As filed with the Securities and Exchange Commission on April 1, 2014
Registration No. 333-193876
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO
FORM F-10
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
HudBay Minerals Inc.
(Exact Name of Registrant as Specified in its Charter)
Canada
(Province or Other Jurisdiction of Incorporation or Organization)
1000
(Primary Standard Industrial Classification Code Number)
98-0485558
(I.R.S. Employee Identification No.)
25 York Street, Suite 800
Toronto, Ontario
M5J 2V5, Canada
Telephone: (416) 362-8181
(Address, including postal code, and telephone number, including area code, of Registrants principal executive offices)
Corporation Service Company
1180 Ave of the Americas, Suite 210
New York, NY 10036
Telephone: (212) 299-5600
(Name, Address (Including Zip Code) and Telephone Number (Including Area Code) of Agent for Service in the United States)
Copies to:
Patrick Donnelly, Esq. |
Mark L. Mandel, Esq. |
Kari MacKay, Esq. |
HudBay Minerals Inc. |
Milbank, Tweed, Hadley & McCloy LLP |
Goodmans LLP |
25 York Street, Suite 800 |
One Chase Manhattan Plaza |
Bay Adelaide Centre |
Toronto, Ontario |
New York, NY 10005-1413 |
333 Bay Street, Suite 3400 |
M5J 2V5, Canada |
(212) 530-5000 |
Toronto, ON M5H 2S7 |
(416) 362-8181 |
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(416) 979-2211 |
Approximate date of commencement of proposed sale of the securities to the public: as soon as practicable after this registration statement becomes effective.
Province of Ontario, Canada
(Principal Jurisdiction Regulating this Form F-10 Offering)
It is proposed that this filing shall become effective (check appropriate box):
A. x upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).
B. o at some future date (check appropriate box below):
1. o Pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner than seven calendar days after filing).
2. o Pursuant to Rule 467(b) on ( ) at ( ) (designate a time seven calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on ( ).
3. o Pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.
4. o After the filing of the next amendment to this form (if preliminary material is being filed).
If any of the securities being registered on this Form F-10 are to be offered on a delayed or continuous basis pursuant to the home jurisdictions shelf prospectus offering procedures, check the following box. o
CALCULATION OF REGISTRATION FEE
Title of Each Class |
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Amount to be |
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Proposed |
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Proposed Maximum |
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Amount of |
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Common Shares, without par value |
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41,921,758 |
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$ |
1.80 |
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$ |
238,887,478.07 |
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$ |
30,768.71 |
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(1) Represents the maximum number of HudBay Minerals Inc. (Hudbay) common shares, without par value (Hudbay shares), estimated to be issuable upon consummation of the exchange offer (the Offer) for all of the issued and outstanding common shares (the Common Shares) of Augusta Resource Corporation (Augusta), assuming the exercise of all the in-the-money convertible securities of Augusta, other than any Common Shares owned directly or indirectly by Hudbay and its affiliates, which equals (a)(i) 156,143,531, the number of Common Shares reported as outstanding on a fully diluted basis (assuming the exercise of all the in-the-money convertible securities of Augusta) as of November 13, 2013 in the Managements Discussion and Analysis for the Third Quarter Ended September 30, 2013 and after giving effect to the 3.3 million Common Share purchase warrants Augusta issued in December 2013, minus (ii) 23,058,585, the number of Common Shares owned directly or indirectly by Hudbay and its affiliates as of February 5, 2014, multiplied by (b) 0.315, which represents the number of Hudbay Shares to be exchanged for each Common Share pursuant to the transactions described herein.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with General Instruction II.H to Form F-10. The proposed maximum aggregate offering price is equal to the product of (i) US$1.795, which is the average of high and low sale prices of the Common Shares as reported on the NYSE MKT on February 5, 2014, and (ii) 133,084,946 Common Shares in the aggregate that may be received by Hudbay or cancelled in the transaction described herein.
(3) Previously paid.
If, as a result of stock splits, stock dividends or similar transactions, the number of securities purported to be registered on this Registration Statement changes, the provisions of Rule 416 under the Securities Act of 1933, as amended, shall apply to this Registration Statement.
PART I
INFORMATION REQUIRED TO BE DELIVERED
TO OFFEREES OR PURCHASERS
Item 1. Home Jurisdiction Document
This Amendment No. 3 (Amendment No. 3) amends and supplements the registration statement on Form F-10 filed on February 11, 2014 (as amended, the Registration Statement) by HudBay Minerals Inc., a corporation existing under the laws of Canada (Hudbay or the Registrant).
The Registration Statement relates to the offer to purchase (the Offer) by Hudbay for all of the issued and outstanding common shares (the Common Shares) of Augusta Resource Corporation, a corporation existing under the laws of Canada (Augusta), other than any Common Shares held directly or indirectly by Hudbay and its affiliates, including any Common Shares that may become issued and outstanding upon the exercise, exchange or conversion of any options or any other rights to acquire Common Shares after the date of the Offer but prior to the expiry time of the Offer, together with the associated rights issued under Augustas shareholder rights plan, for consideration per Common Share of 0.315 of a common share of Hudbay.
The Offer is subject to the terms and conditions set forth in Hudbays Offer and Circular dated February 10, 2014 (as previously amended, the Original Offer and Circular) and related Letter of Transmittal, Notice of Guaranteed Delivery and the Notice of Variation and Extension dated March 14, 2014, copies of which are attached to the Registration Statement as Exhibits 1.1, 1.2, 1.3 and 4.13, respectively, and in the Notice of Variation and Extension dated March 31, 2014, filed herewith as Exhibit 4.14 (Notice of Variation and Extension).
The information set forth in the Original Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery, including all schedules, exhibits and annexes thereto, is hereby expressly incorporated herein by reference in response to all items of information required to be included in, or covered by, a registration statement on Form F-10, and is supplemented by the information specifically provided herein.
Except as specifically provided herein, this Amendment No. 3 does not modify any of the information previously reported in the Registration Statement.
Item 2. Additional Information.
See the financial statements included or incorporated by reference in the Original Offer and Circular.
Item 3. Informational Legends.
See the outside front cover page and the introduction of the Original Offer and Circular.
Item 4. Incorporation of Certain Information by Reference.
See Circular - Documents Incorporated by Reference in the Original Offer and Circular.
Item 5. List of Documents filed with the SEC.
The following documents have been filed with the U.S. Securities and Exchange Commission (the Commission) as part of the Registration Statement: (i) the Original Offer and Circular, Letter of Transmittal, Notice of Guaranteed Delivery and Notice of Variation and Extension; (ii) press releases related to the Offer; (iii) investor relations presentations; (iv) the transcript of a conference call related to the Offer; (v) a newspaper advertisement related to the Offer; (vi) an early warning report filed under National Instrument 62-103 related to the Offer; (vii) a material change report related to the Offer; (viii) a press release related to Hudbays fourth quarter 2013 financial results; (ix) managements discussion and analysis and audited financial statements for the year ended December 31, 2013; (x) the documents listed in the Offer and Circular as incorporated by reference herein; and (xi) consents of auditors, counsel and qualified persons.
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED
TO OFFEREES OR PURCHASERS.
Indemnification of Officers and Directors
The by-laws of Hudbay provide that, subject to the relevant provisions of the Canada Business Corporations Act, Hudbay shall indemnify a director or officer of Hudbay, a former director or officer of Hudbay, or another individual who acts or acted at Hudbays request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with Hudbay or such other entity if (i) the individual acted honestly and in good faith with a view to the best interests of Hudbay or, as the case may be, to the best interests of the other entity for which the individual acted as a director or officer or in a similar capacity at Hudbays request; and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual has reasonable grounds for believing that the individuals conduct was lawful.
Hudbay also maintains insurance for the benefit of its directors and officers against liability in their respective capacities as directors and officers. The directors and officers are not required to pay any premium in respect of the insurance. The policy contains standard industry exclusions.
Insofar as indemnification for liabilities arising under the United States Securities Act of 1933 may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.
EXHIBITS TO FORM F-10
The exhibits to this Registration Statement are listed in the exhibit index, which appears elsewhere herein.
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
Item 1. Undertaking.
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to this Form F-10 or to transactions in said securities.
Item 2. Consent to Service of Process.
Concurrently with the filing of the initial Registration Statement, the Registrant filed with the Commission a written irrevocable consent and power of attorney on Form F-X.
Any change to the name or address of the agent for service of the Registrant shall be communicated promptly to the Commission by amendment to the applicable Form F-X referencing the file number of the Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Province of Ontario, Canada, on this 31st day of March, 2014.
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HUDBAY MINERALS INC. | ||
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By: |
/s/Patrick Donnelly | |
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Name: |
Patrick Donnelly |
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Title: |
Vice President, Legal and Corporate Secretary |
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
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Title |
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Date | |
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* |
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President, Chief Executive Officer |
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March 31, 2014 | |
David A. Garofalo |
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(Principal Executive Officer) and Director |
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* |
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Senior Vice President and Chief Financial Officer |
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March 31, 2014 | |
David S. Bryson |
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(Principal Financial Officer) |
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* |
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G. Wesley Voorheis |
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Chairman and Director |
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March 31, 2014 | |
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* |
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Tom A. Goodman |
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Director |
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March 31, 2014 | |
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* |
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Alan R. Hibben |
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Director |
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March 31, 2014 | |
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* |
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W. Warren Holmes |
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Director |
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March 31, 2014 | |
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* |
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John L. Knowles |
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Director |
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March 31, 2014 | |
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* |
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Alan J. Lenczner |
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Director |
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March 31, 2014 | |
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* |
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Kenneth G. Stowe |
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Director |
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March 31, 2014 | |
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* |
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Sarah B. Kavanagh |
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Director |
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March 31, 2014 | |
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* |
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Igor Gonzales |
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Director |
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March 31, 2014 | |
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*By: |
/s/Patrick Donnelly |
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Patrick Donnelly |
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Attorney-in-Fact |
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AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act, the undersigned has signed this registration statement, solely in the capacity of the duly authorized representative of the Registrant in the United States, in the City of Newark, State of Delaware, USA on this 31st day of March, 2014.
