SIMPLE QUESTION ???? HOW CAN A DEAL BE CONSMATED WITH THE LAWSUIT BETWEEN LIO & HBM STILL GOING ON WITH NO ENDING IN SIGHT ???
HudBay estimates Constancia NPV at $571-million (U.S.)
2012-08-08 09:02 ET - News Release
Mr. David Garofalo reports
HUDBAY BEGINS CONSTRUCTION OF CONSTANCIA COPPER MINE IN PERU AND ANNOUNCES PRECIOUS METALS STREAM TRANSACTION
HudBay Minerals Inc. has approved a $1.5-billion (U.S.) investment to finance the development and construction of its Constancia copper mine in Peru. In addition, Hudbay announced it has entered into a precious-metals-stream transaction with Silver Wheaton Corp. providing for upfront deposit payments of $750-million (U.S.).
Based on the project's capital cost estimate of $1.5-billion (U.S.), the Constancia mine is estimated to generate an unlevered internal rate of return of 14.5 per cent and a net present value of $571-million (U.S.), assuming a discount rate of 8.0 per cent and long-term copper prices of $2.75 (U.S.)/pound.
Hudbay is also arranging a new $600-million (U.S.) credit facility from a syndicate of Canadian and international banks. With approximately $2-billion (U.S.) of capital spending remaining on the Constancia, Lalor and Reed projects, Hudbay expects to finance this requirement with a combination of $710-million (U.S.) in cash on hand as at June 30, 2012, operating cash flow, and the funds received under the stream transaction and credit facility.
"The decision today to proceed with the development of the Constancia project is a significant milestone for Hudbay as we pursue our goal of becoming a leading mid-tier diversified metals producer with long-life, low-cost operations in investment-grade countries," said David Garofalo, Hudbay's president and chief executive officer.
Precious-metals-stream transaction with Silver Wheaton
Hudbay has entered into a precious-metals-stream transaction with Silver Wheaton whereby the company will receive upfront deposit payments of $750-million (U.S.) against delivery of 100 per cent of payable gold and silver from Hudbay's 777 mine until the later of the end of 2016 and satisfaction of a completion test at Constancia, and delivery of 50 per cent of payable gold and 100 per cent of payable silver for the remainder of the 777 mine life. The stream transaction also includes delivery of 100 per cent of payable silver from the Constancia project. Of the upfront payments, $500 million (U.S.) will be paid on closing, which is subject to customary conditions and is expected to occur in the third quarter of 2012. The remaining $250-million (U.S.) will be due in two equal instalments once $500-million (U.S.) and $1.0-billion (U.S.), respectively, in capital expenditures have been incurred at Constancia. The stream transaction does not include gold production at Constancia, precious-metals production from the company's Lalor project, or the company's land package in Peru outside of the Constancia and Pampacancha deposits. Along with the upfront payments, for gold and silver delivered to Silver Wheaton, Hudbay will receive the lesser of the market price and $400 (U.S.) per ounce (for gold) and $5.90 (U.S.) per ounce (for silver), subject to 1-per-cent annual escalation after three years.
"The precious-metals-stream transaction is a non-dilutive source of capital and reflects attractive valuations relative to conventional base-metal valuations of Hudbay's gold and silver reserves," said Mr. Garofalo. "The transaction also preserves full precious-metal upside potential at Lalor, where we continue to delineate a copper-gold zone which remains open at depth, as well as full gold upside potential at Constancia and its satellite deposits."
Hudbay's financial advisers in the precious-metals-stream transaction were CIBC World Markets Inc. and Scotiabank, and its legal advisers were Goodmans LLP and Thorsteinssons LLP.
Credit facility
Hudbay is also arranging a $600-million (U.S.), four-year credit facility with a syndicate of Canadian and international banks, comprising a $400-million (U.S.) term loan and a $200-million (U.S.) revolving credit facility, that is expected to replace the company's current revolving credit facility. Completion of the credit facility is subject to completion of syndication and execution of definitive documents.
Constancia project update
The Constancia development schedule contemplates nine quarters of construction, with initial production in late 2014 and full production commencing in the second quarter of 2015. This timeline to completion is shorter than previously forecast and reflects the progress that has been made in the past year at the project in front-end engineering and design, permitting, and community relations.
Annual contained copper metal in concentrate is expected to average approximately 118,000 tonnes during the first five full years of production (2015 to 2019) and 77,000 tonnes in subsequent years. Operating cash costs, net of byproduct credits, are expected to average 66 U.S. cents/pound of copper for the first five years of production and $1.11 (U.S.)/pound thereafter.
The project capital cost estimate of $1.5-billion (U.S.) includes a project contingency of 14.6 per cent of the remaining at-risk project costs. Hudbay has fixed price orders and supplier commitments for approximately $252-million (U.S.) in project equipment, including grinding mills and mobile equipment, and has spent an additional $62-million (U.S.) (excluding project equipment) of the total estimated capital cost of the project as at June 30, 2012.
