As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/15/15  HudBay Minerals Inc.              F-10/A                 6:1.9M                                   Merrill Corp-MD/FA
          HudBay Marketing & Sales Inc.
          Hudson Bay Exploration & Development Co Ltd
          Hudson Bay Mining & Smelting Co., Ltd

Document/Exhibit                   Description                      Pages   Size 

 1: F-10/A      Pre-Effective Amendment to Registration Statement   HTML   1.02M 
                          of a Foreign Private Issuer (Not                       
                          Effective Immediately)                                 
 2: EX-2.1      Plan of Acquisition, Reorganization, Arrangement,   HTML    128K 
                          Liquidation or Succession                              
 3: EX-5.1      Opinion re: Legality                                HTML      9K 
 4: EX-99.1     Ex-2.1                                              HTML    122K 
 5: EX-99.2     Miscellaneous Exhibit                               HTML     32K 
 6: EX-99.3     Miscellaneous Exhibit                               HTML     17K 

 

As filed with the Securities and Exchange Commission on April 15, 2015

Registration No. 333-203278

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 1 TO

 

FORM F-10

 

 

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

 

HudBay Minerals Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Canada

(Province or Other Jurisdiction of Incorporation or Organization)

 

1000

(Primary Standard Industrial Classification Code Number)

 

98-0485558

(I.R.S. Employee Identification No.)

 

25 York Street, Suite 800

Toronto, Ontario

M5J 2V5, Canada

Telephone: (416) 362-8181

(Address, including postal code, and telephone number, including area code, of Registrant’s principal executive offices)

 

Corporation Service Company

1180 Ave of the Americas, Suite 210

New York, NY 10036

Telephone: (212) 299-5600

(Name, Address (Including Zip Code) and Telephone Number (Including Area Code) of Agent for Service in the United States)

 

Copies to:

 

 

Approximate date of commencement of proposed sale of the securities to the public: as soon as practicable after this registration statement becomes effective.

 

Province of Ontario, Canada

(Principal Jurisdiction Regulating this Form F-10 Offering)

 

It is proposed that this filing shall become effective (check appropriate box):

 

A.  o upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).

B.  x at some future date (check appropriate box below):

1.  o     Pursuant to Rule 467(b) on (        ) at (        ) (designate a time not sooner than seven calendar days after filing).

2.  o     Pursuant to Rule 467(b) on (        ) at (        ) (designate a time seven calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on (        ).

3.  x    Pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.

4.  o     After the filing of the next amendment to this form (if preliminary material is being filed).

If any of the securities being registered on this Form F-10 are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box.  o

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Amount to be Registered		Proposed Maximum Offering Price Per Unit(1)		Proposed Maximum Aggregate Offering Price(1)		Amount of Registration Fee(1)
9.500% Senior Notes due 2020 of HudBay Minerals Inc.		$170,000,000		100%		$170,000,000		$19,754
Guarantees of 9.500% Senior Notes due 2020 of HudBay Minerals Inc.		—		—		—		—(2)
Total		$170,000,000				$170,000,000		$19,754

 

(1)          The notes being registered are offered (i) in exchange for 9.500% Senior Notes due 2020 previously sold in a transaction exempt from registration under the Securities Act of 1933, as amended, and (ii) upon certain resales of the notes by broker-dealers. The registration fee has been computed based on the face value of the notes solely for the purpose of calculating the amount of the registration fee, pursuant to Rule 457 under the Securities Act of 1933, as amended.

 

(2)          Pursuant to Rule 457(n) of the Securities Act of 1933, as amended, no separate fee is payable for the guarantees of the notes by the Additional Registrants set forth below that are being registered pursuant to this Registration Statement.

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registration statement shall become effective as provided in Rule 467 under the Securities Act of 1933 or on such date as the Commission, acting pursuant to Section 8(a) of the Act, may determine.

 

ADDITIONAL REGISTRANTS

 

Exact Name of Additional Registrant as Specified in its Charter*		Province or other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification Number
Hudson Bay Mining and Smelting Co., Limited		Canada		98-0189275
Hudson Bay Exploration and Development Company Limited		Canada		Not Applicable
HudBay Marketing & Sales Inc.		Canada		98-0496301

 

*                  The address for each of the Additional Registrants is 25 York Street, Suite 800, Toronto, Ontario, M5J 2V5, Canada and the telephone number at that address is (416) 362-8181. The primary standard industrial classification code number for each of the Additional Registrants is 1000.

 

 

 

Information has been incorporated by reference in this short form prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of HudBay Minerals Inc. at 25 York Street, Suite 800, Toronto, Ontario, Canada, M5J 2V5, telephone: (416) 362-8181, and are also available electronically at www.sedar.com and at www.sec.gov.

 

SHORT FORM PROSPECTUS

 

New Issue

April 15, 2015

 

 

HudBay Minerals Inc.
Exchange Offer for US$170,000,000 of its
9.500% Senior Notes due 2020

 

The Company

 

·             HudBay Minerals Inc. (“Hudbay”) is an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, Hudbay is focused on the discovery, production and marketing of base and precious metals. Hudbay’s growth strategy is focused on the exploration and development of properties it already controls, as well as other mineral assets it may acquire that fit its strategic criteria.  Hudbay’s head office is located at 25 York Street, Suite 800, Toronto, Ontario, Canada, M5J 2V5. Hudbay’s registered office is located at 2200-201 Portage Avenue, Winnipeg, Manitoba, Canada, R3B 3L3.

 

The Exchange Offer

 

·             If all the conditions of the exchange offer (the “Exchange Offer”) are satisfied, Hudbay will exchange up to US$170,000,000 aggregate principal amount of its 9.500% Senior Notes due 2020 issued on August 6, 2014 (the “August 2014 Notes”) that are validly tendered and not validly withdrawn for an equal principal amount of 9.500% Senior Notes due 2020 (the “Exchange Notes”) that have been registered under the United States Securities Act of 1933, as amended (the “Securities Act”).

 

·             You may withdraw your tender of August 2014 Notes at any time before the expiration of the Exchange Offer.

 

·             The Exchange Offer will expire at 5:00 p.m., New York City time, on May 20, 2015, unless Hudbay extends the Exchange Offer, in which case, the Exchange Offer will expire at 5:00 p.m., New York City time on the date to which the Exchange Offer is extended (the “Expiration Date”).

 

The Exchange Notes

 

·             The terms of the Exchange Notes to be issued in the Exchange Offer are substantially identical to the August 2014 Notes except that, unlike the August 2014 Notes, the Exchange Notes will be freely tradable in the United States by persons not affiliated with Hudbay or any of the Guarantors (as defined below), will not bear legends restricting their transfer and will not contain the registration rights and additional interest provisions of the August 2014 Notes.

 

·             The Exchange Notes will constitute a part of the same series as the US$500 million aggregate principal amount of 9.500% senior unsecured notes that Hudbay issued in September 2012 (the “Initial Notes”), the US$150 million aggregate principal amount of 9.500% senior notes that Hudbay issued on June 20, 2013 (the “First Additional Notes”) and the US$100 million aggregate principal amount of 9.500% senior notes that Hudbay issued on December 9, 2013 (the “Second Additional Notes”), the majority of which have been exchanged for notes that have been registered under the Securities Act (the Initial Notes, the First Additional Notes and the

 

 

Second Additional Notes, or as applicable, as each have been exchanged, being the “Existing Notes”). For all purposes of the indenture and once exchanged pursuant to this Exchange Offer, the Exchange Notes are expected to be fungible with and have the same CUSIP number as the Existing Notes that have been exchanged.

 

·             The Exchange Notes will be fully and unconditionally guaranteed, jointly and severally on an unsubordinated unsecured basis, by substantially all of Hudbay’s existing and future subsidiaries other than unrestricted subsidiaries, including Hudbay’s subsidiaries that own the Rosemont project, and certain excluded subsidiaries, including Hudbay’s subsidiaries that own the Constancia project (collectively, the “Guarantors”, which term shall also include, as the context requires, the guarantors of the August 2014 Notes). Hudbay’s subsidiaries that are currently Guarantors are: Hudson Bay Mining and Smelting Co., Limited, Hudson Bay Exploration and Development Company Limited and HudBay Marketing & Sales Inc.

 

·             The Exchange Notes will be issued in United States dollars.

 

·             The Exchange Notes will be issued in minimum denominations of US$2,000 principal amount and integral multiples of US$1,000 in excess thereof.

 

·             There is currently no established trading market through which the Exchange Notes may be sold, and you may not be able to resell the Exchange Notes issued pursuant to the Exchange Offer. This may affect the pricing of the Exchange Notes in the secondary market, the transparency and availability of trading prices, the liquidity of the Exchange Notes and the extent of regulation affecting Hudbay.  See “Risk Factors” commencing on page 14.

