MINING REPORTER
The new head of HudBay Minerals Inc. lashed out yesterday at the man who wants to replace him, suggesting the only major decision Peter Jones made when he was CEO failed miserably, costing the company $80-million in losses.
Facing the spectre of a stinging rebuke at a special meeting of shareholders next week, Colin Benner, HudBay's interim chief executive officer, said Mr. Jones was protected by soaring metal prices and the cushion of $1.2-billion in accumulated tax losses while he was in the top job at the zinc and copper miner between 2004 and early 2008. Mr. Benner said Mr. Jones failed to conduct any merger and acquisition activity during that time and his only major strategic move was to reopen the Balmat zinc mine and concentrator in New York State in 2007.
"What outside deals were done? What transactions did Mr. Jones contribute to the company and take through the process during his tenure? The answer would be he didn't do any. ... Balmat was the only thing he decided on, and he opened it up and lost $80-million," Mr. Benner said in an interview yesterday.
Mr. Benner has been HudBay's CEO for little more than a week. He replaced Allen Palmiere who resigned last Monday amid mounting investor criticism following the company's ill-fated attempt to acquire rival Lundin Mining Corp. without giving HudBay shareholders a vote on the deal. Now, Mr. Benner and the rest of the current HudBay board are fighting to keep their jobs ahead of a March 25 shareholder vote.
Dissident stockholders led by the Toronto company's largest shareholder, SRM Global Master Fund LP, have nominated a new slate of directors that includes Mr. Jones, who will return to the CEO role if the proxy battle succeeds.
In an interview, Mr. Jones defended his performance as HudBay's CEO and noted that he oversaw the company's initial public offering in 2004 and was in charge in 2006, when HudBay was the second-highest percentage gainer on the Toronto Stock Exchange.
He said the current board's governance lapses and its mismanagement of HudBay's attempt to take over Lundin has destroyed the company's credibility. "It's been so badly destroyed, there is no credibility left. We believe it is irrecoverable with the current board," Mr. Jones said.
As for Balmat, Mr. Jones said the operation was always seen as a "swing mine" to be turned on when metal prices are high and shut when prices are low.
If he returns as HudBay's CEO, Mr. Jones said he will undertake a full review of the company's operations, including the three mines that have been shut down. Unlike Mr. Benner, he believes that the company's Lalor Lake project in Manitoba should be developed more aggressively despite the crash in commodity prices.
"Shutting key facilities down is an easy solution. The hard solution, and what has made HudBay successful over the years, is that they go out and find a way to make it work. That's what we've got to do," Mr. Jones said.
Mr. Benner and HudBay's board have suggested that Monaco-based SRM, which owns 11 per cent of HudBay's stock, wants to gut the company of its $700-million in cash reserves with a massive share buyback or special dividend. Last summer, SRM's hedge fund was reportedly down about 85 per cent from its inception two years before, a result of investments in financial crisis casualties including Bear Stearns Cos., Countrywide Financial Corp. and Northern Rock PLC.
Mr. Benner said that when Mr. Jones was CEO, he let it be known that he was unhappy with SRM's interference with management strategy. But now that he's been nominated by SRM, he appears to have changed his mind, Mr. Benner said.
"There was pressure on the previous CEO, who now wants the job back, to do things he was not happy about and he made that very well known to all his staff at HudBay who are still there. It's kind of like talking out of both sides of your face and that's what concerns people," Mr. Benner said.
Mr. Jones insisted that the proposed slate of directors will act independently of SRM and would only consider returning money to shareholders after management has thoroughly analyzed HudBay's operations and organic growth prospects and pursued accretive acquisitions wherever possible.
"Returning money to shareholders would be almost an admission that we can't manage the company going forward. We're looking to grow the share price and the company," Mr. Jones said.
HudBay Minerals (HBM)
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