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Donald J. Puglisi | |
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(Authorized U.S. Representative) | |
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by |
/s/Donald J. Puglisi |
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Name: Donald J. Puglisi |
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Title: Managing Director |
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Puglisi & Associates |
INDEX TO EXHIBITS
Exhibits to Form F-10
Exhibit No. |
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1.1** |
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Offer and Circular dated February 10, 2014. |
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1.2** |
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Form of Letter of Transmittal. |
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1.3** |
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Form of Notice of Guaranteed Delivery. |
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1.4** |
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Press Release dated February 10, 2014 (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 10, 2014). |
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1.5** |
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Investor Relations Presentation related to the offer dated February 10, 2014 (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 10, 2014). |
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1.6** |
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Investor Relations Presentation related to Constancia Project dated February 2014 (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 10, 2014). |
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1.7** |
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Early warning report under National Instrument 62-103 (incorporated by reference to Hudbays Form 6-K filed February 10, 2014). |
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1.8** |
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Conference call transcript dated February 10, 2014 (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 10, 2014). |
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1.9** |
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Newspaper Advertisement dated February 11, 2014. |
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4.1** |
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The Annual Information Form of HudBay Minerals Inc. for the year ended December 31, 2012 (incorporated by reference to Exhibit 99.1 to Hudbays Form 40-F (Commission File No. 001-34244) filed with the Commission on March 28, 2013 (the Form 40-F)). |
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4.2** |
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The annual audited consolidated financial statements of HudBay Minerals Inc. for the years ended December 31, 2012 and 2011 and notes and the auditors report in respect thereof, and the managements discussion and analysis of HudBay Minerals Inc. for the financial years ended December 31, 2012 and 2011 (incorporated by reference to Exhibits 99.2 and 99.3 to the Form 40-F). |
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4.3** |
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The notice of annual and special meeting of shareholders and management information circular dated April 5, 2013 in respect of the annual and special meeting of shareholders held on May 10, 2013 (incorporated by reference to Exhibit 99.2 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on April 10, 2013). |
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4.4** |
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The material change report of HudBay Minerals Inc., dated June 20, 2013, in respect of the announcement of the offering of an additional US$150 million aggregate principal amount of the Companys 9.50% senior unsecured notes and the closing of such offering (incorporated by reference to Exhibit 99.1 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on June 21, 2013). |
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4.5** |
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The unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2013 and notes related thereto, together with the credit supporter disclosure filed concurrently therewith, and the managements discussion and analysis for the three and nine months ended September 30, 2013 (incorporated by reference to Exhibits 99.1 and 99.2 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on November 12, 2013). |
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4.6** |
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The material change report of HudBay Minerals Inc., dated November 13, 2013, in respect of the announcement that Hudbay entered into an amended and restated precious metals purchase agreement with an affiliate of Silver Wheaton Corp. (incorporated by reference to Exhibits 99.1 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on November |
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14, 2013). |
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4.7** |
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The material change report of HudBay Minerals Inc., dated December 10, 2013, in respect of the announcement of the completion of Hudbays offering of US$100 million of 9.50% senior unsecured notes (incorporated by reference to Exhibits 99.1 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on December 11, 2013). |
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4.8** |
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The press release of HudBay Minerals Inc., dated January 8, 2014, in respect of Hudbays 2014 production guidance and capital and exploration expenditure forecasts. |
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4.9** |
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The material change report of HudBay Minerals Inc., dated January 16, 2014, in respect of an offering of 18,200,000 common shares of Hudbay (incorporated by reference to Exhibits 99.1 to Hudbays Form 6-K (Commission File No. 001-34244), furnished to the Commission on January 17, 2014). |
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4.10** |
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The material change report of HudBay Minerals Inc., dated February 14, 2014, in respect of the Offer (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 14, 2014). |
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4.11** |
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The press release of HudBay Minerals Inc., dated February 19, 2014, in respect of the announcement of Hudbays fourth quarter 2013 financial results (incorporated by reference to Hudbays filing pursuant to Rule 425 on February 19, 2014). |
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4.12** |
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The annual audited consolidated financial statements of HudBay Minerals Inc. for the years ended December 31, 2013 and 2012 and notes and the auditors report in respect thereof, together with the credit supporter disclosure filed concurrently therewith, and the managements discussion and analysis of HudBay Minerals Inc. for the financial years ended December 31, 2013 and 2012 (incorporated by reference to Exhibits 99.1, 99.2 and 99.3 to Hudbays Form 6-K filed February 20, 2014). |
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4.13** |
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Notice of Variation and Extension, dated March 14, 2014. |
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4.14* |
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Notice of Variation and Extension, dated March 31, 2014. |
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5.1** |
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Consent of Deloitte LLP. |
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5.2** |
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Consent of Goodmans LLP. |
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5.3** |
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Consent of Robert Carter. |
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5.4** |
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Consent of Cashel Meagher. |
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6.1** |
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Powers of Attorney (included on the signature pages of the Registration Statement on Form F-10 filed February 11, 2014). |
* Filed herewith.
** Previously filed.
Exhibit 4.14
This document is important and requires your immediate attention. If you are in any doubt as to how to deal with it, you should consult your investment advisor, stockbroker, bank, trust company or other nominee.
March 31, 2014
NOTICE OF VARIATION AND EXTENSION
of HudBay Minerals Inc.s offer to purchase
all of the issued and outstanding common shares of
AUGUSTA RESOURCE CORPORATION
for consideration per Augusta Share of
0.315 of a Hudbay Share
HudBay Minerals Inc. (the Offeror) hereby gives notice that it is varying its offer dated February 10, 2014, as amended by the Notice of Variation and Extension dated March 14, 2014 (together, the Original Offer), to purchase, on and subject to the terms and conditions of the Original Offer, as amended, all of the issued and outstanding common shares (the Augusta Shares) of Augusta Resource Corporation (Augusta), other than any Augusta Shares held directly or indirectly by the Offeror and its affiliates, including any Augusta Shares that may become issued and outstanding after February 10, 2014 but before the Expiry Time (as defined herein) upon the exercise, exchange or conversion of any securities of Augusta exercisable or exchangeable for, convertible into or otherwise conferring a right to acquire, any Augusta Shares, including, any option, warrant or convertible debenture (Convertible Securities), together with the associated rights issued under Augustas Shareholder Rights Plan, in order to, among other things, extend the Original Offer to 5:00 p.m. (Toronto Time) on May 5, 2014. The Original Offer, as amended and extended hereby, is referred to herein as the Offer.
THE ORIGINAL OFFER HAS BEEN AMENDED AND EXTENDED, AND IS NOW OPEN FOR ACCEPTANCE
UNTIL 5:00 P.M. (TORONTO TIME) ON MAY 5, 2014 (THE EXPIRY TIME).
The Offeror will not extend the Offer beyond May 5, 2014 unless, at or by that date, the remaining conditions to the Offer have been satisfied or waived, including the condition that Augustas Shareholder Rights Plan has been waived, invalidated or cease-traded. The Offeror will be applying to the British Columbia Securities Commission to cease trade Augustas Shareholder Rights Plan prior to the Expiry Time.
This Notice of Variation and Extension should be read in conjunction with the Original Offer and take-over bid circular (the Original Circular) dated February 10, 2014, as previously amended (the Original Offer together with the Original Circular collectively referred to as the Original Offer and Circular), and the letter of transmittal (the Letter of Transmittal) and notice of guaranteed delivery (the Notice of Guaranteed Delivery) that accompanied the Original Offer and Circular. The Original Offer and Circular, as amended previously and by this Notice of Variation and Extension collectively constitute the Offer and Circular. Except as otherwise set forth herein, the terms and conditions previously set forth in the Original Offer and Circular, Letter of Transmittal and Notice of Guaranteed Delivery, each as previously amended, continue to be applicable in all respects. All references to the Offer in the Original Offer and Circular, the Letter of Transmittal, the Notice of Guaranteed Delivery and this Notice of Variation and Extension mean the Original Offer as amended hereby, and all references in such documents to the Circular or the Offer and Circular mean the Original Offer and Circular as amended hereby. Unless the context requires otherwise, capitalized terms used herein but not defined herein that are defined in the Original Offer and Circular have the respective meanings given to them in the Original Offer and Circular.
The offering of Hudbay Shares pursuant to the Offer is made by a Canadian issuer that is permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare the Offer and Circular in accordance with the disclosure requirements of Canada. The Offer is subject to applicable disclosure requirements in Canada. Augusta Shareholders should be aware that such requirements are different from those of the United States and may differ from those in other jurisdictions. Financial statements included or incorporated by reference in the Offer and Circular have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and are subject to Canadian auditing standards and auditor independence rules, and thus may not be comparable to financial statements of United States companies or companies incorporated in other jurisdictions. Augusta Shareholders in the United States should be aware that the disposition of Augusta Shares and acquisition of Hudbay Shares by them as described in the Offer and Circular may have tax consequences in the United States, Canada and other jurisdictions. Such consequences may not be fully described in the Offer and Circular and such holders are urged to consult their tax advisors. The enforcement by Augusta Shareholders of civil liabilities under U.S. federal or state securities laws or applicable laws of other jurisdictions may be affected adversely by the fact that the Offeror is incorporated under and governed by the laws of Canada, that its officers and directors may be residents of jurisdictions other than the United States or such other jurisdictions, that the experts named in the Circular may be residents of jurisdictions other than the United States or such other jurisdictions, that all or a substantial portion of the assets of the Offeror and such persons may be located outside the United States or such other jurisdictions, that some of Augustas officers and directors are resident outside the United States or such other jurisdictions and that all or a substantial portion of the assets of Augusta and Augustas officers and directors may be located outside the United States or such other jurisdictions.
THE HUDBAY SHARES AND THE OFFER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC) OR ANY OTHER SECURITIES REGULATORY
AUTHORITY, NOR HAS THE SEC OR ANY OTHER SUCH AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFER AND CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should be aware that, during the period of the Offer, the Offeror or its affiliates, directly or indirectly, may bid for or make purchases of the securities to be distributed or to be exchanged, or certain related securities, as permitted by applicable laws or regulations of Canada or its provinces or territories. Neither the Offeror nor any of its affiliates intends to make any such purchases during the period of the Offer.
Information has been incorporated by reference in the Offer and Circular from documents filed with the securities commissions or similar authorities in Canada. Copies of the documents incorporated by reference in the Offer and Circular are available electronically on SEDAR and EDGAR at www.sedar.com and www.sec.gov, respectively.
The Depositary for the Offer is: |
Information Agent for the Offer is: | ||
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Equity Financial Trust Company |
Kingsdale Shareholder Services | ||
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The Dealer Managers for the Offer are: | |||
In Canada |
In the United States | ||
GMP Securities L.P. |
BMO Nesbitt Burns Inc. |
Griffiths McBurney Corp. |
BMO Capital Markets Corp. |
Augusta Shareholders who have validly deposited and not withdrawn their Augusta Shares need take no further action to accept the Offer.
Registered Augusta Shareholders who wish to accept the Offer must properly complete and execute the Letter of Transmittal (printed on YELLOW paper) that accompanied the Original Offer and Circular, or a manually executed facsimile thereof, and deposit it, at or prior to the Expiry Time, together with certificate(s) or Direct Registration System (DRS) Advices representing their Augusta Shares and all other required documents, with Equity Financial Trust Company (the Depositary) at its office in Toronto, Ontario specified in the Letter of Transmittal, in accordance with the instructions set out in the Letter of Transmittal (as set out in Section 3 of the Original Offer, Manner of Acceptance Letter of Transmittal). Alternatively, registered Augusta Shareholders may accept the Offer by following the procedure for guaranteed delivery set out in Section 3 of the Original Offer, Manner of Acceptance Procedure for Guaranteed Delivery, using the Notice of Guaranteed Delivery (printed on GREEN paper) that accompanied the Original Offer and Circular, or a manually executed facsimile thereof. Augusta Shareholders who hold their Augusta Shares with an investment advisor, stockbroker, bank, trust company or other nominee will not have received a Letter of Transmittal or Notice of Guaranteed Delivery, and should follow the instructions set out by such nominee to tender their Augusta Shares.
Persons whose Augusta Shares are registered in the name of an investment advisor, stockbroker, bank, trust company or other nominee should contact such nominee for assistance if they wish to accept the Offer in order to take the necessary steps to be able to deposit such Augusta Shares under the Offer. Nominees likely have established tendering cut-off times that are up to 48 hours prior to the Expiry Time. Augusta Shareholders must instruct their investment advisor, stockbroker, bank, trust company or other nominee promptly if they wish to tender.
Augusta Shareholders will not be required to pay any fee or commission if they accept the Offer by depositing their Augusta Shares directly with the Depositary or if they make use of the services of a Soliciting Dealer to accept the Offer.
