In a back-and-forth fight that is getting increasingly personal, HudBay Minerals Inc. has lashed out at former chief executive Peter Jones and suggested that his strategy for the miner could wreak havoc with its finances.
It comes just ahead of a proxy vote on March 25 that will determine the future of the company, a future that has generated mixed views from advisory firms.
Mr. Jones is the chosen CEO of SRM Global Master Fund LP, a hedge fund attempting to overthrow the HudBay board and install a dissident slate. Last week, Mr. Jones laid out a plan to restore HudBay's investor confidence by studying all the operations that the current board has shut down and seeing if they can be restarted and run profitably at low metal prices.
But yesterday, interim CEO Colin Benner dismissed that plan. "The people that were running the mines before, while Peter Jones was still in power, are still there," he said in an interview.
"There's been no change in the people that were recommending [the closures], and the board has been very adamant about following the course of action once it makes sense."
One of HudBay's key closures was the Balmat mine in the United States, which opened under Mr. Jones. It was shut last year after racking up losses of $80-million, and Mr. Jones has said that he wants to study a possible restart. Mr. Benner disagrees, particularly because metal prices were higher when Balmat shut down than they are today.
But even as Mr. Benner goes on the attack, his appointment as interim CEO is generating outrage from SRM, which slammed him in a letter to shareholders yesterday.
"We find it incredible that the incumbent board has appointed Mr. Benner, a man who was responsible for the beginnings of the disastrous Lundin [Mining Corp.] transaction, while being on the board of both companies for the duration of the failed transaction," the letter said.
It was the attempted merger with Lundin, a move that drove HudBay's stock down 40% the day that it was announced, that pushed SRM to try and replace the board. The merger fell apart after the Ontario Securities Commission ruled HudBay could not complete it without holding a shareholder vote. So far, proxy advisory firms RiskMetrics Group and Glass Lewis and Co. have published opinions on the fight, the former favouring dissidents and the latter backing the board.
HudBay defended itself against the RiskMetrics conclusion by arguing that it is based on an "incomplete understanding" of the facts around the Lundin transaction. RiskMetrics argued that HudBay should have tried harder to re-negotiate the controversial deal, and the company said that it couldn't because it had a binding contract to buy Lundin.
For SRM, this was simply another reason to attack Hud-Bay. "Not content with attacking its own shareholders, the current board now appears to be attacking Canada's preeminent independent voting advisory service," the fund said in yesterday's letter.
pkoven@nationalpost.com
