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Jan 16, 2019

Hudbay investor seeking to replace CEO and most of company's board

Hudbay Minerals' 777 mine under the Northern Lights in 2012.

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Hudbay Minerals Inc.’s second-largest investor is seeking to oust the Toronto miner’s chief executive officer and replace most of its board.

Waterton Global Resource Management will nominate eight new directors at Hudbay’s upcoming annual meeting with a slate that includes former mining executive Peter Kukielski and financial services industry veteran Richard Nesbitt, according to a letter to shareholders Wednesday.

Shares in Hudbay rose as much as 4.7 per cent in trading Wednesday before settling at $7.43 a share, up 2.8 per cent as of 11:30 a.m., giving the company a market value of $1.9 billion.

Waterton, which owns about 12 per cent of Hudbay, will propose that Kukielski be named CEO of Hudbay and Nesbitt chairman. Kukielski was most recently CEO of Nevsun Resources Ltd. Nesbitt was previously the CEO of CIBC World Markets Inc., as well as the parent company of the Toronto Stock Exchange.

The two would replace Hudbay CEO Alan Hair and Chairman Alan Hibben, both of whom Waterton blames for the company’s underperformance. While shareholders vote to elect directors, appointing the CEO is a board decision.

“Hudbay suffers from a culture of entrenchment,” Isser Elishis, Waterton’s chief investment officer, said in the letter. “We believe that the company’s board must evolve in order to meaningfully hold management to account.”

‘Concerning’

Hudbay praised its board and questioned Waterton’s intentions in an emailed statement.

"While the company remains open to constructive dialogue, it is concerning that Waterton -- a relatively recent shareholder and mining private equity firm that competes with Hudbay for mining assets -- has previously attempted to secure rights and powers not held by any other shareholder," Hudbay spokesman Scott Brubacher said in the statement. "Waterton’s attempt to seize control of a majority of the board is particularly concerning, given that its interests may not be aligned with those of other shareholders."

In November, Waterton demanded that one of its employees be allowed to attend Hudbay board meetings and to receive private company documents and communications, Hudbay said in a statement last month.

Toronto-based Waterton, which has never run a proxy fight, began agitating for changes at Hudbay last year, arguing it was mismanaged. The company’s shares have fallen more than 40 per cent in the past year.

Hudbay has an “opportunity to recruit a CEO with a proven and successful track record,” Elishis said. “Mr. Kukielski not only has the operational experience to lead Hudbay, but, just as importantly, he has decades of experience in developing holistic business strategies for companies with multinational mining portfolios.”

Kuklieski resigned from Nevsun in December after the miner was acquired by Zijin Mining Group Co. Before that, he was CEO of Warburg Pincus-backed Anemka Resources Ltd. and CEO of Arcelormittal’s mining division.

Waterton supports the re-election of two of Hudbay’s incumbent directors: Carol Banducci and Sarah Kavanagh.

Its other nominees are: Mike Anglin, David Deisley, Emily Moore, Daniel Muniz Quintanilla, Ernesto Balarezo and David Smith.