Questions and requests for assistance may be directed to Kingsdale Shareholder Services (the Information Agent), who can be contacted at 1-866-229-8874 toll free in North America or at 1-416-867-2272 outside of North America or by e-mail at contactus@kingsdaleshareholder.com; or to the Depositary at the addresses indicated on the last page of this document and additional copies of this document, the Original Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery, or any documents incorporated by reference or otherwise related to the Offer, may be obtained, without charge, upon request from the Depositary or the Information Agent at their respective offices shown on the last page of this document, and are accessible on the Canadian Securities Administrators website at www.sedar.com, on EDGAR at www.sec.gov and on the Offerors website at www.hudbayminerals.com. These website addresses are provided for informational purposes only and no information contained on, or accessible from, these websites is incorporated by reference in the Offer and Circular unless otherwise expressly indicated in the Offer and Circular.
The information contained in this document is current only as of the date of this document. The Offeror does not undertake to update any such information except as required by applicable Law. Information in this document and in the Original Offer and Circular related to Augusta has been compiled from public sources see INFORMATION CONCERNING AUGUSTA in the Original Offer and Circular.
No broker, dealer, salesperson or other person has been authorized to give any information or make any representation other than those contained in this Notice of Variation and Extension or the Original Offer and Circular, and, if given or made, such information or representation must not be relied upon as having been authorized by the Offeror, the Depositary, the Information Agent or the Dealer Managers.
ADDITIONAL NOTICE TO UNITED STATES SHAREHOLDERS
AND OTHER SHAREHOLDERS OUTSIDE CANADA
The Offer is subject to Section 14(d) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), Regulation 14D promulgated by the SEC thereunder, Section 14(e) of the Exchange Act, and Regulation 14E promulgated by the SEC thereunder.
The Offeror has filed with the SEC a registration statement on Form F10, which contains a prospectus relating to the Offer, a tender offer statement on a Schedule TO and other documents and information, as such documents have been amended, modified, supplemented or restated. 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 CONTAINS OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFEROR, 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 SECs website, www.sec.gov. All such materials may also be obtained without charge at the Offerors website, www.hudbayminerals.com or by directing a written or oral request to the Information Agent for the Offer, Kingsdale Shareholder Services, at 1-866-229-8874 toll free in North America or at 1-416-867-2272 or by e-mail at contactus@kingsdaleshareholder.com or to the Vice President, Legal and Corporate Secretary of the Offeror at 25 York Street, Suite 800, Toronto, Ontario, telephone 1-416-362-8181.
Neither this document nor the Original Offer and Circular generally addresses the income tax consequences of the Offer to Augusta Shareholders in any jurisdiction outside Canada or the United States. Augusta Shareholders in a jurisdiction outside Canada or the United States should be aware that the disposition of Augusta Shares may have tax consequences which may not be described in this document or the Original Offer and Circular. Accordingly, Augusta Shareholders outside Canada and the United States should consult their own tax advisors with respect to tax considerations applicable to them.
The Original Offer and Circular also contains a cautionary note regarding mineral reserve and resource estimates prepared in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects see CAUTIONARY NOTE REGARDING MINERAL RESERVES AND MINERAL RESOURCES in the Original Offer and Circular.
NOTICE TO HOLDERS OF CONVERTIBLE SECURITIES
The Offer is made only for Augusta Shares, together with the associated rights issued under the Shareholder Rights Plan, and is not made for any options, warrants or convertible debentures or any other rights to acquire Augusta Shares. Any holder of Convertible Securities who wishes to accept the Offer should, subject to and to the extent permitted by the terms of such Convertible Securities and applicable Law, exercise, exchange or convert such Convertible Securities in order to obtain certificates representing Augusta Shares and deposit such Augusta Shares in accordance with the Offer. See Section 1 of the Original Offer, The Offer. Any such exercise, exchange or conversion must be completed sufficiently in advance of the Expiry Time to ensure that the holder of such Convertible Securities will have received certificates representing the Augusta Shares issuable upon such exercise, exchange or conversion in time for deposit prior to the Expiry Time, or in sufficient time to comply with the procedures described in Section 3 of the Original Offer, Manner of Acceptance Procedure for Guaranteed Delivery.
The tax consequences to holders of Convertible Securities of exercising or not exercising such securities are not described in the Offer and Circular. Holders of such Convertible Securities should consult their own tax advisors with respect to the potential tax consequences to them in connection with the decision to exercise or not exercise such securities.
REPORTING CURRENCY AND CURRENCY EXCHANGE RATE INFORMATION
All dollar references in this document and the Original Offer and Circular are in Canadian dollars, except where otherwise indicated. On February 7, 2014, the Bank of Canada noon rate of exchange for the Canadian dollar, expressed in U.S. dollars, was Canadian $1.00 = United States $0.9076.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Notice of Variation and Extension contains forward-looking statements and forward-looking information (collectively, forward-looking information) within the meaning of applicable Canadian and United States securities legislation. Forward-looking information includes information that relates to, among other things, the Offerors objectives, strategies, and intentions and future financial and operating performance and prospects, statements with respect to the anticipated timing, mechanics, completion and settlement of the Offer, including the Offerors intention to apply to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan, the prospects of Augustas strategic review process, the market for Hudbay Shares, the value of the Hudbay Shares received as consideration under the Offer, the Offerors anticipated production, the permitting, development and financing of the Rosemont Project, reasons to accept the Offer, and the purpose of the Offer. Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by the Offeror at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information. The material factors or assumptions that the Offeror identified and applied in drawing conclusions or making forecasts or projections set out in the forward looking information include, but are not limited to, the accuracy of Augustas public disclosure; the execution of the Offerors business and growth strategies, including the success of the its strategic investments and initiatives; the availability of financing for the Offerors exploration and development projects and activities; the ability to complete project targets on time and on budget and other events that may affect the Offerors ability to develop its projects; no significant and continuing adverse changes in general economic conditions or conditions in the financial markets; that all conditions to completion of the Offer will be satisfied or waived.
The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, the market value of the Hudbay Shares received as consideration under the Offer and the impact of such issuance on the market price of the Hudbay Shares, the development of the Rosemont Project not occurring as planned, the exercising of dissent and appraisal rights by Augusta Shareholders should a Compulsory Acquisition or Subsequent Acquisition Transaction be undertaken, the reduced trading liquidity of Augusta Shares not deposited under the Offer, Augusta becoming a minority-owned or majority-owned subsidiary of the Offeror after consummation of the Offer, the possibility that the Offeror may remain a minority shareholder of Augusta after consummation of the Offer without the ability to control the management or direction of Augusta, the inaccuracy of Augustas public disclosure upon which the Offer is predicated, the triggering of change of control provisions in Augustas agreements leading to adverse consequences, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of the Offerors projects (including the impact on project cost and schedule of construction delays and unforeseen risks and other factors beyond its control), depletion of the Offerors reserves, risks related to political or social unrest or change and those in respect of aboriginal and community relations and title claims, operational risks and hazards, including unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, dependence on key personnel and employee relations, volatile financial markets that may affect the Offerors ability to obtain financing on acceptable terms, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, the Offerors ability to comply with its pension and other post-retirement obligations, the Offerors ability to abide by the covenants in its debt instruments, as well as the risks discussed under the heading Risk Factors in the Original Offer and Circular and other documents filed with Canadian and U.S. securities regulatory authorities. Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, the reader should not place undue reliance on forward-looking information. The Offeror does not assume any obligation to update or revise any forward-looking information after the date of this Notice of Variation
and Extension or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.
The Original Offer and Circular also contain forward looking information and this cautionary note should be read in conjunction with the Cautionary Note Regarding Forward Looking Statements in the Original Offer and Circular.
NOTICE OF VARIATION AND EXTENSION
March 31, 2014
TO: THE HOLDERS OF COMMON SHARES OF AUGUSTA RESOURCE CORPORATION
This Notice of Variation and Extension amends and supplements the Original Offer and Circular, as previously amended, pursuant to which the Offeror is offering to purchase, on the terms and subject to the conditions of the Offer, all of the issued and outstanding Augusta Shares, other than any Augusta Shares held directly or indirectly by the Offeror and its affiliates, including any Augusta Shares that may become issued and outstanding upon the exercise, exchange or conversion of Convertible Securities after the date of the Original Offer and Circular but prior to the Expiry Time, together with the associated rights issued under the Shareholder Rights Plan, for consideration per Augusta Share of 0.315 of a Hudbay Share.
The Offeror will not extend the Offer beyond May 5, 2014 unless, at or by that date, the remaining conditions to the Offer have been satisfied or waived, including the condition that the Shareholder Rights Plan has been waived, invalidated or cease-traded. The Offeror will be applying to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to the Expiry Time.
The Offeror believes that the Offer represents full and fair value and is the best alternative available to Augusta Shareholders. As long as Augusta continues as a stand-alone entity, its shareholders face significant risk of value erosion and dilution due to uncertain permitting timelines and critical near term financing pressures.
· Augustas Strategic Review Process Has Failed: Augusta has not presented its shareholders with any alternative transactions to the Offer, despite the Offer having been announced 50 days ago and claims by Augusta that parties started conducting due diligence on the Rosemont Project prior to the Offeror launching the Offer. The signing of a confidentiality agreement is not an indication of a willingness to undertake a transaction that would be more beneficial to Augusta Shareholders than the Offer, and Augusta has not provided any evidence that there is any reasonable prospect of such a transaction.
· Augustas Scheduling of Site Visits is a Stalling Tactic: The length of additional time Augusta is anticipating to conclude its strategic review process is nothing more than a stalling tactic. It is unclear why site visits to a greenfield development project 30 miles from Tucson, Arizona would require three to four weeks and, more importantly, why site visits have not already occurred if interested bidders truly exist. If Augusta believed that its strategic review process would result in an alternative transaction, it would not need to continue to rely on the Shareholder Rights Plan as a means of denying Augusta Shareholders the ability to choose to accept the Offer.
· Augustas Shareholder Rights Plan is an Attempt to Deny Shareholder Choice: Augustas announcement, almost 50 days after the commencement of the Offer, that it will put the Shareholder Rights Plan to a vote at its annual meeting on May 9, 2014 is a further attempt to allow a group of current and former insiders to deny shareholder choice and suggests that the Augusta Board of Directors doesnt expect to have any alternative transaction to the Offer almost 90 days after the Offer was commenced. At a special meeting of Augusta Shareholders on October 17, 2013, the Shareholder Rights Plan was approved by holders of only 46% of the outstanding Augusta Shares, which would imply approval by only 19% of holders of the outstanding Augusta Shares if insiders and former insiders who voted in favour are excluded. In attempting to have another vote on the Shareholder Rights Plan, Augusta is acknowledging that the prior vote does not indicate that Augusta Shareholders support the application of the Shareholder Rights Plan in the context of the Offer, and Augustas insiders are continuing to seek to entrench themselves and deny Augusta Shareholders the opportunity to accept the Offer. If the Augusta Board of Directors truly wanted to put power directly in [shareholders] hands, it would allow Augusta Shareholders the opportunity to tender to the Offer.
· Augustas Current Share Price Likely to Fall in the Absence of the Offer or a Superior Proposal: The Offeror notes that since the Offer, Augusta has outperformed its peers by 30%. This is not sustainable; the
reality is that Augustas share price is likely to fall in the absence of the Offer or a superior proposal. Furthermore, any Augusta Shareholder wishing to sell a substantial number of shares at Augustas bid-affected price prior to the expiry of the Offer would be constrained by the lack of market liquidity.
