Hudbay expects to make key investment decision on Rosemont by midsummer

Hudbay Minerals is expected to make a crucial decision on the future of its Rosemont copper prospect by mid-summer when the Toronto-based miner completes an ongoing “definitive” feasibility study.

Hudbay says it will spend $30 million completing the study that will provide the foundation for its decision on future investments in the massive open pit copper project that would be constructed in the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

“Arizona spending on the Rosemont project reflects estimated spending to the completion of an updated definitive feasibility study by mid-2016, at which point additional spending on the project will be evaluated based on the status of permitting, project economics and the metals price environment,” Hudbay stated in a news release posted Thursday on its website.

Hudbay is facing daunting challenges on permitting and metals prices while other project economics may be more favorable.

The company’s stock has been pounded to record lows in the last month closing Thursday on the New York Stock Exchange at $2.11 a share, down 36% over the last month.

Hudbay’s market capitalization has fallen to $496 million, far less than the projected $1.5 billion cost of the Rosemont project. The company’s stock has plummeted as world copper prices continue to decline to reach their lowest levels since the Great Recession.

Copper has dipped below $2 a pound, far below Hudbay’s target price of $3.50 a pound the company has stated is needed to bring new production on line.

Hudbay also needs to obtain several key permits before construction could begin. The company needs a Section 404 Clean Water Act permit from the U.S. Army Corps of Engineers. The Corps is expected to make a decision on the permit later this year.

Hudbay faces significant challenges in crafting a mitigation plan that will meet Army Corps requirements to compensate for the damage the open pit mine would do to washes, streams, seeps and wetlands.

The U.S. Environmental Protection Agency, which can veto Army Corps permits, has opposed the Rosemont project because of the damage it would cause to rare desert wetlands.

The company also needs a state Air Quality Control Permit. A permit issued by the Arizona Department of Environmental Quality was overturned by a Maricopa County Superior Court judge in March 2015. Hudbay has appealed the decision to the state Court of Appeals.

Another potential permitting snag is meeting the requirements of the Endangered Species Act. The Rosemont project would impact a dozen threatened and endangered species, including the only known wild jaguar in the United States.

The U.S. Fish & Wildlife Service is preparing a revised biological opinion and will forward it to the U.S. Forest Service, which is the lead agency on the project since the mine would be constructed in the Coronado National Forest.

Looming behind the scenes is potential litigation should the Army Corps issue the 404 permit or the U.S. Fish & Wildlife Service’s biological opinion determines the mine would not jeopardize the survival of a species.

Mine opponents are also prepared to challenge the Forest Service under the National Environmental Policy Act for shortfalls in the agency’s preparation of the Environmental Impact Statement and the proposed Record of Decision for the mine.

The overall project economics may be more favorable for Hudbay as the cost of energy has also dropped as world oil prices hover near $30 a barrel. The drop in fuel costs is an important factor in the mine’s overall cost of production. The company says the mine would employ about 400 workers and produce approximately 240 million pounds of copper for 22 years.

Waste rock and tailings from the mine would be dumped on more than 3,000 acres of Coronado National Forest. Hudbay has minerals rights to more than 20,000 acres in Santa Rita Mountains.