Relief from continuous disclosure requirements and certification requirements given to wholly-owned subsidiary of a reporting issuer - subsidiary will become a reporting issuer through filing a short form prospectus in Ontario for a south-bound MJDS offering of exchange notes fully and unconditionally guaranteed by parent -- business of the reporting issuer is primarily business of the subsidiary -- relief subject to a number of conditions, including parent must provide comparative selected annual and interim financial information regarding subsidiary -- relief appropriate in light of applicants' specific circumstances
National Instrument 51-102 Continuous Disclosure Obligations
Multilateral Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings
IN THE MATTER OF
NATIONAL INSTRUMENT 51-102
CONTINUOUS DISCLOSURE OBLIGATIONS
IN THE MATTER OF MULTILATERAL INSTRUMENT 52-109
CERTIFICATION OF DISCLOSURE IN
ISSUER'S ANNUAL AND INTERIM FILINGS
IN THE MATTER OF
HUDSON BAY MINING AND SMELTING CO., LIMITED
AND HUDBAY MINERALS INC.
(Section 13.1 of NI 51-102 and Section 4.5 of MI 52-109)
WHEREAS the Ontario Securities Commission (the "Commission") has received an application (the "Application") from Hudson Bay Mining and Smelting Co., Limited ("HBMS") and HudBay Minerals Inc. ("HudBay") (together, the "Applicants") for HBMS to be exempt from:
(a) the requirements in Part 4 (Financial Statements), Part 5 (Management's Discussion & Analysis), Part 6 (Annual Information Form), Part 7 (Material Change Reports), Part 8 (Business Acquisition Report), Part 9 (Proxy Solicitation and Information Circulars), section 11.1, and section 12.2 of National Instrument 51-102 -- Continuous Disclosure Obligations (collectively, the "Continuous Disclosure Requirements"), subject to certain conditions; and
(b) the requirements contained in Part 2 (Certification of Annual Filings) and Part 3 (Certification of Interim Filings) in Multilateral Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings (collectively, the "Certification Requirements"), subject to certain conditions.
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicants having represented to the Commission and the Director that:
1. HudBay is the continuing Ontario corporation resulting from the amalgamation of Pan American Resources Inc. and Marvas Developments Ltd. on January 16, 1996 and the reverse takeover of OntZinc Corporation on March 12, 2002.
2. HudBay is a reporting issuer in each of the Provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Québec and Saskatchewan and, to the best of its knowledge, is not in default of its requirements under the Securities Legislation (as the term is defined in National Instrument 14-101 Definitions) of those jurisdictions.
3. The authorized capital of HudBay consists of an unlimited number of preference shares and an unlimited number of common shares, of which no preference shares and 80,714,692 common shares were issued and outstanding as of March 29, 2005.
4. The common shares of HudBay are listed and posted for trading on the Toronto Stock Exchange.
5. On December 21, 2004, HudBay Mining and Smelting Inc., a wholly-owned subsidiary of HudBay, acquired all of the outstanding shares of 152640 Canada Inc. ("152640") from Anglo American International, S.A. for total consideration valued at approximately $316 million (the "Acquisition"). At the time of the Acquisition, 152640 held all of the outstanding shares of the Hudson Bay Mining and Smelting Co., Limited ("Pre-amalgamation HBMS").
6. To finance the Acquisition, on December 21, 2004, HudBay Mining and Smelting Inc. issued and sold 9 5/8% senior secured notes (the "original notes") due January 15, 2012 in an aggregate principal amount of US$175 million pursuant to available exemptions from prospectus and registration requirements.
7. Following the Acquisition, on December 21, 2004, Pre-amalgamation HBMS amalgamated with HudBay Mining and Smelting Inc. and 152640 under the Canada Business Corporations Act (the "Amalgamation"). HBMS is the continuing company from this Amalgamation and is responsible for the debt obligations represented by the Notes.
8. As a result of the Acquisition and the subsequent Amalgamation, HBMS is a wholly-owned subsidiary of HudBay.
9. HBMS is authorized to issue an unlimited number of common shares, of which 132,666,215 common shares are issued, outstanding and held by HudBay.
10. HBMS is engaged in the mining and processing of ore containing copper, zinc, gold and silver, principally in the Provinces of Manitoba and Saskatchewan, and holds approximately 200,000 hectares of exploration properties in the vicinity of its mines and processing plants.
11. In addition to the mines and facilities operated by HBMS, HudBay also holds interests in two development properties and two exploration projects. The business of HudBay is principally the business of HBMS. Moreover, HBMS is responsible for all of the revenue of HudBay, other than interest revenue.
12. Each of the officers and/or directors of HBMS is also an officer and/or director of HudBay.
13. HudBay and HBMS propose to file a preliminary prospectus (the "Preliminary Prospectus") and a final prospectus (the "Final Prospectus") pursuant to National Instrument 44-101, with the objective of registering in the United States up to US$175 million aggregate principal amount of 9 5/8% senior secured exchange notes due January 15, 2012 (the "exchange notes") (together, the exchange notes and the original notes referred to as the "Notes"), as required under the registration rights agreement between HBMS and Credit Suisse First Boston LLC dated December 21, 2004. Exchange notes will be issued in exchange for the original notes and will have substantially similar terms as the original notes, except that the exchange notes will not be subject to the same transfer restrictions as the original notes and will not be entitled to additional interest in the event of a registration default. The Preliminary Prospectus will be filed in Canada only in the Province of Ontario and will also be filed in the United States under the multi-jurisdictional disclosure system.