1. Extension of the Offer
The Offeror has extended the time for acceptance of the Offer to 5:00 p.m. (Toronto Time) on May 5, 2014. Accordingly, the definition of Expiry Date in the Glossary section of the Original Offer and Circular is hereby deleted and replaced by the following:
Expiry Date means May 5, 2014 or such later date or dates to which the Offer may be extended from time to time by the Offeror in accordance with Section 5 of the Offer, Extension, Variation or Change of the Offer;
In addition, all references to 5:00 p.m. (Toronto Time) on April 2, 2014 in the Original Offer and Circular are amended to refer to 5:00 p.m. (Toronto Time) on May 5, 2014.
2. Other Amendments to the Offer and Circular
The first sentence of the first complete paragraph on the inside front cover of the Original Offer and Circular is hereby deleted and replaced by the following:
The Offer is subject to certain conditions, including, among other things the Shareholder Rights Plan (or any other shareholder rights plan or similar plan adopted by Augusta) having been waived, invalidated or cease-traded so as to have no effect in respect of, and so that it does not and will not reasonably be expected to adversely affect, the Offer or the Offeror and its affiliates. If the Shareholder Rights Plan (or any such other plan) has not otherwise been waived, terminated or invalidated, the Offeror intends to submit an application to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to May 5, 2014. Subject to the other terms and conditions of the Offer, the Offeror will not take up and pay for any tendered Augusta Shares unless each of the conditions of the Offer is satisfied or waived by the Offeror at or before the Expiry Time, including the condition that the Shareholder Rights Plan (or any such other plan) has been waived, invalidated or cease-traded as set out above.
The following sentence is hereby added to the Original Offer and Circular (a) after the final sentence of the first paragraph under the heading Will Augusta continue as a public company? on page (vii), (b) after the first sentence of the second full paragraph on page 4, (c) after the first sentence of the second paragraph under the heading Plans for Augusta on page 33 and (d) after the final paragraph under the heading Effect of the Offer on the Market for and Listing of Augusta Shares and Status as a Reporting Issuer on page 56:
If the Offeror does not acquire a sufficient number of Augusta Shares, it would be unable to cause the delisting of the Augusta Shares or to cause Augusta to cease to be a reporting issuer.
The following sentence is hereby added to the Original Offer and Circular (a) after the last sentence of the first paragraph under the heading If I decide not to tender, how will my Augusta Shares be affected? on page (vii), (b) before the last sentence in the second paragraph under the heading Purpose of the Offer and the Offerors Plans for Augusta on pages 3-4 and (c) after the first sentence of the second paragraph under the heading Purpose of the Offer on page 33:
The Offerors ability to advance the Rosemont Project will be dependent on the extent of its ownership of Augusta and its ability to control or influence the management and operations of Augusta.
The paragraphs under the heading Continued Participation in Rosemont without Single Asset Risk on pages 3 and 32 of the Original Offer and Circular are hereby deleted and replaced with the following paragraph:
As shareholders of the Offeror, former Augusta Shareholders would continue to benefit from future increases in value associated with the permitting and development of the Rosemont Project to the extent of the Offerors interest in Augusta, without the significant single asset permitting, development and financing risk to which Augusta Shareholders are currently exposed.
The following sentence is hereby added under the final paragraph on page 9 of the Original Offer and Circular:
As of 5:00 p.m. on March 13, 2014, 242,404 Augusta Shares had been tendered to and not withdrawn from the Offer.
The following sentences are hereby added after the final sentence of the second paragraph under the heading Other Terms of the Offer on page 24 of the Original Offer and Circular and after the final sentence in clause (i) on page 13 of the Letter of Transmittal:
The foregoing shall not restrict the applicability to the Offer of the federal securities laws of the United States or the jurisdiction of the courts of the United States with respect to the application of such laws.
The following sentence is hereby added after the first sentence of the second paragraph under Shareholder Rights Plan The Offer on page 35 of the Original Offer and Circular:
If the Shareholder Rights Plan (or any such other plan) has not otherwise been waived, terminated or invalidated, the Offeror intends to submit an application to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to May 5, 2014.
The third paragraph under the heading Summary of the Offerors Historical and Pro Forma Financial Information on page 36 of the Original Offer and Circular is hereby deleted and replaced by the following:
The summary unaudited pro forma consolidated financial information set forth below should be read in conjunction with the unaudited pro forma consolidated financial statements of the Offeror and the accompanying notes thereto included as Schedules B, D and E to this Offer and Circular. The summary unaudited pro forma consolidated financial information for the Offeror gives effect to the proposed acquisition of Augusta as if it had occurred as at September 30, 2013, for the purposes of the pro forma consolidated balance sheet information and as at January 1, 2012 for the purposes of the pro forma consolidated statements of earnings for the year ended December 31, 2012 and the nine months ended September 30, 2013. Because the minimum tender condition has been waived by the Offeror, it is possible that the Offeror will not acquire the number of Augusta Shares pursuant to the Offer that would permit it to effect a Compulsory Acquisition or a Subsequent Acquisition Transaction, particularly if the Offeror acquires such number of Augusta Shares that, together with the Augusta Shares directly or indirectly held by the Offeror and its affiliates, represents less than 66 2/3% of total Augusta Shares on a fully diluted basis pursuant to the Offer. If the number of Augusta Shares the Offeror takes up and pays for under the Offer is not sufficient to permit a Compulsory Acquisition or Subsequent Acquisition Transaction, Augusta may continue as a separate, public company following the completion of the Offer with shareholders other than the Offeror. Therefore, in addition to the pro forma financial statements reflecting the acquisition of all of the issued and outstanding Augusta Shares, which can be found in Schedule B to the Offer and Circular, pro forma financial statements have been included to show the pro forma effect of the acquisition by the Offeror of 33% and 51% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer) and are attached as Schedules D and E, respectively, to the Offer and Circular. These acquisition amounts have been selected for illustrative purposes only, and there can be no assurance that the Offeror will acquire Augusta Shares in these amounts, or any specified amounts, in the Offer.
In preparing the unaudited pro forma consolidated financial statements, management of the Offeror has made certain assumptions that affect the amounts reported in the unaudited pro forma consolidated financial statements. The summary unaudited pro forma consolidated financial information is not intended
to be indicative of the results that would actually have occurred, or the results expected in future periods, had the events reflected herein occurred on the dates indicated. Actual amounts recorded upon consummation of the Offer will differ from the pro forma information presented below. Pro forma adjustments have been made to account for significant accounting policy differences identified as of the date of this Offer and Circular. The review undertaken by the Offeror was to identify significant accounting policy differences where the impact was potentially material and could be reasonably estimated. Further accounting policy differences may be identified after the consummation of the proposed transaction. Any potential synergies that may be realized after consummation of the proposed transaction have been excluded from the unaudited pro forma consolidated financial statements.
That certain table Summary of Unaudited Pro Forma Consolidated Financial Information of the Offeror on page 38 of the Original Offer and Circular is hereby deleted and replaced by the following:
Summary of Unaudited Pro Forma Consolidated Financial Information of the Offeror
(in millions of $ except per share information)
|
|
Nine |
|
Year |
|
Nine |
|
Year |
|
Nine |
|
Year |
|
|
|
Sept. 30 |
|
Dec. 31 |
|
Sept. 30 |
|
Dec. 31 |
|
Sept. 30 |
|
Dec. 31 |
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
|
|
100% |
|
100% |
|
33% |
|
33% |
|
51% |
|
51% |
|
Certain Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
380.7 |
|
702.6 |
|
380.7 |
|
702.6 |
|
380.7 |
|
702.6 |
|
Gross Profit |
|
65.7 |
|
197.6 |
|
65.7 |
|
197.6 |
|
65.7 |
|
197.6 |
|
Results from operating activities |
|
1.4 |
|
97.5 |
|
8.2 |
|
105.5 |
|
1.4 |
|
97.5 |
|
(Loss) profit for the period/year |
|
(53.6 |
) |
(4.7 |
) |
(49.7 |
) |
2.2 |
|
(53.6 |
) |
(4.7 |
) |
(Loss) profit attributable to owners of the Company |
|
(51.7 |
) |
(2.0 |
) |
(47.8 |
) |
4.9 |
|
(48.8 |
) |
2.8 |
|
(Loss) profit per share (basic and diluted)(1) |
|
(0.24 |
) |
(0.01 |
) |
(0.27 |
) |
0.03 |
|
(0.26 |
) |
0.01 |
|
Ratio of earnings to fixed charges |
|
(12.4 |
) |
5.2 |
|
(10.3 |
) |
5.5 |
|
(11.0 |
) |
5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
772.9 |
|
|
|
779.5 |
|
|
|
772.9 |
|
|
|
Property, plant and equipment |
|
3,031.0 |
|
|
|
2,359.3 |
|
|
|
3,041.3 |
|
|
|
Current assets |
|
1,062.6 |
|
|
|
1,057.5 |
|
|
|
1,062.6 |
|
|
|
Non-current assets |
|
3,253.5 |
|
|
|
2,709.5 |
|
|
|
3,263.8 |
|
|
|
Total assets |
|
4,316.1 |
|
|
|
3,767.0 |
|
|
|
4,326.4 |
|
|
|
Current liabilities |
|
411.6 |
|
|
|
309.2 |
|
|
|
411.6 |
|
|
|
Long-term debt |
|
657.4 |
|
|
|
654.8 |
|
|
|
657.4 |
|
|
|
Equity |
|
2,015.1 |
|
|
|
1,723.1 |
|
|
|
2,021.3 |
|
|
|
Total liabilities and equity |
|
4,316.1 |
|
|
|
3,767.0 |
|
|
|
4,326.4 |
|
|
|
Book value per share |
|
9.5 |
|
|
|
9.6 |
|
|
|
10.7 |
|
|
|
(1) Attributable to owners.
The final sentence on page 38 of the Original Offer and Circular is hereby deleted and replaced by the following:
The following table sets forth the number of currently outstanding Hudbay Shares and the number expected to be outstanding upon completion of the Offer, based on certain assumptions, including the acquisition by the Offeror of all of the issued and outstanding Augusta Shares.
The first paragraph under the heading Consolidated Capitalization on page 39 of the Original Offer and Circular is hereby deleted and replaced by the following:
As at the date hereof, there have been no material changes in the Hudbay Share or loan capitalization of the Offeror since September 30, 2013, other than: (i) the issuance of US$100 million aggregate principal amount of the Offerors 9.50% senior unsecured notes on December 9, 2013 (the December 2013 Notes); (ii) the issuance of 20,930,000 Hudbay Shares pursuant to an equity offering (the Equity Offering) and (iii) the draw down of approximately $56.5 million pursuant to the equipment financing facility the Offeror has entered into with Cat Financial (the Equipment Financing Loan). The following table sets forth the consolidated capitalization of the Company: (i) as at September 30, 2013; (ii) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering and the Equipment Financing Loan and before giving effect to the Offer; (iii) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of all of the issued and outstanding Augusta Shares; (iv) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of 33% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer); and (v) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of 51% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer).
