Hudbay Minerals, Inc. announced Thursday it plans to spend an additional $10 million for exploratory drilling at its Rosemont copper prospect and another $60 million for permitting and engineering in 2015.
The company provided no details on when and where it plans this year’s drilling program or how the permitting and engineering expenses will be allocated.
“In Arizona, an additional drilling program is planned for 2015 focusing on continuing to improve our understanding of the initial years of mining as well as plant site geotechnical work,” Hudbay stated in a Jan. 15 press release.
Toronto-based Hudbay conducted an $8 million “confirmatory” drilling program late last year at the controversial Rosemont site in the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.
Hudbay stated last August that the goal of the initial drilling was “to improve the company’s understanding of the geology and mineralization and to collect rock characteristic information to validate the current mine plan.” Hudbay stated the drilling would include core sampling of approximately 85,000 linear feet.
The first round of drilling was conducted on private land where the mile-wide, half-mile deep open pit is planned for development. The Rosemont mine site is surrounded by Coronado National Forest. Hudbay may need Forest Service approvals depending on the location of the upcoming drilling program.
The second round of exploratory drilling comes six months after Hudbay acquired Augusta Resource Corporation in a C$550 million stock deal to take control of the Rosemont project.
In Friday’s press release, Hudbay included disclaimer language concerning its production outlook for the next year including a lengthy reference to its purchase of the Rosemont site from Augusta Resource.
“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…the development of the Rosemont project not occurring as planned, any material inaccuracy in Augusta’s historical public disclosure and representations in the support agreement upon which Hudbay’s offer to acquire Augusta was predicated, the failure to obtain required approvals or clearances from government authorities on a timely basis, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources, including the historical estimates of mineral reserves and resources at the Rosemont project, and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities…”
Hudbay provided no details on its “planned expenditures for permitting and engineering work at Rosemont” other than providing a line item expense of $60 million for “growth capital” in Arizona as part of its planned $425 million in capital expenditures in 2015.
Hudbay is projecting more than a 270% increase in copper production over 2014 levels. The increase is due to planned production from three new mines: the $1.7 billion Constancia open-pit mine in Peru and two, much smaller underground mines in Manitoba.
Friday’s announcement comes two days after Hudbay’s stock hit a four-year low on the New York Stock Exchange. Hudbay’s share price fell to $6.29 during midday trading Wednesday before closing at $6.45. Hudbay’s stock rebounded later in the week closing Friday at $7.07.
Lower global economic forecasts sent copper prices plunging this week to the lowest level since the financial crises in 2008. The sell off triggered a sharp drop in share prices for copper producers, including Hudbay.
Copper dropped 5.2 percent Wednesday to $2.55 a pound. The sudden and sharp drop – copper lost as much as 8 per cent before recovering slightly – shocked markets already reeling from oil’s free fall, the Toronto Globe and Mail reported Wednesday.
Copper prices rebounded later in the week after China announced a stimulus program. Future prices for copper delivered in 90 days rose to $2.59 a pound Friday on the London Metal Exchange, according to Bloomberg.com.
The sharp decline in copper prices in the wake of the rout in crude-oil prices is sparking concerns that the slowdown in the global economy might be much deeper than thought and not limited to the energy market, The Guardian reported Wednesday.
“I’m getting worried that this [drop in copper prices] is telling us not all is right with the global economy and that it is slowing faster than anticipated,” Robin Bhar, head of metals research at Societe Generale, told The Guardian.
“If you asked me three to six months ago, I would have been less worried; I would have said it’s oversupply of oil, iron ore, coal. But the combination of greater supply with weaker demand is suggesting it’s indicative that the global slowdown is taking place.”
Declining copper prices is not expected to slow Hudbay’s production plans. Copper producers are expected to continue mining since most are profitable even with the low prices. “The growth for us is necessary because it drove down our cash costs,” Hudbay CEO David Garofalo told the Globe and Mail.
