Hudbay Minerals Inc. (“Hudbay” or the “Company”)
(TSX, NYSE: HBM) is pleased to announce
that it has received an Aquifer Protection Permit for the Copper
World project (“Copper World”) from the Arizona Department of
Environmental Quality (“ADEQ”). The company proactively engaged
with the ADEQ, ensuring a transparent and thorough permitting
process by providing comprehensive and detailed information. The
issuance of this permit is a key milestone in the advancement of
Copper World, which is a standalone operation requiring state and
local permits and is expected to produce 85,000 tonnes of copper
per year over a 20-year mine life.
“Receiving the Aquifer Protection Permit is a
significant de-risking event for Copper World as it brings us one
step closer to being fully permitted,” said Peter Kukielski,
President and Chief Executive Officer. “The last key state-level
permit, the Air Quality Permit, continues to progress as planned
and will mark the completion of one of the three key prerequisites
in the company’s prudent sanctioning plan for the project. Copper
World represents Hudbay’s next significant copper growth project
and is expected to increase consolidated annual copper production
by more than 50% from current levels. Copper World will also be a
key contributor to the domestic U.S. supply chain with our plans to
produce Made-in-America copper.”
Once in production, Copper World is expected to
be a meaningful copper producer in the U.S. domestic copper supply
chain, which will be required to help secure growing U.S. metal
demand related to increased manufacturing capacity, infrastructure
development, increased energy independence and domestic battery
supply chain and production needs. The “Made-in-America” copper
cathode anticipated to be produced at Copper World is expected to
be sold entirely to domestic U.S. customers and would make Copper
World the third largest cathode producer in the U.S.i
Copper World Permitting on
Track
There are three key state permits required for
Copper World sanctioning:
- Mined Land Reclamation Plan
– Completed – the Mined Land Reclamation
Plan was initially approved by the Arizona State Mine Inspector in
October 2021 and was subsequently amended and approved to reflect a
larger private land project footprint. This approval was challenged
in state court, but the challenge was dismissed in May 2023.
- Aquifer Protection Permit
– Completed – the Aquifer Protection
Permit was received on August 29, 2024 from the ADEQ following a
robust process that included detailed analysis by the agency and
Hudbay, along with a public comment period that was completed in
the second quarter of 2024.
- Air Quality Permit
– On Track – the Air Quality Permit
application was submitted to the ADEQ in late 2022 and follows a
similar robust process, including a public comment period that
commenced in July and is scheduled to conclude in September
2024.
Hudbay is pleased with the level of local
support received at the public comment meetings and looks forward
to providing significant social and environmental benefits for the
community and local economy in Arizona. Over the proposed initial
20-year mine life, the company expects to contribute more than $850
million in U.S. taxes, including approximately $170 million in
taxes to the state of Arizona. Hudbay also expects Copper World to
create more than 400 direct jobs and up to 3,000 indirect jobs in
Arizona. Copper World will offer competitive wages and benefits,
and the company intends to engage in partnerships with local
apprenticeship readiness programs and community-based workforce
training programs across the skilled and technical levels to fill
and maintain all positions. The company has received support from
several local unions, with the signing of a letter of intent for
the project execution phase in May 2024, including The
International Brotherhood of Boilermakers, Iron Ship Builders,
Forgers and Helpers Local 627, The Laborers International Union of
North America Local 1184, and The United Brotherhood of Carpenters
and Joiners of America Local 1912.
Advancing Prudent Financing Plan with
Disciplined Capital Allocation
As part of Hudbay’s disciplined financial
planning approach to Copper World, in October 2022, the company
introduced a three prerequisites plan (“3-P”), as shown in Figure
1, including specific leverage targets and other criteria that
would need to be achieved prior to making a project sanctioning
decision for Copper World. The 3-P plan has the following
components:
- Permits – receipt of all required state
level permits
- Plan –
completion of a definitive feasibility study with an internal rate
of return of greater than 15%
- Prudent Financing
Strategy – multi-faceted financing strategy,
including a committed minority joint venture partner, a
renegotiated precious metals stream agreement optimized for the
current project, net debt to EBITDA ratio of less than 1.2 times, a
minimum cash balance of $600 million, and limited non-recourse
project level debt.
Since the release of the 3-P plan, Hudbay has
taken prudent measures to transform its balance sheet in
preparation for a sanctioning decision, through strong cash flow
generation, deleveraging initiatives and the completion of a
successful equity offering. Hudbay has generated $824 million in
Adjusted EBITDAii and substantially reduced net debtii by $559
million for the twelve months ending June 30, 2024. The net debt
reduction, together with higher levels of adjusted EBITDAii, have
improved the company’s net debt to adjusted EBITDA ratioii to 0.8x.
This improved balance sheet flexibility and accelerated debt
reduction significantly advances the company’s progress towards its
3-P plan for sanctioning Copper World and has resulted in the
successful achievement of the targeted 1.2x net debt to adjusted
EBITDA ratio well ahead of schedule.
