HudBay Minerals Inc released its production guidance and its exploration and capital expenditure budgets for 2012.
Mr David Garofalo president and chief executive officer said that "Throughout our operating history in the Flin Flon Greenstone Belt, we have seen a strong correlation between exploration dollars spent and mineral discoveries, which is why we have committed USD 54 million, in the belief that we can replicate this success across the Americas. We have also committed to USD 296 million in capital expenditures to grow our production profile, including the commencement of development of the Reed copper project, the ongoing construction at Lalor and continued procurement and engineering activities at Constancia, where we expect to make a full project decision in the first quarter of 2012."
Production Decision Made at Reed Copper Project
Today, HudBay''s Board of Directors approved a capital investment of USD 71 million towards the construction of the 70% owned Reed copper project. A summary of the project's economics follows (100% basis):
1. Approximate daily ore production of 1,300 tonnes per day at Reed is expected by late 2013, subject to receipt of required permits.
2. Average production grades are expected to be 3.78% copper, 0.45 g/t gold and 5.77 g/t silver. Assumed metal recoveries in the Flin Flon concentrator are 94% copper, 58% gold and 62% silver.
3. Average production in concentrate is expected to be approximately 17,000 tonnes per year of contained copper metal.
4. Total operating costs are estimated to average approximately USD 91 per tonne milled (USD 67 per tonne mining, USD 16 per tonne milling and USD 8 per tonne administration) over the five year mine life.
5. Sustaining capital expenditures are expected to total approximately USD 55 million over the five year mine life.
The Reed copper project will have a very limited environmental footprint with ore being trucked to HudBay''s Flin Flon concentrator. Production at Reed is scheduled to begin at the 260 metre level from Zones 10 and 20 and in Zone 30 from the 135 metre level during the second half of 2013. In 2018, mining at Reed is expected to finish in Zone 30 from the 85 metre level, in Zone 20 from the 110 metre level and in Zone 10 on the 285 metre level.
The preliminary economic assessment prepared by the company in respect of the Reed deposit 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.
2012 Guidance on Production from Existing Mines
Full year 2011 production of all metals remains on track to achieve our previous guidance. Contained copper metal production in concentrate in 2012 is expected to be lower than 2011 because of the pending closures of the Trout Lake and Chisel North mines during 2012, while precious metal and zinc production are expected to remain essentially unchanged from 2011 levels.
| | 2012 Guidance | |
| Copper | Tonnes | 35,000 - 40,000 |
| Zinc | Tonnes | 70,000 - 85,000 |
| Precious Metals1 | Ounces | 85,000 - 105,000 |
Precious metals production includes gold and silver production. Silver converted to gold at a ratio of 50:1
Major Commitment to Growth Opportunities
HudBay''s board of directors has approved a capital budget for 2012 of USD 391 million, of which USD 296 million is allocated toward growth opportunities. Capital expenditures at Lalor are expected to total approximately USD 147 million. With the ramp from Chisel North to Lalor completed on time and on budget, the focus at Lalor has turned to completion of the ventilation shaft to allow first ore production up the temporary hoisting facilities by the middle of 2012.
Other major activities at Lalor will include the commencement of production shaft sinking early in 2012, delivery of underground equipment and completion of engineering and procurement for the new concentrator.
Capital expenditures at Constancia for the first quarter of 2012 and other capitalized costs in Peru are expected to total approximately USD 107 million, in addition to the approximately USD 45 million of capital expenditures expected to have been incurred by the end of 2011. HudBay expects to make a formal production decision in respect of Constancia in the first quarter of 2012, at which time the company intends to provide a further update on expected Constancia capital spending.
HudBay is well positioned to fund these growth investments with available liquidity of approximately USD 1.1 billion and no debt. Subject to a project construction decision by the board of directors, the company also intends to arrange additional debt financing at the Constancia project level to maintain optimum financial flexibility.