 

Before participating in the Exchange Offer, please carefully read this short form prospectus, including the section entitled “Risk Factors” commencing on page 14.

 

For a more detailed description of the Exchange Notes, please refer to the section in this short form prospectus entitled “Description of Notes” commencing on page 48.

 

In this short form prospectus, references to (i) Canadian dollars or $ are to the currency of Canada, (ii) U.S. dollars or US$ are to the currency of the United States and (iii) the “Notes” mean, collectively, the Existing Notes, the August 2014 Notes, if not exchanged, and the Exchange Notes, unless otherwise indicated or required by the context.

 

This offering of the Exchange Notes is made by Hudbay and the offering of the guarantees accompanying the Exchange Notes is made by the Guarantors. Each of these entities is a foreign issuer in the United States and is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this short form prospectus in accordance with Canadian disclosure requirements. Prospective investors should be aware that such requirements are different from those in the United States. This short form prospectus incorporates by reference the audited consolidated financial statements of Hudbay for the years ended December 31, 2014 and December 31, 2013. Such financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Hudbay’s financial statements are subject to Canadian auditing and auditor independence standards and the standards of the Public Company Accounting Oversight Board. Thus, such financial statements may not be comparable to financial statements of United States companies.

 

This short form prospectus does not qualify the distribution, if any, of Exchange Notes to Canadian holders of August 2014 Notes. Exchange Notes distributed to Canadian holders may only be resold pursuant to private placement exemptions from the prospectus requirements of Canadian securities laws.

 

Owning the securities described herein may subject you to tax consequences both in the United States and in Canada, which may not be fully described in this short form prospectus. In addition to reading the tax discussion contained in this short form prospectus, you should consult your own tax advisors.

 

The enforcement by investors of civil liabilities under U.S. federal or state securities laws or other laws of the United States may be affected adversely by the fact that Hudbay and the Guarantors are formed outside the United States, that all of Hudbay’s directors and officers, as well as certain of the experts named in this short form

 

ii

 

TABLE OF CONTENTS

 

DOCUMENTS INCORPORATED BY REFERENCE	1
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS	2
FORWARD-LOOKING INFORMATION	3
CAUTIONARY NOTE REGARDING MINERAL RESERVES AND RESOURCES	5
MINERAL RESERVE AND RESOURCE INFORMATION	6
EXCHANGE RATES	7
WHERE YOU CAN FIND MORE INFORMATION	8
SUMMARY TERMS OF THE EXCHANGE OFFER AND THE EXCHANGE NOTES	9
DESCRIPTION OF THE BUSINESS	13
RISK FACTORS	14
USE OF PROCEEDS	31
CONSOLIDATED CAPITALIZATION	32
TRADING PRICE AND VOLUME	33
EARNINGS COVERAGE RATIOS	36
ADDITIONAL INFORMATION REGARDING GUARANTORS	37
DESCRIPTION OF MATERIAL INDEBTEDNESS AND OTHER COMMITMENTS	38
THE EXCHANGE OFFER	39
DESCRIPTION OF NOTES	48
PRIOR SALES	110
CERTAIN ERISA CONSIDERATIONS	111
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS	112
PLAN OF DISTRIBUTION	113
LEGAL MATTERS	114
INDEPENDENT AUDITORS	115
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT	116
CERTIFICATE OF HUDBAY MINERALS INC.	117
CERTIFICATE OF HUDSON BAY MINING AND SMELTING CO., LIMITED	118
CERTIFICATE OF HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED	119
CERTIFICATE OF HUDBAY MARKETING & SALES INC.	120

 

iv

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The following documents of Hudbay, filed with the various provincial securities commissions or similar authorities in Canada, are specifically incorporated into and form an integral part of this short form prospectus:

 

(a)                                 the annual information form dated March 30, 2015 for the year ended December 31, 2014 (the “AIF”);

 

(b)                                 the audited consolidated financial statements for the years ended December 31, 2014 and 2013, and management’s discussion and analysis for the year ended December 31, 2014, together with the credit supporter disclosure filed concurrently therewith; and

 

(c)                                  the notice of annual and special meeting of shareholders and management information circular dated April 2, 2014 in respect of the annual and special meeting of shareholders of Hudbay held on May 8, 2014.

 

Copies of the documents incorporated herein by reference may be obtained on request without charge from Hudbay at 25 York Street, Suite 800, Toronto, Ontario, Canada, M5J 2V5; Attention: Corporate Secretary. Hudbay’s telephone number at that address is (416) 362-8181. Copies of the documents incorporated herein by reference are also available electronically on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, and on the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) at www.sec.gov.

 

Any documents of the type required by National Instrument 44-101 to be incorporated by reference in this short form prospectus including any material change reports (excluding confidential reports), management’s discussion and analysis, comparative interim financial statements, comparative annual financial statements and the auditors’ report thereon, information circulars, annual information forms and business acquisition reports filed by Hudbay with the securities commissions or similar authorities in the provinces of Canada subsequent to the date of this short form prospectus and prior to the termination of this distribution, shall be deemed to be incorporated by reference in this short form prospectus.

 

The consolidated financial statements of Hudbay, incorporated by reference herein, include the financial results of the Guarantors.

 

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this short form prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission 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. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this short form prospectus.

 

Pursuant to section 13.4 of Form 44-101F1, Hudbay is exempt from providing certain disclosure about the Guarantors required by section 12.1 of Form 44-101F1.

 

Pursuant to section 4.2(a)(ix) of National Instrument 44-101 and an Undertaking in Respect of Credit Supporter Disclosure previously filed by Hudbay, Hudbay has undertaken to file with its consolidated financial statements, for any periods covered by Hudbay’s consolidated financial statements, consolidating summary financial information for Hudbay presented in the format set out in subparagraph 13.4(e)(ii) of Form 44-101F1, for so long as the Exchange Notes are issued and outstanding.

 

 

FORWARD-LOOKING INFORMATION

 

This short form prospectus contains “forward-looking statements” and “forward-looking information” (collectively, “forward-looking information”) within the meaning of applicable Canadian and United States securities legislation. All information contained in this short form prospectus, other than statements of current and historical fact, is forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”, “estimates”, “forecasts”, “strategy”, “target”, “intends”, “objective”, “goal”, “understands”, “anticipates” and “believes” (and variations of these or similar words) and statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or “will be taken” (and variations of these or similar expressions). All of the forward-looking information in this short form prospectus is qualified by this cautionary note.

 

Forward-looking information includes, but is not limited to, Hudbay’s intention to complete the exchange offer, the production, cost and capital and exploration expenditure guidance, the permitting, development and financing of the Rosemont project, production at Hudbay’s Constancia, 777, Lalor and Reed mines, processing at Hudbay’s Constancia concentrator, Flin Flon concentrator, Snow Lake concentrator and Flin Flon zinc plant, anticipated timing of Hudbay’s projects and events that may affect its projects, including the anticipated issue of required licenses and permits, the anticipated effect of external factors on revenue, such as commodity prices, anticipated exploration and development expenditures and activities and the possible success of such activities, estimation of mineral reserves and resources, mine life projections, timing and amount of estimated future production, reclamation costs, economic outlook, government regulation of mining operations, and business and acquisition strategies. 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 Hudbay 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 Hudbay identified and were applied by Hudbay in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to:

 

·                                          the successful ramp up of production at Constancia;

·                                          the success of mining, processing, exploration and development activities;

·                                          the accuracy of geological, mining and metallurgical estimates;

·                                          the costs of production;

·                                          the supply and demand for metals Hudbay produces;

·                                          no significant and continuing adverse changes in financial markets, including commodity prices and foreign exchange rates;

·                                          the supply and availability of concentrate for Hudbay’s processing facilities;

·                                          the supply and availability of third party processing facilities for Hudbay’s concentrate;

·                                          the supply and availability of all forms of energy and fuels at reasonable prices;

·                                          the availability of transportation services at reasonable prices;

·                                          no significant unanticipated operational or technical difficulties;

·                                          the execution of Hudbay’s business and growth strategies, including the success of its strategic investments and initiatives;

·                                          the availability of additional financing, if needed, under Hudbay’s credit facilities;

·                                          the availability of financing for Hudbay’s exploration and development projects and activities;

·                                          the ability to complete project targets on time and on budget and other events that may affect Hudbay’s ability to develop its projects;

·                                          the timing and receipt of various regulatory and governmental approvals;

·                                          the availability of personnel for Hudbay’s exploration, development and operational projects and ongoing employee relations;

·                                          Hudbay’s ability to secure required land rights to complete the Constancia project;

·                                          maintaining good relations with the communities in which Hudbay operates, including the communities surrounding the Constancia and Rosemont projects and First Nations communities surrounding the Lalor and Reed mines;

 

3

 

·                                          no significant unanticipated challenges with stakeholders at Hudbay’s various projects;

·                                          no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;

·                                          no contests over title to Hudbay’s properties, including as a result of rights or claimed rights of aboriginal peoples;

·                                          the timing and possible outcome of pending litigation and no significant unanticipated litigation;

·                                          certain tax matters, including, but not limited to current tax laws and regulations and the refund of certain value added taxes from the Canadian and Peruvian governments; and

·                                          no significant and continuing adverse changes in general economic conditions or conditions in the financial markets.

