TORONTO, ON--(Marketwired - March 30, 2017) - Hudbay Minerals Inc. ("Hudbay" or the "company") (TSX: HBM) (NYSE: HBM) is pleased to announce an optimized mine plan for its 100%-owned Lalor mine in Manitoba, Canada as well as a feasibility study for its Rosemont project in Arizona, United States. The company has also provided its annual mineral reserve and resource update for all of its properties. All amounts are in U.S. dollars, unless otherwise noted.
Lalor highlights:
- Updated Lalor mine plan incorporates a throughput rate of 4,500 tonnes per day at the Stall concentrator, an increase from the current 3,000 tonnes per day
- Planned Lalor zinc production increases to 90 thousand tonnes contained in concentrate in 2017, from 71 thousand tonnes in 2016
- Feasibility work is ongoing for the Lalor gold zone and copper-gold zone targeting an additional 1,500 tonnes per day through the New Britannia mill to fully utilize Lalor's 6,000 tonnes per day shaft capacity
Rosemont highlights:
- Rosemont is expected to have a 19-year mine life and demonstrates robust economics with a projected 15.5% after-tax project IRR on the estimated $1.9 billion project capital cost (100% basis) at a copper price of $3.00 per pound
- Rosemont is expected to have average annual production over the first 10 years of 127 thousand metric tonnes of copper at an average annual cash cost of $1.14 per pound of copper and sustaining cash cost of $1.59 per pound of copper1
- Development of Rosemont is conditional upon receipt of final permits and the approval of Hudbay's Board of Directors
"Our enhancements to the Lalor mine plan offer low-cost, near term zinc production growth with potential future gold production upside, and positions our Manitoba business unit to be a strong contributor to Hudbay's results for many years to come," said Alan Hair, president and chief executive officer. "Our Peru and Manitoba operations are expected to generate strong free cash flow that we can reinvest in the Rosemont project in order to grow the long-term copper production profile of the company. The Rosemont project is expected to be one of the first new copper mines to be built when copper prices improve and, once approved, has the capacity to generate strong returns for Hudbay shareholders. "
1 Cash cost and sustaining cash cost, net of by-product credits per pound of copper are not recognized under IFRS. Rosemont's by-product credits are calculated using $11.00 per pound molybdenum and precious metal stream price of $3.90 per ounce silver, subject to 1% annual inflation adjustment after three years. Cash cost include the impact of capitalized stripping. For a detailed description of each of these non-IFRS financial performance measures, please see the discussion under "Non-IFRS Financial Performance Measures" on page 8 of this news release.
National Instrument 43-101 ("NI 43-101") technical reports in respect of the Lalor mine ("Lalor Technical Report") and the Rosemont project ("Rosemont Technical Report") have been filed on SEDAR at www.sedar.com and will be filed on EDGAR at www.sec.gov.
Lalor Mine Plan - Stall Base Metal Mill
Hudbay's updated mine plan for Lalor enables cost-effective production growth by optimizing the use of existing infrastructure. When full development of Lalor was approved in 2010, the original plan was to build a new concentrator at the mine site to process all of the material from Lalor, while utilizing Hudbay's nearby Stall concentrator to process base metal zone ore until the new concentrator was completed. Since then, however, the performance of the Stall concentrator has exceeded expectations and, with a modest capital investment, the optimized throughput rate for the Stall mill is expected to be 4,500 tonnes per day on a sustainable basis starting in the third quarter of 2018. In addition, the 2015 acquisition of the New Britannia gold mill in Snow Lake is expected to provide a low-cost solution to process the gold zone and copper-gold zone ore at optimal gold recovery rates, with the potential to augment the base metal production from the Stall mill and utilize the full 6,000 tonnes per day capacity of the Lalor mine shaft.
