HudBay Minerals Inc. has moved to block a shareholder rights plan at Augusta Resource Corp., target of a HudBay hostile takeover bid.
The company said Monday that it has asked the British Columbia Securities Commission to cease trade the shareholder rights plan before its takeover offer expires on May 5.
HudBay chief executive David Garofalo said Augusta has had more than 60 days since the offer was announced and has failed to produce an alternative.
“Meanwhile, Augusta continues to make unachievable promises with respect to permitting, financing and project construction,” Garofalo said in a statement.
Augusta said late last month that nine potential buyers had signed confidentiality agreements and were reviewing its books.
The company holds the Rosemont copper-molybdenum project near Tucson, Ariz., with proven and probable reserves of 5.9 billion pounds of copper and 194 million pounds of molybdenum.
Augusta chief executive Gil Clausen said the company will “vigorously defend” its shareholder rights plan.
“We are putting the ultimate power directly in the hands of shareholders by asking them to make the decision on reaffirming the rights plan on May 2, three days before the expiry of HudBay’s low-ball bid,” Clausen said in a statement.
“We will argue our position forcefully before the B.C. Securities Commission in order to protect the rights of Augusta shareholders.”
Augusta adopted a shareholder rights plan last year following HudBay’s acquisition of a large stake in the company.
HudBay said Monday that it currently owns more than 23 million shares of Augusta, representing a roughly 16-per-cent stake.
Shareholder rights plans – sometimes called poison pill defences – can make an acquisition by a hostile bidder prohibitively expensive by increasing the number of shares a company has by allowing shareholders to purchase additional shares at a substantial discount to the market price at the time.
HudBay has offered 0.315 of a HudBay share for each Augusta share, valuing the company at about $407-million or about $2.80 per share, based on its share price Monday.
However, Augusta shares, although down 7.5 cents Monday, were still trading at $3.385 on the Toronto Stock Exchange, well above the offer price.
HudBay shares were up 16 cents at $8.88.