 

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, 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 Hudbay’s projects (including risks associated with the commissioning and ramp up of the Constancia project and risks associated with the permitting of the Rosemont project), depletion of Hudbay’s reserves, dependence on key personnel and employee and union relations, risks related to political or social unrest or change and those in respect of aboriginal and community relations, rights 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, volatile financial markets that may affect Hudbay’s ability to obtain financing on acceptable terms, the permitting and development of the Rosemont project not occurring as planned, any material inaccuracy in Augusta Resource Corporation’s (“Augusta”) historical public disclosure and representations in the support agreement upon which Hudbay’s offer to acquire Augusta was predicated, the failure to obtain required approvals or clearances from government authorities on a timely basis, 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, Hudbay’s ability to comply with its pension and other post-retirement obligations, Hudbay’s ability to abide by the covenants in its debt instruments or other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “Risk Factors”.

 

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, you should not place undue reliance on forward-looking information. Hudbay does not assume any obligation to update or revise any forward-looking information after the date of this short form prospectus or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.

 

4

 

SUMMARY TERMS OF THE EXCHANGE OFFER AND THE EXCHANGE NOTES

 

Hudbay is able to incorporate by reference information into this short form prospectus, which means it can disclose important information to you in documents outside this short form prospectus. This summary is qualified in its entirety by and should be read in conjunction with the detailed information and financial statements incorporated by reference into this short form prospectus. This summary and the “Description of the Business” section that follows highlight selected information contained elsewhere in, or incorporated by reference into, this short form prospectus. You should read the entire short form prospectus and the information incorporated herein closely, including the AIF and management’s discussion and analysis of the financial condition and operations of Hudbay for the year ended December 31, 2014.

 

Hudbay is offering to exchange up to US$170,000,000 aggregate principal amount of August 2014 Notes for an equal principal amount of Exchange Notes. In order to exchange your August 2014 Notes, you must validly tender them, as instructed herein and in the letter of transmittal. Hudbay will exchange all outstanding August 2014 Notes that are validly tendered and not validly withdrawn. Hudbay will issue the Exchange Notes as promptly as practicable after the expiration of the Exchange Offer.

 

Exchange Offer:		Hudbay will exchange your August 2014 Notes for an equal aggregate principal amount of Exchange Notes.
Resale of Exchange Notes:		Hudbay believes you may offer the Exchange Notes for resale, resell and otherwise transfer them without compliance with the registration or prospectus delivery provisions of the Securities Act if:   ·                                          you are acquiring the Exchange Notes in the ordinary course of your business;   ·                                          you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes issued to you; and   ·                                          you are not an affiliate, under Rule 405 of the Securities Act, of Hudbay or any of the Guarantors.   You should read the discussion under the heading “Exchange Offer” for further information regarding the Exchange Offer and resale of the Exchange Notes.
Registration Rights Agreement:		Hudbay has undertaken this Exchange Offer pursuant to the terms of a registration rights agreement entered into with the initial purchasers of the August 2014 Notes (the “Registration Rights Agreement”). See “The Exchange Offer”.
Consequences of Failure to Exchange August 2014 Notes:		You will continue to hold the August 2014 Notes that remain subject to their existing transfer restrictions if: ·                                          you do not tender your August 2014 Notes; or   ·                                          you tender your August 2014 Notes and they are not accepted for exchange.   Subject to certain limited exceptions, Hudbay will have no obligation to register the August 2014 Notes after it consummates the Exchange Offer. See “The Exchange Offer — Terms of the Exchange Offer — Consequences of Failure to Exchange” and “— Acceptance of August 2014 Notes for Exchange; Delivery of Exchange Notes”.
Expiration Date:		The Expiration Date for the Exchange Offer is 5:00 p.m., New York City time, on May 20, 2015, unless Hudbay extends it, in which case “Expiration Date” means 5:00 p.m. on the date to which the Exchange Offer is extended.
Conditions to the Exchange Offer:		The Exchange Offer is subject to certain customary conditions, which Hudbay may waive. See “The Exchange Offer — Terms of the Exchange Offer — Conditions”.

 

9

 

Procedures for Tendering August 2014 Notes:		If you wish to accept the Exchange Offer, you must submit the required documentation and effect a tender of August 2014 Notes pursuant to the procedures for book-entry transfer (or other applicable procedures), all in accordance with the instructions described in this short form prospectus and in the relevant letter of transmittal. See “The Exchange Offer — Terms of the Exchange Offer — Procedures for Tendering”, “— Book Entry Transfer”, “— Exchanging Book-Entry Notes” and “— Guaranteed Delivery Procedures”.
Guaranteed Delivery Procedures:		If you wish to tender your August 2014 Notes, but cannot properly do so prior to the Expiration Date, you may tender your August 2014 Notes in accordance with the guaranteed delivery procedures described in “The Exchange Offer — Terms of the Exchange Offer — Guaranteed Delivery Procedures”.
Withdrawal Rights:		Tenders of August 2014 Notes may be withdrawn at any time prior to the Expiration Date. To withdraw a tender of August 2014 Notes, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth in the letter of transmittal prior to the Expiration Date.
Acceptance of August 2014 Notes and Delivery of Exchange Notes:		Subject to certain conditions, any and all August 2014 Notes that are validly tendered in the Exchange Offer prior to the Expiration Date will be accepted for exchange. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See “The Exchange Offer — Terms of the Exchange Offer”.
U.S. Federal Income Tax Considerations:		The exchange of the August 2014 Notes for the Exchange Notes will not constitute a taxable exchange for U.S. federal income tax purposes. See “Certain U.S. Federal Income Tax Considerations”.
Use of Proceeds:		Hudbay will not receive any proceeds from the issuance of the Exchange Notes and the related guarantees. Hudbay and the Guarantors are offering the Exchange Notes and the related guarantees solely to satisfy their obligations under the Registration Rights Agreement. August 2014 Notes that are validly tendered (and not validly withdrawn) and exchanged will be retired and cancelled and cannot be reissued. See “Use of Proceeds”.
Exchange Agent:		U.S. Bank National Association is serving as the exchange agent.
Summary of Terms of the Exchange Notes:		The terms of the Exchange Notes are substantially identical to the terms of the August 2014 Notes except that the Exchange Notes:   ·                                          will be registered under the Securities Act, and therefore will not contain restrictions on transfer;   ·                                          will not contain provisions relating to additional interest;   ·                                          will bear a different CUSIP number from the August 2014 Notes;   ·                                          will not entitle their holders to registration rights; and   ·                                          will carry the same features as, and be fungible with, the Existing Notes that have been exchanged.
Issuer:		HudBay Minerals Inc.
Notes Offered:		Up to US$170,000,000 aggregate principal amount of 9.500% Senior Notes due 2020.
Maturity Date:		October 1, 2020.
Interest:		9.500% per year payable semi-annually in arrears in cash on April 1 and October 1 of each year beginning October 1, 2015.  The interest payment on October 1, 2015 will include accrued interest from April 1, 2015.
Ranking:		The Exchange Notes and the guarantees will be Hudbay’s and the Guarantors’ senior unsecured obligations and will:

 

10

 

