Waterton Announces its Intention to Requisition a Special Meeting of Shareholders of Hudbay Minerals

• Waterton to propose resolution of shareholders urging the Hudbay Board to refrain, until Hudbay's 2019 annual meeting, from approving new material transactions, transactions that are dilutive on a cash flow per share basis or that involve issuing 5% or more of the company's common shares, in each case unless approved by shareholders.
• Special Meeting will give shareholders a democratic forum for expressing their views and concerns regarding any value-destructive transaction the Board may be planning to consummate without their approval.
• Hudbay Board has left Waterton no choice but to take action to prevent further value destructive behaviours.

TORONTO, Oct. 19, 2018 /CNW/ - Waterton Precious Metals Fund II Cayman, LP and Waterton Mining Parallel Fund Offshore Master, LP (the "Funds"), each of which are managed by Waterton Global Resource Management, Inc. (the "Investment Adviser", the Investment Adviser together with the Funds ("Waterton" or "We")), owning approximately 7% of the issued and outstanding shares of Hudbay Minerals Inc. ("Hudbay" or the "Company") (TSX:HBM) (NYSE:HBM), sent the following letter to the Company's Board of Directors (the "Hudbay Board").

The full text of the letter follows:

Hudbay Minerals Inc.
25 York Street, Suite 800
Toronto, ON
M5J 2V5

Members of the Board:

As you know, funds managed by Waterton Global Resource Management, Inc ("Waterton" or "we") own approximately 7% of the issued and outstanding shares of Hudbay Minerals Inc. ("Hudbay" or the "Company").

As one of the largest owners of the Company, Waterton has previously articulated two simple requests of the Company's Board of Directors (the "Board"), as disclosed in our 13D filing of October 17, 2018. First, Waterton has requested that the Company commit to putting any near-term acquisition, joint venture or similar transaction (an "Imminent Transaction") before its shareholders for a vote prior to consummating any such transaction. Second, Waterton has requested a meeting with Mr. Hibben and other members of the Board to discuss the current composition of the Board and how it can be refreshed to add additional skills that Waterton believes are required at this critical time. We view each of these requests to be urgent. Hudbay has refused our first request and has indicated to us that the Board will not meet with us to discuss our second request until November. This is categorically unacceptable.

Let us be clear on a few indisputable facts. Hudbay's recent market performance has been atrocious, as the Company currently trades at a material discount to its peer group on multiple key valuation metrics. Year to date, Hudbay's share price has declined 47.7%.¹ The Hudbay management team is failing on multiple fronts, including by missing the Street's earnings consensus, missing its own operational costs guidance, missing its own permitting guidance, failing to secure critical land rights and failing to provide cogent, and sensible, strategic plans for key assets. The current Board and management are making a mess out of a portfolio of world class assets. Notwithstanding these failures, the Board's approach is laissez-faire and the Board has not responded to Waterton's requests with any urgency. Perhaps the Board's lack of urgency stems from a misalignment of interests because, collectively, the Board owns 0.12%² of the issued and outstanding common shares of Hudbay. While value is being destroyed for the real owners of the business, the "stewards" remain largely unimpacted.

____________________________

¹ As at market close on October 18, 2018.

² As per SEDI, October 19, 2018.

In recent weeks, it has come to light that this failing Board whose financial interests are not aligned with shareholders and who has overseen an extraordinary amount of value destruction may be considering an Imminent Transaction—this is nothing short of perverse. As previously noted, our informed belief is that at least one-third of the Company's shareholders do not support a material acquisition transaction of any nature at this time. Rather, the true owners of the Company would like to see the Company optimize its existing portfolio of world class assets. The Board's failure to issue a clarifying statement to the market to the effect that it is not pursuing an Imminent Transaction and its failure to engage in a dialogue with Waterton on an urgent basis leads us to believe that Hudbay may be pursuing such a transaction in the furtherance of a destructive empire building exercise or, perhaps more nefariously, in furtherance of a plan by the Board to further entrench itself. This must stop and the true owners of the Company must be given a voice.

At this stage, Waterton has no choice but to take action to prevent further value destructive behaviours. To that end, Waterton intends to immediately requisition a special meeting of shareholders (the "Special Meeting") to adopt a resolution urging the Board not to approve any agreement or proposed transaction prior to the 2019 Annual Meeting that would either (i) commit Hudbay to consummate any new material transaction other than those involving its existing portfolio of assets, (ii) commit Hudbay to consummate any new transaction that would be dilutive to shareholders on a cash flow per share basis, or (iii) involve the issuance of 5% or more of its shares, in each case unless such agreement or transaction would require shareholder approval.

The Special Meeting will give shareholders a democratic forum for expressing their views and concerns regarding any value-destructive transaction the Board may be planning to consummate without their approval. The future value of Hudbay will be materially impacted by any material transaction at this stage, and shareholders deserve the right to seek to stop a potentially grave mistake before it happens.

We encourage you to act as independent fiduciaries to shareholders and voluntarily adopt the resolution and avoid the further waste of shareholder resources.

Sincerely,

Isser Elishis
Chief Investment Officer

About Waterton

Waterton is a leading private equity firm dedicated to developing high quality resource assets in stable jurisdictions. Waterton's founding team has a successful track record of originating, structuring, managing and exiting investments through acquisitions, joint ventures and partnerships, across a range of sectors and asset classes. Waterton's core strength is its cross-functional, fully-integrated, in-house team of professionals who possess significant mining, financial and legal expertise. Waterton's team employs a proactive approach to asset management, leveraging significant sector knowledge and extensive industry relationships to support the firm's investment activities. 

Additional Information:

The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable corporate or securities laws. Although Waterton intends to requisition the Hudbay Board to call a special meeting of shareholders, there is currently no record date or meeting date set for such meeting and shareholders are not being asked to execute a proxy in favour of the matters set forth in this press release at this time. Waterton intends to file an information circular in due course in compliance with applicable law. Notwithstanding the foregoing, Waterton is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with corporate and securities laws applicable to public broadcast solicitations.

This press release and any solicitation made by Waterton in advance of any Hudbay shareholder meeting will be made by Waterton and not by or on behalf of the management of Hudbay. Waterton may engage a solicitation agent to make any such solicitations. All costs incurred for any solicitation will be borne by Waterton, provided that, subject to applicable law, Waterton may seek reimbursement from Hudbay of Waterton`s out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful result at any meeting of shareholders of Hudbay.

As noted above, Waterton is not hereby soliciting proxies in connection with any Hudbay shareholder meeting and shareholders are not being asked at this time to execute proxies in favour of the matters set forth in this press release. Any proxies solicited by Waterton will be solicited in accordance with applicable corporate and securities laws, including pursuant to exemptions thereunder or after sending an information circular to Hudbay shareholders after which solicitation may be made by or on behalf of Waterton, by mail, telephone, fax, email or other electronic means, by public announcement and in person by representatives of Waterton or proxy advisors retained by Waterton. Any proxies solicited by Waterton in connection with any Hudbay shareholder meeting may be revoked by instrument in writing by the shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law.

None of Waterton or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at a meeting of Waterton shareholders other than as set forth herein.

Hudbay`s registered office address is c/o Goodmans LLP, 333 Bay Street, Suite 3400, Bay Adelaide Centre, Toronto Ontario, Canada M5H 2S7.

SOURCE Waterton Global Resource Management

Shareholder Contact: Cheryl Brandon, Partner, Investment Management, 416-504-3505, [email protected]; Media Contact: Riyaz Lalani, Bayfield Strategy, Inc., 416-907-9365,[email protected]