Shareholders' Meeting to Approve Continuation of Shareholder Rights Plan
TORONTO - Augusta Resource Corporation (TSX and NYSE MKT: AZC) ("Augusta" or the "Company") announced Friday that its ongoing strategic review process has generated strong interest and that it will be holding a meeting of its shareholders on May 9, 2014 to re-affirm the continuation of its existing shareholder approved rights plan.
Strategic Review Process
The strategic review process initiated by Augusta in response to the unsolicited offer from HudBay Minerals Inc. ("HudBay") has generated strong interest and remains very active. Nine interested parties, including a number of significant industry players, have signed confidentiality agreements and have been conducting an extensive review of the materials in Augusta's electronic data room. The Company will commence the process of site visits to its Rosemont Copper Project this week and expects that the site visits will take place largely over the next three to four week period.
Gil Clausen, Augusta's President and Chief Executive Officer, stated, "As we anticipated, our strategic review process has proven to be very robust and we are pleased with the quantity and quality of the interested parties. There is no doubt that potential buyers recognize that our near-construction Rosemont Copper Project is a unique, world-class asset that has true scarcity value. With the conclusion of the permitting process which is on track for the second quarter this year, we are on the verge of a significant value-creating milestone. The Board is fully committed to maximizing value for our shareholders by carefully considering all available alternatives to HudBay's low-ball bid."
Shareholders' Meeting to Approve Continuation of Shareholder Rights Plan
Augusta has set its annual and special meeting of shareholders for May 9, 2014, and shareholders will be asked to determine whether to continue the shareholder rights plan or have it terminate. The Board has determined that if shareholders authorize the continuation of the rights plan at the meeting, on an annual basis thereafter, shareholders will be given the opportunity at each annual meeting to determine whether to continue the rights plan or require the Board to have it terminated. The rights plan in its current form has a three-year term.
Richard Warke, Augusta's Executive Chairman, commented, "Our Board takes seriously our fiduciary obligation to protect our shareholders against the predatory and coercive tactics of HudBay. We respect the rights and interests of Augusta's shareholders and are putting the power directly in their hands. We are confident that they will strongly support our Board for putting this critical decision to them."
HudBay's unprecedented tactic of dropping its minimum tender condition part way through its initial bid period is a highly coercive attempt by a shareholder with over 15% of Augusta shares to try to secure a minority blocking position in order to thwart strategic alternatives that might be available for the benefit of all other shareholders. Augusta's rights plan was put in place to prevent exactly this sort of predatory tactic from being used to the detriment of the Company's shareholders. As long as the rights plan remains in effect, HudBay cannot take up any shares without triggering the rights.
Augusta's Board of Directors has determined that it is reasonable, fair and consistent with best practices in corporate governance to seek the views of its shareholders on whether they would like the rights plan to continue in the face of the HudBay offer, based on the following:
- the serious threat of value expropriation posed by HudBay's predatory coercive tactic of dropping its minimum tender condition;
- to ensure that de facto control is not transferred without Augusta shareholders having a full and fair opportunity to receive an adequate change of control premium;
- the fact that HudBay's offer has been almost universally condemned by Augusta's shareholders and the analysts who cover Augusta as a low-ball bid that does not come close to recognizing the value of Augusta's world-class Rosemont Copper Project;
- the reality that after nearly six years of effort, Augusta is on the cusp of finalizing the permitting process for the construction of its Rosemont Copper Project with the understanding that when the last permit and approval is obtained, there are obvious and significant positive value implications for Augusta's shareholders;
- the fact that Augusta's shares have consistently traded at a significant premium to the implied value of the HudBay offer since it was announced, with the premium currently at 27%;
- the fiduciary obligation of the Board to ensure that a comprehensive value-maximizing process is completed;
- the fact that any shareholder of Augusta seeking to sell its shares can easily do so in the market at a substantially higher price than that offered by HudBay and thus is in no way prejudiced by the continuation of the rights plan; and
- the rights plan will continue to allow any party to make a non-coercive "Permitted Bid" which, among other things, includes a non-waivable minimum tender condition of more than 50% of the shares held by independent shareholders.
Augusta's rights plan was adopted on April 19, 2013, specifically in response to the threat posed by HudBay continuing its aggressive accumulation of Augusta shares. The rights plan was ratified by shareholders on October 17, 2013 with over 88% of our outstanding shares, excluding those held by HudBay, voted in approval.
If shareholders other than HudBay do not approve the continuance of the rights plan, the Board will take the necessary steps to terminate it on the day following the shareholder meeting.