		·             rank equally in right of payment with all of Hudbay’s and the Guarantors’ existing and any future senior indebtedness;
		·             rank senior in right of payment to all of Hudbay’s and the Guarantors’ future subordinated indebtedness, if any;
		·             be effectively subordinated to any of Hudbay’s and the Guarantors’ existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness; and
		·             be structurally subordinated to all of the existing and future liabilities (including trade payables) of each of Hudbay’s subsidiaries that do not guarantee the Exchange Notes.
Guarantees:		The Exchange Notes will be guaranteed on a senior unsecured basis by Hudbay’s existing and future restricted subsidiaries, other than unrestricted subsidiaries and certain excluded subsidiaries. Under certain circumstances, Guarantors may be released from their guarantees without the consent of the holders of Exchange Notes. The Note Guarantees will be fully and unconditionally guaranteed by Hudbay on a senior unsecured basis.
		For the 12 months ended December 31, 2014, Hudbay’s non-guarantor subsidiaries did not contribute to Hudbay’s revenue and reduced Hudbay’s profit from continuing operations before tax by approximately $30.7 million.
		As of December 31, 2014, Hudbay’s non-guarantor subsidiaries:
		·             represented approximately 77.2% of Hudbay’s consolidated total assets; and
		·             had approximately $1,237 million of consolidated total liabilities, including debt and trade payables but excluding intercompany liabilities, all of which would have been structurally senior to the Exchange Notes.
Optional Redemption:		The Exchange Notes will be redeemable at Hudbay’s option, in whole or in part, at any time on or after October 1, 2016, at the redemption prices set forth in this short form prospectus, together with accrued and unpaid interest, if any, to the date of redemption. Prior to October 1, 2016, Hudbay may redeem the Exchange Notes, in whole but not in part, at a price equal to 100% of the principal amount of the Exchange Notes plus a “make-whole” premium, plus accrued and unpaid interest, if any, to the date of redemption.
		At any time prior to October 1, 2015, Hudbay may redeem up to 35% of the original principal amount of the Exchange Notes with the proceeds of certain equity offerings at a redemption price of 109.500% of the principal amount of the Exchange Notes, together with accrued and unpaid interest, if any, to the date of redemption.
Change of Control:		Upon the occurrence of specific kinds of changes of control, you will have the right, as holders of the Exchange Notes, to cause Hudbay to repurchase some or all of your Exchange Notes at 101% of their face amount, plus accrued and unpaid interest to, but not including, the repurchase date.
Certain Covenants:		Hudbay will issue the Exchange Notes under an Indenture with U.S. Bank National Association, as trustee. The Indenture will, among other things, limit Hudbay’s ability and the ability of Hudbay’s restricted subsidiaries to:
		·             incur additional indebtedness;
		·             pay dividends or make other distributions or repurchase or redeem Hudbay’s capital stock;
		·             prepay, redeem or repurchase certain debt;
		·             make loans and investments;

 

11

 

		·             sell assets;
		·             incur liens;
		·             enter into transactions with affiliates;
		·             enter into agreements restricting Hudbay’s subsidiaries’ ability to pay dividends; and
		·             consolidate, amalgamate, merge or sell all or substantially all of Hudbay’s assets.
		These covenants will be subject to a number of important exceptions and qualifications. For more details, see “Description of Notes”.
Absence of Public Market for the Notes:		There is currently no established trading market for the Notes. Hudbay does not intend to apply for a listing of the Notes on any securities exchange or an automated dealer quotation system. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes and this may affect the pricing, transparency and availability of trading prices of the Notes.
Additional Amounts:		In the event that certain taxes are payable in respect of payments on the Exchange Notes and the guarantees, Hudbay and the Guarantors will, subject to certain exceptions, pay such additional amounts as will result, after deduction or withholding of such taxes, in the payment of the amounts which would have been payable in respect of the Exchange Notes and the guarantees, respectively, had no such withholding or deduction been required. See “Description of Notes—Payment of Additional Amounts”.
Optional Tax Redemption:		The Exchange Notes may be redeemed at Hudbay’s option in whole, but not in part, at the principal amount thereof plus accrued and unpaid interest to the redemption date, in certain circumstances in which Hudbay would become obligated to pay additional amounts under the Exchange Notes. See “Description of Notes—Optional Redemption”.

 

12

 

DESCRIPTION OF THE BUSINESS

 

Our Business

 

Hudbay is an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, Hudbay is focused on the discovery, production and marketing of base and precious metals. Through its subsidiaries, Hudbay owns copper/zinc/gold mines, ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan and copper projects in Cusco (Peru) and Arizona (United States).  Hudbay also has equity investments in a number of junior exploration companies.  Hudbay’s growth strategy is focused on the exploration and development of properties it already controls, as well as other mineral assets it may acquire that fit its strategic criteria.  Hudbay’s vision is to create sustainable value through increased commodity exposure on a per share basis for its shareholders.

 

Hudbay has four material mineral projects:

 

·                       our 100% owned 777 mine, an underground copper and zinc mine in Flin Flon, Manitoba, which has been producing since 2004;

 

·                       our 100% owned Lalor mine, an underground zinc, copper and gold mine near Snow Lake, Manitoba, which achieved commercial production from the main production shaft in the third quarter of 2014;

 

·                       our 100% owned Constancia mine, an open pit copper mine in Peru, which commenced initial production in the fourth quarter of 2014 and is expected to achieve commercial production during the second quarter of 2015; and

 

·                       our 92.05% owned Rosemont project, a copper development project in Pima County, Arizona; our ownership in the Rosemont project is subject to an Earn-In Agreement with UCM, pursuant to which UCM has earned a 7.95% interest in the project and may earn up to a 20% interest.

 

Hudbay also owns a 70% interest in the Reed mine near Snow Lake, Manitoba, which commenced production in the third quarter of 2013 and commenced commercial production in April 2014, exploration properties in North and South America and minority equity investments in several junior exploration companies as part of its strategy to build a pipeline of projects with the potential for development.

 

In addition, Hudbay owns and operates a portfolio of processing facilities in northern Manitoba, including its primary Flin Flon ore concentrator, which produces zinc and copper concentrates, its Snow Lake concentrator, which produces zinc and copper concentrates and its Flin Flon zinc plant, which produces high-grade zinc metal.  Hudbay also owns and operates a processing facility at Constancia, which produces copper concentrate and is being commissioned to produce molybdenum concentrate.

 

A more detailed description of Hudbay’s material mineral properties is included in the AIF, which is incorporated by reference into this short form prospectus. See “Documents Incorporated by Reference” above.

 

Hudbay’s common shares (“Common Share”) trade under the symbol “HBM” on the Toronto Stock Exchange (“TSX”), New York Stock Exchange (the “NYSE”) and Bolsa de Valores de Lima. Hudbay also has warrants listed under the symbol “HBM.WT” on the TSX and “HBM/WS” on the NYSE.

 

13

 

discussed above, in particular, the development of Hudbay’s Rosemont project is contingent on receiving key permits among other things.

 

Human Resources

 

The success of Hudbay’s operations and development projects depends in part on its ability to attract and retain geologists, engineers, metallurgists and other personnel with specialized skill and knowledge about the mining industry in the geographic areas in which it operates. The success of our operations in Snow Lake, Manitoba and southern Peru, in particular, depend in part on its ability to attract new skilled personnel to work for Hudbay in these geographic areas. Challenges in recruiting employees to work at its Snow Lake operations has led to a higher reliance on contractor labour than expected and correspondingly higher costs.

 

Hudbay also is dependent on a number of key management and operating personnel, and Hudbay’s success will depend in large part on the efforts of these individuals and its ability to retain them. Hudbay does not have any key person insurance on any of these individuals.

 

There can be no assurance that Hudbay’s business will not suffer from a work stoppage at any location where it operates. The collective agreements that Hudbay has with its employees at its Flin Flon and Snow Lake operations expired in December 2014 and there can be no assurance that it will be able to successfully negotiate new collective agreements or that one or more unions will not strike before we are able to do so. We have received notice from one such union that its members have approved strike action. From time to time Hudbay may temporarily suspend or close certain of its operations and it may incur significant labour and severance costs as a result of a suspension or closure. Further, temporary suspensions and closures may adversely affect Hudbay’s future access to skilled labour, as employees who are laid off may seek employment elsewhere.

 

Anti-Bribery Legislation

 

Hudbay is subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. Hudbay is also subject to Canada’s Corruption of Foreign Public Officials Act (“CFPOA”), which prohibits corporations and individuals from giving or offering to give a benefit of any kind to a foreign public official, or any other person for the benefit of the foreign public official, where the ultimate purpose is to obtain or retain a business advantage.

 

Hudbay’s international activities, including its Constancia project and exploration activities elsewhere in South America, create the risk of unauthorized payments or offers of payments by its employees, consultants or agents to foreign persons. While Hudbay has implemented safeguards that are intended to prevent these practices, its existing safeguards and any future improvements to such safeguards may not be completely effective, and its employees, consultants or agents may engage in conduct for which Hudbay might be held responsible. Any failure to comply with the FCPA, the CFPOA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on Hudbay’s ability to conduct business in certain foreign jurisdictions, which may have a material adverse impact on the company and its share price.

 

Community Relations

 

Hudbay’s relationships and reputation, particularly with the communities in which it operates in Manitoba, Peru and Arizona, are critical to the future success of its existing operations and the construction and/or development of future projects. There is an increasing level of public concern relating to the perceived effect of mining activities on the environment and on communities impacted by those activities. Publicity adverse to Hudbay, its operations, or extractive industries generally, including as a result of anti-mining protests or publications, could have an adverse effect on Hudbay and may impact its reputation and relationship with the communities in which it operates, including the communities surrounding its key projects and other stakeholders. For example, while Hudbay has entered into life-of-mine agreements with two local communities directly affected by the Constancia project, two families still need to agree to be relocated pursuant to one of these agreements. In addition, there can be no

 

17

 

Information Technology Systems

 

Hudbay’s operations depend, in part, on information technology (“IT”) systems.  Hudbay’s IT systems are subject to disruption, failure or damage from a number of threats, including, but not limited to, security breaches, computer viruses, cable cuts, natural disasters, terrorism, power loss, vandalism and theft. Although to date Hudbay has not experienced any material losses relating to IT system disruptions, failure or damage, cyber attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. Any of these and other events could result in IT system failures, operational delays, production downtimes, security breaches, destruction or corruption of data or other improper use of Hudbay’s IT systems and networks, any of which could have an adverse effect on Hudbay’s reputation, results of operations and financial performance. Hudbay’s exposure to these risks cannot be fully mitigated because of, among other things, the evolving nature of these threats; as such threats continue to evolve, Hudbay may be required to expend additional resources to continue to change or improve protective measures and to investigate and remediate any security vulnerabilities.