With the receipt of the Aquifer Protection
Permit, the company expects to commence activities related to the
preparation of feasibility studies for Copper World. As a result,
2024 growth capital spending in Arizona is expected to increase by
an additional $25 million, compared to the company’s original 2024
guidance of $20 million.
Hudbay intends to commence a minority joint
venture partner process after receiving the last outstanding
permit. The company expects the potential joint venture partner to
participate in the funding of definitive feasibility study
activities in 2025 as well as in the final project design and
construction for Copper World.
The opportunity to sanction Copper World is not
expected until early 2026 based on current estimated timelines. The
decision to sanction Copper World will ultimately be evaluated
against other competing investment opportunities as part of
Hudbay’s capital allocation process.
Bolstering the Arizona Team
With the significant progress achieved to-date
and the continued advancement of Copper World towards a project
sanctioning decision, Hudbay has been actively expanding its local
team in Arizona to build project bench strength and establish key
leadership roles.
Hudbay’s Senior Vice President of the U.S.
Business Unit, Javier Del Rio, has been focusing his time solely on
leading the Copper World project, leveraging his project
development and operational expertise as the former head of
Hudbay’s South America Business Unit where he oversaw the
development and operation of the company’s flagship Constancia mine
in Peru. In addition, Warren Flannery, Hudbay’s Vice President of
Business Planning and Reclamation, will relocate to Arizona to take
on the role of Vice President of Copper World. In his new role, Mr.
Flannery will lead the operational readiness of Copper World as the
company commences early feasibility work and plans to complete a
definitive feasibility study in 2025.
Adding to the team’s U.S. expertise, Hudbay has
hired Robert Comer as Executive Director, External Affairs &
Legal in Arizona. Mr. Comer brings more than 30 years of U.S.
permitting and mining law experience. During his career, Mr. Comer
has held senior leadership positions with businesses and the
federal government and has successfully advanced numerous resource
projects, including through environmental and land use compliance,
defending permits through litigation, NEPA permitting and
government relations. He will be a significant asset to Copper
World as Hudbay continues to advance towards a sanctioning
decision.
About Copper World
The 100% owned Copper World project is located
in Pima County, Arizona, approximately 50 kilometres southeast of
Tucson. The Copper World project includes seven deposits discovered
in 2021, together with the East deposit (formerly known as the
Rosemont deposit). A new resource model was completed for the
preliminary economic assessment (“PEA”) of Copper World in 2022,
which contemplated a two-phased mine plan with Phase I as a
standalone operation requiring state and local permits only and
Phase II expanding onto federal lands requiring federal
permits.
In September 2023, Hudbay released its enhanced
pre-feasibility study (“PFS”) for Copper World reflecting the
results of further technical work on Phase I of the project. Phase
I has a mine life of 20 years, which is four years longer than the
Phase I mine life that was presented in the PEA, largely due to an
increase in the capacity for tailings and waste deposition as a
result of optimizing the site layout. Phase II is expected to
involve an expansion onto federal lands with a significantly longer
mine life and enhanced project economics. Phase II would be subject
to the federal permitting process and was not included in the PFS
results.
Based on the PFS, Phase I contemplates average
annual copper production of 85,000 tonnes over a 20-year mine life,
at average cash costs and sustaining cash costs of $1.47 and $1.81
per pound of copperiii, respectively. A variable cut-off grade
strategy allows for higher mill head grades in the first ten years,
which increases annual production to approximately 92,000 tonnes of
copper at average cash costs and sustaining cash costs of $1.53 and
$1.95 per pound of copperiii, respectively.
The estimated total initial funding requirement
for Phase I of Copper World, net of the stream agreement, amounts
to approximately $1.1 billion. At a copper price of $3.75 per
pound, the after-tax net present value (“NPV”) of Phase I using an
8% discount rate is $1.1 billion and the internal rate of return
(“IRR”) is 19%. The valuation metrics are leveraged to higher
copper prices and at a price of $4.25 per pound, the after-tax NPV
(8%) of Phase I increases to $1.7 billion, and the IRR increases to
25.5%.
Copper World is one of the highest-grade open
pit copper projects in the Americasiv with proven and probable
mineral reserves of 385 million tonnes at 0.54% copper. There
remains approximately 60% of the total copper contained in measured
and indicated mineral resources (exclusive of mineral reserves),
providing significant potential for Phase II expansion and mine
life extension. In addition, the inferred mineral resource
estimates are at a comparable copper grade and also provide
significant upside potential.
Qualified Person and NI
43-101
The technical and scientific information in this
news release related to the company’s Copper World project has been
approved by Olivier Tavchandjian, P. Geo, Hudbay’s Senior Vice
President, Exploration and Technical Services. Mr. Tavchandjian is
a qualified person pursuant to Canadian Securities Administrators’
National Instrument 43-101 - Standards of Disclosure for Mineral
Projects (“NI 43-101”).
A copy of the Copper World PFS is available on
Hudbay’s SEDAR+ profile at www.sedarplus.ca and on Hudbay’s EDGAR
profile at www.sec.gov.
