Hudbay CEO tells financial analysts that Rosemont will receive key Clean Water Act permit

Toronto-based Hudbay Minerals CEO Alan Hair told investment analysts last week that its proposed Rosemont Mine will receive the two outstanding federal approvals needed for construction to begin on the $1.5 billion open-pit copper mine.

Rosemont needs a Clean Water Act (CWA) permit from the U.S. Army Corps of Engineers and final approval from the U.S. Forest Service before construction could begin on the third largest open pit copper mine in the U.S. planned for the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

“I think it’s fair to say that we’ve always viewed permitting as a scientific and technical process and we believe that good science will prevail,” Hair said in a Feb. 23 conference call with analysts. “We’ve got no reason to believe that we won’t achieve our permits in due course.”

Hudbay CEO Alan Hair

Hair did not respond directly when asked whether the company has discussed permitting issues with the Trump Administration.

“We view this as a scientific and technical process, not a political process,” Hair said according to a transcript of the conference call prepared by Seeking Alpha.

Hair’s declaration that Hudbay will receive a CWA permit stands in sharp contrast to a recommendation by the Army Corps’ Los Angeles district office last July that the CWA  permit not be issued.

The district office determined Rosemont would “cause or contribute to” violations of Arizona water quality standards and trigger “significant degradation” of federally regulated washes, the Arizona Daily Star reported on Jan. 14.

The Daily Star obtained a Dec. 28 letter from the Corps’ South Pacific Division in San Francisco to Hudbay that details the rationale behind the Los Angeles district’s recommendation to deny the permit.

The South Pacific Division is expected to make a final permitting decision later this year.

Hair’s assurance on permitting comes after Hudbay warned the Corps last November that it may challenge the Corps’ authority to issue the Section 404 CWA permit.

Hudbay vice-president Patrick Merrin stated in a Nov. 17 letter to the Corps that the company will likely challenge the Corps’ permitting authority if the federal agency refuses to issue Rosemont’s request for the permit that would allow its mile-wide, half-mile deep open-pit mine to dump waste rock and mine tailings on 3,000 acres of the Coronado National Forest.

Hair indicated that even if Rosemont receives the CWA permit and a final Record of Decision from the Coronado National Forest, Rosemont would not move ahead until economic conditions improve.

Hair said copper prices, which have rebounded sharply since Trump’s election and now hover near $2.70 a pound, have not reached a level where Hudbay would move ahead with credit and financing for the Rosemont project.

“We need to see copper prices with — a three in front of them and that remains our view,” Hair said.

Hudbay’s former chairman David Garofalo said during Hudbay’s 2015 annual meeting that copper prices would have to reach $3.50 a pound before the company would seek approval from its board of directors to move forward with Rosemont.

Hair told analysts that Hudbay expects to release an updated Rosemont feasibility study by the end of March that will provide details on the proven mineral reserves and cost and profit projections. The company stated last October that it is preparing a revised mine plan of operations.

Significant changes to the Rosemont mining plan could trigger additional environmental studies that could impact permits already issued such as the air pollution and aquifer protection permits issued by the state, and the pending federal CWA permit.

The company states it projects spending $20 million on Rosemont in 2017, according to its Management Discussion & Analysis report for the 4^th Quarter 2016.

Hudbay reported a loss of $47.3 million for the 4^th Quarter ending Dec. 31 and an overall loss of $35.2 million for 2016, according to Hudbay’s year-end financial statement.

Hudbay attributed the 4^th quarter loss to refinancing costs.

“While the fourth quarter of 2016 benefited from an increase in gross profit of $19.4 million compared to the same period last year, this was offset in part by $49.9 million in costs primarily relating to the call premium paid to facilitate the early redemption of Hudbay’s $920 million of 9.50% senior unsecured notes due 2020,” the company stated in a Feb. 23 press release.