 

Growth Strategy

 

Hudbay evaluates growth opportunities and continues to consider the acquisition and disposition of exploration and development properties and mineral assets to achieve its strategy. From time to time, Hudbay engages in discussions in respect of both acquisitions and dispositions, and other business opportunities, but there can be no assurance that any such discussions will result in a successfully completed transaction.

 

Fluctuations in the Value of Equity Investments

 

Hudbay is exposed to market risk from the share prices of its equity investments in listed junior exploration companies. These investments are made to foster strategic relationships, in connection with joint venture agreements and for investment purposes. The share prices of these equity investments may be significantly affected by short-term changes in capital markets, commodity prices or in their financial condition or results of their operations, and as a result, will affect the value of Hudbay’s investments.

 

Risks Related to the Notes

 

In addition to the factors above relating to risks associated with Hudbay’s business (and, therefore, to any investment in Hudbay), you should also consider the following factors that represent special risks associated with an investment in the Notes.

 

Hudbay’s substantial indebtedness could adversely affect its financial condition and prevent Hudbay from fulfilling its obligations under the Notes.

 

Hudbay has a significant amount of indebtedness. As of December 31, 2014, Hudbay’s total debt was approximately US$1.1 billion, consisting primarily of the Notes. Hudbay has subsequently incurred approximately US$130 million of indebtedness under its credit facilities.

 

Subject to the limits contained in the Indenture governing the Notes and any limits under Hudbay’s other debt instruments existing from time to time, Hudbay may incur substantial additional debt (including under its credit facilities) to finance working capital, capital expenditures, investments or acquisitions or for other purposes. If Hudbay does so, the risks related to its high level of indebtedness could intensify. Specifically, Hudbay’s substantial level of indebtedness could have important consequences to the holders of the Notes, including:

 

·                                          making it more difficult for Hudbay to satisfy its obligations with respect to the Notes and its other debt;

·                                          limiting Hudbay’s ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

·                                          requiring a substantial portion of Hudbay’s cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

·                                          increasing Hudbay’s vulnerability to general adverse economic and industry conditions;

 

21

 

·                                          exposing Hudbay to the risk of increased interest rates as certain of Hudbay’s borrowings are at variable rates of interest;

·                                          limiting Hudbay’s flexibility in planning for and reacting to changes in the industry in which it competes;

·                                          placing Hudbay at a disadvantage compared to other, less leveraged competitors; and

·                                          increasing Hudbay’s cost of borrowing.

 

In addition, the Indenture governing the Notes contains restrictive covenants that limit Hudbay’s ability to engage in activities that may be in its long-term best interest. Hudbay’s failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all Hudbay’s debt.

 

Hudbay may not be able to generate sufficient cash to service all of its indebtedness, including the Notes, and may be forced to take other actions to satisfy its obligations under such indebtedness, which may not be successful.

 

Hudbay’s ability to make scheduled payments on or refinance its debt obligations, including the Notes, depends on Hudbay’s financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond Hudbay’s control. Hudbay may be unable to maintain a level of cash flows from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness, including the Notes.

 

If Hudbay’s cash flows and capital resources are insufficient to fund its debt service obligations, Hudbay could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness, including the Notes. Hudbay may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternatives may not allow Hudbay to meet its scheduled debt service obligations. The Indenture governing the Notes restricts Hudbay’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict its ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. Hudbay may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

 

In addition, Hudbay is a holding company, and as such it conducts all of its operations through its subsidiaries, certain of which are not Guarantors of the Notes or Hudbay’s other indebtedness. Accordingly, repayment of Hudbay’s indebtedness, including the Notes, is dependent on the generation of cash flow by its subsidiaries and their ability to make such cash available to Hudbay, by dividend, debt repayment or otherwise. Unless they are Guarantors of the Notes or Hudbay’s other indebtedness, Hudbay’s subsidiaries do not have any obligation to pay amounts due on the Notes or Hudbay’s other indebtedness or to make funds available for that purpose. Hudbay’s subsidiaries may not be able to, or may not be permitted to, make distributions to enable Hudbay to make payments in respect of Hudbay’s indebtedness, including the Notes. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit Hudbay’s ability to obtain cash from its subsidiaries. While the Indenture governing the Notes limits the ability of Hudbay’s subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to Hudbay, these limitations are subject to qualifications and exceptions. In the event that Hudbay does not receive distributions from its subsidiaries, Hudbay may be unable to make required principal and interest payments on its indebtedness, including the Notes.

 

Hudbay’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on commercially reasonable terms or at all, would materially and adversely affect Hudbay’s financial position and results of operations and Hudbay’s ability to satisfy its obligations under the Notes.

 

If Hudbay cannot make scheduled payments on its debt, Hudbay will be in default and holders of the Notes could declare all outstanding principal and interest to be due and payable, causing a cross-acceleration or cross-default under certain of Hudbay’s other debt agreements and Hudbay’s other creditors could foreclose against the collateral securing Hudbay’s obligations and Hudbay could be forced into bankruptcy or liquidation. All of these events could result in you losing your investment in the Notes.

 

22

 

Despite Hudbay’s significant level of indebtedness after the offering of the Notes, Hudbay and its subsidiaries may still be able to incur substantially more debt, which could exacerbate the risks to Hudbay’s financial condition described above.

 

Hudbay and its subsidiaries may incur significant additional indebtedness in the future. Although the Indenture governing the Notes contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If Hudbay incurs any additional indebtedness that ranks equally with the Notes the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with Hudbay’s insolvency, liquidation, reorganization, dissolution or other winding up. This may have the effect of reducing the amount of proceeds paid to you. These restrictions also do not prevent Hudbay from incurring obligations that do not constitute indebtedness. If new debt is added to Hudbay’s current debt levels, the related risks that Hudbay and the Guarantors now face could intensify.

 

Volatility in the U.S. and Canadian credit markets could significantly impact Hudbay’s ability to obtain new financing or to refinance Hudbay’s existing debt at reasonable rates as it matures.

 

Hudbay’s US$300 million revolving credit facility matures in March 2018, loans under the Cat Financial equipment financing facility have a term of six years and are amortized quarterly, loans under the Constancia credit facility have a final maturity date in September 2018 and are amortized quarterly and the Notes mature in 2020. In the future these debts may need to be refinanced.  Access to the capital markets for longer-term financing is dependent upon many factors outside of Hudbay’s control. Obtaining new financing arrangements or amending Hudbay’s existing ones may result in significantly higher fees and ongoing interest costs or may not be available at all.

 

The terms of the Indenture governing the Notes restrict Hudbay’s current and future operations, particularly Hudbay’s ability to respond to changes or to take certain actions.

 

The Indenture governing the Notes contains a number of restrictive covenants that impose significant operating and financial restrictions on Hudbay and may limit Hudbay’s ability to engage in acts that may be in Hudbay’s long-term best interest, including restrictions on Hudbay’s ability to:

 

·                                          incur additional indebtedness;

·                                          pay dividends or make other distributions or repurchase or redeem capital stock;

·                                          prepay, redeem or repurchase certain debt;

·                                          make loans and investments;

·                                          sell assets;

·                                          incur liens;

·                                          enter into transactions with affiliates;

·                                          alter the businesses Hudbay conducts;

·                                          enter into agreements restricting Hudbay’s subsidiaries’ ability to pay dividends; and

·                                          consolidate, amalgamate, merge or sell all or substantially all of Hudbay’s assets.

 

A breach of the covenants under the Indenture governing the Notes or Hudbay’s other debt instruments from time to time could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event the holders of Hudbay’s Notes or Hudbay’s lenders accelerate the repayment of Hudbay’s borrowings, Hudbay and its subsidiaries may not have sufficient assets to repay that indebtedness. These restrictions may affect Hudbay’s ability to grow in accordance with its strategy. As a result of these restrictions, Hudbay may be:

 

·                                          limited in how it conducts its business;

·                                          unable to raise additional debt or equity financing to operate during general economic or business downturns; or

·                                          unable to compete effectively or to take advantage of new business opportunities.

 

23

 

The Notes and the guarantees will be effectively subordinated to any of Hudbay’s and the Guarantors’ secured indebtedness or other obligations to the extent of the value of the collateral securing that indebtedness or other obligations.

