HudBay Minerals Completes Precious Metals Stream Transaction

HudBay Minerals Inc. (Hudbay) (TSX:HBM)(NYSE:HBM) approved a US$1.5 billion investment to fund the development and construction of its Constancia copper mine in Peru on August 8, 2012. The $1.5 billion investment included the completion on September 13, 2012, of an offering of US$500 million aggregate principal amount of 9.50 per cent senior unsecured notes due 2020; and the completion on September 28, 2012, of a precious metals stream transaction with Silver Wheaton Corp. (TSX:SLW)(NYSE:SLW) (Silver Wheaton). At closing, Hudbay received an upfront deposit payment of US$500 million and will receive a further US$250 million in deposit payments in two equal instalments once US$500 million and US$1.0 billion, respectively, in capital expenditures have been incurred at its Constancia project. In connection with the granting of certain security to Silver Wheaton at closing, Hudbay also entered into an amendment to its existing US$300 million credit facility.

The US$750 million of deposit payments are for (i) 100 per cent of payable gold and silver from Hudbay's 777 mine until the later of December 31, 2016, and satisfaction of a completion test at Constancia, and thereafter 50 per cent of payable gold and 100 per cent of payable silver, and (ii) 100 per cent of payable silver from the Constancia project. In addition to the deposit payments, for gold and silver delivered, the company will receive cash payments equal to the lesser of (i) the market price and (ii) US$400 per ounce (for gold) and US$5.90 per ounce (for silver), subject to 1 per cent annual escalation after three years. The stream transaction does not include gold production at Constancia, precious metals production from Hudbay's Lalor project or Hudbay's land package in Peru outside of the Constancia and Pampacancha deposits or any other metals or minerals, including copper or zinc, from any of Hudbay's properties.

Hudbay was represented in-house by Patrick Donnelly, Maria Virginia Anzola and Mark Haber, and assisted by Goodmans LLP with a team that included Jonathan Lampe, Kari MacKay and Leah Ramkaran (corporate/mining) and Mark Surchin and Dan Dedic (finance); and by Thorsteinssons LLP on tax matters with a team that included Michael Colborne and Michael McLaren; with assistance from local counsel in Manitoba (Jeff Kowall, Elmer Gomes and Jennifer McRae of Thompson Dorfman Sweatman LLP); Saskatchewan (Penny Yeager and Ryan Hallman of MacPherson Leslie & Tyerman LLP); British Virgin Islands (Cora Miller of Conyers Dill & Pearman); and Peru (Nino Coppero of Hudbay and Jorge Trelles, Luis Arce and Luis Enrique Palacios of Rodrigo, Elisa & Medrano).

Silver Wheaton was represented by Cassels Brock & Blackwell LLP with a team that included Mark Bennett, France Tenaille, Erik Goldsilver and Nia Karabatsos (corporate/mining); Charles Newman, David Budd and Jennifer Wasylyk (finance); with assistance from local counsel in Saskatchewan (Michael Milani of McDougall Gauley LLP); Manitoba (Bruce Taylor and Maria Reimer of Aikins, MacAulay & Thorvaldson LLP); British Virgin Islands and Cayman Islands (John Gosling and Ramesh Maharaj of Walkers); and Peru (Cecilia Gonzales of Estudio Grau).

With respect to the amendment to the credit facility, Hudbay was represented by Fasken Martineau DuMoulin LLP with a team that included John Torrey and David Ferris (finance) and the Bank of Nova Scotia as administration agent was represented by Davies Ward Phillips & Vineberg LLP with a team that included Derek Vesey and Kevin Greenspoon (finance) and British Virgin Islands counsel Cora Miller of Conyers Dill & Pearman.

[See also “Hudbay Completes Offering of Senior Secured Notes,” November/December 2012, page 36]

Lawyer(s)

Dan Dedic Charles Newman Michael W. Milani Michael W. Colborne Maria C. Reimer Mark Surchin Leah Boyd Derek R.G. Vesey David H. Ferris G. Bruce Taylor Jeffrey A. Kowall Erik Goldsilver France M. Tenaille Mark T. Bennett David Budd Kari MacKay Michael H. McLaren Kevin Greenspoon Jonathan Lampe Ryan Hallman John W. Torrey Penny L. Yeager Elmer J. Gomes

Firm(s)

Goodmans LLP Thompson Dorfman Sweatman LLP MLT Aikins LLP Conyers Dill & Pearman Blake, Cassels & Graydon LLP McDougall Gauley LLP MLT Aikins LLP Fasken Martineau DuMoulin LLP Davies Ward Phillips & Vineberg LLP Thorsteinssons LLP