That certain table Consolidated Capitalization on page 39 of the Original Offer and Circular is hereby deleted and replaced by the following:
|
|
As at September 30, 2013 |
| |||||||||||||
|
|
Actual |
|
After giving effect |
|
After giving |
|
After giving |
|
After giving effect |
| |||||
|
|
(Dollar amount in thousands) |
| |||||||||||||
Cash and cash equivalents(1) |
|
$ |
792,487 |
|
$ |
1,058,052 |
(2)(3) |
$ |
1,038,486 |
(2)(3) |
$ |
1,045,052 |
(2)(3) |
$ |
1,038,486 |
(2)(3) |
Debt (including current maturities): |
|
|
|
|
|
|
|
|
|
|
| |||||
Existing Credit Facilities(4) |
|
|
|
|
|
|
|
|
|
|
| |||||
Other secured debt(5) |
|
|
|
$ |
58,202 |
|
$ |
58,202 |
|
$ |
58,202 |
|
$ |
58,202 |
| |
Total secured debt |
|
|
|
|
|
|
|
|
|
|
| |||||
Total senior unsecured debt |
|
$ |
654,827 |
|
$ |
654,827 |
|
$ |
654,827 |
|
$ |
654,827 |
|
$ |
654,827 |
|
Principal amount of December 2013 Notes(1)(2) |
|
|
|
$ |
99,961 |
|
$ |
99,961 |
|
$ |
99,961 |
|
$ |
99,961 |
| |
Long-term debt incurred in Offer (including current portion) |
|
|
|
|
|
$ |
96,058 |
(6) |
|
|
$ |
96,058 |
(6) | |||
Total debt(5) |
|
$ |
654,827 |
|
$ |
812,990 |
|
$ |
909,048 |
(6) |
$ |
812,990 |
|
$ |
909,048 |
(6) |
Equity: |
|
|
|
|
|
|
|
|
|
|
| |||||
Equity |
|
$ |
1,641,784 |
|
$ |
1,641,784 |
|
$ |
1,641,784 |
|
$ |
1,641,784 |
|
$ |
1,641,784 |
|
Equity Offering(3) |
|
|
|
$ |
165,604 |
|
$ |
165,604 |
|
$ |
165,604 |
|
$ |
165,604 |
| |
Shares issued pursuant to the Offer |
|
|
|
|
|
$ |
372,601 |
|
$ |
74,256 |
|
$ |
156,571 |
| ||
Total equity |
|
$ |
1,641,784 |
|
$ |
1,807,388 |
|
$ |
2,179,989 |
|
$ |
1,881,644 |
|
$ |
1,963,959 |
|
Total capitalization(1) |
|
$ |
2,296,611 |
|
$ |
2,620,378 |
|
$ |
3,089,037 |
|
$ |
2,694,634 |
|
$ |
2,873,007 |
|
(1) Reflects the United States dollar/Canadian dollar closing exchange rate as reported by the Bank of Canada as at September 30, 2013.
(2) Reflects net proceeds from the offering of the December 2013 Notes of $99,961.
(3) Reflects net proceeds from the Equity Offering of $165,604.
(4) As of September 30, 2013, there were no borrowings outstanding under the Credit Facility. As of September 30, 2013, the Offeror had commitments available to be borrowed under its credit facility of US$72 million (based on the maximum availability, equal to the lesser of US$100 million and a borrowing base related to accounts receivable and inventory of the Manitoba business unit); however, borrowing capacity was reduced by $64.1 million of letters of credit outstanding on such date.
(5) Does not include available credit facilities, including the undrawn portion of the equipment financing facility for the Constancia mobile fleet which the Offeror has entered into with Cat Financial. The equipment financing facility will be used to finance the purchase of up to approximately US$130 million of equipment.
(6) On December 16, 2013, Augusta announced that it had closed an additional loan facility for US$26.6 million (the Expanded Loan) and had drawn down the first tranche of US$3.5 million. In connection with the Expanded Loan, Augusta paid an arrangement fee of US$1,120,000 and issued a total of 3.3 million Warrants to the lender with an exercise price of US$2.12 per share, subject to amendment if certain conditions are not met. The Warrants expire on December 12, 2016.
(7) Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule B to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.
(8) Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule D to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.
(9) Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule E to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.
The following is added as Schedules D and E to the Original Offer and Circular:
Hudbay Minerals Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
September 30, 2013
(expressed in thousands of Canadian dollars)
Hudbay Minerals Inc.
Pro Forma Consolidated Balance Sheet
(Unaudited) As at September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
792,487 |
|
(13,000 |
) |
(b) |
|
779,487 |
|
Trade and other receivables |
|
120,842 |
|
|
|
|
|
120,842 |
|
Inventories |
|
56,360 |
|
|
|
|
|
56,360 |
|
Prepaid expenses and other current assets |
|
60,796 |
|
|
|
|
|
60,796 |
|
Other financial assets |
|
175 |
|
|
|
|
|
175 |
|
Taxes receivable |
|
39,884 |
|
|
|
|
|
39,884 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
1,070,544 |
|
(13,000 |
) |
|
|
1,057,544 |
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
49,587 |
|
|
|
|
|
49,587 |
|
Inventories |
|
6,579 |
|
|
|
|
|
6,579 |
|
Prepaid expenses |
|
624 |
|
|
|
|
|
624 |
|
Investment in Augusta |
|
|
|
142,532 |
|
(a),(b) |
|
142,532 |
|
Other financial assets |
|
86,786 |
|
(48,192 |
) |
(d) |
|
38,594 |
|
Intangible assets - computer software |
|
13,278 |
|
|
|
|
|
13,278 |
|
Property, plant and equipment |
|
2,359,330 |
|
|
|
|
|
2,359,330 |
|
Goodwill |
|
69,138 |
|
|
|
|
|
69,138 |
|
Deferred tax assets |
|
29,800 |
|
|
|
|
|
29,800 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
3,685,666 |
|
81,340 |
|
|
|
3,767,006 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
186,300 |
|
|
|
|
|
186,300 |
|
Taxes payable |
|
128 |
|
|
|
|
|
128 |
|
Other liabilities |
|
41,985 |
|
|
|
|
|
41,985 |
|
Other financial liabilities |
|
14,275 |
|
|
|
|
|
14,275 |
|
Deferred revenue |
|
66,542 |
|
|
|
|
|
66,542 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
309,230 |
|
|
|
|
|
309,230 |
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities |
|
23,333 |
|
|
|
|
|
23,333 |
|
Long-term debt |
|
654,827 |
|
|
|
|
|
654,827 |
|
Deferred revenue |
|
475,122 |
|
|
|
|
|
475,122 |
|
Provisions |
|
144,349 |
|
|
|
|
|
144,349 |
|
Pension obligations |
|
34,603 |
|
|
|
|
|
34,603 |
|
Other employee benefits |
|
142,643 |
|
|
|
|
|
142,643 |
|
Deferred tax liabilities |
|
259,775 |
|
|
|
|
|
259,775 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
2,043,882 |
|
|
|
|
|
2,043,882 |
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 5) |
|
1,021,088 |
|
74,256 |
|
(a) |
|
1,095,344 |
|
Reserves |
|
2,308 |
|
(20,865 |
) |
(d) |
|
(18,557 |
) |
Retained earnings (deficit) |
|
620,472 |
|
27,949 |
|
(b),(c) |
|
648,421 |
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to controlling shareholders |
|
1,643,868 |
|
81,340 |
|
|
|
1,725,208 |
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
(2,084 |
) |
|
|
|
|
(2,084 |
) |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
1,641,784 |
|
81,340 |
|
|
|
1,723,124 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
3,685,666 |
|
81,340 |
|
|
|
3,767,006 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Pro Forma Consolidated Statement of Income
(Unaudited) For the nine months ended September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
380,720 |
|
|
|
|
|
380,720 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
Mining operating costs |
|
260,212 |
|
|
|
|
|
260,212 |
|
Depreciation and amortization |
|
54,826 |
|
|
|
|
|
54,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
315,038 |
|
|
|
|
|
315,038 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
65,682 |
|
|
|
|
|
65,682 |
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
29,919 |
|
|
|
|
|
29,919 |
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
|
22,082 |
|
|
|
|
|
22,082 |
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
(417 |
) |
|
|
|
|
(417 |
) |
|
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
5,871 |
|
|
|
|
|
5,871 |
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities (Note 1) |
|
8,227 |
|
|
|
|
|
8,227 |
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
(2,870 |
) |
|
|
|
|
(2,870 |
) |
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
7,144 |
|
|
|
|
|
7,144 |
|
|
|
|
|
|
|
|
|
|
|
Other finance losses |
|
26,263 |
|
|
|
|
|
26,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
30,537 |
|
|
|
|
|
30,537 |
|
Share of investment in Augusta |
|
|
|
(1,941 |
) |
(e) |
|
(1,941 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before tax |
|
(22,310 |
) |
(1,941 |
) |
|
|
(24,251 |
) |
|
|
|
|
|
|
|
|
|
|
Tax expense (recovery) |
|
25,484 |
|
|
|
|
|
25,484 |
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
(47,794 |
) |
(1,941 |
) |
|
|
(49,735 |
) |
|
|
|
|
|
|
|
|
|
|
Attributable to |
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
(45,854 |
) |
(1,941 |
) |
|
|
(47,795 |
) |
Non-controlling interests |
|
(1,940 |
) |
|
|
|
|
(1,940 |
) |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
(47,794 |
) |
(1,941 |
) |
|
|
(49,735 |
) |
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to owners of the company |
|
|
|
|
|
|
|
|
|
Basic and diluted (note 6) |
|
(0.27 |
) |
|
|
|
|
(0.27 |
) |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (thousands) (note 6) |
|
172,038 |
|
|
|
|
|
179,938 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Pro Forma Consolidated Statement of Income
(Unaudited) For the year ended December 31, 2012
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
702,550 |
|
|
|
|
|
702,550 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
Mining operating costs |
|
429,155 |
|
|
|
|
|
429,155 |
|
Depreciation and amortization |
|
75,801 |
|
|
|
|
|
75,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
504,956 |
|
|
|
|
|
504,956 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
197,594 |
|
|
|
|
|
197,594 |
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
39,516 |
|
|
|
|
|
39,516 |
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
|
43,572 |
|
|
|
|
|
43,572 |
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
(2,316 |
) |
|
|
|
|
(2,316 |
) |
|
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
11,332 |
|
|
|
|
|
11,332 |
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities (Note 1) |
|
105,490 |
|
|
|
|
|
105,490 |
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
(6,217 |
) |
|
|
|
|
(6,217 |
) |
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
14,858 |
|
|
|
|
|
14,858 |
|
|
|
|
|
|
|
|
|
|
|
Other finance losses (gains) |
|
44,700 |
|
(26,617 |
) |
(d) |
|
18,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
53,341 |
|
(26,617 |
) |
|
|
26,724 |
|
Share of investment in Augusta |
|
|
|
(3,238 |
) |
(e) |
|
(3,238 |
) |
|
|
|
|
|
|
|
|
|
|
Profit before tax |
|
52,149 |
|
23,379 |
|
|
|
75,528 |
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
73,319 |
|
|
|
|
|
73,319 |
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) for the year |
|
(21,170 |
) |
23,379 |
|
|
|
2,209 |
|
|
|
|
|
|
|
|
|
|
|
Attributable to |
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
(18,507 |
) |
23,379 |
|
|
|
4,872 |
|
Non-controlling interests |
|
(2,663 |
) |
|
|
|
|
(2,663 |
) |
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) for the year |
|
(21,170 |
) |
23,379 |
|
|
|
2,209 |
|
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) per share attributable to owners of the company |
|
|
|
|
|
|
|
|
|
Basic (note 6) |
|
(0.11 |
) |
|
|
|
|
0.03 |
|
Diluted (note 6) |
|
(0.11 |
) |
|
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (thousands) (note 6) |
|
171,961 |
|
|
|
|
|
179,861 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
1 Basis of presentation
The unaudited pro forma consolidated balance sheet of Hudbay Minerals Inc. (the Company or Hudbay) as at September 30, 2013 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been derived by management based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), for illustrative purposes only, after giving effect to the acquisition of a 33% interest in the share capital of Augusta Resource Corporation (Augusta), including common shares the Company owned prior to the Take-over Bid Circular, by the Company (note 3). Adjustments applied are directly attributable to the transaction, factually supportable, and expected to have a continuing impact. Terms not otherwise defined herein have the meanings given thereto in the Take-over Bid Circular of the Company or Augusta dated February 10, 2014.
