HudBay Minerals Inc announced that it has entered into an agreement with Aquila Resources Inc granting HudBay the right to acquire a majority interest in Aquila's Back Forty Project located in Menominee County of Michigan.
Under the agreement HudBay has agreed to subscribe for 12,141,051 common shares of Aquila a 14.9% ownership interest at a price of CDN 0.1827 per share for an investment of CDN 2.2 million. Completion of the subscription is subject to receipt of approval from the Toronto Stock Exchange. Upon completion of the subscription, HudBay will obtain an option to acquire a 51% ownership interest in the Project through the expenditure of USD 10 million within three years and the right to further increase its ownership to 65% by completing a feasibility study, submitting an application for permitting the Project and making certain option payments. Upon HudBay acquiring a 51% interest in the Project a joint venture will be formed between the parties. HudBay will act as operator for the joint venture and will have marketing rights to the metal production from the Project.
The Back Forty Project includes an advanced exploration stage volcanogenic massive sulfide deposit containing zinc, gold, copper and silver. An updated NI 43-101 compliant resource estimate announced on January 15, 2009 by Aquila consists of 8.5 million tonnes in the measured and indicated category and an additional 1.2 million tonnes in the inferred category. Much of the deposit can be mined using open pit methods, which could allow for faster, lower cost mine development compared to underground mining. The Project also includes an exploration land package of approximately 9,600 acres which will allow HudBay to use its award winning exploration techniques for VMS deposits.
Mr Peter R Jones CEO of HudBay said that "This is an excellent opportunity for HudBay to advance the Project towards production, and is a close fit with our strategic plan. HudBay brings experience in mining 27 VMS deposits in northern Manitoba, together with local operating knowledge in Michigan at its White Pine copper refinery. As a significant potential open pit zinc mine the Project may also supply concentrate to our Flin Flon metallurgical plant."
Mr Jones added that "Aquila's strong relationship with the local community mirrors HudBay's commitment to positive stakeholder engagement and will help support Project permitting. This agreement presents a win-win for both HudBay and Aquila, and we look forward to advancing the Project toward production."
Mr Thomas O Quigley president & CEO of Aquila commented that "HudBay brings to the Project its development and operating expertise, as well as financial resources and marketing expertise for the products to be produced at Back Forty. The transaction announced today is a strong fit with the Aquila strategy of working to create shareholder value by participating in building and maintaining economically sound, environmentally responsible operations with a focus on safety and social responsibilities."