The updated Lalor mine plan incorporates the increased base metal throughput and includes the processing of the base metal zone, the copper-gold zone and portions of the gold zone when in contact with base metal ore at the Stall base metal mill. Pending the completion of engineering work on the New Britannia mill, the updated Lalor mine plan assumes that copper-gold zone reserves will be mined and processed at the Stall base metal mill at an average rate of 130,000 tonnes per annum between 2020 and 2023. An updated mine plan incorporating the New Britannia mill is expected to enable the copper-gold zone and gold zone material to be processed at New Britannia, given the significantly higher potential gold recoveries at New Britannia. The redirection of copper-gold zone material to New Britannia would also permit accelerated processing of zinc-rich ore and higher zinc production through Stall during those years.
A summary of the updated Lalor mine plan for the Stall mill is shown below.
| Lalor Mine Plan Summary - Stall Base Metal Mill | LOM1 Total / Average | |||
| Production | ||||
| Total ore mined | million tonnes | 14.2 | ||
| Peak daily throughput | tonnes per day | 4,500 | ||
| Mine life | years | 10.5 | ||
| Zinc grade | % Zn | 5.12% | ||
| Copper grade | % Cu | 0.69% | ||
| Gold grade | g/t Au | 2.61 | ||
| Silver grade | g/t Ag | 26.50 | ||
| Zinc recovery | % | 91.8% | ||
| Copper recovery | % | 86.8% | ||
| Gold recovery | % | 58.2% | ||
| Silver recovery | % | 54.0% | ||
| Average annual zinc production2 | thousand tonnes | 63.8 | ||
| Average annual copper production2 | thousand tonnes | 8.1 | ||
| Average annual gold production2 | thousand ounces | 66.1 | ||
| Average annual silver production2 | thousand ounces | 623.3 | ||
| Mining unit cost3 | C$/tonne mined | C$78.32 | ||
| Milling unit cost3 | C$/tonne milled | C$21.51 | ||
| Cash Cost4 | ||||
| Cash cost | $/lb Zn | $0.37 | ||
| Sustaining cash cost | $/lb Zn | $0.50 | ||
| Capital Expenditures | ||||
| Total project capital (2017 and 2018)5 | C$ million | C$117 | ||
| Total sustaining capital | C$ million | C$220 | ||
1 Life-of-mine ("LOM").
2 Production refers to contained metal in concentrate.
3 G&A costs related to shared services incurred in Flin Flon and allocated between 777, Reed and Lalor mines are not included in unit costs.
4 Cash cost and sustaining cash cost are reported on per pound of zinc contained in concentrate and are net of by-product credits, which are calculated using the following assumptions: copper price per pound - $2.60 in 2017, $2.75 in 2018, $3.00 in 2019 to 2020 and long-term; gold price per ounce - $1,300 in 2017 to 2020 and $1,260 long-term; silver price per ounce - $18.00 in 2017 to 2020 and long-term; CAD/USD exchange rate - 1.35 in 2017, 1.25 in 2018, 1.20 in 2019, 1.15 in 2020 and 1.10 long-term. Cash cost includes on-site and off-site costs, and sustaining cash cost includes the addition of royalties and sustaining capital.
5 Includes capital spending for the paste backfill plant, $40 million of which was included in Hudbay's previously disclosed 2017 annual growth capex guidance.
Construction of a paste backfill plant is expected to be completed in the first quarter of 2018 for a total estimated cost of $50 million (C$68 million), of which $40 million was included in Hudbay's 2017 growth capital guidance as announced on January 17, 2017. The paste backfill plant is intended to increase mining rates and maximize ore recovery, while reducing capitalized development costs and better maintaining the integrity of ground conditions. Capital spending of $36 million (C$49 million) is planned for refurbishments to the Stall concentrator and underground ore handling to enable sustainable throughput rates of 4,500 tonnes per day, of which $15 million will be spent in 2017 over and above initial 2017 guidance estimates.
Current mineral reserves for Lalor as of January 1, 2017 are summarized below. Reserves include the base metal zone, the copper-gold zone and portions of the gold zone in contact with the base metal ore, which represent approximately 80%, 4% and 16%, respectively, of the total reserve tonnage.
| Lalor Mineral Reserve Estimates1 |
Tonnes | Zn Grade (%) | Au Grade (g/t) | Cu Grade (%) | Ag Grade (g/t) | |||||
| Proven | 4,383,000 | 6.76 | 2.37 | 0.76 | 27.33 | |||||
| Probable | 9,849,000 | 4.39 | 2.72 | 0.65 | 26.12 | |||||
| Total proven and probable | 14,232,000 | 5.12 | 2.61 | 0.69 | 26.50 |
Note: totals may not add up correctly due to rounding.
