Document:

Exhibit 4.3

 

REGISTERED GLOBAL DEBT SECURITY

 

THIS DEBT SECURITY IS A GLOBAL DEBT SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT (AS DEFINED IN THE ATTACHED CONDITIONS) AND IS REGISTERED IN THE NAME OF CEDE & CO., AS THE NOMINEE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”). THIS DEBT SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A DEBT SECURITY REGISTERED, AND NO TRANSFER OF THIS DEBT SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE CONDITIONS REFERRED TO WITHIN THIS DEBT SECURITY. THIS DEBT SECURITY REPRESENTS “SECURITIES OF A SERIES” WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO HUNGARY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

HUNGARY
 5.375% NOTES DUE 2024

 

PAYABLE AS TO PRINCIPAL AND INTEREST IN LAWFUL MONEY OF 
 THE UNITED STATES OF AMERICA

 

FULLY REGISTERED NOTES

 

	
Certificate   No.                                                    
    	
 
    	
US$500,000,000
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CUSIP No. 445545 AL0
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
COMMON CODE No. 104862322
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ISIN No. US445545AL04
    

 

REGISTERED HOLDER: Cede & Co., or its registered assigns

 

PRINCIPAL SUM OF FIVE HUNDRED MILLION DOLLARS

 

 

HUNGARY, for value received, hereby promises to pay to the registered owner specified above or registered assigns on March 25, 2024, upon presentation and surrender of this Global Debt Security, the principal sum specified above in lawful money of the United States of America at the office of Citibank, N.A., London Branch, in London or The City of New York, New York, and to pay interest thereon in like money in the manner provided in the Conditions endorsed hereon from March 25, 2014 or from the most recent interest payment date to which interest has been paid, or duly provided for, such interest to be payable semi-annually at the rate of 5.375% per annum on March 25 and September 25 in each year (each an “Interest Payment Date”) until the principal of this Global Debt Security shall have been paid, the first of such payments of interest to become due and payable on September 25, 2014. Notwithstanding anything to the contrary provided herein, any payment of principal or interest falling due on a day which is not a Business Day (as defined in the Fiscal Agency Agreement, dated as of September 17, 2013, between Hungary and Citibank, N.A., London Branch, as Fiscal Agent and Paying Agent) will be payable on the next succeeding Business Day and no interest shall accrue for the intervening period, provided however that if that next succeeding Business Day falls in the next calendar month, such payment of principal or interest will be payable on the first preceding business day. The interest so payable on any such Interest Payment Date will be paid to the person in whose name this Global Debt Security is registered at the close of business on the fifteenth day (whether or not such day is a Business Day) preceding such Interest Payment Date (each a “Record Date”).

 

This Global Debt Security is a direct, unconditional, unsecured and general obligation of Hungary. This Global Debt Security ranks and will rank at least equally in right of payment with all other unsecured and unsubordinated payment obligations of Hungary outstanding at the date of issue of this Global Debt Security or issued thereafter, except for such obligations as may be preferred by mandatory provisions of applicable law. This Global Debt Security will be backed by the full faith and credit of Hungary. Hungary will give no preference to one obligation over another on the basis of priority of issue date or currency of payment.

 

This Global Debt Security is not redeemable prior to maturity at the option of Hungary or of the registered holders thereof.

 

This Global Debt Security is subject to the Conditions endorsed on the reverse hereof and shall not be valid or enforceable for any purpose unless authenticated by the manual signature of the Fiscal Agent (as defined in the Fiscal Agency Agreement). This Global Debt Security shall be dated the date of its authentication by the Fiscal Agent.

 

 

IN WITNESS WHEREOF, Hungary has caused this Global Debt Security to be duly executed by the facsimile signature of Mr. István Töröcskei and a facsimile of the written, printed or stamped name of Hungary to be hereon imprinted.

 

On behalf of Hungary

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:   István Töröcskei
    
	
 
    	
Title:   Chief Executive Officer of the Government Debt Management Agency Pte Ltd. of   Hungary
   as attorney for Hungary represented by its Minister for National Economy
    

 

[Signature Page to Global Note]

 

 

FISCAL AGENT’S CERTIFICATE

 

OF AUTHENTICATION

 

This is a permanent global debt security evidencing

the Securities of a Series referred to in the aforementioned

Fiscal Agency Agreement.

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:   Citibank, N.A., London Branch
    
	
 
    	
Title:   Fiscal Agent
    

 

Dated:

 

[Signature Page to Certificate of Authentication]

 

 

 

THE CONDITIONS WITHIN REFERRED TO

 

1          This Global Debt Security is one of the permanent global securities evidencing a duly authorized issue of US$2,000,000,000 aggregate principal amount of 5.375% Notes due March 25, 2024 of Hungary (herein called the “Debt Securities”) as executed by the authorized signatory of Hungary, Mr. István Töröcskei. The Debt Securities are issued under the Fiscal Agency Agreement dated as of September 17, 2013 (as the same may be amended, supplemented or otherwise modified from time to time, the “Fiscal Agency Agreement”) between Hungary and Citibank, N.A., London Branch, as fiscal agent and paying agent (the “Fiscal Agent”, “Agent” or “Registrar”), to which Fiscal Agency Agreement reference is hereby made for a statement of the respective rights, duties, limitations of rights, obligations and immunities thereunder of Hungary, the Agent and the holders of the Debt Securities. Notices to the Fiscal Agent can be sent to Citibank, N.A., Attention: Citigroup Centre, 21st Floor, Canada Wharf, London E14 5LB. The Debt Securities are issuable as fully registered Debt Securities without coupons in minimum denominations of US$2,000 and integral multiples of US$2,000 in lawful money of the United States of America. This Debt Security is one of the series designated on the face hereof, initially limited to the aggregate principal amount of US$2,000,000,000.

 

Hungary may from time to time, without the consent of the holders of the Debt Securities, create and issue further debt securities having the same terms and conditions as the Debt Securities even if further Debt Securities have original issue discount for U.S. federal income tax purposes and even if doing so may adversely affect the value of the original Debt Securities.  Any additional Debt Securities, together with the Debt Securities, will constitute a single series of Debt Securities under the Fiscal Agency Agreement.

 

2          All payments made in respect of this Global Debt Security, including payments of principal and interest, to a holder that is not a resident of Hungary, shall be made by Hungary without withholding or deduction for or on account of any present or future taxes, duties, levies or other governmental charges of whatever nature, imposed or levied by Hungary or by any political subdivision or taxing authority within Hungary (“Taxes”). In the event Hungary is required by law to deduct or withhold any such Taxes from payments, Hungary will pay such additional amounts as may be necessary so that  the net amount received is equal to the amount provided for in this Global Debt Security to be paid in the absence of such deduction or withholding. A holder will not be paid any additional amounts however, if the Tax is:

 

(i)           a Tax that would not have been imposed but for the holder’s present or former connection (or a connection of the holder’s fiduciary, shareholder or other related party) with Hungary, including the holder being or having been a citizen or resident of Hungary or being or having been engaged in a trade or business or present in Hungary or having, or having had, a permanent establishment in Hungary;

 

(ii)          imposed on a payment to an individual and is required to be made pursuant to the European Council Directive 2003/48/EC on taxation of savings income in the form on interest payments or any other Directive implementing the conclusions of the EU Council of Finance Ministers meeting of November 26 and 27, 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive;

 

(iii)         imposed because the holder presents a Debt Security for payment more than thirty (30) days after the date on which the payment became due and payable;

 

(iv)         an estate, inheritance, gift, sales, transfer or personal property tax, assessment or governmental charge;

 

 

(v)          a tax, assessment or other governmental charge which is payable other than by withholding;

 

(vi)         a Tax that would not have been imposed but for the failure to comply with certification, information or other reporting requirements concerning the holder’s nationality, residence or identity (or the nationality, residence or identity of the beneficial owner of this Global Debt Security), if such holder’s compliance is required by the laws of Hungary or of any political subdivision or taxing authority of Hungary to avoid or reduce such tax;

 

(vii)        required to be withheld by any paying agent from a payment on this Global Debt Security if such payment can be made without such withholding by another paying agent; or

 

(viii)       are imposed as a result of any combination of the items listed above.

 

Furthermore, no additional amounts shall be paid with respect to any Debt Security to a holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that the settlor with respect to such fiduciary, partner or beneficial owner, as the case may be, would not have been entitled to payment of such additional amounts if they held this Global Debt Security themselves.

 

3          As long as any Debt Security remains outstanding, Hungary will not allow any Security Interest to be established on any of Hungary’s or the National Bank of Hungary’s assets or revenues, present or future, in order to secure (i) any Public External Indebtedness of Hungary having an original maturity of at least one year; or (ii) any Public External Indebtedness of the National Bank of Hungary having an original maturity of at least one year and incurred on or prior to December 31, 1998, unless the debt securities are secured equally and rateably to this external indebtedness.

 

For these purposes:

 

“External Indebtedness” means any obligation in respect of existing or future Indebtedness denominated or payable, or at the option of the holder thereof payable, in a currency other than the lawful currency of Hungary. If at any time the lawful currency of Hungary becomes the Euro, then External Indebtedness shall also include Indebtedness expressed in or payable or optionally payable in Euro, if (i) such Indebtedness was issued after the date on which the Euro became the lawful currency of Hungary, and (ii) more than 50% of the aggregate principal amount of such Indebtedness was initially placed outside Hungary.

 

“Public External Indebtedness” means External Indebtedness which: (i) is in the form of, or represented by, bonds, notes or other similar securities; and (ii) is, or may be, quoted, listed or ordinarily purchased and sold on any stock exchange, automated trading system or over-the-counter or other securities market.

 

“Indebtedness” means any indebtedness of any Person (whether incurred as principal or surety) for money borrowed.

 

“Person” means any individual, company, corporation, firm, partnership, joint venture, association, organization, state or agency of a state or other entity, whether or not having separate legal personality.

 

“Security Interest” means any lien, pledge hypothecation, mortgage, security interest, charge or other encumbrance or arrangement which has a similar legal and economic effect, and, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction.

 

 

4          An “Event of Default” means any of the following:

 

(i)           Hungary fails to pay the principal of or interest on any of the Debt Securities for more than 30 days after payment is due; or

 

(ii)          Hungary does not perform any of its other covenants under any of the Debt Securities for more than 60 days after the holder of the Debt Security has given written notice of the breach to Hungary at the Fiscal Agent’s corporate trust office.

 

An “Event of Acceleration” means any of the following:

 

(i)           any action, condition or any other thing which at any time is required to be taken, fulfilled or done in order: (A) to enable Hungary lawfully to enter into, exercise its rights and perform and comply with its obligations under and in respect of the Debt Securities, (B) to ensure that those obligations are legal, valid, binding and enforceable and (C) subject to their official translation into the Hungarian language, to make the Debt Securities admissible in evidence in the courts of Hungary, is not taken, fulfilled or done within 30 days of receipt by Hungary of written notice thereof; or

 

(ii)          it becomes illegal for Hungary to perform any of its obligations under the Debt Securities or if these obligations become invalid and not remedied by Hungary within 30 days’ written notice thereof.

 

If an Event of Default or an Event of Acceleration occurs, all of the Debt Securities may, by written notice addressed and delivered by the holders of at least 25% of the aggregate principal amount of the outstanding Debt Securities to Hungary at the office of the Fiscal Agent, be declared to be immediately due and payable, unless prior to such date Hungary shall have remedied the Event of Default or Event of Acceleration for all the Debt Securities.

 

If the Fiscal Agent receives notice in writing from holders of at least 50% in aggregate principal amount of the outstanding Debt Securities and/or a resolution is passed at a meeting of the holders of the Debt Securities, duly convened and held in accordance with the Fiscal Agency Agreement, to the effect that the Event(s) of Default and/or Event(s) of Acceleration giving rise to a declaration of acceleration made pursuant to the conditions above is or are cured or is or are waived by them following any such declaration and that such holders request the Fiscal Agent to rescind the relevant declaration, the Fiscal Agent shall, by notice in writing to Hungary and the holders, rescind the relevant declaration whereupon it shall be rescinded and shall have no further effect.

 

Hungary is not obliged to provide investors with periodic evidence that there are no Events of Default and/or Events of Acceleration. Please also note that the Fiscal Agency Agreement does not provide for the holders to be notified of the existence of an Event of Default or an Event of Acceleration or for any right to examine the Debt Securities register.

 

5          The Fiscal Agency Agreement contains provisions for convening meetings of holders of the Debt Securities to consider matters relating to the Debt Securities, including, without limitation, the modification of any provision of the terms of the Debt Securities. Any such modification may be made if, having been approved in writing by Hungary, it is sanctioned by an Extraordinary Resolution. Such a meeting may be convened by Hungary and shall be convened by the Fiscal Agent upon the request in writing of holders holding not less than 10% of the aggregate principal amount of the outstanding Debt Securities. The quorum at any meeting of holders convened to vote on an Extraordinary Resolution will be two or more persons holding or representing not less than 50% of the aggregate principal amount of the outstanding Debt Securities or, at any adjourned meeting of holders, two or more persons being or representing

 

 

holders, whatever the aggregate principal amount of the outstanding Debt Securities held or represented; provided, however, that any proposals relating to a Reserved Matter may only be sanctioned by an Extraordinary Resolution passed at a meeting of holders at which two or more persons holding or representing not less than 75% of the aggregate principal amount of the outstanding Debt Securities or, at any adjourned meeting, 25% of the aggregate principal amount of the outstanding Debt Securities form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the holders of the Debt Securities, whether present or not.

 

If a resolution is brought in writing, such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more holders.

 

For these purposes:

 

“Extraordinary Resolution” means:

 

(i)           in relation to any Reserved Matter:

 

(x) a resolution passed at a meeting of holders duly convened and held in accordance with the Fiscal Agency Agreement by a majority consisting of not less than 75% of the aggregate principal amount of all outstanding Debt Securities; or

 

(y) a resolution in writing signed by or on behalf of holders of not less than 75% of the aggregate principal amount of all outstanding Debt Securities; and

 

(ii)          in relation to any other matter:

 

(x) a resolution passed at a meeting of holders duly convened and held in accordance with the Fiscal Agency Agreement by a majority consisting of not less than 66.67% of the aggregate principal amount of the outstanding Debt Securities which are represented at that meeting; or

 

(y) a resolution in writing signed by or on behalf of holders of not less than 66.67% of the aggregate principal amount of all outstanding Debt Securities.