 

The Notes and the guarantees are not, and will not be, secured by any of Hudbay’s or the Guarantors’ assets. As a result, the Notes and the guarantees will be effectively subordinated to Hudbay’s and the Guarantors’ future secured indebtedness or other obligations (such as those pursuant to Hudbay’s precious metals stream transaction at its 777 mine and its corporate revolving credit facility) to the extent of the value of the assets that secure such indebtedness or other obligations. In addition, Hudbay may incur additional secured debt or other obligations in the future. The effect of this subordination is that upon a default in payment on, or the acceleration of, any of Hudbay’s secured indebtedness, or in the event of bankruptcy, insolvency, liquidation, dissolution, reorganization or other insolvency proceeding of Hudbay or the Guarantors, the proceeds from the sale of collateral securing Hudbay’s secured indebtedness or other obligations will be available to pay obligations on the Notes only after all secured indebtedness has been paid in full or such other obligations have been discharged. As a result, the holders of the Notes may receive less, ratably, than the holders of secured indebtedness in the event of Hudbay’s or the Guarantors’ or obligees’ of such secured obligations bankruptcy, insolvency, liquidation, dissolution, reorganization or other insolvency proceeding.

 

The Notes are structurally subordinated to all obligations of Hudbay’s existing and future subsidiaries that are not and do not become Guarantors of the Notes.

 

The Notes are, and will be, guaranteed by all of Hudbay’s existing and future subsidiaries, other than unrestricted subsidiaries (including its subsidiaries that own a 92.05% interest in the Rosemont project) and certain excluded subsidiaries, including HudBay (BVI) Inc. (“Hudbay BVI”), HudBay Peru Inc. (“Hudbay Peru”) and HudBay Peru S.A.C. Hudbay’s subsidiaries that do not guarantee the Notes will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The Notes will be structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a Guarantor, all of such subsidiary’s creditors (including trade creditors) would be entitled to payment in full out of such subsidiary’s assets before Hudbay would be entitled to any payment. It is possible that Hudbay’s subsidiaries that do not guarantee the Notes, including its subsidiaries that own the Constancia and Rosemont projects, may generate significant amounts of revenue or hold significant assets which they will not be obligated to, and may otherwise be unable to, apply to pay any amounts due under the Notes.

 

In addition, the Indenture governing the Notes does, subject to certain limitations, permit these subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.

 

For the 12 months ended December 31, 2014, Hudbay’s non-guarantor subsidiaries did not contribute to Hudbay’s revenue and reduced Hudbay’s profit from continuing operations before tax by $30.7 million. As of December 31, 2014, Hudbay’s non-guarantor subsidiaries represented approximately 77.2% of Hudbay’s total assets and had approximately $1,237 million of total liabilities, including debt and trade payables but excluding intercompany liabilities, all of which would have been structurally senior to the Notes.

 

In addition, Hudbay’s subsidiaries that provide, or will provide, guarantees of the Notes will be automatically released from those guarantees upon the occurrence of certain events, including the following:

 

·                                          the designation of that subsidiary guarantor as an unrestricted subsidiary;

 

·                                          the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Notes by such subsidiary guarantor; or

 

·                                          the sale or other disposition, including the sale of substantially all the assets, of that subsidiary guarantor.

 

24

 

·                                          Hudbay or any of the Guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;

 

·                                          the issuance of the Notes or the incurrence of the guarantees left Hudbay or any of the Guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business;

 

·                                          Hudbay or any of the Guarantors intended to, or believed that Hudbay or such Guarantor would, incur debts beyond Hudbay’s or the Guarantor’s ability to pay as they mature; or

 

·                                          Hudbay or any of the Guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against Hudbay or the Guarantor if, in either case, the judgment is unsatisfied after final judgment.

 

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the Notes. In addition, upon certain circumstances specified in “Description of Notes”, a guarantee that had previously been suspended by virtue of the Notes having received investment grade ratings will be required to be reinstated. A court might void a guarantee if, among other things, it found that the applicable guarantor was insolvent when it reinstated its guarantee.

 

Hudbay cannot be certain as to the standards (and such standards will depend on the laws applied in the proceedings) a court would use to determine whether or not Hudbay or the Guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the Notes or the guarantees would be subordinated to Hudbay’s or any of the Guarantors’ other debt. In general, however, a court would deem an entity insolvent if:

 

·                                          the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

 

·                                          the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

·                                          it could not pay its debts as they became due.

 

If a court were to find that the issuance of the Notes or the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or that guarantee, could subordinate the Notes or that guarantee to presently existing and future indebtedness of Hudbay or of the related Guarantor or could require the holders of the Notes to repay any amounts received with respect to that guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the Notes. Further, the avoidance of the Notes could result in an event of default with respect to Hudbay’s and Hudbay’s subsidiaries’ other debt that could result in acceleration of that debt. Each guarantee will contain a provision intended to limit the Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. This provision may not be effective to protect the guarantees from being voided under fraudulent transfer law, or may reduce the Guarantor’s obligation to an amount that effectively makes the guarantee worthless.

 

Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the Notes to other claims against Hudbay under the principle of equitable subordination if the court determines that (a) the holder of Notes engaged in some type of inequitable conduct, (b) the inequitable conduct resulted in injury to Hudbay’s other creditors or conferred an unfair advantage upon the holders of Notes, and (c) equitable subordination is not inconsistent with the provisions of the bankruptcy code.

 

27

 

USE OF PROCEEDS

 

Hudbay will not receive any cash proceeds from the issuance of the Exchange Notes. Hudbay is making this exchange solely to satisfy its obligations under the Registration Rights Agreement entered into in connection with the offering of the August 2014 Notes. In consideration for issuing the Exchange Notes, Hudbay will receive August 2014 Notes in the same aggregate principal amount. Hudbay has agreed to pay the expenses of the Exchange Offer, other than certain taxes. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the August 2014 Notes, except as otherwise described herein, including under “The Exchange Offer—Terms of the Exchange Offer”. The August 2014 Notes surrendered in exchange for the Exchange Notes will be retired and cancelled and will not be reissued. Accordingly, the issuance of the Exchange Notes will not result in any change in Hudbay’s outstanding indebtedness.

 

The following table illustrates Hudbay’s sources and uses of funds (in millions) in connection with the offering of the August 2014 Notes as of the closing thereof.(1)

 

 

Sources of Funds					Uses of Funds
August 2014 Notes (2)		$	211.0		Fees and expenses of the offering of the August 2014 Notes		$	2.0
					Repayment of Augusta debt		$	128.6
					General corporate purposes		$	80.4
Total sources		$	211.0		Total uses		$	211.0

 

(1)             Reflects the United States/Canadian Dollar closing exchange rate as reported by the Bank of Canada as at December 31, 2014.

 

(2)             Reflects the gross proceeds of the offering of US$181.9 million, before deduction of transaction costs associated with the offering of approximately US$1.7 million. In accordance with IFRS, the principal amount of the August 2014 Notes is presented in Hudbay’s financial statements net of the transaction costs, which will be amortized over the life of the Notes, and the principal amount of the Notes will accrete on Hudbay’s financial statements by a corresponding amount.

 

31

 

CONSOLIDATED CAPITALIZATION

 

As no proceeds will be realized from the Exchange Offer, the completion of the Exchange Offer will have no material change on Hudbay’s share and loan capital.

 

As at the date hereof, there have been no material changes in the Common Share or loan capitalization of Hudbay since December 31, 2014, other than the drawdown of US$103.5 million under the US$150 million standby credit facility for the Constancia project (the “Constancia Drawdown”) and the drawdown of US$26 million under the US$300 million corporate revolving credit facility (the “Revolver Drawdown”). The following table sets forth the consolidated capitalization of the Company: (i) as at December 31, 2014; and (ii) as at December 31, 2014 after giving effect to the Constancia Drawdown and the Revolver Drawdown.

 

		As at December 31 2014
		Actual			After giving effect to the Constancia Drawdown and the Revolver Drawdown
		(Dollar amounts in thousands)(1)
Cash and cash equivalents		$	207,273		$	207,203
Debt (including current maturities):
Corporate Revolving Credit Facility(2)		—			$	30,163	(3)
Constancia Credit Facility		—			$	120,070	(4)
Constancia Equipment Financing Facility		$	82,624		$	82,624
Total secured debt		$	82,624		$	232,857
Total senior unsecured debt		$	1,067,292		$	1,067,292
Total debt		$	1,149,916		$	1,300,149
Equity:
Equity		$	2,446,270		$	2,446,270
Total equity		$	2,446,720		$	2,446,720
Total capitalization		$	3,596,636		$	3,746,869

 

(1)              Reflects the United States dollar/Canadian dollar closing exchange rate as reported by the Bank of Canada as at December 31, 2014.