Hudbay expects the remaining capital spending to occur over 2012 to 2014 as shown in the associated table.
CAPITAL SPENDING (In millions of U.S. dollars) Q3 to Q4 2012 391 2013 964 2014 100 Total future capital spending 1,455 Total spent in Q1 and Q2 2012 91 Total 1,546
PROJECT HIGHLIGHTS Years Years Life 1-5 6-16 of mine Annual throughput (Mt) 28.8 27.7 28.1 Average annual copper-equivalent grade (%)(1) 0.65 0.42 0.49 Average annual copper grade (%) 0.47 0.31 0.36 Average annual contained copper in concentrate (000 t) 118 77 90 Mining costs/tonne ore (US$/t)(2) 3.58 2.68 2.97 Milling costs/tonne ore (US$/t) 4.68 4.37 4.47 Average annual sustaining capital expenditures (US$M) 57 32 40 Cash cost per lb of Cu (US$/lb)(3) 0.66 1.11 0.92 (1) Copper-equivalent metal calculated using a copper price of $2.75 (U.S.)/pound, gold price of $1,150 (U.S.)/ounce, silver price of $23.00 (U.S.)/ounce and molybdenum price of $14.00 (U.S.)/pound. (2) Includes cost of waste removal. (3) Net of byproducts.
Constancia project economics at various metal prices are shown in the associated table.
PROJECT ECONOMICS Copper Copper Base prices prices case(1) +10%(2) -10%(2) Long-term copper price (US$/lb) $2.75 $3.03 $2.48 IRR -- unlevered 14.5% 17.3% 11.5% IRR -- with silver stream 15.9% 19.3% 12.1% NPV -- unlevered ($M) $571 $851 $289 (1) Base case assumed metal prices are as follows: copper (2014: $3.40 (U.S.)/pound, 2015: $3.30 (U.S.)/pound, 2016: $3.10 (U.S.)/pound, long-term: $2.75(U.S.)/pound); gold (2014: $1,550 (U.S.)/ounce, 2015: $1,450 (U.S.)/ounce, 2016: $1,350 (U.S.)/ounce, long-term: $1,150 (U.S.)/ounce); silver (2014: $30 (U.S.)/ounce, 2015: $28 (U.S.)/ounce, 2016: $24 (U.S.)/ounce, long-term: $23 (U.S.)/ounce); molybdenum (2014: $15 (U.S.)/ounce, 2015: $15 (U.S.)/ounce, 2016: $14.50 (U.S.)/ounce, long-term: $14 (U.S.)/ounce); Canadian dollar to U.S. dollar (2014: $1.01 to $1 (U.S.), 2015: $1.02 to $1 (U.S.), 2016: $1.05 to $1 (U.S.), long-term: $1.05 to $1 (U.S.)). (2) Copper prices are increased/decreased by respective per cent in every year of forecast.
Proven and probable reserves at Constancia and Pampacancha continue to grow
Proven and probable reserves have continued to grow at Constancia and Pampacancha to 450 million tonnes at a copper-equivalent grade of 0.49 per cent, supporting a 16-year mine life with average annual contained copper in concentrate of approximately 90,000 tonnes.
CONSTANCIA MINERAL RESERVES -- AUG. 8, 2012 Tonnes Cu Mo Ag Au Cu-eq(1) Category (M) (%) (g/t) (g/t) (g/t) (%) Proven 349 0.37 100 3.29 0.043 0.49 Probable 54 0.24 60 2.98 0.035 0.33 Total 403 0.35 96 3.25 0.042 0.47 PAMPACANCHA MINERAL RESERVES -- AUG. 8, 2012 Tonnes Cu Mo Ag Au Cu-eq(1) Category (M) (%) (g/t) (g/t) (g/t) (%) Proven 10 0.54 170 4.20 0.318 0.87 Probable 37 0.46 140 4.56 0.276 0.76 Total 47 0.48 149 4.49 0.285 0.78 (1) Not accounting for recovery.
The remaining mineral resources shown in the associated table are exclusive of the mineral reserves.
CONSTANCIA MINERAL RESOURCES -- NOV. 2, 2011(1) Tonnes Cu Mo Ag Au Cu-eq(1) Category (M) (%) (g/t) (g/t) (g/t) (%) Measured 119 0.23 62 2.3 0.038 0.31 Indicated 344 0.20 58 2.0 0.034 0.27 Total measured and indicated 463 0.21 59 2.0 0.035 0.28 Inferred 219 0.19 49 1.8 0.032 0.25 PAMPACANCHA MINERAL RESOURCES -- APRIL 2, 2012(3) Tonnes Cu Mo Ag Au Cu-eq(1) Category (M) (%) (g/t) (g/t) (g/t) (%) Inferred 4 0.41 103 6.2 0.207 0.67 (1) The Constancia mineral resources are reported at a 0.12-per-cent-copper cut-off grade. (2) Not accounting for recovery. (3) The Pampacancha mineral resources are reported at a 0.20-per-cent-copper cut-off grade.