 

“Reserved Matter” means any proposal to:

 

(i)           change any date, or the method for determining the date, fixed for payment of principal or interest in respect of the Debt Securities, to reduce the amount of principal or interest payable on any date in respect of the Debt Securities or to alter the method of calculating the amount of any payment in respect of the Debt Securities on redemption or maturity or the date for any such payment;

 

(ii)          effect the exchange or substitution of the Debt Securities for, or the conversion of the Debt Securities into, shares, bonds or other obligations or securities of Hungary or any other person or body corporate formed or to be formed;

 

(iii)         reduce or cancel the principal amount of the Debt Securities;

 

(iv)         vary the currency or place of payment in which any payment in respect of the Debt Securities is to be made;

 

(v)          amend the status of the Debt Securities;

 

(vi)         amend the obligation of Hungary to pay additional amounts under Condition 2;

 

(vii)        amend the Events of Default or the Events of Acceleration set out in Condition 4;

 

 

(viii)       amend the law governing the Debt Securities, the courts to the jurisdiction to which Hungary has submitted in the Debt Securities, Hungary’s obligation to maintain an agent for service of process in the United States or Hungary’s waiver of immunity, in respect of actions or proceedings brought by any holder of the Debt Securities set out in Conditions 6 and 7;

 

(ix)         modify the provisions contained in Schedule I to the Fiscal Agency Agreement concerning the quorum required at any meeting of holders of the Debt Securities or any adjournment thereof or concerning the majority required to pass an Extraordinary Resolution or the percentage of votes required for the taking of any action;

 

(x)          change the definition of “Extraordinary Resolution” or “outstanding” in these conditions of the Debt Securities and/or in the Fiscal Agency Agreement;

 

(xi)         instruct any holder of the Debt Securities or committee appointed on behalf of all holders of the Debt Securities pursuant to the Fiscal Agency Agreement to withdraw, settle or compromise any proceeding or claim being asserted pursuant to Condition 4;

 

(xii)        confer upon any committee appointed pursuant to the Fiscal Agency Agreement any powers or discretions which the holder of the Debt Securities could themselves exercise by Extraordinary Resolution; or

 

(xiii)       amend this definition.

 

The holders of the Debt Securities may, by a resolution passed at a meeting of holders duly convened and held in accordance with the Fiscal Agency Agreement by a majority of at least 50% in aggregate principal amount of the Debt Securities then outstanding, or by notice in writing to the Fiscal Agent signed by or on behalf of the holders of at least 50% in aggregate principal amount of the Debt Securities then outstanding, appoint any persons as a committee to represent the interests of the holders if any of the following events shall have occurred:

 

(i)           an Event of Default or an Event of Acceleration;

 

(ii)          any event or circumstance which would, with the giving of notice, lapse of time, the issuing of a certificate and/or fulfillment of any other requirement provided for in Condition 4 become an Event of Default or an Event of Acceleration; or

 

(iii)         any public announcement by Hungary, to the effect that Hungary is seeking or intends to seek a restructuring of the Debt Securities (whether by amendment, exchange offer or otherwise).

 

Such committee in its discretion may, among other things, (i) engage legal advisers and financial advisers to assist it in representing the interests of the holders of the Debt Securities, (ii) adopt such rules as it considers appropriate regarding its proceedings and (iii) enter into discussions with Hungary and/or other creditors of Hungary. Hungary shall pay any reasonably incurred fees and expenses of any such committee (including, without limitation, the fees and expenses of the committee’s legal advisers and financial advisers, if any) within 30 days of the delivery to Hungary of a reasonably detailed invoice and supporting documentation.

 

For the purposes of (i) ascertaining the right to attend and vote at any meeting of the holders of the Debt Securities and (ii) Conditions 4 and 5, those Debt Securities (if any) which are for the time being held by any person (including but not limited to Hungary) for the benefit of Hungary or by any public body owned or controlled, directly or indirectly, by Hungary shall (unless and until ceasing to be so held) be deemed not to remain outstanding.

 

 

6          As more fully set forth in the Fiscal Agency Agreement, Hungary has appointed the Economic and Trade Commissioner of Hungary in New York, 223 East 52nd Street, New York, New York 10022, as its authorized agent upon which process may be served in any action arising out of or based on the Debt Securities which may be instituted in any Federal or State court in New York, New York by the holder of any Debt Security, and Hungary hereby expressly accepts the jurisdiction of any such court in respect of any such action. Such appointment shall be irrevocable so long as any of the Debt Securities remain outstanding, unless and until a successor shall have been appointed by Hungary as its authorized agent for such purpose and such successor authorized agent shall have accepted such appointment. Notwithstanding the foregoing, any action arising out of or based on the Debt Securities may be instituted by the holder of any Debt Security in any competent court in Hungary. Hungary hereby waives irrevocably, to the fullest extent permitted by law, any immunity from jurisdiction to which it might otherwise be entitled in any such action which may be instituted by the holder of any Debt Security in Federal or State court in New York, New York or in any competent court in Hungary. This waiver is intended to be effective upon execution of this Global Debt Security without further act by Hungary before any such court, and introduction of this Global Debt Security into evidence shall be final and conclusive evidence of such waiver. Such waiver constitutes only a limited and specific waiver for the purposes of the Debt Securities and under no circumstances shall it be interpreted as a general waiver by Hungary or a waiver with respect to proceedings unrelated to the Debt Securities. Neither such appointment nor such waiver shall be interpreted to include the waiver of any immunity with respect to: (i) actions brought against Hungary under U.S. State or Federal securities laws; (ii) present or future “premises of the mission” as defined in the Vienna Convention on Diplomatic Relations signed in 1961; (iii) “Consular premises” as defined in the Vienna Convention on Consular Relations signed in 1963; (iv) any other property or assets used solely or mainly for official state purposes in Hungary or elsewhere; (v) military property or military assets or property or assets of Hungary related thereto; or (vi) any non-transferable national assets and national assets with priority importance as defined in or in accordance with applicable Hungarian laws.

 

7          This Global Debt Security shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law principles of such State, except with respect to its authorization and execution by Hungary, which shall be governed by the laws of Hungary.

 

8          Except as set forth in this Condition 8, the Debt Securities are issuable only as fully registered global securities, without coupons, each registered in the name of DTC, a nominee thereof or a successor to DTC or a nominee thereof, and

 

(i)           no Global Debt Security may be transferred, except in whole and not in part, and only to DTC, one or more nominees of DTC or one or more respective successors of DTC and its nominees; and

 

(ii)          no Global Debt Security may be exchanged for any Debt Security other than another Global Debt Security.

 

Notwithstanding any other provisions of the Fiscal Agency Agreement or this Global Debt Security, a Global Debt Security may be transferred to, or exchanged for registered Debt Securities registered in the name of, a person other than DTC, a nominee of DTC or a successor of DTC or its nominee if:

 

(i)           DTC or each of Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) (a) notifies Hungary that it is unwilling or unable to continue as depository for such Global Debt Security or (b) ceases to be a clearing agency

 

 

registered under the Securities Exchange Act of 1934 at a time when it is required to be, and in either such case (a) or (b) a successor depository is not appointed by Hungary within 90 days after receiving such notice from Euroclear, Clearstream or DTC or on becoming aware that DTC is no longer so registered;

 

(ii)          Hungary, in its sole discretion, instructs the Fiscal Agent in writing that a Global Debt Security shall be so transferable and exchangeable; or

 

(iii)         there shall have occurred and be continuing an Event of Default and/or Event of Acceleration with respect to the Debt Securities evidenced by this Global Debt Security.

 

Registered Debt Securities issued in exchange for this Global Debt Security will be registered in such names, and issued in such denominations (of $2,000 and integral multiples thereof), as an authorized representative of DTC shall request.

 

9          Hungary will maintain for the Debt Securities (i) a Paying Agent and Registrar in the City of London, England or The City and State of New York, and (ii) if the Debt Securities are issued in definitive form, a transfer agent and paying agent in The City and State of New York. Hungary will cause the Registrar to maintain a register in which shall be entered the names and addresses of the holders of the Debt Securities of this issue and the particulars of the Debt Securities held by them respectively and in which, subject to Condition 8 above, transfers of the Debt Securities shall be registered. Such Paying Agent and Registrar in England shall be Citibank, N.A., London Branch, unless and until Hungary appoints a different Paying Agent or Registrar (if applicable) in the same city. Hungary will appoint a transfer agent and paying agent as or when required in The City and State of New York. The holders of the Debt Securities may serve notices and demands with respect to the Debt Securities at the office of any Paying Agent and Registrar maintained pursuant to this Condition. In addition, all notices of Hungary will be published in a daily newspaper of general circulation in London for so long as the Debt Securities are listed on the London Stock Exchange and the rules of the London Stock Exchange so require. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once on different dates, on the first date on which publication is made.

 

10        Subject to Condition 8 above, this Global Debt Security is transferable upon presentation for such purpose at the office of the Registrar referred to in Condition 9, accompanied by a written instrument of transfer in form approved by Hungary executed by the registered holder hereof or by his duly authorized attorney, whereupon this Global Debt Security will be canceled and one or more Debt Securities of this issue for an equal aggregate principal amount will be delivered to the transferee.

 

11        Subject to Condition 8 above, Debt Securities of this issue upon presentation for such purpose at the office of the Registrar referred to in Condition 9, accompanied by a written instrument of transfer in form approved by Hungary executed by the registered holder or by his duly authorized attorney, may be exchanged for an equal aggregate principal amount of other fully registered Debt Securities of this issue in other authorized denominations.

 

12        Subject to Condition 8 above, Hungary will make transfers and exchanges of Debt Securities of this issue as aforesaid upon compliance by the holders of the Debt Securities with such reasonable regulations as may be prescribed by Hungary, and Hungary shall not be entitled to make any charge in respect to transfers and exchanges of Debt Securities of this issue, other than in respect of transfer taxes, if any. Each Debt Security issued upon any such transfer or exchange shall be dated the date of its authentication by the Fiscal Agent.

 

 

13        Interest on the Debt Securities of this issue shall be computed on the basis of a 360-day year of twelve 30-day months. Unless other arrangements are made, payments of interest on this Global Debt Security will be made by check drawn on a bank or trust company in The City and State of New York payable to the order of the registered holder, or, in the case of joint holders, to the order of all such joint holders or to such person as the joint holders may request in writing, provided that payment of principal will be made only upon prior presentation and surrender of this Global Debt Security at the office of a Paying Agent of Hungary referred to in Condition 9. Such check shall be mailed to the address of the registered holder as such address shall appear on the register maintained by the Registrar pursuant to Condition 9 hereof, or, in the case of joint holders, to such registered address of that joint holder who is first named in the register as one of such joint holders or to such address specified in the aforementioned request of such joint holders. The registered holder hereof or his legal personal representatives will be regarded as exclusively entitled to the principal monies hereby secured, and in the case of joint registered holders of this Global Debt Security the said principal monies shall be deemed to be owing to them on joint account. Any holder of Debt Securities, the aggregate principal amount of which equals or exceeds U.S. $1,000,000, may, by written notice to the Paying Agent no later than the Record Date therefor, elect to receive the interest payment in respect of such Debt Securities by wire transfer in same-day funds to a bank account maintained by such holder in the United States.

 

14        Claims for payment of the principal amount of this Debt Security shall become void 10 years after such principal amount became due and payable. Claims for payment of interest on this Debt Security shall become void five years after the relevant interest payment date on which the interest became due and payable.

 

15        In case any Debt Security shall at any time become mutilated or destroyed or stolen or lost, and such Debt Security, or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Registrar referred to in Condition 9 above, a new Debt Security of like tenor and date will be issued by Hungary in exchange for the Debt Security so mutilated, or in lieu of the Debt Security so destroyed or stolen or lost, but, in the case of any destroyed or stolen or lost Debt Security, only upon receipt of evidence satisfactory to Hungary that such Debt Security was destroyed or stolen or lost, and, upon receipt also of indemnity satisfactory to Hungary. Mutilated Debt Securities must be surrendered before replacement therefore will be issued. Application for replacement may be made only by the registered holder thereof and shall be made at the office of the Fiscal Agent specified in Condition 1.  All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Debt Security shall be borne by the owner of the Debt Security mutilated, destroyed, stolen or lost.

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

 

	
TEN   COM-as tenants in common
    	
UNIF   GIFT MINACT- ______________ Custodian ______________
    
	
 
    	
(Cust)                                   (Minor)
    
	
 
    	
 
    
	
TEN   ENT-as tenants by the entireties
    	
Under   Uniform Gifts to Minors Act ______________
    
	
 
    	
  (State)
    

 

JT TEN-as joint tenants with right of survivorship and not as tenants in common.

 

 

Additional abbreviations may also be used though not in the above list.

 

TRANSFERS

 

For Value Received the undersigned hereby sells, assigns and transfers unto

 

 

 

name and address including zip code and social security number or other identifying number of assignee the within Debt Security, hereby irrevocably constituting and appointing

 

 

 

Attorney to transfer the Debt Security on the register kept at the office of the Registrar of Hungary for such purpose in the Borough of Manhattan, The City of New York and State of New York, United States of America or London, with full power of substitution

 

dated this                         day of                    ,             .

 

	
By:
    	
 
    	
 
    
	
 
    	
Signature
    

 

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within Debt Security in every particular without alteration or enlargement or any change whatsoever and must be guaranteed by a commercial bank or trust company having its principal office or correspondent in The City of New York or by a member of the New York Stock Exchange.Exhibit 4.14

 

 

This document is important and requires your immediate attention. If you are in any doubt as to how to deal with it, you should consult your investment advisor, stockbroker, bank, trust company or other nominee.

 

March 31, 2014

 

 

NOTICE OF VARIATION AND EXTENSION

 

of HudBay Minerals Inc.’s offer to purchase

 

all of the issued and outstanding common shares of

 

AUGUSTA RESOURCE CORPORATION

 

for consideration per Augusta Share of
 0.315 of a Hudbay Share

 

HudBay Minerals Inc. (the “Offeror”) hereby gives notice that it is varying its offer dated February 10, 2014, as amended by the Notice of Variation and Extension dated March 14, 2014 (together, the “Original Offer”), to purchase, on and subject to the terms and conditions of the Original Offer, as amended, all of the issued and outstanding common shares (the “Augusta Shares”) of Augusta Resource Corporation (“Augusta”), other than any Augusta Shares held directly or indirectly by the Offeror and its affiliates, including any Augusta Shares that may become issued and outstanding after February 10, 2014 but before the Expiry Time (as defined herein) upon the exercise, exchange or conversion of any securities of Augusta exercisable or exchangeable for, convertible into or otherwise conferring a right to acquire, any Augusta Shares, including, any option, warrant or convertible debenture (“Convertible Securities”), together with the associated rights issued under Augusta’s Shareholder Rights Plan, in order to, among other things, extend the Original Offer to 5:00 p.m. (Toronto Time) on May 5, 2014. The Original Offer, as amended and extended hereby, is referred to herein as the “Offer”.

 

THE ORIGINAL OFFER HAS BEEN AMENDED AND EXTENDED, AND IS NOW OPEN FOR ACCEPTANCE
 UNTIL 5:00 P.M. (TORONTO TIME) ON MAY 5, 2014 (THE “EXPIRY TIME”).

 

The Offeror will not extend the Offer beyond May 5, 2014 unless, at or by that date, the remaining conditions to the Offer have been satisfied or waived, including the condition that Augusta’s Shareholder Rights Plan has been waived, invalidated or cease-traded. The Offeror will be applying to the British Columbia Securities Commission to cease trade Augusta’s Shareholder Rights Plan prior to the Expiry Time.

