii) as of December 31,
2018, Sierra Metals had a negative working capital balance, and
(iv) Sierra Metals has significantly underperformed its peers
year-to-date
- As CEO of Sierra Metals, Mr. Gonzales is subject to potential
commercial conflicts, requiring recusal, further limiting his
utility on the Board
- By his own admission, he was a key leader at Pascua-Lama, on
which Barrick took a $5.1 billion write down which will go down in
the mining sector as being one of the worst examples of capital
allocation, having capex estimates increase from $1.2 billion to
~$8.5 billion
We Need Your Support
We encourage our fellow shareholders to consider the facts and
remember Hudbay’s consistent poor performance, ongoing flawed
strategy, damaged credibility and entrenched culture. The Waterton
Nominees are ready and willing to help create new Hudbay with a
defined strategy and a focus on creating long-term shareholder
value. Please read Waterton’s information circular accompanying
this letter and review the additional shareholder materials
available, including the comprehensive investor presentation titled
“Rebuilding Hudbay & Maximizing Shareholder Value” setting out
a detailed path forward for Hudbay to recognize its potential and
unlock shareholder value at www.NewHudbay.com.
Your vote is critical to initiate much-needed change at the
Board and management level at Hudbay and we encourage you to vote
for the Waterton Nominees on the BLUE form of proxy and/or BLUE voting instruction form by
5:00 p.m. (Eastern time) on Thursday, May
2, 2019. Shareholders willing to express their support
for the Waterton Nominees may contact Kingsdale Advisors, our
strategic shareholder advisor and proxy solicitation agent, at
1-888-518-1563 toll-free in North America, or at 416-867-2272
outside of North America (collect calls accepted), or by email at
contactus@kingsdaleadvisors.com.
Sincerely,
Isser ElishisChief Investment Officer
About Waterton
Waterton is an investment firm that manages capital for global
institutional investors, sovereign wealth funds and endowments. The
firm has ~US$2 billion in assets under management and focuses
solely on the metals and mining sector. Waterton has a culture of
thoroughness and a disciplined approach to capital allocation, and
utilizes its significant industry expertise to produce out-sized
risk-adjusted returns.
Additional Information
In its early warning report dated January 22, 2019 (the
"January EWR"), Waterton had disclosed that it intended to
nominate and solicit proxies for a slate of eight director
candidates for election to the Board at the Meeting. As announced
today, Waterton is now intending to solicit proxies for five
individuals for election to the Board at the Meeting.
Waterton owns and exercises control or direction over an
aggregate of 31,583,117 Shares, representing approximately 12.09%
of the issued and outstanding Shares. At the time of the January
EWR, Waterton owned and exercised control or direction over
31,352,658 Shares, representing approximately 12.00% of the issued
and outstanding Shares.
The Shares were acquired for investment purposes and for other
reasons detailed herein and in Item 5 of the January EWR and other
early warning reports filed by Waterton under applicable Canadian
securities laws. Waterton may, depending on market and other
conditions, acquire additional Shares through market transactions,
private agreements, treasury issuances, exercise of warrants, or
otherwise, or may sell all or some portion of the Shares, or may
continue to hold the Shares.
For further information and to obtain a copy of the early
warning reports filed by Waterton, please see Hudbay's profile on
the SEDAR website at www.sedar.com or contact Richard Wells, Chief
Financial Officer of WGRM at 416-504-3505.
The head office address of WGRM is Commerce Court West, 199 Bay
Street, Suite 5050, Toronto, Ontario, M5L 1E2, Canada. The head
office address of each of Waterton Mining LP and Waterton Fund II
is Ugland House, Grand Cayman, Cayman Islands, KY1-1104.
The head office address of Hudbay is 25 York Street, Suite 800,
Toronto, Ontario, Canada M5J 2V5.
Legal Notices and Disclaimers
The data, information and opinions contained or referenced
herein (collectively, the "Information") is for general
informational purposes only for the Shareholders in order to
provide the views of Waterton regarding certain changes we are
requesting to the composition of the Board, and other matters which
Waterton believes to be of concern to Shareholders described
herein. The Information is not tailored to specific investment
objectives, the financial situation, suitability, or particular
need of any specific person(s) who may receive the Information, and
should not be taken as advice in considering the merits of any
investment decision. The views expressed in the Information
represent the views and opinions of Waterton, whose opinions may
change at any time and which are based on analyses of Waterton and
its advisors. Unless otherwise indicated, the Information has been
derived or obtained from public disclosure and filings with respect
to and/or made by Hudbay and other issuers that we consider to be
comparable to Hudbay, and from other third party reports (see
"Legal Notices and Disclaimers - Disclaimer Respecting Publicly
Sourced Information" in the Waterton Circular, a copy of which is
available on SEDAR at www.sedar.com or on www.newhudbay.com).
The Information contains forward-looking statements or
forward-looking information within the meaning of applicable
securities laws (collectively, "forward-looking statements"),
including, without limitation, Waterton's and Hudbay's respective
priorities, plans and strategies for Hudbay and certain members of
Hudbay's operational, compensation and other noted peer groups'
anticipated financial and operating performance and business
prospects. All statements and information, other than statements of
historical fact, included herein are forward-looking statements,
including, without limitation, statements regarding activities,
events or developments that Waterton expects or anticipates may
occur in the future. Certain forward-looking statements contained
herein may be considered to be future-oriented financial
information or a financial outlook for the purposes of applicable
Canadian securities laws. These forward-looking statements can be
identified by the use of forward-looking words such as "will",
"expect", "intend", "plan", "estimate", "anticipate", "believe" or
"continue" or similar words and expressions or the negative
thereof. There can be no assurance that the plans, intentions or
expectations upon which these forward-looking statements are based
will occur or, even if they do occur, will result in the
performance, events or results expected.
We caution readers not to place undue reliance on
forward-looking statements contained herein, which are not a
guarantee of performance, events or results and are subject to a
number of known and unknown risks and uncertainties, including but
not limited to those set forth in the Waterton Circular under the
heading "Legal Notices and Disclaimers – Forward-Looking
Statements" and those risks and uncertainties detailed in the
continuous disclosure and other filings of Hudbay and certain
members of Hudbay's operational, compensation and other noted peer
groups with applicable securities regulators, copies of which are
available on SEDAR at www.sedar.com or on the Electronic Data
Gathering, Analysis, and Retrieval at www.sec.gov. We urge you to
carefully consider those risks and uncertainties. The
forward-looking statements contained herein are expressly qualified
in their entirety by this cautionary statement. Unless expressly
stated otherwise, the forward-looking statements included herein
are made as of April 15, 2019 and Waterton disclaims any obligation
to publicly update such forward-looking statements, except as
required by applicable law.
1 Peers include Antofagasta, Ero Copper, First Quantum,
Freeport, Lundin, Oz Minerals, Southern Copper2 Canaccord Genuity,
January 14, 2016.3 Quote by George Topping at Stifel Nicolaus, The
Globe & Mail, “HudBay bets big with Constancia project as
rivals pull back,” March 7, 2013.4 FactSet. As of December 31,
2015; debt defined as short-term debt and long-term debt; equity
defined as market capitalization as of December 31, 2015.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190415005451/en/
InvestorsKingsdale AdvisorsToll-Free (within North America):
1-888-518-1563Call Collect (outside North America):
1-416-867-2272E-mail: contactus@kingsdaleadvisors.comMediaSloane
& CompanyDan Zacchei / Joe Germani: 1-212-486-9500E-mail:
Dzacchei@sloanepr.com / JGermani@sloanepr.com
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