14. The Notes are not convertible into other securities of HBMS, HudBay or any other entity.
15. HudBay has fully and unconditionally guaranteed the Notes as to payment of principal, interest and all other amounts due thereunder.
16. In connection with the registration of the Notes in the United States:
(a) the Preliminary Prospectus and Final Prospectus will include, whether incorporated by reference or otherwise, all material disclosure required by the Securities Legislation concerning HudBay and HBMS;
(b) the Preliminary Prospectus and Final Prospectus will incorporate by reference HudBay's current and future public disclosure documents as required by Item 12 of Form 44-101F3 and will state that holders of Notes will not receive separate continuous disclosure information regarding HBMS;
(c) HudBay and HBMS propose to include the following financial statement and related disclosure in the Preliminary Prospectus and the Final Prospectus:
A. in respect of HudBay:
i. an annual information form for the financial year ended December 31, 2004 (the "HudBay AIF"), incorporated by reference,
ii. audited consolidated financial statements of HudBay as at December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002, incorporated by reference, including, in a note thereto, a U.S. GAAP reconciliation pursuant to Item 18 of Form 20-F of the United States Securities and Exchange Commission ("Form 20-F"),
iii. MD&A for the annual comparative financial statements referred to in paragraph ii above, supplemented to include selected results for HBMS's years ended December 31, 2004 and 2003 with an accompanying discussion of those results, incorporated by reference,
iv. a pro forma income statement of HudBay to give effect to the Acquisition as if it had taken place at the beginning of fiscal 2004 including an Item 17 U.S. GAAP reconciliation pursuant to Form 20-F in a note thereto, and
v. pro forma earnings per share based on the pro forma income statement referred to in iv above.
B. in respect of 152640 , the parent of Pre-amalgamation HBMS:
i. audited consolidated financial statements of 152640 as at December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001,
ii. unaudited statements of income, retained earnings and cash flows for the most recently completed interim period of 152640 that ended before the date of the Acquisition and the comparable period in the preceding financial year, being September 30, 2004 and 2003,
iii. an Item 18 U.S. GAAP reconciliation pursuant to Item 18 of Form 20-F in respect of the financial statements referred to in paragraphs i and ii in a note thereto, and
iv. MD&A for the financial statements referred to in paragraphs i and ii above.
(c) HBMS will sign the Preliminary Prospectus and the Final Prospectus as issuer of the Notes and HudBay will sign the Preliminary Prospectus and the Final Prospectus as credit supporter in respect of the Notes; and
(d) HudBay will continue to file with the Commission all documents required to be filed by it under the Securities Legislation.
17. The Notes will not be offered or sold, directly or indirectly, in Canada or to any resident thereof, except in accordance with applicable exemptions from prospectus and registration requirements. The Preliminary Prospectus and Final Prospectus will contain disclosure that the Notes are not being offered or sold in Canada under the Preliminary Prospectus and Final Prospectus.
18. HBMS will become a reporting issuer in Ontario upon filing the Final Prospectus and obtaining a receipt for it under the Securities Act (Ontario).
AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to grant the exemptive relief requested;
THE DECISION of the Director under section 13.1 of NI 51-102 and section 4.5 of MI 52-109 is that the Continuous Disclosure Requirements and the Certification Requirements shall not apply to HBMS, provided that:
1. HudBay directly or indirectly beneficially owns all voting securities of HBMS;
2. either (a) the audited financial statements of HudBay filed in Ontario include as a note thereto a summary of annual comparative selected financial information for HBMS; or (b) HudBay or HBMS file in Ontario, in electronic format, annual comparative selected financial information for HBMS derived from the audited annual financial statements of HudBay from its most recently completed financial year and the financial year immediately preceding such financial year, accompanied by a selected procedures report of the auditors of the respective companies;
3. either (a) the unaudited interim financial statements of HudBay filed in Ontario include as a note thereto a summary of interim comparative selected financial information for HBMS, or (ii) HudBay or HBMS file in Ontario, in electronic format, interim comparative selected financial information for HBMS derived from the unaudited interim financial statements of HudBay for its most recently completed interim period and the comparative interim period for the previous financial year;
4. HudBay remains a reporting issuer in Ontario and complies with all of its reporting issuer obligations;
5. HudBay continues to fully and unconditionally guarantee payment of the principal, interest and other amounts due in respect of the Notes;
6. HBMS files copies of all documents that HudBay is required to file pursuant to the Continuous Disclosure Requirements on HBMS's SEDAR profile at the same time that such documents are required to be filed by HudBay on its own SEDAR profile;
7. HBMS complies with Part 7 (Material Change Reports) of NI 51-102 in respect of material changes in the affairs of HBMS that are not also material changes in the affairs of HudBay;
8. HBMS complies with section 12.2 of NI 51-102 in respect of contracts of HBMS that would be material to HBMS but not material to HudBay;
9. HBMS complies with Part 8 (Business Acquisition Report) in respect of business acquisitions that would be significant acquisitions to HBMS but not to HudBay;
10. HBMS has not issued to the public any securities, other than debt securities that rank subordinate in priority to the Notes and are guaranteed by HudBay as to payment of principal, interest and all other amounts due thereunder; and
11. HudBay files copies of its own Annual Certificates and Interim Certificates on HBMS's SEDAR profile at the same time as those documents are required to be filed by HudBay on its own SEDAR profile.
April 19, 2005.