 

This Notice of Variation and Extension should be read in conjunction with the Original Offer and take-over bid circular (the “Original Circular”) dated February 10, 2014, as previously amended (the Original Offer together with the Original Circular collectively referred to as the “Original Offer and Circular”), and the letter of transmittal (the “Letter of Transmittal”) and notice of guaranteed delivery (the “Notice of Guaranteed Delivery”) that accompanied the Original Offer and Circular. The Original Offer and Circular, as amended previously and by this Notice of Variation and Extension collectively constitute the “Offer and Circular”. Except as otherwise set forth herein, the terms and conditions previously set forth in the Original Offer and Circular, Letter of Transmittal and Notice of Guaranteed Delivery, each as previously amended, continue to be applicable in all respects. All references to the “Offer” in the Original Offer and Circular, the Letter of Transmittal, the Notice of Guaranteed Delivery and this Notice of Variation and Extension mean the Original Offer as amended hereby, and all references in such documents to the “Circular” or the “Offer and Circular” mean the Original Offer and Circular as amended hereby. Unless the context requires otherwise, capitalized terms used herein but not defined herein that are defined in the Original Offer and Circular have the respective meanings given to them in the Original Offer and Circular.

 

The offering of Hudbay Shares pursuant to the Offer is made by a Canadian issuer that is permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare the Offer and Circular in accordance with the disclosure requirements of Canada. The Offer is subject to applicable disclosure requirements in Canada. Augusta Shareholders should be aware that such requirements are different from those of the United States and may differ from those in other jurisdictions. Financial statements included or incorporated by reference in the Offer and Circular have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and are subject to Canadian auditing standards and auditor independence rules, and thus may not be comparable to financial statements of United States companies or companies incorporated in other jurisdictions. Augusta Shareholders in the United States should be aware that the disposition of Augusta Shares and acquisition of Hudbay Shares by them as described in the Offer and Circular may have tax consequences in the United States, Canada and other jurisdictions. Such consequences may not be fully described in the Offer and Circular and such holders are urged to consult their tax advisors. The enforcement by Augusta Shareholders of civil liabilities under U.S. federal or state securities laws or applicable laws of other jurisdictions may be affected adversely by the fact that the Offeror is incorporated under and governed by the laws of Canada, that its officers and directors may be residents of jurisdictions other than the United States or such other jurisdictions, that the experts named in the Circular may be residents of jurisdictions other than the United States or such other jurisdictions, that all or a substantial portion of the assets of the Offeror and such persons may be located outside the United States or such other jurisdictions, that some of Augusta’s officers and directors are resident outside the United States or such other jurisdictions and that all or a substantial portion of the assets of Augusta and Augusta’s officers and directors may be located outside the United States or such other jurisdictions.

 

THE HUDBAY SHARES AND THE OFFER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”) OR ANY OTHER SECURITIES REGULATORY 

 

 

AUTHORITY, NOR HAS THE SEC OR ANY OTHER SUCH AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFER AND CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

Prospective investors should be aware that, during the period of the Offer, the Offeror or its affiliates, directly or indirectly, may bid for or make purchases of the securities to be distributed or to be exchanged, or certain related securities, as permitted by applicable laws or regulations of Canada or its provinces or territories. Neither the Offeror nor any of its affiliates intends to make any such purchases during the period of the Offer.

 

Information has been incorporated by reference in the Offer and Circular from documents filed with the securities commissions or similar authorities in Canada. Copies of the documents incorporated by reference in the Offer and Circular are available electronically on SEDAR and EDGAR at www.sedar.com and www.sec.gov, respectively.

 

	
The Depositary for the   Offer is:
    	
Information Agent for the   Offer is:
    
	
 
    	
 
    
	
Equity Financial Trust   Company
    	
Kingsdale Shareholder   Services
    
	
 
    
	
The Dealer Managers for   the Offer are:
    
	
In Canada
    	
In the United States
    
	
GMP Securities L.P.
    	
BMO Nesbitt Burns Inc.
    	
Griffiths McBurney Corp.
    	
BMO Capital Markets Corp.
    
				

 

Augusta Shareholders who have validly deposited and not withdrawn their Augusta Shares need take no further action to accept the Offer.

 

Registered Augusta Shareholders who wish to accept the Offer must properly complete and execute the Letter of Transmittal (printed on YELLOW paper) that accompanied the Original Offer and Circular, or a manually executed facsimile thereof, and deposit it, at or prior to the Expiry Time, together with certificate(s) or Direct Registration System (DRS) Advices representing their Augusta Shares and all other required documents, with Equity Financial Trust Company (the “Depositary”) at its office in Toronto, Ontario specified in the Letter of Transmittal, in accordance with the instructions set out in the Letter of Transmittal (as set out in Section 3 of the Original Offer, “Manner of Acceptance — Letter of Transmittal”). Alternatively, registered Augusta Shareholders may accept the Offer by following the procedure for guaranteed delivery set out in Section 3 of the Original Offer, “Manner of Acceptance — Procedure for Guaranteed Delivery”, using the Notice of Guaranteed Delivery (printed on GREEN paper) that accompanied the Original Offer and Circular, or a manually executed facsimile thereof. Augusta Shareholders who hold their Augusta Shares with an investment advisor, stockbroker, bank, trust company or other nominee will not have received a Letter of Transmittal or Notice of Guaranteed Delivery, and should follow the instructions set out by such nominee to tender their Augusta Shares.

 

Persons whose Augusta Shares are registered in the name of an investment advisor, stockbroker, bank, trust company or other nominee should contact such nominee for assistance if they wish to accept the Offer in order to take the necessary steps to be able to deposit such Augusta Shares under the Offer. Nominees likely have established tendering cut-off times that are up to 48 hours prior to the Expiry Time. Augusta Shareholders must instruct their investment advisor, stockbroker, bank, trust company or other nominee promptly if they wish to tender.

 

Augusta Shareholders will not be required to pay any fee or commission if they accept the Offer by depositing their Augusta Shares directly with the Depositary or if they make use of the services of a Soliciting Dealer to accept the Offer.

 

Questions and requests for assistance may be directed to Kingsdale Shareholder Services (the “Information Agent”), who can be contacted at 1-866-229-8874 toll free in North America or at 1-416-867-2272 outside of North America or by e-mail at contactus@kingsdaleshareholder.com; or to the Depositary at the addresses indicated on the last page of this document and additional copies of this document, the Original Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery, or any documents incorporated by reference or otherwise related to the Offer, may be obtained, without charge, upon request from the Depositary or the Information Agent at their respective offices shown on the last page of this document, and are accessible on the Canadian Securities Administrators’ website at www.sedar.com, on EDGAR at www.sec.gov and on the Offeror’s website at www.hudbayminerals.com. These website addresses are provided for informational purposes only and no information contained on, or accessible from, these websites is incorporated by reference in the Offer and Circular unless otherwise expressly indicated in the Offer and Circular.

 

The information contained in this document is current only as of the date of this document. The Offeror does not undertake to update any such information except as required by applicable Law. Information in this document and in the Original Offer and Circular related to Augusta has been compiled from public sources — see “INFORMATION CONCERNING AUGUSTA” in the Original Offer and Circular.

 

 

No broker, dealer, salesperson or other person has been authorized to give any information or make any representation other than those contained in this Notice of Variation and Extension or the Original Offer and Circular, and, if given or made, such information or representation must not be relied upon as having been authorized by the Offeror, the Depositary, the Information Agent or the Dealer Managers.

 

 

ADDITIONAL NOTICE TO UNITED STATES SHAREHOLDERS

AND OTHER SHAREHOLDERS OUTSIDE CANADA

 

The Offer is subject to Section 14(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), Regulation 14D promulgated by the SEC thereunder, Section 14(e) of the Exchange Act, and Regulation 14E promulgated by the SEC thereunder.

 

The Offeror has filed with the SEC a registration statement on Form F—10, which contains a prospectus relating to the Offer, a tender offer statement on a Schedule TO and other documents and information, as such documents have been amended, modified, supplemented or restated. AUGUSTA SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE DOCUMENTS, ALL DOCUMENTS INCORPORATED BY REFERENCE, ALL OTHER APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE EACH CONTAINS OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFEROR, AUGUSTA AND THE OFFER. Materials filed with the Canadian securities regulatory authorities are available electronically without charge at www.sedar.com. Materials filed with the SEC are available electronically without charge at the SEC’s website, www.sec.gov. All such materials may also be obtained without charge at the Offeror’s website, www.hudbayminerals.com or by directing a written or oral request to the Information Agent for the Offer, Kingsdale Shareholder Services, at 1-866-229-8874 toll free in North America or at 1-416-867-2272 or by e-mail at contactus@kingsdaleshareholder.com or to the Vice President, Legal and Corporate Secretary of the Offeror at 25 York Street, Suite 800, Toronto, Ontario, telephone 1-416-362-8181.

 

Neither this document nor the Original Offer and Circular generally addresses the income tax consequences of the Offer to Augusta Shareholders in any jurisdiction outside Canada or the United States. Augusta Shareholders in a jurisdiction outside Canada or the United States should be aware that the disposition of Augusta Shares may have tax consequences which may not be described in this document or the Original Offer and Circular. Accordingly, Augusta Shareholders outside Canada and the United States should consult their own tax advisors with respect to tax considerations applicable to them.

 

The Original Offer and Circular also contains a cautionary note regarding mineral reserve and resource estimates prepared in accordance with Canadian National Instrument 43-101 — Standards of Disclosure for Mineral Projects — see “CAUTIONARY NOTE REGARDING MINERAL RESERVES AND MINERAL RESOURCES” in the Original Offer and Circular.

 

NOTICE TO HOLDERS OF CONVERTIBLE SECURITIES

 

The Offer is made only for Augusta Shares, together with the associated rights issued under the Shareholder Rights Plan, and is not made for any options, warrants or convertible debentures or any other rights to acquire Augusta Shares. Any holder of Convertible Securities who wishes to accept the Offer should, subject to and to the extent permitted by the terms of such Convertible Securities and applicable Law, exercise, exchange or convert such Convertible Securities in order to obtain certificates representing Augusta Shares and deposit such Augusta Shares in accordance with the Offer. See Section 1 of the Original Offer, “The Offer”. Any such exercise, exchange or conversion must be completed sufficiently in advance of the Expiry Time to ensure that the holder of such Convertible Securities will have received certificates representing the Augusta Shares issuable upon such exercise, exchange or conversion in time for deposit prior to the Expiry Time, or in sufficient time to comply with the procedures described in Section 3 of the Original Offer, “Manner of Acceptance — Procedure for Guaranteed Delivery”.

 

The tax consequences to holders of Convertible Securities of exercising or not exercising such securities are not described in the Offer and Circular. Holders of such Convertible Securities should consult their own tax advisors with respect to the potential tax consequences to them in connection with the decision to exercise or not exercise such securities.

 

iv

 

REPORTING CURRENCY AND CURRENCY EXCHANGE RATE INFORMATION

 

All dollar references in this document and the Original Offer and Circular are in Canadian dollars, except where otherwise indicated. On February 7, 2014, the Bank of Canada noon rate of exchange for the Canadian dollar, expressed in U.S. dollars, was Canadian $1.00 = United States $0.9076.

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Notice of Variation and Extension contains “forward-looking statements” and “forward-looking information” (collectively, “forward-looking information”) within the meaning of applicable Canadian and United States securities legislation. Forward-looking information includes information that relates to, among other things, the Offeror’s objectives, strategies, and intentions and future financial and operating performance and prospects, statements with respect to the anticipated timing, mechanics, completion and settlement of the Offer, including the Offeror’s intention to apply to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan, the prospects of Augusta’s strategic review process, the market for Hudbay Shares, the value of the Hudbay Shares received as consideration under the Offer, the Offeror’s anticipated production, the permitting, development and financing of the Rosemont Project, reasons to accept the Offer, and the purpose of the Offer. Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by the Offeror at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information. The material factors or assumptions that the Offeror identified and applied in drawing conclusions or making forecasts or projections set out in the forward looking information include, but are not limited to, the accuracy of Augusta’s public disclosure; the execution of the Offeror’s business and growth strategies, including the success of the its strategic investments and initiatives; the availability of financing for the Offeror’s exploration and development projects and activities; the ability to complete project targets on time and on budget and other events that may affect the Offeror’s ability to develop its projects; no significant and continuing adverse changes in general economic conditions or conditions in the financial markets; that all conditions to completion of the Offer will be satisfied or waived.

 

The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, the market value of the Hudbay Shares received as consideration under the Offer and the impact of such issuance on the market price of the Hudbay Shares, the development of the Rosemont Project not occurring as planned, the exercising of dissent and appraisal rights by Augusta Shareholders should a Compulsory Acquisition or Subsequent Acquisition Transaction be undertaken, the reduced trading liquidity of Augusta Shares not deposited under the Offer, Augusta becoming a minority-owned or majority-owned subsidiary of the Offeror after consummation of the Offer, the possibility that the Offeror may remain a minority shareholder of Augusta after consummation of the Offer without the ability to control the management or direction of Augusta, the inaccuracy of Augusta’s public disclosure upon which the Offer is predicated, the triggering of change of control provisions in Augusta’s agreements leading to adverse consequences, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of the Offeror’s projects (including the impact on project cost and schedule of construction delays and unforeseen risks and other factors beyond its control), depletion of the Offeror’s reserves, risks related to political or social unrest or change and those in respect of aboriginal and community relations and title claims, operational risks and hazards, including unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated, compliance with government and environmental regulations, including permitting requirements and anti-bribery legislation, dependence on key personnel and employee relations, volatile financial markets that may affect the Offeror’s ability to obtain financing on acceptable terms, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, the Offeror’s ability to comply with its pension and other post-retirement obligations, the Offeror’s ability to abide by the covenants in its debt instruments, as well as the risks discussed under the heading “Risk Factors” in the Original Offer and Circular and other documents filed with Canadian and U.S. securities regulatory authorities. Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, the reader should not place undue reliance on forward-looking information. The Offeror does not assume any obligation to update or revise any forward-looking information after the date of this Notice of Variation

 

 

and Extension or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.

 

The Original Offer and Circular also contain forward looking information and this cautionary note should be read in conjunction with the Cautionary Note Regarding Forward Looking Statements in the Original Offer and Circular.

 

 

NOTICE OF VARIATION AND EXTENSION

 

March 31, 2014

 

TO: THE HOLDERS OF COMMON SHARES OF AUGUSTA RESOURCE CORPORATION

 

This Notice of Variation and Extension amends and supplements the Original Offer and Circular, as previously amended, pursuant to which the Offeror is offering to purchase, on the terms and subject to the conditions of the Offer, all of the issued and outstanding Augusta Shares, other than any Augusta Shares held directly or indirectly by the Offeror and its affiliates, including any Augusta Shares that may become issued and outstanding upon the exercise, exchange or conversion of Convertible Securities after the date of the Original Offer and Circular but prior to the Expiry Time, together with the associated rights issued under the Shareholder Rights Plan, for consideration per Augusta Share of 0.315 of a Hudbay Share.

 

The Offeror will not extend the Offer beyond May 5, 2014 unless, at or by that date, the remaining conditions to the Offer have been satisfied or waived, including the condition that the Shareholder Rights Plan has been waived, invalidated or cease-traded. The Offeror will be applying to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to the Expiry Time.

 

The Offeror believes that the Offer represents full and fair value and is the best alternative available to Augusta Shareholders. As long as Augusta continues as a stand-alone entity, its shareholders face significant risk of value erosion and dilution due to uncertain permitting timelines and critical near term financing pressures.

