Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
A preliminary economic assessment (PEA) on Hudbay Minerals’ (TSX, NYSE: HBM) Mason porphyry copper project in Nevada outlines a large-scale open pit operation that could become the third-largest copper mine in the U.S., more than doubling the miner’s copper production.
With a 27-year life, the project would involve 20 years of mining and seven years of stockpile processing at a 120,000 t/d flotation concentrator. A copper sulphide plant would produce copper and molybdenum concentrates with a flowsheet similar to the one at Hudbay’s Constancia mine in Peru.
Over its first 10 years of full production, Mason would produce approximately 140,000 tonnes of copper a year; life-of-mine cash costs are estimated at $1.61 per copper lb. With an initial capital cost estimate of $2.1 billion (that includes a 20% contingency), the project after-tax net present value estimate is pegged at $945 million, using an 8% discount rate and $3.1 per lb. copper.
Mason valuation metrics are “highly sensitive” to the copper price, the release notes, with the after-tax NPV increasing to $2.3 billion at $3.75 per lb. copper, also at an 8% discount.
“The Mason PEA demonstrates the success of Hudbay’s consistent growth strategy and our team’s ability to create value from accretive acquisitions of high-quality copper projects in mining-friendly jurisdictions,” Peter Kukielski, Hudbay president and CEO, said in a release. “We added Mason to our development pipeline portfolio in 2018 and have since leveraged our integrated core competencies of exploration, mine planning and project development to demonstrate that Mason is a quality long-term development project in our robust organic growth pipeline.”
Hudbay made its first investment in Mason back in 2017, through a $2 million equity investment in Mason Resources. In October 2018, miner entered into an agreement to acquire the remaining Mason shares outstanding for $15 million.
A January 2021 resource estimate for the project outlined 2.2 billion measured and indicated tonnes grading 0.29% copper, 67 g/t molybdenum, 0.029 g/t gold and 0.73 g/t silver. Inferred resources add 237 million tonnes at 0.24% copper, 78 g/t molybdenum, 0.033 g/t gold and 0.73 g/t silver.
Hudbay sees potential to further improve the economics of the project by exploring for higher-grade deposits on its Nevada land package, such as the Mason Valley property prospective for near-surface skarn mineralization that hosts historical copper mines.
Mason, a greenfield deposit, lies in Nevada’s Yerington district.
This year, Hudbay expects to produce 92,000 to 112,000 tonnes of copper, as well as 190,000 to 215,000 gold oz., 96,000 to 107,000 tonnes of zinc, 3 to 3.6 million oz. of silver and 1.4 to 1.7 million tonnes of molybdenum, in concentrate, from mines in Manitoba and Peru. Hudbay’s other U.S. copper asset is the pre-development Rosemont project in Arizona.
(This article first appeared in the Canadian Mining Journal)