1 Mineral reserves calculated using metal prices of $1.07 per pound zinc (includes premium), $1,260 per ounce gold, $3.00 per pound copper and $18.00 per ounce of silver, and using a CAD/USD exchange rate of 1.10.
Current mineral resources, exclusive of reserves, for the Lalor base metal zone as of September 30, 2016 are summarized below.
| Lalor Base Metal Zone Mineral Resource Estimates1 |
Tonnes | Zn Grade (%) | Au Grade (g/t) | Cu Grade (%) | Ag Grade (g/t) | |||||
| Indicated | 2,100,000 | 5.34 | 1.69 | 0.49 | 28.10 | |||||
| Inferred | 545,300 | 8.15 | 1.45 | 0.32 | 22.28 |
Note: totals may not add up correctly due to rounding.
1 Mineral resources calculated using metal prices of $1.19 per pound zinc (includes premium), $1,300 per ounce gold, $18.00 per ounce of silver and $2.67 per pound copper.
Lalor Mine Plan - New Britannia Gold Mill
Hudbay's current expectation is that a portion of the material mined from the gold zone and copper-gold zone at Lalor will be processed through the New Britannia mill at a rate of up to 1,500 tonnes per day starting in 2019. When combined with processing capacity at the Stall base metal mill, this is expected to achieve an aggregate throughput rate of up to 6,000 tonnes per day. The New Britannia mill is expected to achieve significantly higher gold recoveries than the Stall mill, and Hudbay is examining the potential to install a copper pre-float facility in the mill to maximize copper recoveries. Work on gold zone production and the New Britannia refurbishment is ongoing, and the focus of the remaining engineering work is on finalizing the New Britannia flowsheet and optimizing the utilization of the existing tailings management facilities.
Current mineral resources, exclusive of reserves, for the Lalor gold zone and copper-gold zone as of September 30, 2016 are summarized below.
| Lalor Gold and Copper-Gold Mineral Resource Estimates1 |
Tonnes | Zn Grade (%) | Au Grade (g/t) | Cu Grade (%) | Ag Grade (g/t) | |||||
| Indicated | 1,750,000 | 0.40 | 5.18 | 0.34 | 30.61 | |||||
| Inferred | 4,124,000 | 0.31 | 5.02 | 0.90 | 27.61 |
Note: totals may not add up correctly due to rounding.
1 Mineral resources calculated using metal prices of $1.19 per pound zinc (includes premium), $1,300 per ounce gold, $18.00 per ounce of silver and $2.67 per pound copper.
Rosemont Feasibility Study
Since the acquisition of the Rosemont project, Hudbay has completed an extensive work program, including in-fill drilling, detailed metallurgical test work, and a bottom-up approach to cost estimation, along with other feasibility-level work, as summarized in the Rosemont Technical Report.
The Rosemont project will be a traditional open pit, shovel and truck operation with an expected 19-year mine life. Rosemont is expected to generate an after-tax, unlevered internal rate of return of 15.5%, using a long-term copper price of $3.00 per pound of copper.
A summary of the Rosemont mine plan is shown below. References to "tons" refer to short tons, not metric tonnes, except where noted.
