TMCnet News
Waterton Announces Eight Fully Independent Director Nominees for Election to Hudbay Minerals Board at 2019 Annual MeetingWaterton Global Resource Management, Inc. (collectively with Waterton Precious Metals Fund II Cayman, LP, Waterton Mining Parallel Fund Offshore Master, LP and certain other affiliates, "Waterton" or "we" or "us"), which owns approximately 11.9% of the issued and outstanding shares (the "Shares") of Hudbay Minerals Inc. ("Hudbay" or the "Company") (TSX:HBM) (NYSE:HBM), today issued the following letter to its fellow shareholders announcing its majority slate of eight highly-qualified and experienced independent director candidates for election to the Hudbay Board of Directors (the "Board") at the Company's 2019 Annual Meeting of Shareholders (the "Annual Meeting"): This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190116005443/en/ (Graphic: Business Wire) January 16, 2019 Dear Hudbay Shareholders: Waterton, one of Hudbay Minerals Inc.'s ("Hudbay" or the "Company") (TSX: HBM) (NYSE: HBM) largest shareholders with approximately 11.9% of the issued and outstanding shares, today announced eight highly-qualified and experienced director candidates for election to the Hudbay Board at the 2019 Annual Meeting. The 2019 Annual Meeting will provide you with an opportunity to elect a truly independent board that can offer critically important fresh perspectives on maximizing shareholder value at Hudbay. Waterton's proposed director slate is fully independent and does not include any employees or direct representatives of Waterton. Under the current Board and management team, Hudbay has repeatedly failed to realize its potential. We believe this underperformance derives from the following four factors and it is specifically because of these factors that eight of the ten current Hudbay directors need to be replaced:
In an effort to finally end Hudbay's underperformance, Waterton is proposing a Board slate of individuals who have the skillset, experience and imminent willingness to resolve the issues currently plaguing the Company. The nominees collectively include:
While ultimately the Board will select the CEO of Hudbay, Waterton is proposing its Board nominee, Peter Kukielski, for the role. Mr. Kukielski most recently held the CEO role at Nevsun Resources ("Nevsun") (TSX: NSU) (NYSE American: NSU). We believe Mr. Kukielski is the right person to lead Hudbay because he has exceptional operating experience and a proven track record of creating and crystallizing market value for investors. Mr. Kukielski was announced as CEO of Nevsun in May 2017. During his tenure, Total Shareholder Return for Nevsun investors was 93%1. During this same period, Hudbay's Total Shareholder Return was -12%. Over his 30-year career at Nevsun, ArcelorMittal, Teck Resources, Falconbridge and BHP Billiton, Mr. Kukielski has overseen dozens of complex operating and development stage mines in approximately 15 jurisdictions. We believe Mr. Kukielski's immense experience defining, communicating and executing on a holistic business strategy across multiple mining projects and jurisdictions will be invaluable to Hudbay. As compared to other "best in class" mining companies, Hudbay's business and capital allocation strategies are alarmingly thin; one reason for this is that the C-suite does not have the necessary global, multi-asset, experience to meaningfully define these strategies. Hudbay has evolved from being essentially a single-asset/single-province company to a complex multinational company, yet the current CEO, COO and CFO all have their roots in the older, simpler Hudbay. During Hudbay's expansion, this home-grown team has been learning on the job, but the time for learning on the job is over. Hudbay requires, and shareholders deserve, a CEO who already has decades of experience managing a multinational portfolio of mining assets and who can help define and execute on a clear business strategy that maximizes shareholder value. Underperformance and Current Board Issues Hudbay has the potential to become a world-class intermediate copper producer. However, under the oversight of the current Board, the Company has been a chronic underperformer. The Company's 1-year, 3-year and 5-year Total Shareholder Return relative to its peer group2 has been an abysmal -37%, -89% and -68%, respectively.3 The Entrenched Five Hudbay suffers from a culture of entrenchment. Each of Mr. Alan Hibben, Mr. Warren Holmes, Mr. Alan Lenczner, Mr. Kenneth Stowe and Mr. Alan Hair (collectively, the "Entrenched Five") has either been on the Board or in a senior management role at the Company for nearly a decade.
