HudBay CEO proposes new bylaw requiring shareholder approval for dilutive acquisitions

By Kristine Owram, The Canadian Press

TORONTO - Stung by a failed recent takeover attempt opposed by shareholders, HudBay Minerals Inc. (TSX: HBM.TO) plans to require shareholder approval in future before the zinc miner issues a whack of new stock to finance acquisitions.

The Toronto miner revealed Tuesday it will change its bylaws to require shareholders to approve any move to issue common shares in excess of 25 per cent of those outstanding to pay for an acquisition.

HudBay CEO Peter Jones mentioned the initiative at RBC Capital Markets' global mining and materials conference Tuesday but wouldn't go into further detail, saying the company's new strategic plan will be unveiled at its annual shareholder meeting June 19.

The planned move comes after a failed attempt by former HudBay CEO Allen Palmiere to acquire Lundin Mining Corp. (TSX: LUN.TO) last November in a big share-swap transaction without holding a shareholder vote on the deal.

Shareholders opposed the takeover in part because it would have led to the issuing of nearly 158 million new HudBay shares, doubling HudBay's share capital and diluting the value of their own stock.

HudBay currently has about 153 million shares outstanding.

After several of the company's shareholders protested, the Ontario Securities Commission ruled that a vote must be held on the transaction.

After the deal fell apart, dissident shareholder SRM Global Master Fund LP nominated a new slate of directors to replace Palmiere and his board.

Facing defeat, the board resigned in March, clearing the way for the appointment of the new board and Jones, who was CEO of HudBay from 2002 until early 2008.

Jones has said he is evaluating opportunities for expansion through acquisitions and internal growth, including the development of the deferred Fenix nickel project in Guatemala and the Lalor deposit in the Flin Flon region of northern Manitoba.

There has also been speculation that HudBay could be the target of a takeover bid by Indian company Vedanta Resources PLC.

HudBay's main operations are in northern Manitoba and Saskatchewan, with others in Central America.

Shares in the company were up 13 cents to $8.10 in Tuesday trading on the Toronto Stock Exchange.