Dual-listed Hudbay Minerals is preparing for the next phase of growth, focusing on mining the high-grade Pampacancha satellite deposit, in Peru, and completing the refurbishment of the New Britannia gold mill, in Canada.

Both projects, CEO Peter Kukielski says, require low capital intensity, but will yield high returns with short paybacks on the invested capital.

Hudbay has budgeted $170-million in growth capital for 2020, $80-million of which will be spent at the Manitoba operations, $70-million in Peru and $20-million in Arizona.

The Manitoba spending relates to the New Britannia mill refurbishment, where construction activities are set to start in the second quarter of this year.

Hudbay notes that the New Britannia mill refurbishment costs, at about $115-million over 2020 and 2021, are higher than the original estimate of $95-million, mainly owing to the introduction of new instruments to improve mill efficiency, as well as labour cost inflation and some cost escalation on equipment.

Once the New Britannia gold mill is in operation by 2022, gold is expected to account for more than 60% of revenues at Lalor with gold production expected to grow to about 140 000 oz/y at a sustaining cash cost of about $450/oz over the first five years.

In 2020, the Manitoba operation is forecast to produce between 110 000 oz and 135 000 oz  of precious metals, compared with 110 406 oz in 2019, as well as 18 000 t to 22 000 t of copper and 105 000 t to 125 000 t of zinc.

Peru’s growth capital includes initial expenditures for developing the Pampacancha deposit and acquiring surface rights from the local community, but excludes the costs associated with recognising the current uses of the land by certain community members, which are subject to pending agreements with those individuals.

“Hudbay's patient approach to community negotiations has proven successful, demonstrating our strong relationships with the neighbouring communities and positioning us well to unlock future value on our other regional growth targets in Peru,” says Kukielski.

In Peru, Hudbay is forecasting lower 2020 copper production of 80 000 t to 95 000 t, from 113 825 t in 2019, and 2020 precious metals output of 45 000 oz to 55 000 oz, from 55 506 oz in 2019. The company will also produce 1 300 t to 1 600 t of molybdenum.

The group’s overall copper production forecast is for 98 000 t to 117 000 t of copper, 105 000 t to 125 000 t of zinc and 155 000 oz to 190 000 oz of precious metals.

Arizona’s spending of $20-million is intended to support ongoing matters on the Rosemont project and advance preliminary economic studies at the Mason project, in Nevada.

Plans for the Rosemont project came to a halt in July last year, after a US district judge issued a ruling against the federal agencies and the issuance of the permits at the project.

Hudbay and the federal agencies have appealed the decision with the US Ninth Circuit Court of Appeal, which Kukielski says could take two years to conclude.

“We are obviously deeply disappointed and frustrated by the decision, which appears to overturn decades of settled mining law in the United States.”

CHANGES

Meanwhile, Hudbay has announced that former chairperson Alan Hibben has stepped down as a director of the company. He was replaced by Stephen Lang as chairperson last year, following a settlement with shareholder Waterton.

The company also announced that senior VP and CFO David Bryson would retire from the company at the end of March. A search for a new CFO is under way, and Eugene Lei, currently senior VP for corporate development and strategy, will act as interim CFO.