We would note how drastically the Entrenched Five have underperformed the peer group they select for themselves, in addition to all relevant market indices. The issue at Hudbay is not just the lengthy tenures of the Entrenched Five. It is that a critical mass of the Board has served together for nearly a decade and, even more dubiously, their service has coincided with Mr. Hair and a substantial portion of the current C-suite being in senior management roles. Given these facts, shareholders should have a legitimate concern as to whether, after a decade, the linchpin of good corporate governance - director independence - has been eroded and whether that erosion is adversely impacting decision-making and, ultimately, shareholder value. We believe this culture of entrenchment at Hudbay has negatively impacted shareholder value and it must stop now. Engagement in Critical Areas We believe that the Company is lacking an engaged and focused South American perspective on the Board. It seems that the Board's primary recent South American expertise comes from Mr. Igor Gonzales, who joined the Board in July 2013. In May 2017, Mr. Gonzales became the President and Chief Executive Officer of Sierra Metals ("Sierra") (TSX: SMT) (BVL: SMT) (NYSE American: SMTS). Currently, Sierra is (i) completing pre-feasibility and feasibility studies on three separate projects; (ii) undergoing significant expansion at its three operating mines; and, (iii) working to acquire key permits at its Peruvian operations after the Peruvian regulator recently rejected its Environmental Impact Assessment. Hudbay requires representation on its Board that has the bandwidth to meaningfully analyze the Company's South America operations. Due to the considerable attention required of Mr. Gonzales to address the issues facing Sierra, he lacks the adequate bandwidth that Hudbay shareholders deserve. Targeting Expertise in the Mining Sector In the same way that Hudbay has changed and grown, we believe that the Company's Board must evolve in order to meaningfully hold management to account. As currently constituted, the Board does not have the requisite skillset in the sector to hold management accountable, as evidenced by the Company's failures on multiple fronts and also by the inappropriate methodologies applied by the Board to assess management. To that end, we believe the Board should be refreshed to include mining sector expertise that is responsive to the very specific and material issues that challenge the Company so that progress can be made and, just as importantly, management can be meaningfully assessed. Each Board seat should be allocated to either a leadership role or to a subject matter expert (i.e., US permitting, open pit mine construction, South American stakeholder relations). While we respect Ms. Carin Knickel's and Mr. Colin Osborne's experience in the oil and gas and steel sectors, respectively, we believe that, at this critical juncture, these Board seats should be allocated to subject matter experts with deeper experience in the base metals sector who would more effectively provide strategic corporate guidance while holding management to account. Given the foregoing entrenchment, lack of engagement, and inadequate expertise, we believe that eight of the ten current directors of Hudbay should be either entirely disqualified from sitting on the Company's Board or their seats should be upgraded with new independent directors who offer far more engagement, relevant expertise, and a proven track record of creating value for shareholders. It's Time for Fresh Perspectives and New Ideas Waterton's director nominees have been selected in a very targeted manner, keeping in mind the specific and complementary expertise that is required on the Board to meaningfully inform corporate strategy, hold management to account, and maximize shareholder value. Waterton's director nominees are as follows:
Strong, Proven and Experienced Leadership in the C-suite Hudbay now has the rare opportunity to recruit a CEO with a proven and successful track record. Mr. Kukielski not only has the operational experience to lead Hudbay, but, just as importantly, he has decades of experience in developing holistic business strategies for companies with multinational mining portfolios. Mr. Kukielski's credentials include:
A Board with the Skills and Expertise Necessary to Resurrect Hudbay
Maintaining Appropriate Continuity on the Board While we believe the majority of the incumbent Board is entrenched, lacks necessary expertise, and is unable to hold management to account, we also view a certain level of continuity at the Board level as important. Therefore, we currently would be supportive of the re-election of incumbent Hudbay directors Carol Banducci and Sarah Kavanagh to the Board at the upcoming Annual Meeting. In particular, we recognize Ms. Banducci's strong experience in the mining industry and we acknowledge that she has not had the same history at Hudbay as some of the other directors and that she is widely recognized for her professional competence in Canada. Further, in our limited interactions with Ms. Kavanagh, we found her to be professional and reasonable and we believe her vast financial and regulatory experience would continue to add value to the Hudbay boardroom. ### We encourage Hudbay shareholders not to be misled by the Company's rhetoric about Waterton, our intentions or potential conflicts of interest. It should now be clear that Waterton has no desire to be in the Hudbay boardroom, but we do have a desire to see competent, entirely independent, directors in the boardroom overseeing the Company. As