 

·      Augusta’s Strategic Review Process Has Failed: Augusta has not presented its shareholders with any alternative transactions to the Offer, despite the Offer having been announced 50 days ago and claims by Augusta that parties started conducting due diligence on the Rosemont Project prior to the Offeror launching the Offer. The signing of a confidentiality agreement is not an indication of a willingness to undertake a transaction that would be more beneficial to Augusta Shareholders than the Offer, and Augusta has not provided any evidence that there is any reasonable prospect of such a transaction.

 

·      Augusta’s Scheduling of Site Visits is a Stalling Tactic: The length of additional time Augusta is anticipating to conclude its strategic review process is nothing more than a stalling tactic. It is unclear why site visits to a greenfield development project 30 miles from Tucson, Arizona would require three to four weeks and, more importantly, why site visits have not already occurred if interested bidders truly exist. If Augusta believed that its strategic review process would result in an alternative transaction, it would not need to continue to rely on the Shareholder Rights Plan as a means of denying Augusta Shareholders the ability to choose to accept the Offer.

 

·      Augusta’s Shareholder Rights Plan is an Attempt to Deny Shareholder Choice: Augusta’s announcement, almost 50 days after the commencement of the Offer, that it will put the Shareholder Rights Plan to a vote at its annual meeting on May 9, 2014 is a further attempt to allow a group of current and former insiders to deny shareholder choice and suggests that the Augusta Board of Directors doesn’t expect to have any alternative transaction to the Offer almost 90 days after the Offer was commenced. At a special meeting of Augusta Shareholders on October 17, 2013, the Shareholder Rights Plan was approved by holders of only 46% of the outstanding Augusta Shares, which would imply approval by only 19% of holders of the outstanding Augusta Shares if insiders and former insiders who voted in favour are excluded. In attempting to have another vote on the Shareholder Rights Plan, Augusta is acknowledging that the prior vote does not indicate that Augusta Shareholders support the application of the Shareholder Rights Plan in the context of the Offer, and Augusta’s insiders are continuing to seek to entrench themselves and deny Augusta Shareholders the opportunity to accept the Offer. If the Augusta Board of Directors truly wanted to put “power directly in [shareholders’] hands”, it would allow Augusta Shareholders the opportunity to tender to the Offer.

 

·      Augusta’s Current Share Price Likely to Fall in the Absence of the Offer or a Superior Proposal: The Offeror notes that since the Offer, Augusta has outperformed its peers by 30%. This is not sustainable; the 

 

1

 

reality is that Augusta’s share price is likely to fall in the absence of the Offer or a superior proposal. Furthermore, any Augusta Shareholder wishing to sell a substantial number of shares at Augusta’s bid-affected price prior to the expiry of the Offer would be constrained by the lack of market liquidity.

 

1.                                      Extension of the Offer

 

The Offeror has extended the time for acceptance of the Offer to 5:00 p.m. (Toronto Time) on May 5, 2014. Accordingly, the definition of “Expiry Date” in the “Glossary” section of the Original Offer and Circular is hereby deleted and replaced by the following:

 

“Expiry Date” means May 5, 2014 or such later date or dates to which the Offer may be extended from time to time by the Offeror in accordance with Section 5 of the Offer, “Extension, Variation or Change of the Offer”;

 

In addition, all references to “5:00 p.m. (Toronto Time) on April 2, 2014” in the Original Offer and Circular are amended to refer to “5:00 p.m. (Toronto Time) on May 5, 2014”.

 

2.                                      Other Amendments to the Offer and Circular

 

The first sentence of the first complete paragraph on the inside front cover of the Original Offer and Circular is hereby deleted and replaced by the following:

 

“The Offer is subject to certain conditions, including, among other things the Shareholder Rights Plan (or any other shareholder rights plan or similar plan adopted by Augusta) having been waived, invalidated or cease-traded so as to have no effect in respect of, and so that it does not and will not reasonably be expected to adversely affect, the Offer or the Offeror and its affiliates. If the Shareholder Rights Plan (or any such other plan) has not otherwise been waived, terminated or invalidated, the Offeror intends to submit an application to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to May 5, 2014. Subject to the other terms and conditions of the Offer, the Offeror will not take up and pay for any tendered Augusta Shares unless each of the conditions of the Offer is satisfied or waived by the Offeror at or before the Expiry Time, including the condition that the Shareholder Rights Plan (or any such other plan) has been waived, invalidated or cease-traded as set out above.”

 

                        The following sentence is hereby added to the Original Offer and Circular (a) after the final sentence of the first paragraph under the heading “Will Augusta continue as a public company?” on page (vii), (b) after the first sentence of the second full paragraph on page 4, (c) after the first sentence of the second paragraph under the heading “Plans for Augusta” on page 33 and (d) after the final paragraph under the heading “Effect of the Offer on the Market for and Listing of Augusta Shares and Status as a Reporting Issuer” on page 56:

 

“If the Offeror does not acquire a sufficient number of Augusta Shares, it would be unable to cause the delisting of the Augusta Shares or to cause Augusta to cease to be a reporting issuer.”

 

The following sentence is hereby added to the Original Offer and Circular (a) after the last sentence of the first paragraph under the heading “If I decide not to tender, how will my Augusta Shares be affected?” on page (vii), (b) before the last sentence in the second paragraph under the heading “Purpose of the Offer and the Offeror’s Plans for Augusta” on pages 3-4 and (c) after the first sentence of the second paragraph under the heading “Purpose of the Offer” on page 33:

 

“The Offeror’s ability to advance the Rosemont Project will be dependent on the extent of its ownership of Augusta and its ability to control or influence the management and operations of Augusta.”

 

The paragraphs under the heading “Continued Participation in Rosemont without Single Asset Risk” on pages 3 and 32 of the Original Offer and Circular are hereby deleted and replaced with the following paragraph:

 

2

 

“As shareholders of the Offeror, former Augusta Shareholders would continue to benefit from future increases in value associated with the permitting and development of the Rosemont Project to the extent of the Offeror’s interest in Augusta, without the significant single asset permitting, development and financing risk to which Augusta Shareholders are currently exposed.”

 

The following sentence is hereby added under the final paragraph on page 9 of the Original Offer and Circular:

 

“As of 5:00 p.m. on March 13, 2014, 242,404 Augusta Shares had been tendered to and not withdrawn from the Offer.”

 

The following sentences are hereby added after the final sentence of the second paragraph under the heading “Other Terms of the Offer” on page 24 of the Original Offer and Circular and after the final sentence in clause (i) on page 13 of the Letter of Transmittal:

 

“The foregoing shall not restrict the applicability to the Offer of the federal securities laws of the United States or the jurisdiction of the courts of the United States with respect to the application of such laws.”

 

The following sentence is hereby added after the first sentence of the second paragraph under “Shareholder Rights Plan — The Offer” on page 35 of the Original Offer and Circular:

 

“If the Shareholder Rights Plan (or any such other plan) has not otherwise been waived, terminated or invalidated, the Offeror intends to submit an application to the British Columbia Securities Commission to cease trade the Shareholder Rights Plan prior to May 5, 2014.”

 

The third paragraph under the heading “Summary of the Offeror’s Historical and Pro Forma Financial Information” on page 36 of the Original Offer and Circular is hereby deleted and replaced by the following:

 

“The summary unaudited pro forma consolidated financial information set forth below should be read in conjunction with the unaudited pro forma consolidated financial statements of the Offeror and the accompanying notes thereto included as Schedules “B”, “D” and “E” to this Offer and Circular. The summary unaudited pro forma consolidated financial information for the Offeror gives effect to the proposed acquisition of Augusta as if it had occurred as at September 30, 2013, for the purposes of the pro forma consolidated balance sheet information and as at January 1, 2012 for the purposes of the pro forma consolidated statements of earnings for the year ended December 31, 2012 and the nine months ended September 30, 2013. Because the minimum tender condition has been waived by the Offeror, it is possible that the Offeror will not acquire the number of Augusta Shares pursuant to the Offer that would permit it to effect a Compulsory Acquisition or a Subsequent Acquisition Transaction, particularly if the Offeror acquires such number of Augusta Shares that, together with the Augusta Shares directly or indirectly held by the Offeror and its affiliates, represents less than 66 2/3% of total Augusta Shares on a fully diluted basis pursuant to the Offer. If the number of Augusta Shares the Offeror takes up and pays for under the Offer is not sufficient to permit a Compulsory Acquisition or Subsequent Acquisition Transaction, Augusta may continue as a separate, public company following the completion of the Offer with shareholders other than the Offeror. Therefore, in addition to the pro forma financial statements reflecting the acquisition of all of the issued and outstanding Augusta Shares, which can be found in Schedule “B” to the Offer and Circular, pro forma financial statements have been included to show the pro forma effect of the acquisition by the Offeror of 33% and 51% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer) and are attached as Schedules “D” and “E”, respectively, to the Offer and Circular. These acquisition amounts have been selected for illustrative purposes only, and there can be no assurance that the Offeror will acquire Augusta Shares in these amounts, or any specified amounts, in the Offer.

 

In preparing the unaudited pro forma consolidated financial statements, management of the Offeror has made certain assumptions that affect the amounts reported in the unaudited pro forma consolidated financial statements. The summary unaudited pro forma consolidated financial information is not intended 

 

3

 

to be indicative of the results that would actually have occurred, or the results expected in future periods, had the events reflected herein occurred on the dates indicated. Actual amounts recorded upon consummation of the Offer will differ from the pro forma information presented below. Pro forma adjustments have been made to account for significant accounting policy differences identified as of the date of this Offer and Circular. The review undertaken by the Offeror was to identify significant accounting policy differences where the impact was potentially material and could be reasonably estimated. Further accounting policy differences may be identified after the consummation of the proposed transaction. Any potential synergies that may be realized after consummation of the proposed transaction have been excluded from the unaudited pro forma consolidated financial statements.”

 

That certain table “Summary of Unaudited Pro Forma Consolidated Financial Information of the Offeror” on page 38 of the Original Offer and Circular is hereby deleted and replaced by the following:

 

Summary of Unaudited Pro Forma Consolidated Financial Information of the Offeror
 (in millions of $ except per share information)

 

	
 
    	
 
    	
Nine
   months
   ended
    	
 
    	
Year
   ended
    	
 
    	
Nine
   months
   ended
    	
 
    	
Year
   ended
    	
 
    	
Nine
   months
   ended
    	
 
    	
Year
   ended
    	
 
    
	
 
    	
 
    	
Sept. 30
    	
 
    	
Dec. 31
    	
 
    	
Sept. 30
    	
 
    	
Dec. 31
    	
 
    	
Sept. 30
    	
 
    	
Dec. 31
    	
 
    
	
 
    	
 
    	
2013
    	
 
    	
2012
    	
 
    	
2013
    	
 
    	
2012
    	
 
    	
2013
    	
 
    	
2012
    	
 
    
	
 
    	
 
    	
100%
    	
 
    	
100%
    	
 
    	
33%
    	
 
    	
33%
    	
 
    	
51%
    	
 
    	
51%
    	
 
    
	
Certain Income Statement Data
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revenue
    	
 
    	
380.7
    	
 
    	
702.6
    	
 
    	
380.7
    	
 
    	
702.6
    	
 
    	
380.7
    	
 
    	
702.6
    	
 
    
	
Gross Profit
    	
 
    	
65.7
    	
 
    	
197.6
    	
 
    	
65.7
    	
 
    	
197.6
    	
 
    	
65.7
    	
 
    	
197.6
    	
 
    
	
Results from operating activities
    	
 
    	
1.4
    	
 
    	
97.5
    	
 
    	
8.2
    	
 
    	
105.5
    	
 
    	
1.4
    	
 
    	
97.5
    	
 
    
	
(Loss) profit for the period/year
    	
 
    	
(53.6
    	
)
    	
(4.7
    	
)
    	
(49.7
    	
)
    	
2.2
    	
 
    	
(53.6
    	
)
    	
(4.7
    	
)
    
	
(Loss) profit attributable to owners of the   Company
    	
 
    	
(51.7
    	
)
    	
(2.0
    	
)
    	
(47.8
    	
)
    	
4.9
    	
 
    	
(48.8
    	
)
    	
2.8
    	
 
    
	
(Loss) profit per share (basic and diluted)(1)
    	
 
    	
(0.24
    	
)
    	
(0.01
    	
)
    	
(0.27
    	
)
    	
0.03
    	
 
    	
(0.26
    	
)
    	
0.01
    	
 
    
	
Ratio of earnings to fixed charges
    	
 
    	
(12.4
    	
)
    	
5.2
    	
 
    	
(10.3
    	
)
    	
5.5
    	
 
    	
(11.0
    	
)
    	
5.5
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Certain Balance Sheet Data
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash equivalents
    	
 
    	
772.9
    	
 
    	
—
    	
 
    	
779.5
    	
 
    	
—
    	
 
    	
772.9
    	
 
    	
—
    	
 
    
	
Property, plant and equipment
    	
 
    	
3,031.0
    	
 
    	
—
    	
 
    	
2,359.3
    	
 
    	
—
    	
 
    	
3,041.3
    	
 
    	
—
    	
 
    
	
Current assets
    	
 
    	
1,062.6
    	
 
    	
—
    	
 
    	
1,057.5
    	
 
    	
—
    	
 
    	
1,062.6
    	
 
    	
—
    	
 
    
	
Non-current assets
    	
 
    	
3,253.5
    	
 
    	
—
    	
 
    	
2,709.5
    	
 
    	
—
    	
 
    	
3,263.8
    	
 
    	
—
    	
 
    
	
Total assets
    	
 
    	
4,316.1
    	
 
    	
—
    	
 
    	
3,767.0
    	
 
    	
—
    	
 
    	
4,326.4
    	
 
    	
—
    	
 
    
	
Current liabilities
    	
 
    	
411.6
    	
 
    	
—
    	
 
    	
309.2
    	
 
    	
—
    	
 
    	
411.6
    	
 
    	
—
    	
 
    
	
Long-term debt
    	
 
    	
657.4
    	
 
    	
—
    	
 
    	
654.8
    	
 
    	
—
    	
 
    	
657.4
    	
 
    	
—
    	
 
    
	
Equity
    	
 
    	
2,015.1
    	
 
    	
—
    	
 
    	
1,723.1
    	
 
    	
—
    	
 
    	
2,021.3
    	
 
    	
—
    	
 
    
	
Total liabilities and equity
    	
 
    	
4,316.1
    	
 
    	
—
    	
 
    	
3,767.0
    	
 
    	
—
    	
 
    	
4,326.4
    	
 
    	
—
    	
 
    
	
Book value per share
    	
 
    	
9.5
    	
 
    	
—
    	
 
    	
9.6
    	
 
    	
—
    	
 
    	
10.7
    	
 
    	
—
    	
 
    

 

(1)             Attributable to owners.

 

The final sentence on page 38 of the Original Offer and Circular is hereby deleted and replaced by the following:

 

“The following table sets forth the number of currently outstanding Hudbay Shares and the number expected to be outstanding upon completion of the Offer, based on certain assumptions, including the acquisition by the Offeror of all of the issued and outstanding Augusta Shares.”

