(Reuters) - Private equity firm Waterton Global Resource Management has filed a lawsuit against Canadian miner Hudbay Minerals Inc in a bid to stop it from soliciting proxies for its annual shareholder meeting in May.
The lawsuit, filed at the Ontario Superior Court on Monday, escalates tensions between Toronto-based Hudbay and Waterton, which has blamed Hudbay’s management for “abysmal” shareholder returns and “chronic underperformance,” and has proposed five new independent board members, two of whom Hudbay has accepted.
Hudbay disclosed Waterton’s legal action in a regulatory filing on Tuesday.
Waterton, which says it owns 12 percent of Hudbay, alleges in court documents there are misrepresentations in Hudbay’s management circular for an upcoming May 7 annual shareholder meeting.
“Hudbay believes the litigation is frivolous and will vigorously defend itself,” the miner said, adding it will seek to recover its legal costs from Waterton.
Hudbay shares were up 3.1 percent at C$10.08 on the Toronto Stock Exchange, erasing much of a 4.1 percent loss from Monday. The benchmark S&P/TSX Global Gold Index retreated 2.1 percent on Tuesday.
Much of Waterton’s ire against Hudbay surrounds alleged talks the company had to acquire Chile’s Mantos Copper for about $780 million last year, which Bloomberg reported in October.
Hudbay never confirmed the talks and appeared not to be advancing a deal. But its information circular makes “material omissions” relating to its pursuit of Mantos, Waterton said in the court documents.
Waterton alleges this information would “materially affect (shareholders’) votes at the meeting as it goes directly to the judgment of the board they’re being asked to vote on.”
Waterton took issue with several of Hudbay’s claims about the private equity firm, including that Waterton made 60 percent of its share purchases after driving the miner’s share price down, as well as regarding the track record of several of its investments and comments about one of its board nominees.
In a separate letter to investors on Monday, Waterton also said Hudbay’s acceptance of two of its proposed board members to an expanded 11-member board “does not constitute the level of change that is desperately needed,” and urged shareholders to vote for its five board nominees.
Reporting by Nichola Saminather in Toronto and Shradha Singh in Bengaluru; Editing by Paul Simao and Bernadette Baum