TORONTO (miningweekly.com) – HudBay Minerals has begun looking for partners to participate in developing its Fenix nickel project in Guatemala and expects to have some news towards the end of this year, CEO David Garofalo said on Thursday.
The company completed an updated feasibility study on the project early this year, although it hasn't released it publicly, and has engaged a financial consultant to look for partners, he said on a conference call.
“They began that process in late January and there are interested parties going through the data room now,” Garofalo said.
“We think we should be able to provide some clarity to the market on this project by later in the second half of this year.”
Garofalo said in November the company would be looking at both credit and equity partners on the project.
HudBay acquired the Fenix nickel project in 2008 when it bought Skye Resources, but froze work in November that year because of market conditions at the time.
PERU PLAN THIS MONTH
Garofalo also said HudBay expects to outline a schedule later this month to optimise the development plan and conduct more exploration work at its new Constancia project in Peru, leading up to a construction decision on the asset in early 2012.
HudBay announced in January it had agreed to buy the project's owner, Norsemont Mining, and said last week it had taken up about 91% of the smaller firm's shares and intends to buy the rest in a compulsory acquisition after the offer expires on March 15.
According to a feasibility study completed by Norsemont, the mine could produce an average of 85 000 t of copper, 1 400 t of molybdenum and 69 t of silver a year, with an average copper cost of $0,93/lb.
Capital costs were forecast at $920-million, based on a processing plant with a 70 000 t/d capacity.
RAIL WOES CONTINUE
In Canada, HudBay runs two mines, a concentrator and a zinc plant in Flin Flon, Manitoba, as well as the Chisel North mine and a concentrator near Snow Lake in the same province.
The company is also building a new mine at its Lalor project, near Chisel North, and expects first production from Lalor by mid-year 2012.
HudBay, which reported fourth-quarter results after close of trading on Wednesday, said it continued to struggle to move copper concentrates because of constrained rail transport capacity.
The firm first flagged the problem in November, and Garofalo said he expects the issue will also affect sales in the first quarter of this year.
HudBay used to process concentrates at its own smelter in Flin Flon, but closed the plant around mid-year last year because of tightening environmental regulations on emissions control and lower treatment charges for processing third-party concentrate.
“With the closure of our copper smelter, as well as the closure of the Kidd Creek facilities (owned by Xstrata), there was a significant increase in the overall demand for gondolas for moving concentrate and our view is that the railways sort of dropped the ball in terms of making arrangements for those additional rail cars,” said CFO David Bryson.
But he added that company was also not pushing hard to get shipments out and ramp up sales in the fourth quarter, because of a softer market at the time for copper concentrate.
Shares in Hudbay declined 3,3% on Thursday, to C$16,12 apiece by 16:00 in Toronto. The S&P/TSX Global Mining Index declined 3,28%, amid a broad equities sell-off and decline in commodity prices.