 

(2)              On March 13, 2015, Hudbay entered into an amendment to its revolving credit facility that increased the availability under the facility from US$100 million to US$300 million. As at December 31, 2014, $64.1 million of letters of credit had been advanced under the revolving credit facility to support Hudbay’s reclamation obligations in Manitoba.

 

(3)              Reflects the drawdown of US$26 million under the revolving credit facility on March 27, 2015.

 

(4)              Reflects the drawdown of an aggregate of US$103.5 million under the Constancia standby credit facility in February 2015 and March 2015.

 

32

 

ADDITIONAL INFORMATION REGARDING GUARANTORS

 

The following table sets forth, for the three months and year ended December 31, 2014 and 2013, and as at December 31, 2014 and 2013, consolidated summary financial information for Hudbay and the Guarantors (in thousands).

 

For the three months ending December 31:

 

		Guarantor - Issuer				Guarantor - Credit Supporters				Non Guarantor - Others				Consolidating adjustments 1				Consolidated Hudbay total
(000’s)		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
Total revenue		—		—		387,024		346,546		—		—		(258,608	)	(210,464	)	128,416		136,082
Profit (loss) continuing operations - attributable to owners		(19,165	)	(27,424	)	27,364		(2,403	)	26,185		(23,997	)	15,199		(1,680	)	49,583		(55,504	)
Profit (loss) - attributable to owners		(19,165	)	(27,424	)	27,364		(2,403	)	26,185		(23,997	)	15,199		(1,680	)	49,583		(55,504	)

 

For the twelve months ending December 31:

 

		Guarantor - Issuer				Guarantor - Credit Supporters				Non Guarantor - Others				Consolidating adjustments 1				Consolidated Hudbay total
(000’s)		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
Total revenue		—		—		842,059		750,066		—		—		(282,103	)	(233,265	)	559,956		516,801
Profit (loss) continuing operations - attributable to owners		12,882		(76,845	)	64,837		33,214		(14,951	)	(81,965	)	9,188		24,237		71,956		(101,359	)
Profit (loss) - attributable to owners		12,882		(76,845	)	64,837		33,214		(14,951	)	(81,965	)	9,188		24,237		71,956		(101,359	)

 

As at December 31, 2014 and December 31, 2013:

 

		Guarantor - Issuer				Guarantor - Credit Supporters				Non Guarantor - Others				Consolidating adjustments 1				Consolidated Hudbay total
(000’s)		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
Current assets		88,103		92,219		240,941		453,170		199,400		379,025		6,372		744		534,816		925,158
Non-current assets		3,265,276		2,347,384		1,335,585		1,259,673		6,568,215		3,113,176		(6,076,384	)	(3,801,405	)	5,092,692		2,918,828
Current liabilities		43,575		32,333		181,025		192,975		201,637		115,973		7,455		753		433,692		342,034
Non-current liabilities		1,092,096		784,179		1,177,109		1,322,925		1,667,451		540,819		(1,189,560	)	(773,678	)	2,747,096		1,874,245

 

1 This column includes all necessary amounts to eliminate all intercompany balances between the Guarantor credit supporters and the non-guarantor others, and other adjustments to arrive at the information for Hudbay on a consolidated basis.

 

37

 

DESCRIPTION OF MATERIAL INDEBTEDNESS AND OTHER COMMITMENTS

 

Exchange Notes and August 2014 Notes

 

On August 6, 2014, Hudbay issued US$170 million aggregate principal amount of its 9.500% Senior Notes due 2020, or the August 2014 Notes, under the Indenture. If all the conditions of the Exchange Offer are satisfied, Hudbay intends to exchange the August 2014 Notes that are validly tendered and not validly withdrawn for an equal principal amount of Exchange Notes.

 

The Exchange Notes will constitute a part of the same series of notes as the Existing Notes for all purposes of the Indenture and once exchanged pursuant to this Exchange Offer, are expected to be fungible with and have the same CUSIP number as the Existing Notes that have been exchanged.

 

Other Indebtedness

 

As of December 31, 2014, Hudbay had US$920 million in long-term debt outstanding (including the August 2014 Notes). Hudbay had US$750 million in long-term debt outstanding as of December 31, 2013.

 

On September 13, 2012, June 20, 2013, and December 9, 2013, Hudbay issued US$500 million aggregate principal amount, US$150 million aggregate principal amount and US$100 million aggregate principal amount, respectively, of its 9.500% Senior Notes due 2020 pursuant to private placement offerings, the majority of which notes have been exchanged and are now freely tradable.

 

On March 13, 2015, Hudbay entered into an amendment to its revolving credit facility that increased the availability under the facility from US$100 million to US$300 million. On March 27, 2015, Hudbay borrowed US$26 million under the revolving credit facility. The revolving credit facility is primarily secured by the assets of Hudbay’s Manitoba business unit, has covenants customary for a facility of this type and matures in March 2018.

 

As at December 31, 2014, $64.1 million of letters of credit had been advanced under the revolving credit facility and Hudbay was in compliance with its covenants under the revolving credit facility.

 

In June 2014, Hudbay entered into a US$150 million standby credit facility to provide financing for expenditures on the Constancia project. Drawdowns under the facility are repayable in quarterly instalments beginning December 31, 2015 and ending September 30, 2018. The facility is secured by the assets of Hudbay’s Peru business unit and Hudbay has borrowed an aggregate of US$103.5 million under the facility.

 

In October 2013, Hudbay entered into an equipment financing facility with Cat Financial to finance the purchase of components of the mobile fleet at the Constancia project. Loans pursuant to the equipment financing facility have a term of six years, amortize on a quarterly basis and are secured by the financed equipment. As at December 31, 2014, Hudbay had approximately US$71.2 million outstanding under the facility.

 

38

 

THE EXCHANGE OFFER

 

Terms of the Exchange Offer

 

General

 

In connection with the issuance of the August 2014 Notes, Hudbay entered into the Registration Rights Agreement with the initial purchasers of the August 2014 Notes. The following contains a summary of the provisions of the Registration Rights Agreement. Because this is a summary description, it does not contain all of the information that may be important to an investor in the Exchange Notes and is qualified in its entirety by the Registration Rights Agreement. Hudbay refers you to the Registration Rights Agreement, which has been filed as an exhibit to the registration statement of which this short form prospectus forms a part.

 

Under the Registration Rights Agreement, Hudbay agreed to file under the Securities Act and use its commercially reasonable efforts to cause to become effective under the Securities Act, on or prior to 270 days after the closing of the offering of the August 2014 Notes, the registration statement of which this short form prospectus is a part with respect to a registered offer to exchange the August 2014 Notes for Exchange Notes. Hudbay is required to keep the Exchange Offer open for at least 20 business days (or longer if required by law) after the date notice of the Exchange Offer is mailed to holders of the August 2014 Notes.

 

Upon the terms and subject to the conditions set forth in the registration statement filed on Form F-10 with the SEC, which includes this short form prospectus, and in the letter of transmittal, all August 2014 Notes validly tendered and not validly withdrawn prior to the Expiration Date will be accepted for exchange. Exchange Notes will be issued in exchange for an equal principal amount of outstanding August 2014 Notes accepted in the Exchange Offer. This short form prospectus, together with the letter of transmittal, is being sent to all holders of August 2014 Notes as of the date of this short form prospectus. The Exchange Offer is not conditioned upon any minimum principal amount of August 2014 Notes being tendered for exchange. However, the obligation to accept August 2014 Notes for exchange pursuant to the Exchange Offer is subject to certain customary conditions as set forth herein under “— Conditions”.

 

August 2014 Notes shall be deemed to have been accepted as validly tendered when, as and if Hudbay has given oral (promptly confirmed in writing) or written notice thereof to U.S. Bank National Association, the exchange agent. The exchange agent will act as agent for the tendering holders of August 2014 Notes for the purposes of receiving the August 2014 Notes and delivering Exchange Notes to such holders.

 

Based on Hudbay’s understanding of interpretations of the Securities Act by the staff of the SEC set forth in several no-action letters to third parties, including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications Corporation (available May 14, 1993) and Shearman & Sterling (available July 2, 1993), Hudbay believes that holders who (i) are not “affiliates” of Hudbay within the meaning of Rule 405 under the Securities Act, (ii) acquire their Exchange Notes in the ordinary course of business, (iii) do not engage in, intend to engage in, or have arrangements to participate in a distribution (within the meaning of the Securities Act) of the Exchange Notes, and (iv) are not broker-dealers, may offer for resale, resell or otherwise transfer the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act. Holders described in the preceding sentence must tell Hudbay in writing at Hudbay’s request that they meet these criteria.

 

By tendering August 2014 Notes in exchange for Exchange Notes and executing the letter of transmittal, each holder will represent to Hudbay that:

 

·                                          it is neither an affiliate of Hudbay nor a broker/dealer tendering August 2014 Notes acquired directly from Hudbay for its own account;

 

·                                          any Exchange Notes to be received by it will be acquired in the ordinary course of its business;

 

·                                          at the time of commencement of the Exchange Offer, it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in the

 

39

 

distribution (within the meaning of the Securities Act) of the Exchange Notes to be issued in the Exchange Offer; and

 

·                                          it is not acting on behalf of any person who could not truthfully make the foregoing representations.