These unaudited pro forma consolidated financial statements have been compiled as follows:
a) an unaudited pro forma consolidated balance sheet giving effect to the transaction described in note 3, as if the transaction occurred on September 30, 2013 based on:
· the unaudited condensed consolidated interim balance sheet of the Company as at September 30, 2013; and
· information derived from the unaudited condensed consolidated interim statement of financial position of Augusta as at September 30, 2013.
b) an unaudited pro forma consolidated income statement for the nine months ended September 30, 2013, which assumes the transaction occurred as of January 1, 2012, based on:
· the unaudited condensed consolidated interim income statement of the Company for the nine months ended September 30, 2013; and,
· information derived from the unaudited condensed consolidated interim statement of comprehensive loss of Augusta for the nine months ended September 30, 2013.
c) an unaudited pro forma consolidated income statement for the year ended December 31, 2012, which assumes the transaction occurred as of January 1, 2012, based on:
· the audited consolidated income statement of the Company for the year ended December 31, 2012; and
· information derived from the audited consolidated statement of comprehensive profit (loss) of Augusta for the year ended December 31, 2012.
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
It is managements opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation, in all material respects, of the transactions described in notes 3 and 4 in accordance with IFRS, applied on a basis consistent with the Companys accounting policies. The unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations that might be obtained in the future.
The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and Augusta.
Augustas financial statements are presented in United States dollars. For the purposes of these unaudited pro forma consolidated financial statements, any financial information of Augusta has been translated into Canadian dollars at the following rates:
· September 30, 2013 balance sheet at the exchange rate of $1.0303;
· December 31, 2012 income statement at the average rate for the year of $0.9994; and
· September 30, 2013 income statement at the average rate for the period of $1.0236.
All foreign exchange rates have been obtained from the Bank of Canada website. Unless where otherwise noted, these unaudited pro forma consolidated financial statements and their accompanying notes are presented in Canadian dollars.
Prior to the transaction described in Note 3, the Company owned 23,058,585 shares of Augusta which were recorded on the unaudited condensed interim balance sheet of the Company at September 30, 2013 at a fair value of $48,192 (cost of $69,058).
The Company assumes they will have significant influence over Augusta subsequent to the transaction. The allocation of the preliminary purchase price to reflect the fair values of the identifiable net assets is based on managements estimate of such assets and liabilities and, accordingly, the adjustments that have been included in the pro forma consolidated balance sheet may be subject to change. The final purchase price allocations may differ materially from the allocations included herein.
2 Summary of significant accounting policies
These unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies, as set out in the audited consolidated financial statements of the Company as at December 31, 2012. Management has determined, based on their initial assessment, that certain adjustments may be necessary to conform Augustas audited consolidated financial statements to the accounting policies used by the Company in the preparation of its audited consolidated financial statements:
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
a) Stock based compensation Augusta capitalizes stock based compensation related to personnel that service their development project to development costs. Hudbay expenses similar charges to various income statement accounts. The amount of the cumulative impact is unknown at the current time.
b) Deposits and prepayments on long-lead equipment - Augusta presents this as a separate financial statement line item. Hudbay groups these assets within prepaid expenses. An amount of $12,000 has been reclassified to conform to Hudbay policies.
3 The transaction
Proposed transaction
These pro forma financial statements have been prepared on the basis consistent with the terms of the Take-over Bid Circular, but under the assumption that Hudbay acquires 33% of the issued and outstanding common shares of Augusta, including any Augusta Shares held directly or indirectly by Hudbay and its affiliates prior to the Take-over Bid Circular.
The transaction will be accounted for as an investment in associate under the equity method. A summary of the allocation of the preliminary purchase price to the acquired assets and liabilities assumed is as follows:
|
|
$ |
|
|
|
|
|
Preliminary purchase price |
|
|
|
Hudbay share consideration (note 4(a)) |
|
74,256 |
|
Fair value of Augusta shares previously held by Hudbay (note 4(c)) |
|
68,276 |
|
|
|
|
|
Investment in Augusta |
|
142,532 |
|
The final purchase price and the Companys share of the Augustas fair value of the identifiable net assets acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the purchase price, including share consideration, and the fair values of net assets will vary from those shown above. These differences may be material.
4 Pro forma assumptions and adjustments
The unaudited pro forma consolidated financial statements reflect the following assumptions and adjustments to give effect to the acquisition of 33% of the issued and outstanding common shares of Augusta as described in note 3 as if the transactions had occurred on January 1, 2012 for statement of income items and September 30, 2013 for balance sheet items. Assumptions relating to the share price of Hudbay or Augusta have used the date of February 7, 2014 which represents the last trading day before February 10, 2014.
a) An adjustment to reflect the issuance of 7,899,596 Hudbay shares in exchange for 25,078,082 common shares of Augusta representing a share exchange ratio of 0.315 Hudbay shares to 1 Augusta share and an
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
adjustment to recognize the related investment in Augusta. The closing price of Augusta shares on February 7, 2014 was $2.51. Future movements in share prices may impact the share numbers disclosed within.
b) An adjustment to reflect the transaction costs of $13,000 in professional fees.
c) An adjustment to re-measure the fair value of the Companys existing investment in Augusta held prior to investment becoming an associate. This investment is designated as an available-for-sale investment by Hudbay, carried at fair value and all fair value changes are recognized in other comprehensive income (OCI), except for declines in values which are significant or prolonged which are recognized in the statement of loss.
d) An adjustment to eliminate the Companys existing investment in Augusta as at September 30, 2013 and an adjustment to eliminate the related accumulated fair value gains (losses) in reserves. Correspondingly, recognized fair value changes in the statement of income are eliminated for the nine months ended September 30, 2013 and the year ended December 31, 2012 of $nil and $26,617, respectively.
e) An adjustment to recognize Hudbays share of investment in Augusta.
5 Pro forma share capital
|
|
September 30, 2013 |
|
December 31, 2012 |
| ||||
|
|
Number |
|
|
|
Number |
|
|
|
|
|
(000s) |
|
$ |
|
(000s) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Hudbays common shares outstanding |
|
172,078 |
|
1,021,088 |
|
171,984 |
|
1,020,458 |
|
Hudbays common shares issued under the proposed transaction (note 4(a)) |
|
7,900 |
|
74,256 |
|
7,900 |
|
74,256 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma share capital |
|
179,978 |
|
1,095,344 |
|
179,884 |
|
1,094,714 |
|
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
6 Pro forma earnings/(loss) per share
For the purposes of the unaudited pro forma consolidated financial statements, the earnings/(loss) per share has been calculated using the weighted average number of shares which would have been outstanding as at the period end, after giving effect to the transaction described in notes 3 and 4 as if it had occurred on January 1, 2012.
|
|
September 30, |
|
December 31, |
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
Actual weighted average number of Hudbay shares outstanding (thousands) |
|
172,038 |
|
171,961 |
|
Assumed number of Hudbay shares issued to Augusta shareholders (note 4(a)) (thousands) |
|
7,900 |
|
7,900 |
|
|
|
|
|
|
|
Pro forma weighted average number of Hudbay shares outstanding Basic (thousands) |
|
179,938 |
|
179,861 |
|
Actual number of Hudbay dilutive securities (thousands) |
|
219 |
|
275 |
|
Pro forma weighted average number of Hudbay shares outstanding Diluted (thousands) |
|
180,157 |
|
180,136 |
|
|
|
|
|
|
|
Pro forma profit/(loss) attributable to owners of the Company |
|
(47,795 |
) |
4,872 |
|
Pro forma earnings/(loss) per share - basic |
|
(0.27 |
) |
0.03 |
|
Pro forma earnings/(loss) per share - diluted |
|
(0.27 |
) |
0.03 |
|
Hudbay Minerals Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
September 30, 2013
(expressed in thousands of Canadian dollars)
Hudbay Minerals Inc.
Pro Forma Consolidated Balance Sheet
(Unaudited) As at September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Augusta |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
(Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
792,487 |
|
772 |
|
(20,338 |
) |
(b), (f) |
|
772,921 |
|
Trade and other receivables |
|
120,842 |
|
7,366 |
|
|
|
|
|
128,208 |
|
Inventories |
|
56,360 |
|
|
|
|
|
|
|
56,360 |
|
Prepaid expenses and other current assets |
|
60,796 |
|
4,085 |
|
|
|
|
|
64,881 |
|
Other financial assets |
|
175 |
|
154 |
|
|
|
|
|
329 |
|
Taxes receivable |
|
39,884 |
|
|
|
|
|
|
|
39,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
1,070,544 |
|
12,377 |
|
(20,338 |
) |
|
|
1,062,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
49,587 |
|
|
|
|
|
|
|
49,587 |
|
Inventories |
|
6,579 |
|
|
|
|
|
|
|
6,579 |
|
Prepaid expenses |
|
624 |
|
12,025 |
|
|
|
|
|
12,649 |
|
Other financial assets |
|
86,786 |
|
1,422 |
|
(48,192 |
) |
(g), (h) |
|
40,016 |
|
Intangible assets - computer software |
|
13,278 |
|
1,459 |
|
|
|
|
|
14,737 |
|
Property, plant and equipment |
|
2,359,330 |
|
296,657 |
|
385,327 |
|
(d) |
|
3,041,314 |
|
Goodwill |
|
69,138 |
|
|
|
|
|
|
|
69,138 |
|
Deferred tax assets |
|
29,800 |
|
|
|
|
|
|
|
29,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
3,685,666 |
|
323,940 |
|
316,797 |
|
|
|
4,326,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
186,300 |
|
5,946 |
|
|
|
|
|
192,246 |
|
Taxes payable |
|
128 |
|
|
|
|
|
|
|
128 |
|
Other liabilities |
|
41,985 |
|
2,886 |
|
|
|
|
|
44,871 |
|
Other financial liabilities |
|
14,275 |
|
93,510 |
|
|
|
|
|
107,785 |
|
Deferred revenue |
|
66,542 |
|
|
|
|
|
|
|
66,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
309,230 |
|
102,342 |
|
|
|
|
|
411,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities |
|
23,333 |
|
795 |
|
|
|
|
|
24,128 |
|
Long-term debt |
|
654,827 |
|
2,548 |
|
|
|
(c), (e) |
|
657,375 |
|
Deferred revenue |
|
475,122 |
|
|
|
|
|
|
|
475,122 |
|
Provisions |
|
144,349 |
|
|
|
|
|
|
|
144,349 |
|
Pension obligations |
|
34,603 |
|
|
|
|
|
|
|
34,603 |
|
Other employee benefits |
|
142,643 |
|
|
|
|
|
|
|
142,643 |
|
Deferred tax liabilities |
|
259,775 |
|
2,932 |
|
152,590 |
|
(d) |
|
415,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
2,043,882 |
|
108,617 |
|
152,590 |
|
|
|
2,305,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 5) |
|
1,021,088 |
|
227,392 |
|
(70,821 |
) |
(a), (f), (j) |
|
1,177,659 |
|
Reserves |
|
2,308 |
|
28,543 |
|
(28,682 |
) |
(a), (g), (h), (i) |
|
2,169 |
|
Retained earnings (deficit) |
|
620,472 |
|
(40,612 |
) |
41,477 |
|
(a), (b), (h), (j) |
|
621,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to controlling shareholders |
|
1,643,868 |
|
215,323 |
|
(58,026 |
) |
|
|
1,801,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
(2,084 |
) |
|
|
222,233 |
|
(a) |
|
220,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
1,641,784 |
|
215,323 |
|
164,207 |
|
|
|
2,021,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
3,685,666 |
|
323,940 |
|
316,797 |
|
|
|
4,326,403 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Pro Forma Consolidated Statement of Income
(Unaudited) For the nine months ended September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Augusta |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
(Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
380,720 |
|
|
|
|
|
|
|
380,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
Mining operating costs |
|
260,212 |
|
|
|
|
|
|
|
