TORONTO (miningweekly.com) – TSX-listed Hudbay Minerals will restart its Chisel North mine and concentrator in Snow Lake, Manitoba, effective immediately, at a capital  cost of about C$7-million, the company announced on Friday.

The operations will ramp up to full production, likely by the second quarter of 2010, and will provide some 30 000 t/y of zinc concentrate feed to HudBay's Flin Flon zinc plant.

"Restarting this supply of domestic zinc concentrate is more economical than purchasing third-party concentrates,” CEO Peter Jones said in a statement.

Operating costs to run the mine and smelter are expected to be similar to what they were before the operations were suspended in the first quarter this year because of weak zinc prices.

Work will begin immediately to prepare both the mine and concentrator for the restart, HudBay said.

Simultaneously, as the project to restart operations in Snow Lake, HudBay will also launch the first phase of exploration and development at its nearby Lalor deposit.

The firm will build a ramp to the zinc-rich base-metals zone at Lalor over the next 30 months and, assuming it secures the necessary approvals, will produce about 1 200 t/d of ore once the ramp is completed.

“Production from Chisel North and the early production from Lalor will help provide a continuous feed of domestic zinc concentrate to the company's Flin Flon zinc plant until Lalor reaches full production, which is expected in 2014,” HudBay said on Friday.

The firm currently mines zinc, copper, gold and silver from its 777 and Trout Lake mines, in Flin Flon.

The company first discovered the zinc mineralisation at Lalor about two years ago, and later reported it had found high-grade gold in first one and then a second zone. Most recently, the firm reported it had identified a copper/gold zone at a lower depth.

Hudbay announced earlier this month it will spend C$85-million to build a production ramp linking the Chisel North mine to the new Lalor deposit.

At Lalor, beyond the initial ramp and underground drilling of the gold zones, HudBay will complete a prefeasibility study by year end, followed by a full feasibility study next year, on the further plans to develop Lalor, the firm said on October 9.

ZINC HEDGES

The company also announced that it has entered into a hedge on around 50% of the planned zinc production from the Chisel North mine, at an average price of approximately $1,01/lb.

The forward sale was put in place so the company can be sure that Chisel North remains economic at lower zinc prices, while providing “unfettered upside” for the remaining 50% of its zinc production.

The price of zinc has recovered strongly over the last 12 months, and was trading at just below $1/lb on Friday morning, compared with around $0,50/lb a year ago.

The metal is mainly used to galvanise steel, as protection against corrosion.