| Rosemont Feasibility Study Summary | Years 1-10 Average |
LOM Average1 |
LOM Total1 |
|||||
| Production | ||||||||
| Ore mined | million tons | 37 | 31 | 592 | ||||
| Waste mined2 | million tons | 95 | 61 | 1,155 | ||||
| Strip ratio2 | waste:ore | 2.5 | 2.0 | 2.0 | ||||
| Ore milled | million tons | 32 | 31 | 592 | ||||
| Copper grade milled3 | % TCu | 0.53% | 0.45% | 0.45% | ||||
| Copper recovery | % | 82% | 80% | 80% | ||||
| Copper production4 | thousand tons | 140 | 112 | 2,129 | ||||
| Copper production4 | thousand metric tonnes | 127 | 102 | 1,932 | ||||
| Total on-site unit costs5 | $/ton milled | $8.01 | $7.92 | $7.92 | ||||
| Cash Cost6 | ||||||||
| Cash cost | $/lb Cu | $1.14 | $1.29 | $1.29 | ||||
| Sustaining cash cost | $/lb Cu | $1.59 | $1.65 | $1.65 | ||||
| Capital Expenditures | ||||||||
| Development capital | $ million | - | - | $1,921 | ||||
| Sustaining capital | $ million | $29 | $20 | $387 | ||||
| Capitalized stripping | $ million | $71 | $41 | $781 | ||||
| Total sustaining capital (including capitalized stripping) | $ million | $100 | $61 | $1,168 | ||||
| Economics - Project Basis (100%)7 | ||||||||
| Net present value at 8% | $ million | - | - | $769 | ||||
| Net present value at 10% | $ million | - | - | $496 | ||||
| After-tax internal rate of return | % | - | - | 15.5% | ||||
| Payback period | years | - | - | 5.2 | ||||
| Economics - Hudbay Basis (80%)7 | ||||||||
| Net present value at 8% | $ million | - | - | $719 | ||||
| Net present value at 10% | $ million | - | - | $499 | ||||
| After-tax internal rate of return | % | - | - | 17.7% | ||||
| Payback period | years | - | - | 4.9 | ||||
1 Life-of-mine ("LOM") average and total calculated over years 1 to 19.
2 Waste and strip ratio excludes pre-stripping tons.
3 Production refers to contained metal in concentrate.
4 Total copper grade includes both the sulfide and acid-soluble copper in the ore.
5 On-site unit costs include mining, milling, G&A, reclamation and severance tax costs, and are after deducting capitalized stripping.
6 Cash cost and sustaining cash cost are reported net of by-product credits, which are calculated using $11.00 per pound molybdenum and precious metal streaming prices of $3.90 per ounce silver and $450 per ounce gold, and include the impact of capitalized stripping. Cash cost includes on-site and off-site costs, and sustaining cash cost includes the addition of royalties and sustaining capital.
7 Economic analysis assumes $3.00 per pound copper, $11.00 per pound molybdenum, and precious metal streaming price of $3.90 per ounce silver, subject to 1% annual inflation adjustment after three years. Hudbay basis adjusts for joint venture partner expected payments to earn into their minority interest and outstanding joint venture loan owed to Hudbay.
The Rosemont project capital cost estimate of $1,921 million (100% basis) was developed based on realistic assumptions and informed by Hudbay's recent experience in successfully building and ramping up the Constancia copper mine in Peru. The cost estimate is based on mid-cycle cost expectations, and does not factor in potential savings that could be available if construction begins during the current period of muted new mine construction activity.
Total project development capital is expected to be spent over an approximate three year construction period and will be offset by existing funding sources. The precious metals stream agreement with Silver Wheaton (Caymans) Ltd. provides for a payment of a $230 million deposit upon achievement of certain milestones. Up to $200 million in mobile equipment included in the Rosemont project cost estimate is expected to be financed using conventional equipment financing. In addition, the joint venture agreement with a Korean consortium contemplates $106 million in cash payments from the joint venture partners in order to complete their earn-in for 20% of the project and contributions of 20% of the remaining funding required net of the precious metals stream, equipment financing and joint venture earn-in proceeds. Combined, these funding sources are expected to provide approximately $800 million in project-level funding. Hudbay expects that a significant portion of the remaining required funding can be met through free cash flow generation from the company's operations in Peru and Manitoba.
The permitting process for Rosemont is well advanced and continues to progress. The key federal permits outstanding are the Final Record of Decision from the U.S. Forest Service and the Section 404 Water Permit from the U.S. Army Corps of Engineers. These federal permits are currently in the final stages of the review process. All State of Arizona permits and approvals have been issued for Rosemont and remain in force and are current. The project design included in the Rosemont Technical Report is specifically intended to meet the impacts analyzed and commitments outlined in the federal and state permits.