 

4

 

The first paragraph under the heading “Consolidated Capitalization” on page 39 of the Original Offer and Circular is hereby deleted and replaced by the following:

 

“As at the date hereof, there have been no material changes in the Hudbay Share or loan capitalization of the Offeror since September 30, 2013, other than: (i) the issuance of US$100 million aggregate principal amount of the Offeror’s 9.50% senior unsecured notes on December 9, 2013 (the “December 2013 Notes”); (ii) the issuance of 20,930,000 Hudbay Shares pursuant to an equity offering (the “Equity Offering”) and (iii) the draw down of approximately $56.5 million pursuant to the equipment financing facility the Offeror has entered into with Cat Financial (the “Equipment Financing Loan”). The following table sets forth the consolidated capitalization of the Company: (i) as at September 30, 2013; (ii) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering and the Equipment Financing Loan and before giving effect to the Offer; (iii) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of all of the issued and outstanding Augusta Shares; (iv) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of 33% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer); and (v) as at September 30, 2013 after giving effect to the December 2013 Notes, the Equity Offering, the Equipment Financing Loan and the acquisition in the Offer of 51% of the issued and outstanding Augusta Shares (including Augusta Shares held by the Offeror and its affiliates prior to the commencement of the Offer).”

 

5

 

That certain table “Consolidated Capitalization” on page 39 of the Original Offer and Circular is hereby deleted and replaced by the following:

 

	
 
    	
 
    	
As at September 30, 2013
    	
 
    
	
 
    	
 
    	
Actual
    	
 
    	
After giving effect
   to December 2013
   Notes, the Equity
   Offering and the
   Equipment
   Financing Loan
   before giving effect
   to the Offer
    	
 
    	
After giving
   effect to
   December 2013
   Notes, the Equity
   Offering, the
   Equipment
   Financing Loan
   and the Offer(7)
    	
 
    	
After giving
   effect to
   December
   2013 Notes,
   the Equity
   Offering, the
   Equipment
   Financing
   Loan and the
   Offer(8)
    	
 
    	
After giving effect
   to December 2013
   Notes, the Equity
   Offering, the
   Equipment
   Financing Loan
   and the Offer(9)
    	
 
    
	
 
    	
 
    	
(Dollar amount in thousands)
    	
 
    
	
Cash and cash equivalents(1)
    	
 
    	
$
    	
792,487
    	
 
    	
$
    	
1,058,052
    	
(2)(3)
    	
$
    	
1,038,486
    	
(2)(3)
    	
$
    	
1,045,052
    	
(2)(3)
    	
$
    	
1,038,486
    	
(2)(3)
    
	
Debt (including current maturities):
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Existing Credit Facilities(4)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Other secured debt(5)
    	
 
    	
—
    	
 
    	
$
    	
58,202
    	
 
    	
$
    	
58,202
    	
 
    	
$
    	
58,202
    	
 
    	
$
    	
58,202
    	
 
    
	
Total secured debt
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Total senior unsecured debt
    	
 
    	
$
    	
654,827
    	
 
    	
$
    	
654,827
    	
 
    	
$
    	
654,827
    	
 
    	
$
    	
654,827
    	
 
    	
$
    	
654,827
    	
 
    
	
Principal amount of December 2013 Notes(1)(2)
    	
 
    	
—
    	
 
    	
$
    	
99,961
    	
 
    	
$
    	
99,961
    	
 
    	
$
    	
99,961
    	
 
    	
$
    	
99,961
    	
 
    
	
Long-term debt incurred in Offer (including   current portion)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
$
    	
96,058
    	
(6)
    	
—
    	
 
    	
$
    	
96,058
    	
(6)
    
	
Total debt(5)
    	
 
    	
$
    	
654,827
    	
 
    	
$
    	
812,990
    	
 
    	
$
    	
909,048
    	
(6)
    	
$
    	
812,990
    	
 
    	
$
    	
909,048
    	
(6)
    
	
Equity:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity
    	
 
    	
$
    	
1,641,784
    	
 
    	
$
    	
1,641,784
    	
 
    	
$
    	
1,641,784
    	
 
    	
$
    	
1,641,784
    	
 
    	
$
    	
1,641,784
    	
 
    
	
Equity Offering(3)
    	
 
    	
—
    	
 
    	
$
    	
165,604
    	
 
    	
$
    	
165,604
    	
 
    	
$
    	
165,604
    	
 
    	
$
    	
165,604
    	
 
    
	
Shares issued pursuant to the Offer
    	
 
    	
—
    	
 
    	
—
    	
 
    	
$
    	
372,601
    	
 
    	
$
    	
74,256
    	
 
    	
$
    	
156,571
    	
 
    
	
Total equity
    	
 
    	
$
    	
1,641,784
    	
 
    	
$
    	
1,807,388
    	
 
    	
$
    	
2,179,989
    	
 
    	
$
    	
1,881,644
    	
 
    	
$
    	
1,963,959
    	
 
    
	
Total capitalization(1)
    	
 
    	
$
    	
2,296,611
    	
 
    	
$
    	
2,620,378
    	
 
    	
$
    	
3,089,037
    	
 
    	
$
    	
2,694,634
    	
 
    	
$
    	
2,873,007
    	
 
    

 

(1)             Reflects the United States dollar/Canadian dollar closing exchange rate as reported by the Bank of Canada as at September 30, 2013.

(2)             Reflects net proceeds from the offering of the December 2013 Notes of $99,961.

(3)             Reflects net proceeds from the Equity Offering of $165,604.

 

6

 

(4)             As of September 30, 2013, there were no borrowings outstanding under the Credit Facility. As of September 30, 2013, the Offeror had commitments available to be borrowed under its credit facility of US$72 million (based on the maximum availability, equal to the lesser of US$100 million and a borrowing base related to accounts receivable and inventory of the Manitoba business unit); however, borrowing capacity was reduced by $64.1 million of letters of credit outstanding on such date.

(5)             Does not include available credit facilities, including the undrawn portion of the equipment financing facility for the Constancia mobile fleet which the Offeror has entered into with Cat Financial. The equipment financing facility will be used to finance the purchase of up to approximately US$130 million of equipment.

(6)             On December 16, 2013, Augusta announced that it had closed an additional loan facility for US$26.6 million (the “Expanded Loan”) and had drawn down the first tranche of US$3.5 million. In connection with the Expanded Loan, Augusta paid an arrangement fee of US$1,120,000 and issued a total of 3.3 million Warrants to the lender with an exercise price of US$2.12 per share, subject to amendment if certain conditions are not met. The Warrants expire on December 12, 2016.

(7)             Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule B to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.

(8)             Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule D to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.

(9)             Refer to the unaudited pro forma consolidated financial statements of the Offeror for the nine months ended September 30, 2013 attached as Schedule E to this Offer and Circular for details regarding the assumptions used to calculate the effect of the Offer.

 

The following is added as Schedules “D” and “E” to the Original Offer and Circular:

 

7

 

SCHEDULE D

 

UNAUDITED PRO FORMA FINANCIAL STATEMENT

 

8

 

Hudbay Minerals Inc.

 

Pro Forma Consolidated Financial Statements

(Unaudited)

September 30, 2013

(expressed in thousands of Canadian dollars)

 

9

 

Hudbay Minerals Inc.

Pro Forma Consolidated Balance Sheet

(Unaudited) As at September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
    consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash   equivalents 
    	
 
    	
792,487
    	
 
    	
(13,000
    	
)
    	
(b)
    	
 
    	
779,487
    	
 
    
	
Trade and other   receivables 
    	
 
    	
120,842
    	
 
    	
—
    	
 
    	
 
    	
 
    	
120,842
    	
 
    
	
Inventories
    	
 
    	
56,360
    	
 
    	
—
    	
 
    	
 
    	
 
    	
56,360
    	
 
    
	
Prepaid expenses   and other current assets
    	
 
    	
60,796
    	
 
    	
—
    	
 
    	
 
    	
 
    	
60,796
    	
 
    
	
Other financial   assets
    	
 
    	
175
    	
 
    	
—
    	
 
    	
 
    	
 
    	
175
    	
 
    
	
Taxes receivable
    	
 
    	
39,884
    	
 
    	
—
    	
 
    	
 
    	
 
    	
39,884
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   current assets
    	
 
    	
1,070,544
    	
 
    	
(13,000
    	
)
    	
 
    	
 
    	
1,057,544
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Receivables
    	
 
    	
49,587
    	
 
    	
—
    	
 
    	
 
    	
 
    	
49,587
    	
 
    
	
Inventories
    	
 
    	
6,579
    	
 
    	
—
    	
 
    	
 
    	
 
    	
6,579
    	
 
    
	
Prepaid expenses
    	
 
    	
624
    	
 
    	
—
    	
 
    	
 
    	
 
    	
624
    	
 
    
	
Investment in   Augusta
    	
 
    	
—
    	
 
    	
142,532
    	
 
    	
(a),(b)
    	
 
    	
142,532
    	
 
    
	
Other financial   assets
    	
 
    	
86,786
    	
 
    	
(48,192
    	
)
    	
(d)
    	
 
    	
38,594
    	
 
    
	
Intangible assets -   computer software
    	
 
    	
13,278
    	
 
    	
—
    	
 
    	
 
    	
 
    	
13,278
    	
 
    
	
Property, plant and   equipment
    	
 
    	
2,359,330
    	
 
    	
—
    	
 
    	
 
    	
 
    	
2,359,330
    	
 
    
	
Goodwill 
    	
 
    	
69,138
    	
 
    	
—
    	
 
    	
 
    	
 
    	
69,138
    	
 
    
	
Deferred tax assets
    	
 
    	
29,800
    	
 
    	
—
    	
 
    	
 
    	
 
    	
29,800
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   assets
    	
 
    	
3,685,666
    	
 
    	
81,340
    	
 
    	
 
    	
 
    	
3,767,006
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Trade and other   payables
    	
 
    	
186,300
    	
 
    	
—
    	
 
    	
 
    	
 
    	
186,300
    	
 
    
	
Taxes payable
    	
 
    	
128
    	
 
    	
—
    	
 
    	
 
    	
 
    	
128
    	
 
    
	
Other liabilities
    	
 
    	
41,985
    	
 
    	
—
    	
 
    	
 
    	
 
    	
41,985
    	
 
    
	
Other financial   liabilities
    	
 
    	
14,275
    	
 
    	
—
    	
 
    	
 
    	
 
    	
14,275
    	
 
    
	
Deferred revenue
    	
 
    	
66,542
    	
 
    	
—
    	
 
    	
 
    	
 
    	
66,542
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   current liabilities
    	
 
    	
309,230
    	
 
    	
—
    	
 
    	
 
    	
 
    	
309,230
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other financial   liabilities
    	
 
    	
23,333
    	
 
    	
—
    	
 
    	
 
    	
 
    	
23,333
    	
 
    
	
Long-term debt
    	
 
    	
654,827
    	
 
    	
—
    	
 
    	
 
    	
 
    	
654,827
    	
 
    
	
Deferred revenue
    	
 
    	
475,122
    	
 
    	
—
    	
 
    	
 
    	
 
    	
475,122
    	
 
    
	
Provisions
    	
 
    	
144,349
    	
 
    	
—
    	
 
    	
 
    	
 
    	
144,349
    	
 
    
	
Pension obligations
    	
 
    	
34,603
    	
 
    	
—
    	
 
    	
 
    	
 
    	
34,603
    	
 
    
	
Other employee   benefits
    	
 
    	
142,643
    	
 
    	
—
    	
 
    	
 
    	
 
    	
142,643
    	
 
    
	
Deferred tax   liabilities
    	
 
    	
259,775
    	
 
    	
—
    	
 
    	
 
    	
 
    	
259,775
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   liabilities
    	
 
    	
2,043,882
    	
 
    	
—
    	
 
    	
 
    	
 
    	
2,043,882
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shareholders’   Equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Share capital (note   5)
    	
 
    	
1,021,088
    	
 
    	
74,256
    	
 
    	
(a)
    	
 
    	
1,095,344
    	
 
    
	
Reserves
    	
 
    	
2,308
    	
 
    	
(20,865
    	
)
    	
(d)
    	
 
    	
(18,557
    	
)
    
	
Retained earnings   (deficit)
    	
 
    	
620,472
    	
 
    	
27,949
    	
 
    	
(b),(c)
    	
 
    	
648,421
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   equity attributable to controlling shareholders
    	
 
    	
1,643,868
    	
 
    	
81,340
    	
 
    	
 
    	
 
    	
1,725,208
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Non-controlling   interests
    	
 
    	
(2,084
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(2,084
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   equity
    	
 
    	
1,641,784
    	
 
    	
81,340
    	
 
    	
 
    	
 
    	
1,723,124
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   liabilities and shareholders’ equity
    	
 
    	
3,685,666
    	
 
    	
81,340
    	
 
    	
 
    	
 
    	
3,767,006
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

10

 

Hudbay Minerals Inc.

Pro Forma Consolidated Statement of Income

(Unaudited) For the nine months ended September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
   consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revenue   
    	
 
    	
380,720
    	
 
    	
—
    	
 
    	
 
    	
 
    	
380,720
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost   of sales 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mining operating   costs
    	
 
    	
260,212
    	
 
    	
—
    	
 
    	
 
    	
 
    	
260,212
    	
 
    
	
Depreciation and   amortization
    	
 
    	
54,826
    	
 
    	
—
    	
 
    	
 
    	
 
    	
54,826
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
315,038
    	
 
    	
—
    	
 
    	
 
    	
 
    	
315,038
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   profit (loss)
    	
 
    	
65,682
    	
 
    	
—
    	
 
    	
 
    	
 
    	
65,682
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Selling   and administrative expenses
    	
 
    	
29,919
    	
 
    	
—
    	
 
    	
 
    	
 
    	
29,919
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exploration   and evaluation
    	
 
    	
22,082
    	
 
    	
—
    	
 
    	
 
    	
 
    	
22,082
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating income
    	
 
    	
(417
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(417
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating expenses
    	
 
    	
5,871
    	
 
    	
—
    	
 
    	
 
    	
 
    	
5,871
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Results   from operating activities  (Note 1)
    	
 
    	
8,227
    	
 
    	
—
    	
 
    	
 
    	
 
    	
8,227
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   income
    	
 
    	
(2,870
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(2,870
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   expenses
    	
 
    	
7,144
    	
 
    	
—
    	
 
    	
 
    	
 
    	
7,144
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   finance losses
    	
 
    	
26,263
    	
 
    	
—
    	
 
    	
 
    	
 
    	
26,263
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
30,537
    	
 
    	
—
    	
 
    	
 
    	
 
    	
30,537
    	
 
    
	
Share   of investment in Augusta  
    	
 
    	
—
    	
 
    	
(1,941
    	
)
    	
(e)
    	
 
    	
(1,941
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   before tax
    	
 
    	
(22,310
    	
)
    	
(1,941
    	
)
    	
 
    	
 
    	
(24,251
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tax   expense (recovery)
    	
 
    	
25,484
    	
 
    	
—
    	
 
    	
 
    	
 
    	
25,484
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the period
    	
 
    	
(47,794
    	
)
    	
(1,941
    	
)
    	
 
    	
 
    	
(49,735
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Attributable   to
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Owners of the   Company
    	
 
    	
(45,854
    	
)
    	
(1,941
    	
)
    	
 
    	
 
    	
(47,795
    	
)
    
	
Non-controlling   interests
    	
 
    	
(1,940
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(1,940
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the period
    	
 
    	
(47,794
    	
)
    	
(1,941
    	
)
    	
 
    	
 
    	
(49,735
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   per share attributable to owners of the company
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic and diluted   (note 6)
    	
 
    	
(0.27
    	
)
    	
 
    	
 
    	
 
    	
 
    	
(0.27
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted   average shares outstanding (thousands) (note 6)
    	
 
    	
172,038
    	
 
    	
 
    	
 
    	
 
    	
 
    	
179,938
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

11

 

Hudbay Minerals Inc.