260,212 |
|
Depreciation and amortization |
|
54,826 |
|
|
|
|
|
|
|
54,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315,038 |
|
|
|
|
|
|
|
315,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
65,682 |
|
|
|
|
|
|
|
65,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
29,919 |
|
5,442 |
|
|
|
|
|
35,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
|
22,082 |
|
1,342 |
|
|
|
|
|
23,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
(417 |
) |
|
|
|
|
|
|
(417 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
5,871 |
|
|
|
|
|
|
|
5,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities (Note 1) |
|
8,227 |
|
(6,784 |
) |
|
|
|
|
1,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
(2,870 |
) |
(821 |
) |
|
|
|
|
(3,691 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
7,144 |
|
71 |
|
|
|
|
|
7,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other finance losses |
|
26,263 |
|
476 |
|
|
|
|
|
26,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,537 |
|
(274 |
) |
|
|
|
|
30,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before tax |
|
(22,310 |
) |
(6,510 |
) |
|
|
|
|
(28,820 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense (recovery) |
|
25,484 |
|
(686 |
) |
|
|
|
|
24,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
(47,794 |
) |
(5,824 |
) |
|
|
|
|
(53,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to |
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
(45,854 |
) |
(5,824 |
) |
2,854 |
|
(a) |
|
(48,824 |
) |
Non-controlling interests |
|
(1,940 |
) |
|
|
(2,854 |
) |
(a) |
|
(4,794 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
(47,794 |
) |
(5,824 |
) |
|
|
|
|
(53,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to owners of the company |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (note 6) |
|
(0.27 |
) |
|
|
|
|
|
|
(0.26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (thousands) (note 6) |
|
172,038 |
|
|
|
|
|
|
|
188,694 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Pro Forma Consolidated Statement of Income
(Unaudited) For the year ended December 31, 2012
(expressed in thousands of Canadian dollars)
|
|
Hudbay |
|
Augusta |
|
Adjustments |
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
$ |
|
Note 4 |
|
$ |
|
|
|
|
|
(Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
702,550 |
|
|
|
|
|
|
|
702,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
Mining operating costs |
|
429,155 |
|
|
|
|
|
|
|
429,155 |
|
Depreciation and amortization |
|
75,801 |
|
|
|
|
|
|
|
75,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
504,956 |
|
|
|
|
|
|
|
504,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
197,594 |
|
|
|
|
|
|
|
197,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
39,516 |
|
6,739 |
|
|
|
|
|
46,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
|
43,572 |
|
1,213 |
|
|
|
|
|
44,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
(2,316 |
) |
|
|
|
|
|
|
(2,316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
11,332 |
|
|
|
|
|
|
|
11,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities (Note 1) |
|
105,490 |
|
(7,952 |
) |
|
|
|
|
97,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
(6,217 |
) |
(657 |
) |
|
|
|
|
(6,874 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
14,858 |
|
18 |
|
|
|
|
|
14,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other finance losses (gains) |
|
44,700 |
|
96 |
|
(26,227 |
) |
(h) |
|
18,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,341 |
|
(543 |
) |
(26,227 |
) |
|
|
26,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax |
|
52,149 |
|
(7,409 |
) |
26,227 |
|
|
|
70,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
73,319 |
|
2,304 |
|
|
|
|
|
75,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
|
(21,170 |
) |
(9,713 |
) |
26,227 |
|
|
|
(4,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to |
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
(18,507 |
) |
(9,713 |
) |
30,986 |
|
(a) |
|
2,766 |
|
Non-controlling interests |
|
(2,663 |
) |
|
|
(4,759 |
) |
(a) |
|
(7,422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
|
(21,170 |
) |
(9,713 |
) |
26,227 |
|
|
|
(4,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share attributable to owners of the company |
|
|
|
|
|
|
|
|
|
|
|
Basic (note 6) |
|
(0.11 |
) |
|
|
|
|
|
|
0.01 |
|
Diluted (note 6) |
|
(0.11 |
) |
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (thousands) (note 6) |
|
171,961 |
|
|
|
|
|
|
|
188,617 |
|
The accompanying notes are an integral part of these pro forma consolidated financial statements.
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
1 Basis of presentation
The unaudited pro forma consolidated balance sheet of Hudbay Minerals Inc. (the Company or Hudbay) as at September 30, 2013 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been derived by management based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), for illustrative purposes only, after giving effect to the acquisition of 51% of the share capital of Augusta Resource Corporation (Augusta) including common shares the Company owned prior to the Take-over Bid Circular, by the Company (note 3). Adjustments applied are directly attributable to the transaction, factually supportable, and expected to have a continuing impact. Terms not otherwise defined herein have the meanings given thereto in the Take-over Bid Circular of the Company or Augusta dated February 10, 2014.
These unaudited pro forma consolidated financial statements have been compiled as follows:
a) an unaudited pro forma consolidated balance sheet giving effect to the transaction described in note 3, as if the transaction occurred on September 30, 2013 combining:
· the unaudited condensed consolidated interim balance sheet of the Company as at September 30, 2013; and
· the unaudited condensed consolidated interim statement of financial position of Augusta as at September 30, 2013.
b) an unaudited pro forma consolidated income statement for the nine months ended September 30, 2013, which assumes the transaction occurred as of January 1, 2012, combining:
· the unaudited condensed consolidated interim income statement of the Company for the nine months ended September 30, 2013; and,
· the unaudited condensed consolidated interim statement of comprehensive loss of Augusta for the nine months ended September 30, 2013.
c) an unaudited pro forma consolidated income statement for the year ended December 31, 2012, which assumes the transaction occurred as of January 1, 2012, combining:
· the audited consolidated income statement of the Company for the year ended December 31, 2012; and
· the audited consolidated statement of comprehensive profit (loss) of Augusta for the year ended December 31, 2012.
It is managements opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation, in all material respects, of the transactions described in notes 3 and 4 in accordance with IFRS, applied on a basis consistent with the Companys accounting policies. The
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations that might be obtained in the future.
The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and Augusta.
Augustas financial statements are presented in United States dollars. For the purposes of these unaudited pro forma consolidated financial statements, line items have been translated into Canadian dollars at the following rates:
· September 30, 2013 balance sheet at the exchange rate of $1.0303;
· December 31, 2012 income statement at the average rate for the year of $0.9994; and
· September 30, 2013 income statement at the average rate for the period of $1.0236.
All foreign exchange rates have been obtained from the Bank of Canada website. Unless where otherwise noted, these unaudited pro forma consolidated financial statements and their accompanying notes are presented in Canadian dollars.
Prior to the transaction described in Note 3, the Company owned 23,058,585 shares of Augusta which were recorded on the unaudited condensed interim balance sheet of the Company at September 30, 2013 at a fair value of $48,192 (cost of $69,058).
The allocation of the preliminary purchase price to reflect the fair values of the assets acquired and liabilities assumed is based on managements estimate of such assets and liabilities and, accordingly, the adjustments that have been included in the pro forma consolidated balance sheet may be subject to change. For purposes of these pro forma financial statements, the excess of the purchase price over the estimated fair value of the net assets acquired has been allocated to property, plant and equipment. The final purchase price allocations may differ materially from the allocations included herein.
2 Summary of significant accounting policies
These unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies, as set out in the audited consolidated financial statements of the Company as at December 31, 2012. Management has determined, based on their initial assessment, that certain adjustments are necessary to conform Augustas audited consolidated financial statements to the accounting policies used by the Company in the preparation of its audited consolidated financial statements:
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
a) Stock based compensation Augusta capitalizes stock based compensation related to personnel that service their development project to development costs. Hudbay expenses similar charges to various income statement accounts. The amount of the cumulative impact is unknown at the current time.
b) Deposits and prepayments on long-lead equipment - Augusta presents this as a separate financial statement line item. Hudbay groups these assets within prepaid expenses. An amount of $12,000 has been reclassified to conform to Hudbay policies.
3 The transaction
Proposed transaction
These proforma financial statements have been prepared on the basis consistent with the terms of the Take-over Bid Circular, but under the assumption that Hudbay acquires 51% of the issued and outstanding common shares of Augusta, including any Augusta Shares held directly or indirectly by Hudbay and its affiliates prior to the Take-over Bid Circular, and any Augusta Shares that may become issued and outstanding after the date hereof but before the expiry time upon the exercise, exchange or conversion of any convertible securities, together with the associated rights issued under the Shareholder Rights Plan.
The transaction will be accounted for as a business combination with Hudbay identified as the acquirer. A summary of the allocation of the preliminary purchase price to the acquired assets and liabilities assumed is as follows:
|
|
$ |
|
|
|
|
|
Preliminary purchase price |
|
|
|
Hudbay share consideration (note 4(a(ii))) |
|
156,571 |
|
Fair value of Augusta options settled in cash (note 4(f)) |
|
5,814 |
|
Fair value of Augusta warrants exchanged for Hudbay warrants (note 4(i)) |
|
642 |
|
Fair value of Augusta shares previously held by Hudbay (note 4(g)) |
|
68,276 |
|
|
|
|
|
Total consideration |
|
231,303 |
|
The preliminary purchase price has been allocated to the following net assets based on their estimated fair values as of September 30, 2013:
|
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
Assets acquired and liabilities assumed |
|
|
|
|
|
Cash and cash equivalents (Note 4(f)) |
|
|
|
6,248 |
|
|
|
|
|
|
|
Accounts receivable |
|
7,241 |
|
|
|
Due from related parties |
|
125 |
|
|
|
Trade and other receivables |
|
|
|
7,366 |
|
|
|
|
|
|
|
Current portion of other assets |
|
773 |
|
|
|
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
|
|
Pro forma |
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
Prepaids and other |
|
3,312 |
|
|
|
Prepaid expenses and other current assets |
|
|
|
4,085 |
|
|
|
|
|
|
|
Short-term investments |
|
154 |
|
|
|
Other financial assets-current |
|
|
|
154 |
|
|
|
|
|
|
|
Deposits on long-lead equipment |
|
12,025 |
|
|
|
Prepaid expenses |
|
|
|
12,025 |
|
|
|
|
|
|
|
Restricted funds |
|
394 |
|
|
|
Other assets |
|
1,028 |
|
|
|
Other financial assets |
|
|
|
1,422 |
|
|
|
|
|
|
|
Other assets |
|
1,459 |
|
|
|
Intangible assets-computer software |
|
|
|
1,459 |
|
Development costs |
|
182,057 |
|
|
|
Property, plant, and equipment |
|
89,263 |
|
|
|
Mineral properties |
|
25,337 |
|
|
|
Property, plant and equipment |
|
|
|
296,657 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
(102,342 |
) |
Long-term liabilities |
|
|
|
(3,343 |
) |
Deferred tax liabilities |
|
|
|
(155,522 |
) |
Unallocated purchase price (note 1) |
|
|
|
385,327 |
|
Total net assets |
|
|
|
453,536 |
|
Less: Non-controlling interest |
|
|
|
(222,233 |
) |
|
|
|
|
|
|
Total net assets acquired |
|
|
|
231,303 |
|
The final purchase price and the fair value of the net assets of Augusta to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the purchase price, including share consideration, and the fair values of assets acquired and liabilities assumed will vary from those shown above. These differences may be material.