Current mineral reserves and resources for Rosemont as of March 30, 2017 are summarized below.
| Rosemont Project Mineral Reserve and Resource Estimates |
Short Tons | Cu Grade1 (%) | Mo Grade (%) | Ag Grade (oz/T) | ||||
| Mineral Reserves2 | ||||||||
| Proven | 469,708,117 | 0.48% | 0.012% | 0.14 | ||||
| Probable | 122,324,813 | 0.31% | 0.010% | 0.09 | ||||
| Total proven and probable | 592,032,930 | 0.45% | 0.012% | 0.13 | ||||
| Mineral Resources3 | ||||||||
| Measured | 177,700,000 | 0.38% | 0.01% | 0.079 | ||||
| Indicated | 413,200,000 | 0.25% | 0.01% | 0.076 | ||||
| Total measured and indicated | 591,000,000 | 0.29% | 0.01% | 0.077 | ||||
| Inferred | 68,700,000 | 0.30% | 0.01% | 0.046 |
Note: totals may not add up correctly due to rounding.
1 Total copper grade includes both the sulfide and acid-soluble copper in the ore.
2 Mineral reserves calculated using metal prices of $3.15 per pound copper, $11.00 per pound molybdenum and $18.00 per ounce silver.
3 Mineral resources are exclusive of mineral reserves. Mineral resources include oxide, mix and hypogene resources. Mineral resources calculated using metal prices of $3.15 per pound copper, $11.00 per pound molybdenum and $18.00 per ounce of silver.
Constancia Mine
Current mineral reserves and resources for Constancia and Pampacancha as of January 1, 2017 are summarized below.
| Constancia Mine Mineral Reserve and Resource Estimates |
Tonnes | Cu Grade (%) | Mo Grade (g/t) | Au Grade (g/t) | Ag Grade (g/t) | |||||
| Constancia Reserves1 | ||||||||||
| Proven | 431,300,000 | 0.30 | 95 | 0.037 | 2.88 | |||||
| Probable | 109,900,000 | 0.23 | 62 | 0.034 | 2.55 | |||||
| Total proven and probable - Constancia | 541,200,000 | 0.28 | 88 | 0.037 | 2.81 | |||||
| Pampacancha Reserves1 | ||||||||||
| Proven | 22,800,000 | 0.53 | 149 | 0.299 | 4.44 | |||||
| Probable | 20,200,000 | 0.44 | 164 | 0.250 | 3.85 | |||||
| Total proven and probable - Pampacancha | 43,000,000 | 0.49 | 156 | 0.276 | 4.17 | |||||
| Total proven and probable | 584,200,000 | 0.30 | 93 | 0.054 | 2.91 | |||||
| Constancia Resources2 | ||||||||||
| Measured | 161,800,000 | 0.19 | 55 | 0.031 | 2.26 | |||||
| Indicated | 287,800,000 | 0.17 | 50 | 0.026 | 1.89 | |||||
| Total measured and indicated - Constancia | 449,600,000 | 0.18 | 52 | 0.028 | 2.02 | |||||
| Inferred | 138,100,000 | 0.17 | 40 | 0.018 | 1.70 | |||||
| Pampacancha Resources2 | ||||||||||
| Measured | 7,500,000 | 0.35 | 57 | 0.235 | 4.13 | |||||
| Indicated | 15,200,000 | 0.18 | 90 | 0.180 | 2.85 | |||||
| Total measured and indicated - Pampacancha | 22,700,000 | 0.23 | 79 | 0.198 | 3.27 | |||||
| Total measured and indicated | 472,300,000 | 0.18 | 53 | 0.036 | 2.08 |
Note: totals may not add up correctly due to rounding.
1 Mineral reserves calculated using metal prices of $3.00 per pound copper, $11.00 per pound molybdenum, $18.00 per ounce silver, and $1,260 per ounce gold.