Pro Forma Consolidated Statement of Income

(Unaudited) For the year ended December 31, 2012

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
    consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revenue
    	
 
    	
702,550
    	
 
    	
—
    	
 
    	
 
    	
 
    	
702,550
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost   of sales
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mining operating   costs
    	
 
    	
429,155
    	
 
    	
—
    	
 
    	
 
    	
 
    	
429,155
    	
 
    
	
Depreciation and   amortization
    	
 
    	
75,801
    	
 
    	
—
    	
 
    	
 
    	
 
    	
75,801
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
504,956
    	
 
    	
—
    	
 
    	
 
    	
 
    	
504,956
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   profit (loss)
    	
 
    	
197,594
    	
 
    	
—
    	
 
    	
 
    	
 
    	
197,594
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Selling   and administrative expenses
    	
 
    	
39,516
    	
 
    	
—
    	
 
    	
 
    	
 
    	
39,516
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exploration   and evaluation
    	
 
    	
43,572
    	
 
    	
—
    	
 
    	
 
    	
 
    	
43,572
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating income
    	
 
    	
(2,316
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(2,316
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating expenses
    	
 
    	
11,332
    	
 
    	
—
    	
 
    	
 
    	
 
    	
11,332
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Results   from operating activities  (Note 1)
    	
 
    	
105,490
    	
 
    	
—
    	
 
    	
 
    	
 
    	
105,490
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   income
    	
 
    	
(6,217
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(6,217
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   expenses
    	
 
    	
14,858
    	
 
    	
—
    	
 
    	
 
    	
 
    	
14,858
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   finance losses (gains)
    	
 
    	
44,700
    	
 
    	
(26,617
    	
)
    	
(d)
    	
 
    	
18,083
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
53,341
    	
 
    	
(26,617
    	
)
    	
 
    	
 
    	
26,724
    	
 
    
	
Share   of investment in Augusta  
    	
 
    	
—
    	
 
    	
(3,238
    	
)
    	
(e)
    	
 
    	
(3,238
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Profit   before tax
    	
 
    	
52,149
    	
 
    	
23,379
    	
 
    	
 
    	
 
    	
75,528
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tax   expense
    	
 
    	
73,319
    	
 
    	
—
    	
 
    	
 
    	
 
    	
73,319
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Profit/(Loss)   for the year
    	
 
    	
(21,170
    	
)
    	
23,379
    	
 
    	
 
    	
 
    	
2,209
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Attributable   to
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Owners of the   Company
    	
 
    	
(18,507
    	
)
    	
23,379
    	
 
    	
 
    	
 
    	
4,872
    	
 
    
	
Non-controlling   interests
    	
 
    	
(2,663
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(2,663
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Profit/(Loss)   for the year
    	
 
    	
(21,170
    	
)
    	
23,379
    	
 
    	
 
    	
 
    	
2,209
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Earnings/(Loss)   per share attributable to owners of the company
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic (note 6)
    	
 
    	
(0.11
    	
)
    	
 
    	
 
    	
 
    	
 
    	
0.03
    	
 
    
	
Diluted (note 6)
    	
 
    	
(0.11
    	
)
    	
 
    	
 
    	
 
    	
 
    	
0.03
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted   average shares outstanding (thousands) (note 6)
    	
 
    	
171,961
    	
 
    	
 
    	
 
    	
 
    	
 
    	
179,861
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

12

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

1                      Basis of presentation

 

The unaudited pro forma consolidated balance sheet of Hudbay Minerals Inc. (the “Company” or “Hudbay”) as at September 30, 2013 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been derived by management based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), for illustrative purposes only, after giving effect to the acquisition of a 33% interest in the share capital of Augusta Resource Corporation (“Augusta”), including common shares the Company owned prior to the Take-over Bid Circular, by the Company (note 3). Adjustments applied are directly attributable to the transaction, factually supportable, and expected to have a continuing impact. Terms not otherwise defined herein have the meanings given thereto in the Take-over Bid Circular of the Company or Augusta dated February 10, 2014.

 

These unaudited pro forma consolidated financial statements have been compiled as follows:

 

a)                  an unaudited pro forma consolidated balance sheet giving effect to the transaction described in note 3, as if the transaction occurred on September 30, 2013 based on:

 

·                      the unaudited condensed consolidated interim balance sheet of the Company as at September 30, 2013; and

 

·                      information derived from the unaudited condensed consolidated interim statement of financial position of Augusta as at September 30, 2013.

 

b)                  an unaudited pro forma consolidated income statement for the nine months ended September 30, 2013, which assumes the transaction occurred as of January 1, 2012, based on:

 

·                      the unaudited condensed consolidated interim income statement of the Company for the nine months ended September 30, 2013; and,

 

·                      information derived from the unaudited condensed consolidated interim statement of comprehensive loss of Augusta for the nine months ended September 30, 2013.

 

c)                   an unaudited pro forma consolidated income statement for the year ended December 31, 2012, which assumes the transaction occurred as of January 1, 2012, based on:

 

·                      the audited consolidated income statement of the Company for the year ended December 31, 2012; and

 

·                      information derived from the audited consolidated statement of comprehensive profit (loss) of Augusta for the year ended December 31, 2012.

 

13

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

It is management’s opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation, in all material respects, of the transactions described in notes 3 and 4 in accordance with IFRS, applied on a basis consistent with the Company’s accounting policies. The unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations that might be obtained in the future.

 

The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and Augusta.

 

Augusta’s financial statements are presented in United States dollars. For the purposes of these unaudited pro forma consolidated financial statements, any financial information of Augusta has been translated into Canadian dollars at the following rates:

 

·                       September 30, 2013 balance sheet at the exchange rate of $1.0303;

 

·                       December 31, 2012 income statement at the average rate for the year of $0.9994; and

 

·                       September 30, 2013 income statement at the average rate for the period of $1.0236.

 

All foreign exchange rates have been obtained from the Bank of Canada website. Unless where otherwise noted, these unaudited pro forma consolidated financial statements and their accompanying notes are presented in Canadian dollars.

 

Prior to the transaction described in Note 3, the Company owned 23,058,585 shares of Augusta which were recorded on the unaudited condensed interim balance sheet of the Company at September 30, 2013 at a fair value of $48,192 (cost of $69,058).

 

The Company assumes they will have significant influence over Augusta subsequent to the transaction.  The allocation of the preliminary purchase price to reflect the fair values of the identifiable net assets is based on management’s estimate of such assets and liabilities and, accordingly, the adjustments that have been included in the pro forma consolidated balance sheet may be subject to change. The final purchase price allocations may differ materially from the allocations included herein.

 

2                      Summary of significant accounting policies

 

These unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies, as set out in the audited consolidated financial statements of the Company as at December 31, 2012. Management has determined, based on their initial assessment, that certain adjustments may be necessary to conform Augusta’s audited consolidated financial statements to the accounting policies used by the Company in the preparation of its audited consolidated financial statements:

 

14

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

a)                  Stock based compensation — Augusta capitalizes stock based compensation related to personnel that service their development project to development costs. Hudbay expenses similar charges to various income statement accounts. The amount of the cumulative impact is unknown at the current time.

 

b)                  Deposits and prepayments on long-lead equipment - Augusta presents this as a separate financial statement line item. Hudbay groups these assets within prepaid expenses. An amount of $12,000 has been reclassified to conform to Hudbay policies.

 

3                      The transaction

 

Proposed transaction

 

These pro forma financial statements have been prepared on the basis consistent with the terms of the Take-over Bid Circular, but under the assumption that Hudbay acquires 33% of the issued and outstanding common shares of Augusta, including any Augusta Shares held directly or indirectly by Hudbay and its affiliates prior to the Take-over Bid Circular.

 

The transaction will be accounted for as an investment in associate under the equity method.  A summary of the allocation of the preliminary purchase price to the acquired assets and liabilities assumed is as follows:

 

	
 
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Preliminary   purchase price
    	
 
    	
 
    	
 
    
	
Hudbay share   consideration (note 4(a))
    	
 
    	
74,256
    	
 
    
	
Fair value of   Augusta shares previously held by Hudbay (note 4(c))
    	
 
    	
68,276
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Investment in   Augusta
    	
 
    	
142,532
    	
 
    

 

The final purchase price and the Company’s share of the Augusta’s fair value of the identifiable net assets acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the purchase price, including share consideration, and the fair values of net assets will vary from those shown above. These differences may be material.

 

4                      Pro forma assumptions and adjustments

 

The unaudited pro forma consolidated financial statements reflect the following assumptions and adjustments to give effect to the acquisition of 33% of the issued and outstanding common shares of Augusta as described in note 3 as if the transactions had occurred on January 1, 2012 for statement of income items and September 30, 2013 for balance sheet items.  Assumptions relating to the share price of Hudbay or Augusta have used the date of February 7, 2014 which represents the last trading day before February 10, 2014.

 

a)                  An adjustment to reflect the issuance of 7,899,596 Hudbay shares in exchange for 25,078,082 common shares of Augusta representing a share exchange ratio of 0.315 Hudbay shares to 1 Augusta share and an 

 

15

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

adjustment to recognize the related investment in Augusta. The closing price of Augusta shares on February 7, 2014 was $2.51.  Future movements in share prices may impact the share numbers disclosed within.

 

b)                  An adjustment to reflect the transaction costs of $13,000 in professional fees.

 

c)                   An adjustment to re-measure the fair value of the Company’s existing investment in Augusta held prior to investment becoming an associate. This investment is designated as an available-for-sale investment by Hudbay, carried at fair value and all fair value changes are recognized in other comprehensive income (OCI), except for declines in values which are significant or prolonged which are recognized in the statement of loss.

 

d)                  An adjustment to eliminate the Company’s existing investment in Augusta as at September 30, 2013 and an adjustment to eliminate the related accumulated fair value gains (losses) in reserves. Correspondingly, recognized fair value changes in the statement of income are eliminated for the nine months ended September 30, 2013 and the year ended December 31, 2012 of $nil and $26,617, respectively.

 

e)                   An adjustment to recognize Hudbay’s share of investment in Augusta.

 

5                      Pro forma share capital

 

	
 
    	
 
    	
September 30, 2013
    	
 
    	
December 31, 2012
    	
 
    
	
 
    	
 
    	
Number
    of shares
    	
 
    	
 
    	
 
    	
Number
    of shares
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(000s)
    	
 
    	
$
    	
 
    	
(000s)
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Hudbay’s common   shares outstanding
    	
 
    	
172,078
    	
 
    	
1,021,088
    	
 
    	
171,984
    	
 
    	
1,020,458
    	
 
    
	
Hudbay’s common   shares issued under the proposed transaction (note 4(a))
    	
 
    	
7,900
    	
 
    	
74,256
    	
 
    	
7,900
    	
 
    	
74,256
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma share   capital
    	
 
    	
179,978
    	
 
    	
1,095,344
    	
 
    	
179,884
    	
 
    	
1,094,714
    	
 
    

 

16

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

6                      Pro forma earnings/(loss) per share

 

For the purposes of the unaudited pro forma consolidated financial statements, the earnings/(loss) per share has been calculated using the weighted average number of shares which would have been outstanding as at the period end, after giving effect to the transaction described in notes 3 and 4 as if it had occurred on January 1, 2012.

 

	
 
    	
 
    	
September 30,
    2013
    	
 
    	
December 31,
    2012
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Actual weighted   average number of Hudbay shares outstanding (thousands)
    	
 
    	
172,038
    	
 
    	
171,961
    	
 
    
	
Assumed number of   Hudbay shares issued to Augusta shareholders (note 4(a)) (thousands)
    	
 
    	
7,900
    	
 
    	
7,900
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma weighted   average number of Hudbay shares outstanding — Basic (thousands)
    	
 
    	
179,938
    	
 
    	
179,861
    	
 
    
	
Actual number of   Hudbay dilutive securities (thousands)
    	
 
    	
219
    	
 
    	
275
    	
 
    
	
Pro forma weighted   average number of Hudbay shares outstanding — Diluted (thousands)
    	
 
    	
180,157
    	
 
    	
180,136
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma   profit/(loss) attributable to owners of the Company
    	
 
    	
(47,795
    	
)
    	
4,872
    	
 
    
	
Pro forma   earnings/(loss) per share - basic
    	
 
    	
(0.27
    	
)
    	
0.03
    	
 
    
	
Pro forma   earnings/(loss) per share - diluted
    	
 
    	
(0.27
    	
)
    	
0.03
    	
 
    

 

17

 

SCHEDULE E

 

UNAUDITED PRO FORMA FINANCIAL STATEMENT

 

18

 

Hudbay Minerals Inc.

 

Pro Forma Consolidated Financial Statements

(Unaudited)

September 30, 2013

(expressed in thousands of Canadian dollars)

 

19

 

Hudbay Minerals Inc.