4 Pro forma assumptions and adjustments
The unaudited pro forma consolidated financial statements reflect the following assumptions and adjustments to give effect to the acquisition of 51% of the issued and outstanding common shares of Augusta as described in note 3 as if the transactions had occurred on January 1, 2012 for statement of income items and September 30, 2013 for balance sheet items. Assumptions relating to the share price of Hudbay or Augusta have used the date of February 7, 2014 which represents the last trading day before February 10, 2014.
a) |
i) |
An adjustment to eliminate the historical equity accounts of Augusta. |
|
|
|
|
ii) |
An adjustment to reflect the issuance of 16,656,488 Hudbay shares in exchange for 52,877,740 common shares of Augusta representing a share exchange ratio of 0.315 Hudbay shares to 1 Augusta |
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
|
|
share. The closing price of Augusta shares on February 7, 2014 was $2.51. Future movements in share prices may impact the share numbers disclosed within.
|
|
|
|
|
iii) |
An adjustment to reflect the 49% non-controlling interest component of the proforma adjustments. |
b) An adjustment to reflect the transaction costs related to the transaction, including $7,000 of change of control payments and $13,000 in professional fees.
c) For purposes of pro forma presentation, no adjustment has been made to settle or convert the existing debt on Augustas statement of financial position on the assumption that this debt is out-of the money as at February 7, 2014.
On December 16, 2013, Augusta announced that it has closed an additional loan facility for US$26.6 million (the Expanded Loan) and has drawn down the first tranche of US$3.5 million. In connection with the Expanded Loan, Augusta paid an arrangement fee of US$1.12 million and issued a total of 3.3 million common share purchase warrants (Warrants) to the lender with an exercise price of US$2.12 per share, subject to amendment if certain conditions are not met. The Warrants expire on December 12, 2016. This disclosure is provided for informational purposes only. No adjustment has been reflected in the pro forma consolidated financial statements related to this event. The potential impact on the share consideration of the exercise of these warrants is estimated to be an increase of $4,983 and the issuance of an additional 530,145 Hudbay common shares.
d) An adjustment to reflect the fair value of the property, plant, and equipment acquired, in excess of the book value and the resulting deferred tax liability, assuming an income tax rate of 39.6%. The applicable tax rate is based on the tax jurisdiction of the asset where it will be recovered through use.
e) On September 4, 2013, Augusta closed the first tranche for $2,000 of a previously announced financing for a total of $10,000 in convertible unsecured notes. The second tranche of $1,500 closed on September 19, 2013. Subsequent to September 30, 2013 Augusta issued notes for the remaining $6,500.
This disclosure is provided for informational purposes only. No adjustment has been reflected in the pro forma consolidated financial statements for the subsequent event.
f) An adjustment to reflect the cash paid for the fair value of stock options issued by Augusta of $5,814, outstanding as at February 7, 2014 which are estimated to be out of-the-money. The options have been valued using a Black-Scholes model, using the share price of Augusta as at February 7, 2014, and the following assumptions: exercise prices ($2.79 to $4.35), life of options (3.42 to 3.78 years), interest rates (1.13%) and volatility rates (90.8% to 92.2%).
All other options that are estimated to be in-the-money as February 7, 2014, are assumed to be converted into common shares of Augusta, with the corresponding exercise price received as proceeds of $5,476.
g) An adjustment to re-measure the fair value of the Companys existing investment in Augusta held prior to acquisition of control. This investment is designated as an available-for-sale investment by Hudbay,
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
carried at fair value and all fair value changes are recognized in other comprehensive income (OCI), except for other than temporary decline in values recognized in the statement of comprehensive loss.
h) An adjustment to eliminate the Companys existing investment in Augusta as at September 30, 2013 and an adjustment to eliminate the related accumulated fair value gains (losses) in reserves. Correspondingly, recognized fair value changes in the statement of income are eliminated of $nil and $26,617 for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.
i) An adjustment to reflect the warrants issued by Hudbay in exchange for the warrants issued by Augusta, outstanding as at February 7, 2014. For purposes of pro forma presentation, the warrants issued by Augusta are assumed to be out-of-the money and therefore not exercised. Based on the exchange share ratio of Hudbay shares for Augusta shares (note 4(a)) of 0.315 to 1, respectively, 564,386 warrants were issued on February 7, 2014. The warrants have been valued using a Black-Scholes model using the following assumptions: exercise price of $12.22, interest rates of 0.78% to 1.13%, life of warrants of 1.47 to 2.47 years and volatility rates of 40.4% to 40.7%.
An adjustment was also made to eliminate losses arising in the year ended December 31, 2012 from re-measurement of warrants issued by Augusta recognized in its statement of comprehensive income of $390.
j) All unvested restricted shares and restricted share units (RSU) of Augusta are assumed to vest immediately on February 10, 2014. An adjustment is made for the issuance of the common shares of $3,376.
5 Pro forma share capital
|
|
September 30, 2013 |
|
December 31, 2012 |
| ||||
|
|
Number |
|
|
|
Number |
|
|
|
|
|
(000s) |
|
$ |
|
(000s) |
|
$ |
|
Hudbays common shares outstanding |
|
172,078 |
|
1,021,088 |
|
171,984 |
|
1,020,458 |
|
Hudbays common shares issued under the proposed transaction (note 4(a)) |
|
16,656 |
|
156,571 |
|
16,656 |
|
156,571 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma share capital |
|
188,734 |
|
1,177,659 |
|
188,640 |
|
1,177,029 |
|
Hudbay Minerals Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited) September 30, 2013
(expressed in thousands of Canadian dollars)
6 Pro forma earnings/(loss) per share
For the purposes of the unaudited pro forma consolidated financial statements, the earnings/(loss) per share has been calculated using the weighted average number of shares which would have been outstanding as at the period end, after giving effect to the transaction described in notes 3 and 4 as if it had occurred on January 1, 2012.
|
|
September 30, |
|
December 31, |
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
Actual weighted average number of Hudbay shares outstanding (thousands) |
|
172,038 |
|
171,961 |
|
Assumed number of Hudbay shares issued to Augusta shareholders (note 4(a)) (thousands) |
|
16,656 |
|
16,656 |
|
|
|
|
|
|
|
Pro forma weighted average number of Hudbay shares outstanding Basic (thousands) |
|
188,694 |
|
188,617 |
|
Actual number of Hudbay dilutive securities (thousands) |
|
219 |
|
275 |
|
Pro forma weighted average number of Hudbay shares outstanding Diluted (thousands) |
|
188,913 |
|
188,892 |
|
|
|
|
|
|
|
Pro forma profit/(loss) attributable to owners of the Company |
|
(48,824 |
) |
2,766 |
|
Pro forma earnings/(loss) per share - basic |
|
(0.26 |
) |
0.01 |
|
Pro forma earnings/(loss) per share - diluted |
|
(0.26 |
) |
0.01 |
|
3 Time for Acceptance
The Offer is now open for acceptance until 5:00 p.m. (Toronto Time) on May 5, 2014. Shareholders who have validly deposited and not withdrawn their Augusta Shares need take no further action to accept the Offer. If, at the time immediately prior to 5:00 p.m. (Toronto Time) on May 5, 2014, all of the conditions of the Offer are satisfied or waived by the Offeror, then the Initial Offering Period will end at such time and all Augusta Shares deposited under the Offer and not withdrawn will be taken up by the Offeror. If the Offeror elects to provide for a Subsequent Offering Period, it will do so by extending the Expiry Time beyond the end of the Initial Offering Period.
4 Manner of Acceptance
Augusta Shares may be deposited to the Offer in accordance with the provisions of Section 3 of the Original Offer, Manner of Acceptance.
5 Take-Up of and Payment for Deposited Augusta Shares
If all the conditions of the Offer have been satisfied or waived by the Offeror, the Offeror will take up Augusta Shares validly deposited under the Offer and not properly withdrawn no later than 9:00 a.m. on the first business day following the end of the Initial Offering Period. The Offeror will pay for Augusta Shares taken up as soon as practicable thereafter and in any event within three business days thereafter. By so taking up and paying for Augusta Shares validly deposited under the Offer and not properly withdrawn, the Offeror will comply with the requirement under Canadian law to take up such Augusta Shares within ten days following the end of the Initial
Offering Period and paying for such shares within three business days thereafter. See Section 6 of the Original Offer, Take Up of and Payment for Deposited Augusta Shares.
6 Withdrawal of Deposited Augusta Shares
Augusta Shares deposited under the Offer may be withdrawn by or on behalf of the depositing Augusta Shareholder at any time before the Augusta Shares have been taken up by the Offeror under the Offer (including during any Subsequent Offering Period) and in the other circumstances described in Section 8 of the Original Offer, Withdrawal of Deposited Augusta Shares. Except as so indicated or as otherwise required or permitted by applicable Laws, deposits of Augusta Shares are irrevocable.
7 Consequential Amendments to the Original Offer and Circular and Other Documents
The Original Offer and Circular, Letter of Transmittal and Notice of Guaranteed Delivery shall be read together with this Notice of Variation and Extension and are hereby amended to the extent necessary to reflect the amendments contemplated by, and the information contained in, this Notice of Variation and Extension.
Except as otherwise set forth in or amended by this Notice of Variation and Extension, the terms and conditions of the Offer and the information in the Original Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery continue to be applicable in all respects.
8 Statutory Rights
Securities legislation in the provinces and territories of Canada provides security holders of Augusta with, in addition to any other rights they may have at law, one or more rights of rescission, price revision or to damages, if there is a misrepresentation in a circular or a notice that is required to be delivered to those security holders. However, such rights must be exercised within prescribed time limits. Security holders should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer.
9 Directors Approval
The contents of this Notice of Variation and Extension have been approved, and the sending thereof to the Augusta Shareholders has been authorized by the Hudbay Board of Directors.
APPROVAL AND CERTIFICATE OF HUDBAY MINERALS INC.
The foregoing, together with the Original Offer and Circular, contains no untrue statement of a material fact and does not 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.
Dated: March 31, 2014.
(Signed) DAVID GAROFALO |
|
(Signed) DAVID S. BRYSON |
|
|
|
President and Chief Executive Officer |
|
Senior Vice President and Chief Financial Officer |
|
|
|
On behalf of the Board of Directors | ||
|
|
|
|
|
|
(Signed) G. WESLEY VOORHEIS |
|
(Signed) SARAH B. KAVANAGH |
Director |
|
Director |
The Depositary for the Offer is:
By Registered Mail, Mail, Hand or Courier
Toronto
200 University Avenue
Suite 300
Toronto, Ontario
M5H 4H1
Attention: Corporate Actions
Inquiries
North American Toll Free: 1-866-393-4891
Telephone: 416-361-0930 ext. 205
Facsimile: 416-361-0470
E-Mail: corporateactions@equityfinancialtrust.com
THE INFORMATION AGENT FOR THE OFFER IS:
The Exchange Tower
130 King Street West, Suite 2950, P.O. Box 361
Toronto, Ontario M5X 1E2
North American Toll Free Phone:
1-866-229-8874
E-mail: contactus@kingsdaleshareholder.com
Facsimile: 416-867-2271
Toll Free Facsimile: 1-866-545-5580
Outside North America, Banks and Brokers Call Collect: 416-867-2272