2 Mineral resources are exclusive of mineral reserves. Mineral resources calculated using metal prices of $3.00 per pound copper, $11.00 per pound molybdenum, $18.00 per ounce silver, and $1,260 per ounce gold.
777 and Reed Mines
Current mineral reserves and resources for 777 and Reed as of January 1, 2017 are summarized below.
| 777 Mine Mineral Reserve and Resource Estimates1 |
Tonnes | Cu Grade (%) | Zn Grade (%) | Au Grade (g/t) | Ag Grade (g/t) | |||||
| Mineral Reserves | ||||||||||
| Proven | 3,080,000 | 1.98 | 4.93 | 2.01 | 31.53 | |||||
| Probable | 1,386,000 | 1.16 | 5.09 | 2.04 | 30.96 | |||||
| Total proven and probable | 4,466,000 | 1.73 | 4.98 | 2.02 | 31.35 | |||||
| Mineral Resources2 | ||||||||||
| Indicated | 736,000 | 0.99 | 3.53 | 1.82 | 26.24 | |||||
| Inferred | 673,000 | 1.01 | 4.26 | 1.72 | 30.95 |
Note: totals may not add up correctly due to rounding.
1 Mineral reserves and resources calculated using metal prices of $2.67 per pound copper, $1.24 per pound zinc (includes premium), $1,300 per ounce gold, and $18.00 per ounce silver, and using a CAD/USD exchange rate of 1.25.
2 Mineral resources are exclusive of mineral reserves.
| Reed Mine Mineral Reserve and Resource Estimates1 |
Tonnes | Cu Grade (%) | Zn Grade (%) | Au Grade (g/t) | Ag Grade (g/t) | |||||
| Mineral Reserves | ||||||||||
| Proven | 362,000 | 3.35 | 0.68 | 0.39 | 5.35 | |||||
| Probable | 337,000 | 3.95 | 0.31 | 0.52 | 5.26 | |||||
| Total proven and probable | 699,000 | 3.64 | 0.50 | 0.45 | 5.30 | |||||
| Mineral Resources2 | ||||||||||
| Inferred | 88,000 | 3.13 | 0.42 | 0.79 | 6.00 |
Note: totals may not add up correctly due to rounding.
1 Mineral reserves calculated using metal prices of $2.50 per pound copper, $1.22 per pound zinc (includes premium), $1,300 per ounce gold, and $18.00 per ounce silver, and using a CAD/USD exchange rate of 1.28.
2 Mineral resources are exclusive of mineral reserves and are calculated using metal prices of $2.67 per pound copper, $1.24 per pound zinc (includes premium), $1,300 per ounce gold, and $18.00 per ounce silver, and using a CAD/USD exchange rate of 1.25.
The focus for the 777 and Reed mines is maximizing value as the mines approach the end of their lives. Hudbay has re-sequenced the 777 mine plan to prioritize stopes containing higher zinc grades in order to take advantage of favourable expected zinc prices.
Additional detail on the Constancia, Lalor, Rosemont, 777 and Reed properties, including a year-over-year reconciliation of reserves and resources, is included in Hudbay's Annual Information Form for the year ended December 31, 2016, which is available on SEDAR at www.sedar.com and will be filed on EDGAR at www.sec.gov.
Non-IFRS Financial Performance Measures
Cash cost and sustaining cash cost per pound of copper produced are shown because the company believes they help investors and management assess the performance of its operations, including the margin generated by the operations and the company. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. For further details on how Hudbay calculates these measures in respect of its operating assets, please refer to page 40 of Hudbay's management's discussion and analysis for the three months and year ended December 31, 2016 available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Qualified Person
The technical and scientific information in this news release has been approved by Cashel Meagher, P. Geo, Hudbay's Senior Vice President and Chief Operating Officer, and Robert Carter, P. Eng., Hudbay's Lalor Mine Manager. Messrs. Meagher and Carter are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates of scientific and technical information may be affected by any known environmental, permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please refer to the NI 43-101 technical reports as filed by Hudbay on SEDAR at www.sedar.com.
