Friday, November 21, 2008

Consolidation Continues... Gold's back to $800/ounce on China Asia rise...more^

Top news of the day... Lundin (LUN.to) announces:

HudBay Minerals, Lundin Mining to merge

Mr. Allen Palmiere of HudBay reports

HUDBAY AND LUNDIN ANNOUNCE FRIENDLY BUSINESS COMBINATION

HudBay Minerals Inc. and Lundin Mining Corp. have agreed to a business combination (the transaction) that will create a new Canadian leader in global mining.

The transaction will be structured as a plan of arrangement under the Canada Business Corporations Act.

Highlights of the transaction:

  • On completion of the transaction, each Lundin common share will be automatically exchanged for 0.3919 HudBay common shares, and Lundin will become a wholly owned subsidiary of HudBay.
  • The consideration Lundin shareholders will receive pursuant to the transaction represents approximately a 32.0-per-cent premium over Lundin's 30-day, volume-weighted average trading price on the Toronto Stock Exchange, based on HudBay's 30-day, volume-weighted average trading price on the TSX.
  • On completion of the transaction, HudBay will have approximately 306 million common shares outstanding.
  • The chief executive officer of the resulting company will be Allen J. Palmiere.
  • The boards of directors of both companies have approved the transaction with all voting members in favour.

Creating a new Canadian leader in global mining

After the combination, HudBay is expected to be the second-largest base metals company in Canada, measured by market capitalization. It will have a broad portfolio of producing assets in Canada, Portugal, Sweden, Spain, and Ireland, along with a strong growth pipeline that includes the world-class Tenke Fungurume and Fenix projects, located in the Democratic Republic of Congo and Guatemala, respectively.

Following the completion of the transaction, the combined company's profile will include:

  • Combined 2007 actual metal production of 187,115 tonnes of copper, 278,289 tonnes of zinc, 44,560 tonnes of lead, 3,270 tonnes of nickel, 102,587 ounces of gold and 4,184,536 ounces of silver;
  • Cash on hand of approximately $900-million (Canadian) and total debt of approximately $240-million (U.S.), based on reported amounts at Sept. 30, 2008;
  • The financial strength to capitalize on opportunities arising from turbulent markets;
  • A strong management team and an experienced board.

"The combination of HudBay and Lundin creates a company that is financially strong, has excellent internal growth projects, and has the size and strength to take advantage of opportunities over the next 18 months," said Phil J. Wright, president and chief executive officer of Lundin. "This arrangement is in the best interest of Lundin shareholders, and I look forward to making a contribution toward building what has the potential to be a major new Canadian mining house."

"We're excited to create a Canadian base metals company that we believe will be a major presence on the world stage," added Mr. Palmiere, chief executive officer of HudBay. "We will continue to grow the company with discipline, and use its financial strength with a view to creating future value for all of our shareholders."

Following the completion of the transaction, HudBay's board will be composed of Mr. Palmiere, Mr. Wright, Lukas Lundin, M. Norman Anderson, Colin K. Benner, Donald K. Charter, Ronald P. Gagel, R. Peter Gillin and William A. Rand.

Private placement and loan

In connection with the transaction, HudBay and Lundin have entered into a loan agreement, pursuant to which HudBay will lend Lundin approximately $135.8-million on a subordinated basis. Lundin will use the proceeds of the loan to finance capital investments and other general corporate purposes. HudBay and Lundin have also entered into a share purchase agreement, pursuant to which HudBay will acquire approximately 97.0 million common shares of Lundin, representing approximately 19.9 per cent of Lundin's outstanding common shares, at a price of $1.40 per share, in a private placement for total gross proceeds to Lundin of approximately $135.8-million. The proceeds of the private placement will be used to repay the loan. Completion of the private placement of the Lundin common shares is subject to the satisfaction of certain regulatory requirements.

Board recommendation

The transaction has been approved by the board of directors of Lundin (with interested directors abstaining), following the unanimous recommendation of a special committee comprising independent Lundin directors. The board of directors of Lundin recommends that holders of Lundin shares vote in favour of the transaction. The transaction has also been approved by the board of directors of HudBay.

The definitive agreement includes a commitment by Lundin not to solicit or initiate discussions concerning alternative transactions, including the sale of material assets. Lundin has agreed to pay a break fee of $24.25-million to HudBay in certain circumstances, and has granted HudBay the right to match competing offers. HudBay has also agreed to non-solicitation provisions.

In addition to the 19.9-per-cent ownership to be acquired by HudBay pursuant to the private placement, certain shareholders holding approximately 21.1 per cent of the outstanding Lundin shares, as well as certain directors and officers of Lundin, have agreed to vote in favour of the transaction.

Advisers and fairness opinions

GMP Securities LP is acting as financial adviser to the special committee of the board of directors of HudBay, and GMP has provided an opinion to the special committee of HudBay that, subject to certain assumptions and limitations set out therein, the proposed transaction is fair, from a financial point of view, to HudBay shareholders. Haywood Securities Inc. has provided an opinion to the special committee of the board of directors of Lundin that, subject to its assumptions and limitations, and its review and analysis of current market conditions, the consideration to be received by the shareholders of Lundin in connection with the transaction is fair, from a financial point of view. Cassels Brock & Blackwell LLP and White & Case LLP are acting as external legal counsel to HudBay, and Osler Hoskin & Harcourt LLP, Shearman & Sterling LLP and McCullough O'Connor are acting as external legal counsel to Lundin. Fraser Milner Casgrain LLP is acting as external legal counsel to the special committee of HudBay.

Closing

Completion of the transaction is subject to customary conditions, including a favourable vote of two-thirds of the Lundin common shares voted at a special meeting of shareholders called to approve the transaction, and the receipt of court and all necessary regulatory approvals.

An information circular for the special shareholders' meeting of Lundin is expected to be mailed during the first quarter of 2009. The transaction is expected to close prior to May 30, 2009.

Conference call

Mr. Palmiere, HudBay's chief executive officer, and Mr. Wright, president and chief executive officer of Lundin Mining, will host a joint conference call to discuss this transaction.

The details are as follows:

Date:  Nov. 21, 2008

Time:  2 p.m. (Eastern Time)

Webcast:  HudBay or Lundin website

Dial in:  416-644-3415 or 800-733-7571

Replay:  416-640-1917 or 877-289-8525

Replay passcode:  21290286, followed by the pound key

The conference call replay will be available until midnight (Eastern Time) on Nov. 28, 2008. An archived audio webcast of the call also will be available on HudBay's and Lundin's websites.

We seek Safe Harbor.

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