Pro Forma Consolidated Balance Sheet

(Unaudited) As at September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Augusta
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
    consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(Note 1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash   equivalents 
    	
 
    	
792,487
    	
 
    	
772
    	
 
    	
(20,338
    	
)
    	
(b), (f)
    	
 
    	
772,921
    	
 
    
	
Trade and other   receivables 
    	
 
    	
120,842
    	
 
    	
7,366
    	
 
    	
—
    	
 
    	
 
    	
 
    	
128,208
    	
 
    
	
Inventories
    	
 
    	
56,360
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
56,360
    	
 
    
	
Prepaid expenses   and other current assets
    	
 
    	
60,796
    	
 
    	
4,085
    	
 
    	
—
    	
 
    	
 
    	
 
    	
64,881
    	
 
    
	
Other financial   assets
    	
 
    	
175
    	
 
    	
154
    	
 
    	
—
    	
 
    	
 
    	
 
    	
329
    	
 
    
	
Taxes receivable
    	
 
    	
39,884
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
39,884
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   current assets
    	
 
    	
1,070,544
    	
 
    	
12,377
    	
 
    	
(20,338
    	
)
    	
 
    	
 
    	
1,062,583
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Receivables
    	
 
    	
49,587
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
49,587
    	
 
    
	
Inventories
    	
 
    	
6,579
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
6,579
    	
 
    
	
Prepaid expenses
    	
 
    	
624
    	
 
    	
12,025
    	
 
    	
—
    	
 
    	
 
    	
 
    	
12,649
    	
 
    
	
Other financial   assets
    	
 
    	
86,786
    	
 
    	
1,422
    	
 
    	
(48,192
    	
)
    	
(g), (h)
    	
 
    	
40,016
    	
 
    
	
Intangible assets -   computer software
    	
 
    	
13,278
    	
 
    	
1,459
    	
 
    	
—
    	
 
    	
 
    	
 
    	
14,737
    	
 
    
	
Property, plant and   equipment
    	
 
    	
2,359,330
    	
 
    	
296,657
    	
 
    	
385,327
    	
 
    	
(d)
    	
 
    	
3,041,314
    	
 
    
	
Goodwill 
    	
 
    	
69,138
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
69,138
    	
 
    
	
Deferred tax assets
    	
 
    	
29,800
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
29,800
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   assets
    	
 
    	
3,685,666
    	
 
    	
323,940
    	
 
    	
316,797
    	
 
    	
 
    	
 
    	
4,326,403
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Trade and other   payables
    	
 
    	
186,300
    	
 
    	
5,946
    	
 
    	
—
    	
 
    	
 
    	
 
    	
192,246
    	
 
    
	
Taxes payable
    	
 
    	
128
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
128
    	
 
    
	
Other liabilities
    	
 
    	
41,985
    	
 
    	
2,886
    	
 
    	
—
    	
 
    	
 
    	
 
    	
44,871
    	
 
    
	
Other financial   liabilities
    	
 
    	
14,275
    	
 
    	
93,510
    	
 
    	
—
    	
 
    	
 
    	
 
    	
107,785
    	
 
    
	
Deferred revenue
    	
 
    	
66,542
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
66,542
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   current liabilities
    	
 
    	
309,230
    	
 
    	
102,342
    	
 
    	
—
    	
 
    	
 
    	
 
    	
411,572
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other financial   liabilities
    	
 
    	
23,333
    	
 
    	
795
    	
 
    	
—
    	
 
    	
 
    	
 
    	
24,128
    	
 
    
	
Long-term debt
    	
 
    	
654,827
    	
 
    	
2,548
    	
 
    	
—
    	
 
    	
(c), (e)
    	
 
    	
657,375
    	
 
    
	
Deferred revenue
    	
 
    	
475,122
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
475,122
    	
 
    
	
Provisions
    	
 
    	
144,349
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
144,349
    	
 
    
	
Pension obligations
    	
 
    	
34,603
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
34,603
    	
 
    
	
Other employee   benefits
    	
 
    	
142,643
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
142,643
    	
 
    
	
Deferred tax   liabilities
    	
 
    	
259,775
    	
 
    	
2,932
    	
 
    	
152,590
    	
 
    	
(d)
    	
 
    	
415,297
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   liabilities
    	
 
    	
2,043,882
    	
 
    	
108,617
    	
 
    	
152,590
    	
 
    	
 
    	
 
    	
2,305,089
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shareholders’   Equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Share capital (note   5)
    	
 
    	
1,021,088
    	
 
    	
227,392
    	
 
    	
(70,821
    	
)
    	
(a), (f), (j)
    	
 
    	
1,177,659
    	
 
    
	
Reserves
    	
 
    	
2,308
    	
 
    	
28,543
    	
 
    	
(28,682
    	
)
    	
(a), (g), (h), (i)
    	
 
    	
2,169
    	
 
    
	
Retained earnings   (deficit)
    	
 
    	
620,472
    	
 
    	
(40,612
    	
)
    	
41,477
    	
 
    	
(a), (b), (h), (j)
    	
 
    	
621,337
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   equity attributable to controlling shareholders
    	
 
    	
1,643,868
    	
 
    	
215,323
    	
 
    	
(58,026
    	
)
    	
 
    	
 
    	
1,801,165
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Non-controlling   interests
    	
 
    	
(2,084
    	
)
    	
—
    	
 
    	
222,233
    	
 
    	
(a)
    	
 
    	
220,149
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   equity
    	
 
    	
1,641,784
    	
 
    	
215,323
    	
 
    	
164,207
    	
 
    	
 
    	
 
    	
2,021,314
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   liabilities and shareholders’ equity
    	
 
    	
3,685,666
    	
 
    	
323,940
    	
 
    	
316,797
    	
 
    	
 
    	
 
    	
4,326,403
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

20

 

Hudbay Minerals Inc.

Pro Forma Consolidated Statement of Income

(Unaudited) For the nine months ended September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Augusta
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
    consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(Note 1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revenue   
    	
 
    	
380,720
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
380,720
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost   of sales 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mining operating   costs
    	
 
    	
260,212
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
260,212
    	
 
    
	
Depreciation and   amortization
    	
 
    	
54,826
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
54,826
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
315,038
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
315,038
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   profit (loss)
    	
 
    	
65,682
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
65,682
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Selling   and administrative expenses
    	
 
    	
29,919
    	
 
    	
5,442
    	
 
    	
—
    	
 
    	
 
    	
 
    	
35,361
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exploration   and evaluation
    	
 
    	
22,082
    	
 
    	
1,342
    	
 
    	
—
    	
 
    	
 
    	
 
    	
23,424
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating income
    	
 
    	
(417
    	
)
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
(417
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating expenses
    	
 
    	
5,871
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
5,871
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Results   from operating activities  (Note 1)
    	
 
    	
8,227
    	
 
    	
(6,784
    	
)
    	
—
    	
 
    	
 
    	
 
    	
1,443
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   income
    	
 
    	
(2,870
    	
)
    	
(821
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(3,691
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   expenses
    	
 
    	
7,144
    	
 
    	
71
    	
 
    	
—
    	
 
    	
 
    	
 
    	
7,215
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   finance losses
    	
 
    	
26,263
    	
 
    	
476
    	
 
    	
—
    	
 
    	
 
    	
 
    	
26,739
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
30,537
    	
 
    	
(274
    	
)
    	
—
    	
 
    	
 
    	
 
    	
30,263
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   before tax
    	
 
    	
(22,310
    	
)
    	
(6,510
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(28,820
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tax   expense (recovery)
    	
 
    	
25,484
    	
 
    	
(686
    	
)
    	
—
    	
 
    	
 
    	
 
    	
24,798
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the period
    	
 
    	
(47,794
    	
)
    	
(5,824
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(53,618
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Attributable   to
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Owners of the   Company
    	
 
    	
(45,854
    	
)
    	
(5,824
    	
)
    	
2,854
    	
 
    	
(a)
    	
 
    	
(48,824
    	
)
    
	
Non-controlling   interests
    	
 
    	
(1,940
    	
)
    	
—
    	
 
    	
(2,854
    	
)
    	
(a)
    	
 
    	
(4,794
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the period
    	
 
    	
(47,794
    	
)
    	
(5,824
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(53,618
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   per share attributable to owners of the company
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic and diluted   (note 6)
    	
 
    	
(0.27
    	
)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(0.26
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted   average shares outstanding (thousands) (note 6)
    	
 
    	
172,038
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
188,694
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

21

 

Hudbay Minerals Inc.

Pro Forma Consolidated Statement of Income

(Unaudited) For the year ended December 31, 2012

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
Hudbay
    	
 
    	
Augusta
    	
 
    	
Adjustments
    	
 
    	
 
    	
 
    	
Pro forma
    consolidated
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    	
Note 4
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(Note 1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revenue
    	
 
    	
702,550
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
702,550
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost   of sales
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mining operating   costs
    	
 
    	
429,155
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
429,155
    	
 
    
	
Depreciation and   amortization
    	
 
    	
75,801
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
75,801
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
504,956
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
504,956
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   profit (loss)
    	
 
    	
197,594
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
197,594
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Selling   and administrative expenses
    	
 
    	
39,516
    	
 
    	
6,739
    	
 
    	
—
    	
 
    	
 
    	
 
    	
46,255
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exploration   and evaluation
    	
 
    	
43,572
    	
 
    	
1,213
    	
 
    	
—
    	
 
    	
 
    	
 
    	
44,785
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating income
    	
 
    	
(2,316
    	
)
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
(2,316
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   operating expenses
    	
 
    	
11,332
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
11,332
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Results   from operating activities  (Note 1)
    	
 
    	
105,490
    	
 
    	
(7,952
    	
)
    	
—
    	
 
    	
 
    	
 
    	
97,538
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   income
    	
 
    	
(6,217
    	
)
    	
(657
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(6,874
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Finance   expenses
    	
 
    	
14,858
    	
 
    	
18
    	
 
    	
—
    	
 
    	
 
    	
 
    	
14,876
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other   finance losses (gains)
    	
 
    	
44,700
    	
 
    	
96
    	
 
    	
(26,227
    	
)
    	
(h)
    	
 
    	
18,569
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
53,341
    	
 
    	
(543
    	
)
    	
(26,227
    	
)
    	
 
    	
 
    	
26,571
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Profit/(loss)   before tax
    	
 
    	
52,149
    	
 
    	
(7,409
    	
)
    	
26,227
    	
 
    	
 
    	
 
    	
70,967
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tax   expense
    	
 
    	
73,319
    	
 
    	
2,304
    	
 
    	
—
    	
 
    	
 
    	
 
    	
75,623
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the year
    	
 
    	
(21,170
    	
)
    	
(9,713
    	
)
    	
26,227
    	
 
    	
 
    	
 
    	
(4,656
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Attributable   to
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Owners of the   Company
    	
 
    	
(18,507
    	
)
    	
(9,713
    	
)
    	
30,986
    	
 
    	
(a)
    	
 
    	
2,766
    	
 
    
	
Non-controlling   interests
    	
 
    	
(2,663
    	
)
    	
—
    	
 
    	
(4,759
    	
)
    	
(a)
    	
 
    	
(7,422
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Loss   for the year
    	
 
    	
(21,170
    	
)
    	
(9,713
    	
)
    	
26,227
    	
 
    	
 
    	
 
    	
(4,656
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Earnings/(loss)   per share attributable to owners of the company
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic (note 6)
    	
 
    	
(0.11
    	
)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
0.01
    	
 
    
	
Diluted (note 6)
    	
 
    	
(0.11
    	
)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
0.01
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted   average shares outstanding (thousands) (note 6)
    	
 
    	
171,961
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
188,617
    	
 
    

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

22

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

1                      Basis of presentation

 

The unaudited pro forma consolidated balance sheet of Hudbay Minerals Inc. (the “Company” or “Hudbay”) as at September 30, 2013 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been derived by management based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), for illustrative purposes only, after giving effect to the acquisition of 51% of the share capital of Augusta Resource Corporation (“Augusta”) including common shares the Company owned prior to the Take-over Bid Circular, by the Company (note 3). Adjustments applied are directly attributable to the transaction, factually supportable, and expected to have a continuing impact. Terms not otherwise defined herein have the meanings given thereto in the Take-over Bid Circular of the Company or Augusta dated February 10, 2014.

 

These unaudited pro forma consolidated financial statements have been compiled as follows:

 

a)                  an unaudited pro forma consolidated balance sheet giving effect to the transaction described in note 3, as if the transaction occurred on September 30, 2013 combining:

 

·                      the unaudited condensed consolidated interim balance sheet of the Company as at September 30, 2013; and

 

·                      the unaudited condensed consolidated interim statement of financial position of Augusta as at September 30, 2013.

 

b)                  an unaudited pro forma consolidated income statement for the nine months ended September 30, 2013, which assumes the transaction occurred as of January 1, 2012, combining:

 

·                      the unaudited condensed consolidated interim income statement of the Company for the nine months ended September 30, 2013; and,

 

·                      the unaudited condensed consolidated interim statement of comprehensive loss of Augusta for the nine months ended September 30, 2013.

 

c)                   an unaudited pro forma consolidated income statement for the year ended December 31, 2012, which assumes the transaction occurred as of January 1, 2012, combining:

 

·                      the audited consolidated income statement of the Company for the year ended December 31, 2012; and

 

·                      the audited consolidated statement of comprehensive profit (loss) of Augusta for the year ended December 31, 2012.

 

It is management’s opinion that these unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation, in all material respects, of the transactions described in notes 3 and 4 in accordance with IFRS, applied on a basis consistent with the Company’s accounting policies. The

 

23

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations that might be obtained in the future.

 

The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and Augusta.

 

Augusta’s financial statements are presented in United States dollars. For the purposes of these unaudited pro forma consolidated financial statements, line items have been translated into Canadian dollars at the following rates:

 

·                       September 30, 2013 balance sheet at the exchange rate of $1.0303;

 

·                       December 31, 2012 income statement at the average rate for the year of $0.9994; and

 

·                       September 30, 2013 income statement at the average rate for the period of $1.0236.

 

All foreign exchange rates have been obtained from the Bank of Canada website. Unless where otherwise noted, these unaudited pro forma consolidated financial statements and their accompanying notes are presented in Canadian dollars.

 

Prior to the transaction described in Note 3, the Company owned 23,058,585 shares of Augusta which were recorded on the unaudited condensed interim balance sheet of the Company at September 30, 2013 at a fair value of $48,192 (cost of $69,058).

 

The allocation of the preliminary purchase price to reflect the fair values of the assets acquired and liabilities assumed is based on management’s estimate of such assets and liabilities and, accordingly, the adjustments that have been included in the pro forma consolidated balance sheet may be subject to change. For purposes of these pro forma financial statements, the excess of the purchase price over the estimated fair value of the net assets acquired has been allocated to property, plant and equipment. The final purchase price allocations may differ materially from the allocations included herein.

 

2                      Summary of significant accounting policies

 

These unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies, as set out in the audited consolidated financial statements of the Company as at December 31, 2012. Management has determined, based on their initial assessment, that certain adjustments are necessary to conform Augusta’s audited consolidated financial statements to the accounting policies used by the Company in the preparation of its audited consolidated financial statements:

 

24

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

a)                  Stock based compensation — Augusta capitalizes stock based compensation related to personnel that service their development project to development costs. Hudbay expenses similar charges to various income statement accounts. The amount of the cumulative impact is unknown at the current time.

 

b)                  Deposits and prepayments on long-lead equipment - Augusta presents this as a separate financial statement line item. Hudbay groups these assets within prepaid expenses. An amount of $12,000 has been reclassified to conform to Hudbay policies.

 

3                      The transaction

 

Proposed transaction

 

These proforma financial statements have been prepared on the basis consistent with the terms of the Take-over Bid Circular, but under the assumption that Hudbay acquires 51% of the issued and outstanding common shares of Augusta, including any Augusta Shares held directly or indirectly by Hudbay and its affiliates prior to the Take-over Bid Circular, and any Augusta Shares that may become issued and outstanding after the date hereof but before the expiry time upon the exercise, exchange or conversion of any convertible securities, together with the associated rights issued under the Shareholder Rights Plan.