Front-end engineering and design work at Constancia are now complete. The principal beneficiation concession (construction permit) was granted in June, 2012, and other required permits are expected in the ordinary course.
Site activity to date has included the completion of a 660-bed construction camp, mobilization of the EPCM and civil works contractors, and the continuing construction of homes for the 14 families that are scheduled to be moved from the project site later this year. The remaining 22 families are scheduled to be relocated next year. Hydrogeological and geotechnical drilling is continuing and is scheduled to be completed by the end of August, 2012.
Exploration drilling at Pampacancha is under way, with two drills concentrating on infill drilling as well as testing the extension of the deposit to the north and the west. The exploration program has been modified to an expected 18,000 metres for 2012 due to the continued requirement for geotechnical drilling to support detailed engineering. Hudbay expects to begin testing gold and porphyry copper targets in the Chilloroya South prospect in August, 2012. This exploration program will also concentrate on previously identified high-priority targets within the mining concessions. The Chilloroya community has ratified an exploration agreement with Hudbay that allows the company to access these exploration prospects for drilling over the next three years.
Conference call and webcast
Date: Wednesday, Aug. 8, 2012
Time: 2 p.m. ET
Webcast: The company's website
Dial-in numbers: 416-644-3416 or 800-814-4860
Replay: 416-640-1917 or 877-289-8525
Replay passcode: 4551269 followed by the pound key
The conference call replay will be available until 12 a.m. ET on Aug. 22, 2012. An archived audio webcast of the call also will be available on Hudbay's website.
Additional information regarding Constancia project
Mineral reserves at Constancia are calculated based on an updated mineral resource completed by AMEC under Hudbay supervision in 2011 incorporating the diamond drilling information to Aug. 23, 2011. Mineral reserves at Pampacancha are based on a mineral resource completed internally by Hudbay in April, 2012, which incorporates the diamond drilling information to April 2, 2012.
The Constancia and Pampacancha mineral reserves were estimated using the measured and indicated resources at a cut-off of 0.12 per cent copper for the Constancia deposit and a cut-off of 0.20 per cent copper for the Pampacancha deposit. The Whittle 4-X program was used to create pit shells based on the Lerch Grossman method. The copper-equivalent calculations, and the stated reserves and that are based on an net-smelter-returns royalty cut-off, used the following long-term metal prices, exchange rates and other necessary economic parameters incorporated by Hudbay: Peruvian new sol to U.S. dollar: 2.85 to 1; Cu price: $2.75 (U.S.)/pound; Ag price: $23.00 (U.S.)/ounce; Au price: $1,150 (U.S.)/ounce; molydenum price: $14.00 (U.S.)/pound. The expected aftertax payback period for the project is 4.5 years.
Mineral reserves are reported in contained units, and are estimated using appropriate process recoveries, operating costs and mine plans. Dilution and mining recovery were incorporated into the mine plan through reblocking of the resource model from a 10-metre-by-10-metre-by-15-metre block size to a 20 m by 20 m by 15 m block size. The resulting dilution applied is approximately 2 per cent in the Constancia deposit and 7.5 per cent in the Pampacancha deposit.
The Constancia main pit's strip ratio is 1.31 based on 528 million tonnes of waste mined. Pampacancha's strip ratio is 1.52 based on 71 million tonnes of waste mined. This represents a total strip ratio of 1.33 based on 599 million tonnes of waste mined.
Mineral reserve and mineral resource estimates reflect the company's reasonable expectation that all necessary permits and approvals will be obtained and maintained.
Additional assumptions respecting the Constancia project are shown in the associated table.
ADDITIONAL ASSUMPTIONS Life of mine Average annual contained silver in concentrate (000 troy oz) 2,170 Average annual contained gold in concentrate (000 troy oz) 38 Average annual contained molybdenum in concentrate (t) 1,470 Copper recoveries (%) 89.4 Silver recoveries (%) 71.8 Gold recoveries (%) 60.5 Molybdenum recoveries (%) 53.5 G&A costs/tonne ore (US$/t) 1.11
Qualified person
The technical and scientific information in this news release has been approved by Cashel Meagher, PGeo, Hudbay's vice-president, South America business unit, a qualified person pursuant to National Instrument 43-101.
Quality control and data verification
Details regarding verification of data, including sampling, analytical and test data underlying the information herein, are based on the same process contained in the technical report titled "Constancia Project Technical Report," dated Feb. 21, 2011, available under Norsemont Mining Inc.'s profile at SEDAR.
We seek Safe Harbor.
HOW CAN A DEAL BE CONSUMATED WITH THE LAWSUIT BETWEEN LIO & HBM GOING ON & NO ENDING IN SITE?????