owners of approximately 11.9% of the Company's outstanding shares, our interests are fully aligned with those of all shareholders. We would also note that, on information and belief, we are aware that the Company or its representatives have recently contacted certain of our suggested director nominees to join the Board. To this, we would say, if the Company is already interested in our candidates, why should it matter that we are suggesting the candidates? In a meritocratic manner we believe the best qualified candidates with the most relevant skillsets should be elected to the Hudbay Board. For Waterton, this campaign is about the facts. The facts are that Hudbay is underperforming because of its culture of entrenchment; lack of real leadership in the C-suite; lack of necessary engagement in the boardroom; and a lack of key industry skills and expertise. Focusing on the facts, we would ask shareholders to do a factual "like for like" comparison of the current Hudbay Board and Waterton's proposed slate to determine which slate has the more relevant professional expertise and experience to substantively hold the Company's management to account and put Hudbay back on the path to prosperity. The answer is clear and categorical: it's the Waterton slate. Our proposed directors together with the continuing directors will have the ability to finally free Hudbay from its culture of entrenchment and guide the Company in a manner that unlocks and maximizes value for all shareholders. It's time for change. Sincerely,
Isser Elishis About Waterton Waterton is a leading private equity firm dedicated to developing high quality resource assets in stable jurisdictions. Waterton's founding team has a successful track record of originating, structuring, managing and exiting investments through acquisitions, joint ventures and partnerships, across a range of sectors and asset classes. Waterton's core strength is its cross-functional, fully-integrated, in-house team of professionals who possess significant mining, financial and legal expertise. Waterton's team employs a proactive approach to asset management, leveraging significant sector knowledge and extensive industry relationships to support the firm's investment activities. Additional Information: The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. As there is currently no record or meeting date for the Annual Meeting, Waterton is not at this time asking Hudbay shareholders to execute a proxy in favour of any matter, including the election of Waterton's proposed nominees. In connection with the upcoming Annual Meeting, Waterton may file a dissident information circular in due course in compliance with applicable securities laws. Notwithstanding the foregoing, Waterton is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations and section 150(1.2) of the Canada Business Corporations Act in accordance with Canadian securities and corporate laws applicable to public broadcast solicitations. In connection therewith, certain information regarding, among other things, Waterton's nominees has been provided below. The table below sets out, in respect of each of Waterton's proposed nominees, his or her name, province or state and country of residence, his or her principal occupation, business or employment within the five preceding years, and the number of shares beneficially owned, or controlled or directed, directly or indirectly, by such nominee.
The information contained herein and any solicitation made by Waterton in advance of the upcoming Annual Meeting is, or will be, as applicable, made by Waterton and not by or on behalf of the management of Hudbay. All costs incurred for any solicitation will be borne by Waterton, provided that, subject to applicable law, Waterton may seek reimbursement from Hudbay of Waterton's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board. Waterton is not soliciting proxies in connection with the upcoming Annual Meeting at this time. Waterton may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on behalf of Waterton. Waterton has retained Kingsdale Advisors as its proxy advisor. Kingsdale Advisor's responsibilities will principally include soliciting shareholders should Waterton commence a formal solicitation of proxies, providing strategic advice and advising Waterton with respect to the meeting and proxy protocol. Any proxies solicited by or on behalf of Waterton, including by Kingsdale Advisors or any other agent, may be solicited pursuant to a dissident information circular or by way of public broadcast, including through press releases, speeches or publications and by any other manner permitted under Canadian corporate and securities laws. Any such proxies may be revoked by instrument in writing executed by a Hudbay shareholder or by his or her attorney authorized in writing or, if the shareholder is a body corporate, by an officer or attorney thereof duly authorized or by any other manner permitted by law. None of Waterton nor, to its knowledge, any of the proposed director nominees or any of its or their respective associates or affiliates has any material interest, direct or indirect, (i) in any transaction since the beginning of Hudbay's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Hudbay or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter to be acted on by Hudbay at its upcoming Annual Meeting, other than the election of directors to the Board. Hudbay's principal office address is 25 York Street, Suite 800, Toronto, ON (News - Alert) M5J 2V5. SOURCE Waterton Global Resource Management, Inc.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190116005443/en/ |