 

If such holder is a broker-dealer, it will also be required to represent that the August 2014 Notes were acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of Exchange Notes. Each holder, whether or not it is a broker-dealer, shall also represent that it is not acting on behalf of any person that could not truthfully make any of the foregoing representations contained in this paragraph. If a holder of August 2014 Notes is unable to make the foregoing representations, such holder may not rely on the applicable interpretations of the Staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction unless such sale is made pursuant to an exemption from such requirements.

 

Each broker-dealer that receives Exchange Notes for its own account in exchange for August 2014 Notes where such August 2014 Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act and that it has not entered into any arrangement or understanding with Hudbay or an affiliate of Hudbay’s to distribute the Exchange Notes in connection with any resale of such Exchange Notes.

 

Upon consummation of the Exchange Offer, any August 2014 Notes not tendered will remain outstanding and continue to accrue interest but, subject to certain limited exceptions, holders of August 2014 Notes who do not exchange their August 2014 Notes for Exchange Notes in the Exchange Offer will no longer be entitled to registration rights or the payment of additional interest. In addition, such holders will not be able to offer or sell their August 2014 Notes, unless such August 2014 Notes are subsequently registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Subject to limited exceptions, Hudbay will have no obligation to effect a subsequent registration of the August 2014 Notes.

 

Expiration Date; Extensions; Amendments; Termination

 

The Expiration Date shall be 5:00 p.m., New York City time, on May 20, 2015, unless Hudbay, in its sole discretion, extends the Exchange Offer, in which case the Expiration Date shall be 5:00 p.m. on the date to which the Exchange Offer is extended.

 

To extend the Expiration Date, Hudbay will notify the exchange agent of any extension by oral (promptly confirmed in writing) or written notice and will notify the holders of August 2014 Notes by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the Expiration Date. Such announcement will state that Hudbay is extending the Exchange Offer for a specified period of time.

 

Hudbay reserves the right:

 

·                                          to delay acceptance of any August 2014 Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not permit acceptance of August 2014 Notes not previously accepted if any of the conditions set forth under “— Conditions” shall have occurred and shall not have been waived prior to the Expiration Date, by giving oral (promptly confirmed in writing) or written notice of such delay, extension or termination to the exchange agent; or

 

·                                          to amend the terms of the Exchange Offer in any manner deemed by Hudbay to be advantageous to the holders of the August 2014 Notes.

 

Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral (promptly confirmed in writing) or written notice to the exchange agent. If the Exchange Offer is amended in a manner determined by Hudbay to constitute a material change, Hudbay will promptly disclose such amendment in a manner reasonably calculated to inform the holders of the August 2014 Notes of such amendment and Hudbay will extend the Exchange Offer for a period of five to ten business days. In addition, if Hudbay amends

 

40

 

or terminates the Exchange Offer, Hudbay will promptly file a post-effective amendment to the registration statement of which this short form prospectus forms a part. Without limiting the manner in which Hudbay may choose to make public the announcement of any delay, extension, amendment or termination of the Exchange Offer, Hudbay shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency.

 

Interest on the Exchange Notes

 

The Exchange Notes will accrue interest at the rate of 9.500% per annum payable semi-annually in arrears in cash. The Exchange Notes will accrue interest from and including the last interest payment date on which interest was paid on the August 2014 Notes surrendered in exchange therefor or, if no interest has been paid on such August 2014 Notes, from the issue date of such August 2014 Notes; provided that if August 2014 Notes are surrendered for exchange on or after a record date for an interest payment date that will occur on or after the date of such exchange and as to which interest will be paid, interest on the Exchange Notes received in exchange therefor will accrue from the date of such interest payment date. Interest on the Exchange Notes is payable on April 1 and October 1, beginning on October 1, 2015.  The interest payment on October 1, 2015 will include accrued interest from April 1, 2015.  No additional interest will be paid on August 2014 Notes tendered and accepted for exchange.

 

Absence of Dissenter’s Rights of Appraisal

 

Holders of the August 2014 Notes do not have any dissenter’s rights of appraisal in connection with the Exchange Offer.

 

Procedures for Tendering

 

To tender in the Exchange Offer, a holder must complete, sign and date the applicable letter of transmittal or a facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal and mail, or otherwise deliver, such letter of transmittal or such facsimile, together with any other required documents, to the exchange agent prior to the Expiration Date. In addition, either:

 

·                                          a timely confirmation of a book-entry transfer of such August 2014 Notes, if such procedure is available, into the exchange agent’s account at the book-entry transfer facility, the Depository Trust Company, pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the Expiration Date with the applicable letter of transmittal; or

 

·                                          the holder must comply with the guaranteed delivery procedures described below.

 

The method of delivery of August 2014 Notes, letter of transmittal and all other required documents is at the election and risk of the holders. If such delivery is by mail, it is recommended that registered mail, properly insured, with return receipt requested, be used. In all cases, sufficient time should be allowed to assure timely delivery. No August 2014 Notes, letters of transmittal or other required documents should be sent to Hudbay. Delivery of all August 2014 Notes, if applicable, letters of transmittal and other documents must be made to the exchange agent at its address set forth in the letter of transmittal. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such holders.

 

The tender by a holder of August 2014 Notes will constitute an agreement between such holder and Hudbay in accordance with the terms and subject to the conditions set forth herein and in the applicable letter of transmittal. Any beneficial owner whose August 2014 Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on its behalf.

 

Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by any member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or correspondent in the United States or an “eligible guarantor” institution within the meaning of Rule 17Ad-15 under the Exchange Act or an eligible institution unless the August 2014 Notes tendered pursuant thereto are tendered (1) by a registered holder of August 2014 Notes who

 

41

 

has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal, or (2) for the account of an eligible institution.

 

If a letter of transmittal is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing and, unless waived by Hudbay, evidence satisfactory to Hudbay of their authority to so act must be submitted with such letter of transmittal.

 

All questions as to the validity, form, eligibility, time of receipt and withdrawal of the tendered August 2014 Notes will be determined by Hudbay in its sole discretion, which determination will be final and binding. Hudbay reserves the absolute right to reject any and all August 2014 Notes not validly tendered or exchange any August 2014 Notes if such exchange, in the opinion of counsel for Hudbay, be unlawful. Hudbay also reserves the absolute right to waive any irregularities or conditions of tender as to particular August 2014 Notes. Hudbay will not waive any condition of the Exchange Offer with respect to an individual holder unless Hudbay waives that condition for all holders. Hudbay’s interpretation of the terms and conditions of the Exchange Offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of August 2014 Notes must be cured within such time as Hudbay shall determine. Neither Hudbay, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of August 2014 Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of August 2014 Notes will not be, or be deemed to have been, made until all irregularities have been cured or waived. Any August 2014 Note received by the exchange agent that is not validly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the exchange agent, unless otherwise provided in the letter of transmittal, promptly following the Expiration Date.

 

In addition, Hudbay reserves the right, in its sole discretion, subject to the provisions of the Indenture pursuant to which the August 2014 Notes were issued:

 

·                                          to purchase or make offers for any August 2014 Notes that remain outstanding subsequent to the Expiration Date or, as described under “— Conditions”, to terminate the Exchange Offer;

 

·                                          to redeem August 2014 Notes as a whole, or in part, at any time and from time to time; and

 

·                                          to the extent permitted under applicable law, to purchase August 2014 Notes in the open market, in privately negotiated transactions or otherwise.

 

The terms of any such purchases or offers could differ from the terms of the Exchange Offer.

 

Each broker-dealer that receives Exchange Notes for its own account in exchange for August 2014 Notes where such August 2014 Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act and that it has not entered into any arrangement or understanding with Hudbay, or an affiliate of Hudbay, to distribute the Exchange Notes in connection with any resale of such Exchange Notes.

 

Acceptance of August 2014 Notes for Exchange; Delivery of Exchange Notes

 

Upon satisfaction or waiver of all of the conditions to the Exchange Offer, all August 2014 Notes validly tendered will be accepted promptly after the Expiration Date and the Exchange Notes will be issued promptly after acceptance of the August 2014 Notes. See “— Conditions”. For purposes of the Exchange Offer, August 2014 Notes shall be deemed to have been accepted as validly tendered for exchange when, as and if Hudbay has given oral (promptly confirmed in writing) or written notice thereof to the exchange agent.

 

For each August 2014 Note accepted for exchange, the holder of such August 2014 Note will receive an Exchange Note having a principal amount equal to that of the surrendered August 2014 Note.

 

In all cases, issuance of Exchange Notes for August 2014 Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the exchange agent of:

 

42