HUDBAY ANNOUNCES ROBUST PRELIMINARY ECONOMIC ASSESSMENT FOR THE COPPER WORLD COMPLEX
Two-phase mine plan has an after-tax net present value (10%) of $1,296 million and generates an 18% internal rate of return at $3.50 per pound copper 1
Phase I reflects a standalone operation on private land and patented mining claims over a 16-year mine life with average annual copper production of approximately 86,000 tonnes i at cash costs and sustaining cash costs of $1.15 and $1.44 per pound of copper ii , respectively, generating an after-tax net present value (10%) of $741 million and an internal rate of return of 17%1
Phase I of the Copper World Complex includes a 60,000 ton per day sulfide concentrator, a 20,000 ton per day oxide heap leach, an SX/EW facility and a concentrate leach facility with an initial capital cost estimate of approximately $1.9 billion. The concentrator is intended to expand to 90,000 tons per day in Phase II
The processing facilities are planned to have annual production capacity of 100,000 tonnes of copper cathode during Phase I and 125,000 tonnes of copper cathode during Phase II, and have been designed to reduce the project's carbon footprint to produce “Made in America” copper
Supports U.S. copper supply through onshore production of copper cathode expected to be sold entirely to domestic customers and eliminates GHG and sulfur emissions associated with overseas shipping and processing
Phase II expands mining activities onto federal land and extends the mine life to 44 years with average annual copper production of approximately 101,000 tonnes i at cash costs and sustaining cash costs of $1.11 and $1.42 per pound of copper i i , respectively. Phase II provides additional optionality with an after-tax net present value (10%) of $555 million and an internal rate of return of 49% (and a projected after-tax net present value (10%) of $2,806 million at the time of Phase II sanctioning) 1
Significant increase in copper contained in all mineral resource categories
Hudbay is evaluating several opportunities to optimize the project, including the potential to expand Phase I beyond 16 years with additions to the company’s private land package for tailings and waste rock storage and the potential to accelerate Phase II if federal permits are received earlier than as outlined in the PEA
TORONTO, June 08, 2022 (GLOBE NEWSWIRE) -- Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE: HBM) today announced the results of the preliminary economic assessment (“PEA”) of its 100%-owned Copper World Complex in Arizona, which includes the recently discovered Copper World deposits along with the Rosemont deposit. All dollar amounts are in US dollars, unless otherwise noted.
1 The valuation metrics presented in this news release are based on a preliminary economic assessment that includes an economic analysis of the potential viability of mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. This preliminary economic assessment is preliminary in nature, includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty the preliminary economic assessment will be realized. See “Qualified Person and NI 43-101” below.
“The Copper World Complex PEA represents the next leg of copper growth at Hudbay, generating significant value for all of our stakeholders with robust project economics and many benefits for the community and local economy in Arizona,” said Peter Kukielski, Hudbay’s President and Chief Executive Officer. “We have been successfully executing an alternative Arizona strategy since 2019 to deliver this attractive project, which is significantly de-risked and has the potential to nearly double our annual copper production while maintaining Hudbay’s first quartile cash cost positioning. Phase I represents an attractive standalone operation on our private land and Phase II provides significant long-term growth potential in this prolific district. Through applying our core competencies of exploration, mine planning and project development, the Copper World Complex is expected to be the next major copper operation in the United States, delivering the copper needed to meet domestic electrification and decarbonization supply chain needs.”
Successfully Executing an Alternative Strategy
Hudbay has been evaluating alternative options to unlock value from its Arizona mineral assets since the July 2019 ruling from the U.S. District Court to vacate the final record of decision (“FROD”) issued by the U.S. Forest Service relating to its Rosemont copper deposit. The FROD was based upon a standalone development plan for the Rosemont deposit utilizing federal land as set forth in Hudbay’s 2017 feasibility study and technical report (the “2017 Feasibility Study”).