Cautionary Note to United States
Investors
This news release has been prepared in
accordance with the requirements of the securities laws in effect
in Canada, which differ from the requirements of United States
securities laws. Canadian reporting requirements for disclosure of
mineral properties are governed NI 43-101.
For this reason, information contained in this
news release in respect of the Copper World project may not be
comparable to similar information made public by United States
companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and
regulations thereunder. For further information on the differences
between the disclosure requirements for mineral properties under
the United States federal securities laws and NI 43-101, please
refer to the company’s annual information form, a copy of which has
been filed under Hudbay’s profile on SEDAR+ at www.sedarplus.ca and
the company’s Form 40-F, a copy of which has been filed under
Hudbay’s profile on EDGAR at www.sec.gov.
Forward-Looking Information
This news release contains forward-looking
information within the meaning of applicable Canadian and United
States securities legislation. Forward-looking information
includes, but is not limited to, Hudbay’s expectations regarding
the remaining permits for Copper World, expectations around the
timing and amount of future spending at Copper World, intentions
with respect to Hudbay’s 3-P plan for sanctioning Copper World and
expectations regarding the economics for the Copper World project.
Forward-looking information is not, and cannot be, a guarantee of
future results or events. Forward-looking information is based on,
among other things, opinions, assumptions, estimates and analyses
that, while considered reasonable by the company at the date the
forward-looking information is provided, inherently are subject to
significant risks, uncertainties, contingencies and other factors
that may cause actual results and events to be materially different
from those expressed or implied by the forward-looking
information.
The material factors or assumptions that Hudbay
identified and were applied by the company in drawing conclusions
or making forecasts or projections set out in the forward-looking
information include, but are not limited to, obtaining the final
permits for Copper World Phase I, no significant unanticipated
litigation or delays to the advancement of Copper World,
maintaining the company’s 3-P plan for sanctioning Copper World, no
change in laws, renegotiating the precious metals stream agreement
for Copper World and the availability of a minority partner and
financing to develop Copper World.
The risks, uncertainties, contingencies and
other factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking information
may include, but are not limited to, risks generally associated
with the mining industry, such as economic factors (including
future commodity prices, currency fluctuations, energy prices and
general cost escalation), litigation, regulatory and landholding
risks associated with the development and operation of Copper World
as well as the risks discussed under the heading “Risk Factors” in
Hudbay’s most recent Annual Information Form.
Should one or more risk, uncertainty,
contingency or other factor materialize or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking information.
Accordingly, you should not place undue reliance on forward-looking
information. Hudbay does not assume any obligation to update or
revise any forward-looking information after the date of this news
release or to explain any material difference between subsequent
actual events and any forward-looking information, except as
required by applicable law.
About Hudbay
Hudbay (TSX, NYSE: HBM) is a copper-focused
mining company with three long-life operations and a world-class
pipeline of copper growth projects in tier-one mining-friendly
jurisdictions of Canada, Peru and the United States.
Hudbay’s operating portfolio includes the
Constancia mine in Cusco (Peru), the Snow Lake operations in
Manitoba (Canada) and the Copper Mountain mine in British Columbia
(Canada). Copper is the primary metal produced by the company,
which is complemented by meaningful gold production. Hudbay’s
growth pipeline includes the Copper World project in Arizona
(United States), the Mason project in Nevada (United States), the
Llaguen project in La Libertad (Peru) and several expansion and
exploration opportunities near its existing operations.
The value Hudbay creates and the impact it has
is embodied in its purpose statement: “We care about our people,
our communities and our planet. Hudbay provides the metals the
world needs. We work sustainably, transform lives and create better
futures for communities.” Hudbay’s mission is to create sustainable
value and strong returns by leveraging its core strengths in
community relations, focused exploration, mine development and
efficient operations.
For further information, please contact:
Candace BrûléVice President, Investor
Relations(416) 814-4387investor.relations@hudbay.com
Figure 1: Prudently Advancing Copper
World with Disciplined 3-P Plan for Project SanctioningIn
late 2022, Hudbay unveiled a prudent financial plan with three key
prerequisites to be achieved prior to a potential project
sanctioning decision, including a Plan with robust economics from a
definitive feasibility study, Permits from the state issuing
agencies and a Prudent financing strategy.
_____________________i Sourced from Wood Mackenzie (Q2 2024
dataset).ii Adjusted EBITDA, net debt, and net debt to adjusted
EBITDA ratio are non-IFRS financial performance measures with no
standardized definition under IFRS. For further information and
detailed reconciliation, please see the “Non-IFRS Financial
Performance Measures” in the latest earnings news release or
management's discussion and analysis for each reporting period.iii
Cash costs and sustaining cash costs are non-IFRS financial
performance measures with no standardized definition under IFRS.
For further details on why Hudbay believes cash costs are a useful
performance indicator, please refer to the company's most recent
management's discussion and analysis for the period ended June 30,
2024.iv Sourced from S&P Global, August 2024.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/75d408de-0f5d-423d-90d8-35fef09d45c1
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