HudBay settles proxy fight with Waterton

HudBay Minerals Inc.  [HBM-TSX, NYSE] and Waterton Global Resource Management Inc. have reached a settlement agreement regarding the proxy contest for HudBay’s board of directors.

Waterton Global Resource Management is a private equity firm, which owns 12% of HudBay’s outstanding shares.

Under the agreement, three of the 11 board seats will be Waterton nominees and a search will begin for a new Chair.

HudBay shares advanced on the news, rising 2.44% or 21 cents to $8.81. The shares are trading in a 52-week range of $4.50 and $10.42.

The deal is viewed as positive because it eases fears that Waterton might dump its Hudbay shares if it lost the proxy battle.

HudBay is an integrated mining company, primarily producing copper concentrate (containing copper, gold and silver), zinc concentrate and zinc metal. The company owns four polymetallic mines, four ore concentrators and a zinc production facility.

The operations are located in northern Manitoba and Saskatchewan, Peru and Arizona.

The Waterton board nominees are Peter Kukielski, Daniel Muniz Quintanilla, and David Smith.  They will replace current board members Warren Holmes, Alan Lenczner, and Kenneth Stowe. The remainder of the board members will consist of HudBay nominees.

HudBay’s current Chair Alan Hibben has agreed to remain in that position until a successor is found. He is expected to retire from the board at the 2020 annual general meeting.

Waterton and HudBay recently clashed over media speculation that HudBay was in talks to buy Mantos Copper SA, a Chilean private miner owned equally by Audley Capital and Orion Mine Finance. Published reports said Mantos was seeking a buyer to fund its expansion plans.

Waterton quickly responded by saying it was opposed to the idea. It expressed the view that HudBay should not be pursuing growth for the sake of empire building.

Waterton also said if HudBay intended to begin construction of the Rosemont copper project in Arizona in the first quarter of 2019, it could face an imminent funding requirement of $1.1 billion. “This reinforces, from a capital allocation perspective, the need to terminate any potential negotiations for new acquisitions immediately, and specifically acquisitions like the Mantos transaction,” Waterton said.

HudBay recently announced that it has completed the permitting process at its Rosemont Project. Rosemont is an open-pit copper-molybdenum-silver porphyry-skarn deposit located in Arizona. It is expected to be one of the largest copper mines in the U.S., accounting for 10% of total U.S. copper production.

HudBay recently said the project has achieved a key milestone after receiving the approved Mine Plan of Operations (MPO) from the U.S. Forest Service.  The issuance of the MPO is the final administrative step in the permitting process.

Rosemont is expected to produce approximately 127,000 tonnes of copper annually at a cash cost of US$1.14 per pound (net of by-product credits) over the first 10 years of operations.