Discovering New Mineralization on Patented Mining Claims
In the fall of 2019, the company began pursuing a private land development plan, including exploring nearby patented mining claims in the historic Helvetia mining district. The company initiated a drill program in 2020 to confirm historical drilling in this past-producing region, and the drill program was further expanded throughout 2021 after continuing to receive encouraging results. Four deposits were discovered in early 2021 with oxide and sulfide mineralization occurring at shallow depths on Hudbay’s wholly-owned patented mining claims. By September 2021, the exploration program had identified seven mineral deposits (referred to at the time as the “Copper World deposits”) over a seven-kilometre strike area, as shown in Figure 1. An initial mineral resource estimate was declared at the Copper World deposits in December 2021, which was larger and at a higher level of geological confidence than expected.
Expanding Private Land Package
Hudbay has been acquiring additional private land in the area to support an operation entirely on private land. The company now holds approximately 4,500 acres of private land and patented mining claims, which are enough to support the first 16 years of production at the Copper World Complex. Please refer to Figure 2 for a map of the company’s private land package.
Unlocking District Potential
Following the recent exploration success on patented mining claims and ongoing litigation uncertainty regarding the project design set forth in the 2017 Feasibility Study, Hudbay began to evaluate alternative design options to unlock value within this prospective district. This included remodeling the 2017 mineral resources, incorporating the new mineral resources from successful exploration results and completing new metallurgical testing work, which led to a comprehensive review of the mine plan, process plant design, tailings deposition strategies and permitting requirements for the new project.
Advancing State-Level Permitting
In June 2021, Hudbay initiated the state-level permitting process for the project with an application for its Mined Land Reclamation Plan (“MLRP”), which was subsequently approved by the Arizona State Mine Inspector in October 2021. The MLRP approval included a requirement for reclamation cost bonding prior to initiating work on the company’s private lands and represented the first step in the permitting process for a private land operation.
An aquifer protection permit and air quality permit are the remaining key state-level permits required for a private land operation, which, along with other minor permits, are expected to be advanced in the second half of 2022. Hudbay previously received aquifer protection and air quality permits for the 2017 design of the Rosemont project and these permits have been successfully upheld through litigation.
Hudbay does not believe any federal permits are required for Phase I of the mine plan for the Copper World Complex (see “Simplified Permitting Process” below).
2022 PEA Summary
The Copper World Complex PEA contemplates a two-phased mine plan with the first phase reflecting a standalone operation with processing infrastructure on Hudbay’s private land and mining occurring on patented mining claims. Phase I is expected to require only state and local permits and reflects a 16-year mine life. Phase II extends the mine life to 44 years through an expansion onto federal land to mine the entire deposits. Phase II would be subject to the federal permitting process.
Phase I contemplates average annual copper production of up to 100,000 tonnesi over a 16-year mine life, including approximately 86,000 tonnesi of copper from mined resources at average cash costs and sustaining cash costs of $1.15 and $1.44 per pound of copperii, respectively. At a copper price of $3.50 per pound, the after-tax net present value of Phase I using a 10% discount rate is $741 million and the internal rate of return is 17%. Phase II contemplates an expansion of the processing facilities which would increase average annual copper production up to approximately 125,000 tonnesi over the remaining mine life, including approximately 101,000 tonnesi of copper from mined resources at average cash costs and sustaining cash costs of $1.11 and $1.42 per pound of copperii, respectively. With the inclusion of Phase II and assuming a copper price of $3.50 per pound, the after-tax net present value of the total project using a 10% discount rate increases to $1,296 million and the internal rate of return is 18%. The valuation metrics are highly sensitive to the copper price and at a price of $4.00 per pound, the after-tax net present value of Phase I and LOM, using a 10% discount rate, increases to $1,193 million and $1,903 million, respectively, and the internal rate of return in Phase I and LOM increases to 21% and 22%, respectively.
A summary of key valuation, production and cost details from the PEA can be found below. For further details, including operating and cash flow metrics provided on an annual basis, please refer to Exhibit 1 at the end of this news release. For further details regarding the preliminary nature of the PEA and its limitations, please refer to “Qualified Person and NI 43-101” below.