Hudbay is reporting that its cash costs of producing copper at Constancia is expected to average about $1 a pound.
HUDBAY IS AN OPERATING MINING COMPANY AND HAS ALWAYS BEEN SO WHEREAS AUGUSTA NEVER WAS A MINING COMPANY AND HAD NO INTENTIONS TO BECOME ONE . HUDBAY IS LOOKING AT THE THE ROSEMONT DEPOSIT WITH OBVIOUS INTENTIONS TO BRING IT INTO PRODUCTION AS AND WHEN CONDITIONS ARE FAVOURABLE TO DO SO . AUGUSTA WAS ALL ABOUT SPECULATION , PROMOTION AND HYPE IN ORDER TO ATTRACT INVESTORS AND STOCK MARKET PLAYERS .
HUDBAY IS IN NO RUSH TO DEVELOP ROSEMONT , PARTICULARLY AT A TIME WHEN WORLD METAL PRICES ARE IN DECLINE . AT PRESENT , IT WOULD APPEAR TO BE A RELATIVELY LOW PRIORITY IN THEIR OVERALL PORTFOLIO OF COPPER PROSPECTS .
THE ADDITIONAL DRILLING IS NOT SURPRISING AS AUGUSTA GLOSSED OVER THE DETAILS OF THE ROSEMONT PROSPECT TO THE POINT WHERE THERE WAS SOME DOUBT IN THE ACCURACY OF WHAT THEY WERE REPORTING . IT STILL REMAINS THAT A BULK SAMPLE STILL HAS NOT BEEN TAKEN FOR METALLURGICAL TESTING . HUDBAY MUST FIRST PRODUCE AN ACCURATE MODEL OF THE DEPOSIT BEFORE THEY CAN DETERMINE HOW TO BEST MINE IT . UNDERGROUND MINING CAN NOT BE RULED OUT . IN THE END , IT ALL COMES DOWN TO COST .
THE PERMITTING PROCESS IS SLOW AND AGONIZING . NO DOUBT HUDBAY HAS LOBBYISTS WHO MONITOR THE POLITICS OF MINING IN ARIZONA . THEY ARE KEEPING A RELATIVELY LOW PROFILE AT PRESENT IN ORDER TO NOT DRAW UNNECESSARY ATTENTION TO THEIR ACTIVITIES . CONSIDER IT A COOLING OFF PERIOD .
ROSEMONT MINE TRUTH IN ITS JANUARY 20 , 2015 ARTICLE MAKES REFERENCE TO , AND QUOTES FROM , A FRIDAY HUDBAY NEWS RELEASE THAT WAS ACTUALLY ISSUED ON THURSDAY , JANUARY 15 , 2015 AND APPEARS ON HUDBAY’S WEBSITE AS SUCH . PERHAPS THE ” FRIDAY ” REFERENCE IS INCORRECT ?
THE NEWS RELEASE MAKES REFERENCE TO A BUDGET OF $60 MILLION AT ROSEMONT BUT IT PROVIDES NO DETAILS AS TO HOW THE MONEY IS TO BE SPENT . HOWEVER , THE ROSEMONT MINE TRUTH ARTICLE CLEARLY STATES THAT THE $60 MILLION IS ” PLANNED EXPENDITURES FOR PERMITTING AND ENGINEERING WORK AT ROSEMONT ” . WHEN HUDBAY TOOK OVER THE ROSEMONT PROPERTY , THE FOREST SERVICE WAS IN THE FINAL STAGES OF THE PERMITTING PROCESS AND SUBMISSIONS , EXCEPT FOR COURT ACTIONS , HAD BEEN MADE BY ALL PARTIES CONCERNED . DOES THIS $60 MILLION BUDGET SUGGEST THAT HUDBAY MAY COME UP WITH A NEW MINE PLAN FOR THE FOREST SERVICE TO CONSIDER ? PERHAPS IT INCLUDES A WAR CHEST TO COVER UNFORSEEN LEGAL FEES .