TORONTO (miningweekly.com) – Canadian miner Hudbay Minerals on Friday announced that it had completed the sale of its 51% controlling stake in the Back Forty zinc/gold exploration property, located in Menominee county, Michigan, to its fellow TSX-listed joint venture (JV) partner, Aquila Resources.

Through the deal, Hudbay received 18.65-million Aquila common shares for its stake in the property, which Aquila had been exploring for about a decade with various partners.

As a result, Hudbay's stake in Aquila has risen to about 18% from about 14.6% when the deal was announced early in November.

Aquila and TSX-V-listed REBgold in November announced that the companies would combine their businesses, after which the merged entity would buy the remaining 51% interest in the Back Forty from Hudbay and complete a nonbrokered financing through a private placement of REBgold shares of up to $6-million, at a price of $0.13 a share.

Aquila on Friday reported that it had closed the first two objectives of the deal, as well as raised $4.85-million through the private placement, in which Baker Steel Capital Managers, on behalf of investment funds managed or controlled by it, invested $4.5-million.

The proceeds from the REBgold financing would be used for general working capital and to fund the next phase of development activity at Back Forty, Aquila said.

The Back Forty project is an advanced-staged exploration project delineating a zinc- and gold-rich volcanogenic massive sulphide deposit located within the Penokean volcanic belt. Over the past ten years, Aquila and various JV partners have spent more than $50-million exploring and advancing the Back Forty project.

As of July 3, 2012, Hudbay had decided to suspend funding for the JV; however, the JV published an updated Canadian National Instrument 43-101 resource estimate that included 78 new drill holes, on February 4, which followed up on a positive preliminary economic assessment (PEA) completed in April 2012.

The project currently holds 15.1-million tons in the measured and indicated categories, and 2.3-million tons of inferred resources.

The updated measured and indicated resource estimate contained 987 236 oz of gold, 11.91-million ounces of silver, 1.02-billion pounds of zinc, 74.3-million pounds of lead and 110.4-million pounds of copper. The inferred category also held an estimated 155 885 oz of gold, 1.99-million ounces of silver, 113.3-million pounds of zinc, 17.2-million pounds of lead and 18.6-million pounds of copper.

The PEA had concluded that at a base-case gold price of $1 332/oz, the Back Forty project had a pretax cash flow of $211.8-million, a pretax net present value, including an 8% discount, of $73.6-million, and an internal rate of return of 18.2%.

The project would cost about $224.7-million to build and would require about $47.6-million in operating capital throughout its expected seven-year mine life.

Over the project’s life, it was expected to produce 77 200 t of copper concentrate, 323 500 t of zinc concentrate, 295 300 oz of gold and 2.6-million ounces of silver contained in gold-silver alloy dore and within the copper concentrate.

The average unit operating costs were expected to total about $36.79/t mined and processed over the life of the project.

Aquila shares were trading 7.14% higher on Friday at C$0.15 apiece.