 

The transaction will be accounted for as a business combination with Hudbay identified as the acquirer. A summary of the allocation of the preliminary purchase price to the acquired assets and liabilities assumed is as follows:

 

	
 
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Preliminary   purchase price
    	
 
    	
 
    	
 
    
	
Hudbay share   consideration (note 4(a(ii)))
    	
 
    	
156,571
    	
 
    
	
Fair value of   Augusta options settled in cash (note 4(f))
    	
 
    	
5,814
    	
 
    
	
Fair value of   Augusta warrants exchanged for Hudbay warrants (note 4(i))
    	
 
    	
642
    	
 
    
	
Fair value of   Augusta shares previously held by Hudbay (note 4(g))
    	
 
    	
68,276
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Total consideration
    	
 
    	
231,303
    	
 
    

 

The preliminary purchase price has been allocated to the following net assets based on their estimated fair values as of September 30, 2013:

 

	
 
    	
 
    	
 
    	
 
    	
Pro forma
    presentation
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets acquired and   liabilities assumed
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash   equivalents (Note 4(f))
    	
 
    	
 
    	
 
    	
6,248
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts receivable
    	
 
    	
7,241
    	
 
    	
 
    	
 
    
	
Due from related   parties
    	
 
    	
125
    	
 
    	
 
    	
 
    
	
Trade and other   receivables
    	
 
    	
 
    	
 
    	
7,366
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current portion of   other assets
    	
 
    	
773
    	
 
    	
 
    	
 
    

 

25

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
 
    	
 
    	
Pro forma
    presentation
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Prepaids and other
    	
 
    	
3,312
    	
 
    	
 
    	
 
    
	
Prepaid expenses   and other current assets
    	
 
    	
 
    	
 
    	
4,085
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Short-term   investments
    	
 
    	
154
    	
 
    	
 
    	
 
    
	
Other financial   assets-current
    	
 
    	
 
    	
 
    	
154
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Deposits on   long-lead equipment
    	
 
    	
12,025
    	
 
    	
 
    	
 
    
	
Prepaid expenses
    	
 
    	
 
    	
 
    	
12,025
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Restricted funds
    	
 
    	
394
    	
 
    	
 
    	
 
    
	
Other assets
    	
 
    	
1,028
    	
 
    	
 
    	
 
    
	
Other financial   assets
    	
 
    	
 
    	
 
    	
1,422
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other assets
    	
 
    	
1,459
    	
 
    	
 
    	
 
    
	
Intangible   assets-computer software
    	
 
    	
 
    	
 
    	
1,459
    	
 
    
	
Development costs
    	
 
    	
182,057
    	
 
    	
 
    	
 
    
	
Property, plant,   and equipment
    	
 
    	
89,263
    	
 
    	
 
    	
 
    
	
Mineral properties
    	
 
    	
25,337
    	
 
    	
 
    	
 
    
	
Property, plant and   equipment
    	
 
    	
 
    	
 
    	
296,657
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current liabilities
    	
 
    	
 
    	
 
    	
(102,342
    	
)
    
	
Long-term   liabilities
    	
 
    	
 
    	
 
    	
(3,343
    	
)
    
	
Deferred tax   liabilities
    	
 
    	
 
    	
 
    	
(155,522
    	
)
    
	
Unallocated   purchase price (note 1)
    	
 
    	
 
    	
 
    	
385,327
    	
 
    
	
Total net assets
    	
 
    	
 
    	
 
    	
453,536
    	
 
    
	
Less:   Non-controlling interest
    	
 
    	
 
    	
 
    	
(222,233
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total net assets   acquired
    	
 
    	
 
    	
 
    	
231,303
    	
 
    

 

The final purchase price and the fair value of the net assets of Augusta to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the purchase price, including share consideration, and the fair values of assets acquired and liabilities assumed will vary from those shown above. These differences may be material.

 

4                      Pro forma assumptions and adjustments

 

The unaudited pro forma consolidated financial statements reflect the following assumptions and adjustments to give effect to the acquisition of 51% of the issued and outstanding common shares of Augusta as described in note 3 as if the transactions had occurred on January 1, 2012 for statement of income items and September 30, 2013 for balance sheet items.  Assumptions relating to the share price of Hudbay or Augusta have used the date of February 7, 2014 which represents the last trading day before February 10, 2014.

 

	
a)
    	
i)
    	
An adjustment to eliminate   the historical equity accounts of Augusta.
    
	
 
    	
 
    	
 
    
	
 
    	
ii)
    	
An adjustment to reflect   the issuance of 16,656,488 Hudbay shares in exchange for 52,877,740 common   shares of Augusta representing a share exchange ratio of 0.315 Hudbay shares   to 1 Augusta
    

 

26

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

	
 
    	
 
    	
share. The closing   price of Augusta shares on February 7, 2014 was $2.51.  Future movements in share prices may impact   the share numbers disclosed within.

 
    
	
 
    	
 
    	
 
    
	
 
    	
iii)
    	
An adjustment to reflect the 49% non-controlling interest component of   the proforma adjustments.
    

 

b)                  An adjustment to reflect the transaction costs related to the transaction, including $7,000 of change of control payments and $13,000 in professional fees.

 

c)                   For purposes of pro forma presentation, no adjustment has been made to settle or convert the existing debt on Augusta’s statement of financial position on the assumption that this debt is out-of the money as at February 7, 2014.

 

On December 16, 2013, Augusta announced that it has closed an additional loan facility for US$26.6 million (the “Expanded Loan”) and has drawn down the first tranche of US$3.5 million. In connection with the Expanded Loan, Augusta paid an arrangement fee of US$1.12 million and issued a total of 3.3 million common share purchase warrants (“Warrants”) to the lender with an exercise price of US$2.12 per share, subject to amendment if certain conditions are not met.  The Warrants expire on December 12, 2016.  This disclosure is provided for informational purposes only.  No adjustment has been reflected in the pro forma consolidated financial statements related to this event.  The potential impact on the share consideration of the exercise of these warrants is estimated to be an increase of $4,983 and the issuance of an additional 530,145 Hudbay common shares.

 

d)                  An adjustment to reflect the fair value of the property, plant, and equipment acquired, in excess of the book value and the resulting deferred tax liability, assuming an income tax rate of 39.6%. The applicable tax rate is based on the tax jurisdiction of the asset where it will be recovered through use.

 

e)                   On September 4, 2013, Augusta closed the first tranche for $2,000 of a previously announced financing for a total of $10,000 in convertible unsecured notes. The second tranche of $1,500 closed on September 19, 2013. Subsequent to September 30, 2013 Augusta issued notes for the remaining $6,500.

 

This disclosure is provided for informational purposes only.  No adjustment has been reflected in the pro forma consolidated financial statements for the subsequent event.

 

f)                    An adjustment to reflect the cash paid for the fair value of stock options issued by Augusta of $5,814, outstanding as at February 7, 2014 which are estimated to be out of-the-money. The options have been valued using a Black-Scholes model, using the share price of Augusta as at February 7, 2014, and the following assumptions: exercise prices ($2.79 to $4.35), life of options (3.42 to 3.78 years), interest rates (1.13%) and volatility rates (90.8% to 92.2%).

 

All other options that are estimated to be in-the-money as February 7, 2014, are assumed to be converted into common shares of Augusta, with the corresponding exercise price received as proceeds of $5,476.

 

g)                   An adjustment to re-measure the fair value of the Company’s existing investment in Augusta held prior to acquisition of control. This investment is designated as an available-for-sale investment by Hudbay, 

 

27

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

carried at fair value and all fair value changes are recognized in other comprehensive income (OCI), except for other than temporary decline in values recognized in the statement of comprehensive loss.

 

h)                  An adjustment to eliminate the Company’s existing investment in Augusta as at September 30, 2013 and an adjustment to eliminate the related accumulated fair value gains (losses) in reserves. Correspondingly, recognized fair value changes in the statement of income are eliminated of $nil and $26,617 for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.

 

i)                      An adjustment to reflect the warrants issued by Hudbay in exchange for the warrants issued by Augusta, outstanding as at February 7, 2014.  For purposes of pro forma presentation, the warrants issued by Augusta are assumed to be out-of-the money and therefore not exercised. Based on the exchange share ratio of Hudbay shares for Augusta shares (note 4(a)) of 0.315 to 1, respectively, 564,386 warrants were issued on February 7, 2014. The warrants have been valued using a Black-Scholes model using the following assumptions: exercise price of $12.22, interest rates of 0.78% to 1.13%, life of warrants of 1.47 to 2.47 years and volatility rates of 40.4% to 40.7%.

 

An adjustment was also made to eliminate losses arising in the year ended December 31, 2012 from re-measurement of warrants issued by Augusta recognized in its statement of comprehensive income of $390.

 

j)                     All unvested restricted shares and restricted share units (RSU) of Augusta are assumed to vest immediately on February 10, 2014.  An adjustment is made for the issuance of the common shares of $3,376.

 

5                      Pro forma share capital

 

	
 
    	
 
    	
September 30, 2013
    	
 
    	
December 31, 2012
    	
 
    
	
 
    	
 
    	
Number
    of shares
    	
 
    	
 
    	
 
    	
Number
    of shares
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(000s)
    	
 
    	
$
    	
 
    	
(000s)
    	
 
    	
$
    	
 
    
	
Hudbay’s common   shares outstanding
    	
 
    	
172,078
    	
 
    	
1,021,088
    	
 
    	
171,984
    	
 
    	
1,020,458
    	
 
    
	
Hudbay’s common   shares issued under the proposed transaction (note 4(a))
    	
 
    	
16,656
    	
 
    	
156,571
    	
 
    	
16,656
    	
 
    	
156,571
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma share   capital
    	
 
    	
188,734
    	
 
    	
1,177,659
    	
 
    	
188,640
    	
 
    	
1,177,029
    	
 
    

 

28

 

Hudbay Minerals Inc.

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)  September 30, 2013

 

(expressed in thousands of Canadian dollars)

 

6                      Pro forma earnings/(loss) per share

 

For the purposes of the unaudited pro forma consolidated financial statements, the earnings/(loss) per share has been calculated using the weighted average number of shares which would have been outstanding as at the period end, after giving effect to the transaction described in notes 3 and 4 as if it had occurred on January 1, 2012.

 

	
 
    	
 
    	
September 30,
    2013
    	
 
    	
December 31,
    2012
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Actual weighted   average number of Hudbay shares outstanding (thousands)
    	
 
    	
172,038
    	
 
    	
171,961
    	
 
    
	
Assumed number of   Hudbay shares issued to Augusta shareholders (note 4(a)) (thousands)
    	
 
    	
16,656
    	
 
    	
16,656
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma weighted   average number of Hudbay shares outstanding — Basic (thousands)
    	
 
    	
188,694
    	
 
    	
188,617
    	
 
    
	
Actual number of   Hudbay dilutive securities (thousands)
    	
 
    	
219
    	
 
    	
275
    	
 
    
	
Pro forma weighted   average number of Hudbay shares outstanding — Diluted (thousands)
    	
 
    	
188,913
    	
 
    	
188,892
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pro forma   profit/(loss) attributable to owners of the Company
    	
 
    	
(48,824
    	
)
    	
2,766
    	
 
    
	
Pro forma   earnings/(loss) per share - basic
    	
 
    	
(0.26
    	
)
    	
0.01
    	
 
    
	
Pro forma earnings/(loss)   per share - diluted
    	
 
    	
(0.26
    	
)
    	
0.01
    	
 
    

 

29

 

3                                         Time for Acceptance

 

The Offer is now open for acceptance until 5:00 p.m. (Toronto Time) on May 5, 2014. Shareholders who have validly deposited and not withdrawn their Augusta Shares need take no further action to accept the Offer. If, at the time immediately prior to 5:00 p.m. (Toronto Time) on May 5, 2014, all of the conditions of the Offer are satisfied or waived by the Offeror, then the Initial Offering Period will end at such time and all Augusta Shares deposited under the Offer and not withdrawn will be taken up by the Offeror. If the Offeror elects to provide for a Subsequent Offering Period, it will do so by extending the Expiry Time beyond the end of the Initial Offering Period.

 

4                                        Manner of Acceptance

 

Augusta Shares may be deposited to the Offer in accordance with the provisions of Section 3 of the Original Offer, “Manner of Acceptance”.

 

5                                         Take-Up of and Payment for Deposited Augusta Shares

 

If all the conditions of the Offer have been satisfied or waived by the Offeror, the Offeror will take up Augusta Shares validly deposited under the Offer and not properly withdrawn no later than 9:00 a.m. on the first business day following the end of the Initial Offering Period. The Offeror will pay for Augusta Shares taken up as soon as practicable thereafter and in any event within three business days thereafter. By so taking up and paying for Augusta Shares validly deposited under the Offer and not properly withdrawn, the Offeror will comply with the requirement under Canadian law to take up such Augusta Shares within ten days following the end of the Initial 

 

30

 

Offering Period and paying for such shares within three business days thereafter. See Section 6 of the Original Offer, “Take Up of and Payment for Deposited Augusta Shares”.

 

6                                         Withdrawal of Deposited Augusta Shares

 

Augusta Shares deposited under the Offer may be withdrawn by or on behalf of the depositing Augusta Shareholder at any time before the Augusta Shares have been taken up by the Offeror under the Offer (including during any Subsequent Offering Period) and in the other circumstances described in Section 8 of the Original Offer, “Withdrawal of Deposited Augusta Shares”. Except as so indicated or as otherwise required or permitted by applicable Laws, deposits of Augusta Shares are irrevocable.

 

7                                         Consequential Amendments to the Original Offer and Circular and Other Documents

 

The Original Offer and Circular, Letter of Transmittal and Notice of Guaranteed Delivery shall be read together with this Notice of Variation and Extension and are hereby amended to the extent necessary to reflect the amendments contemplated by, and the information contained in, this Notice of Variation and Extension.

 

Except as otherwise set forth in or amended by this Notice of Variation and Extension, the terms and conditions of the Offer and the information in the Original Offer and Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery continue to be applicable in all respects.

 

8                                         Statutory Rights

 

Securities legislation in the provinces and territories of Canada provides security holders of Augusta with, in addition to any other rights they may have at law, one or more rights of rescission, price revision or to damages, if there is a misrepresentation in a circular or a notice that is required to be delivered to those security holders. However, such rights must be exercised within prescribed time limits. Security holders should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer.

 

9                                         Directors’ Approval

 

The contents of this Notice of Variation and Extension have been approved, and the sending thereof to the Augusta Shareholders has been authorized by the Hudbay Board of Directors.

 

31

 

APPROVAL AND CERTIFICATE OF HUDBAY MINERALS INC.

 

The foregoing, together with the Original Offer and Circular, contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

 

Dated: March 31, 2014.

 

	
(Signed) DAVID GAROFALO
    	
 
    	
(Signed) DAVID S. BRYSON
    
	
 
    	
 
    	
 
    
	
President and Chief   Executive Officer
    	
 
    	
Senior Vice President and   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
On behalf of the Board of   Directors
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Signed) G. WESLEY VOORHEIS
    	
 
    	
(Signed) SARAH B. KAVANAGH
    
	
Director
    	
 
    	
Director
    

 

32

 

The Depositary for the Offer is:

 

 

By Registered Mail, Mail, Hand or Courier

 

Toronto

200 University Avenue 
 Suite 300
 Toronto, Ontario

M5H 4H1

Attention:  Corporate Actions

 

Inquiries

 

North American Toll Free:  1-866-393-4891

Telephone:  416-361-0930 ext. 205

Facsimile:  416-361-0470

E-Mail:  corporateactions@equityfinancialtrust.com

 

THE INFORMATION AGENT FOR THE OFFER IS:

 

 

The Exchange Tower

130 King Street West, Suite 2950, P.O. Box 361

Toronto, Ontario M5X 1E2

North American Toll Free Phone:

1-866-229-8874

E-mail: contactus@kingsdaleshareholder.com

Facsimile: 416-867-2271

Toll Free Facsimile: 1-866-545-5580

Outside North America, Banks and Brokers Call Collect: 416-867-2272

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