Lundin Mining Asks For Compensation

Lundin Mining Corporation is demanding that HudBay Minerals Inc. pay a $2.5-million break fee if HudBay stockholders do not approve an agreed-on takeover of Lundin by March 31.

HudBay responded on Monday that it disagrees with Lundin's position, but has advanced a shareholder vote on the issue to March 25.

The deal was cast into doubt when the Ontario Securities Commission ruled on Jan. 23 that HudBay shareholders must be allowed to vote on the all-stock transaction, which envisages an issue of 157.6 million shares, more than doubling the HudBay common equity outstanding.

Lundin shareholders voted 99.7 per cent in favour of the deal on Jan. 26.

Lundin, a 1,500-employee company active in Spain, Portugal, Sweden and Ireland, said it now has served notice to HudBay of breaches of their Nov. 21 takeover accord.

Lundin "believes it has the right to terminate the arrangement agreement immediately, and to be paid a fee of $2.5 million," but said it will postpone exercising this right "provided that HudBay uses its best efforts to obtain the requisite shareholder approval for the arrangement on or before March 31."

HudBay issued a statement Monday setting March 25 as the date for a special meeting of shareholders, advancing the vote from March 31.

HudBay said it will not appeal the Ontario Securities Commission's ruling, which set aside a Toronto Stock Exchange decision in December allowing the share issue.

"HudBay disagrees with the recently received notice of breach from Lundin Mining regarding alleged breaches of certain terms of the arrangement agreement," added HudBay, which has zinc and copper mines in northern Manitoba and Saskatchewan, along with a zinc oxide plant in Ontario, a copper refinery in Michigan and a nickel project in Guatemala.

Analysts have said HudBay shareholders are unlikely to approve the deal, which represented a 32 per cent premium for Lundin based on the companies' stock prices before it was struck in November.

HudBay shares fell 40 per cent after the announcement of the transaction, which would leave Lundin investors owning about half of the combined entity.

Source: Canadian Press