TMX, NYSE – HBM 2020 No. 7 Hudbay Provides Annual Reserve and Resource Update
- 41%i increase in Lalor’s life-of-mine gold production from the previous mine plan, including an increase in average annual gold production to over 150,000 ounces during the first eight years of New Britannia production at the lowest quartile all-in sustaining cost globallyii
- 35% increase in total Snow Lake gold reserves to 2.2 million ounces, supporting an 18-year mine life for the Snow Lake operations
- Successful exploration efforts at Lalor and in the Snow Lake region added to the mineral resource inventory and offset the conversion of mineral resources to reserves; initial inferred resource estimates announced for high-grade copper-gold Lens 17 at Lalor and nearby Watts base metal deposit
- Recent drilling intersections north of the Constancia open pit highlight the potential for porphyry copper and high-grade skarn mineralization within the limit of the currently permitted mining areas
- Community agreement reached on two targets located southwest of Constancia; continuing to advance community relations and technical activities on other regional properties near Constancia
- Conducted strategic land consolidation near the Mason project, including a large package of claims hosting potential for high-grade skarn deposits
Toronto, Ontario, March 30, 2020 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE: HBM) today provided an update on its annual mineral reserve and resource estimates and exploration activities. All dollar amounts are in US dollars, unless otherwise noted.
“We are extremely pleased with our exploration success over the past 12 months in Manitoba where we’ve doubled the mine life in Snow Lake and more than doubled Lalor’s annual gold production from current levels,” said Peter Kukielski, Hudbay’s President and Chief Executive Officer. “In addition to replacing the ore that was mined at Constancia last year, we are also encouraged by recent drilling results north of the Constancia pit where high-grade skarn mineralization has been intersected. Hudbay has a proven track record of delivering value through the drill bit and successfully extending the life of our mines, demonstrating one of the many ways we can leverage our core competencies to create value.”
Lalor Mine and Snow Lake Operations
Phase One of Snow Lake Gold Strategy
In February 2019, Hudbay announced the results from its first phase of its Snow Lake gold strategy which repositioned Lalor as a gold mine with precious metals contributing a majority of the life-of-mine revenues. The first phase resulted in a 65% increase in Lalor’s gold reserves and was the first mine plan that included the processing of gold and copper-gold ore at the company’s New Britannia mill. Several years of detailed work was completed in advance of the phase one mine plan, including significant drilling and test mining of the Lalor gold and copper-gold zones, and trade-off studies on the various processing solutions for the gold ore. The New Britannia mill was determined to be the optimal processing solution for Lalor gold, as it capitalizes on existing infrastructure and is expected to achieve gold recoveries of approximately 93% compared to the current gold recoveries of approximately 53% at the Stall mill. The phase one gold mine plan contemplated Lalor’s annual gold production more than doubling from then current levels to approximately 140,000 ounces over the first five years once the New Britannia mill is refurbished.
Phase Two of Snow Lake Gold Strategy
Over the last 12 months, the company has executed on the second phase of its Snow Lake gold strategy, focusing on extensive infill and exploration drilling at Lalor and advancing engineering studies on the regional deposits in Snow Lake. This has resulted in a significant increase in the mineral reserves and mineral resources for Lalor and the nearby satellite deposits, including a 35% increase in total Snow Lake gold reserves to 2.2 million ounces. Lalor’s current reserve estimate has added more than a year to its mine life, and with the inclusion of the reserves at the nearby satellite deposits, the mine life of the Snow Lake operations now totals 18 years. Based on the updated reserve, Lalor’s life-of-mine gold production increased by 41%i compared to the previous mine plan, and annual gold production is expected to average greater than 150,000 ounces over the first eight years after the New Britannia mill is refurbished, which is more than double the current annual gold production from Lalor and 9%iii higher than the previous mine plan. Lalor will remain a low-cost gold mine with sustaining cash costsiv, net of by-product credits, of approximately $655 per ounce over the first eight years once New Britannia is in production, positioning Lalor in the lowest quartile on the global all-in sustaining cost curve.
The revised 18-year mine plan for the Snow Lake operations utilizes the existing mining capacity of up to 4,500 tonnes per day at the Lalor mine for the first ten years followed by the mining of the gold-rich WIM and 3 Zone deposits for the last eight years of the mine plan. Please refer to Figure 1 for a map outlining the location of the various Snow Lake deposits within trucking distance of the New Britannia mill and other regional infrastructure.
Under the revised mine plan, the New Britannia gold mill will operate at its maximum capacity of 1,500 tonnes per day from 2022 to 2030 by processing Lalor’s current reserves at average grades of 6.4 grams per tonne gold and 1.0% copper. From 2030 to 2037, New Britannia is expected to operate at a processing rate between 1,200 to 1,500 tonnes per day at average grades of 2.2 grams per tonne gold and 1.3% copper, as the Lalor feed is replaced by WIM and 3 Zone (see “Snow Lake Mine Plan” below).
The WIM deposit was acquired by Hudbay in the third quarter of 2018 for approximately C$0.5 million. WIM is a copper-gold deposit that starts from surface, is expected to be developed via an underground ramp and is located approximately 15 kilometres by road from New Britannia. The 3 Zone deposit was acquired by Hudbay as part of the acquisition of the New Britannia mine and mill. 3 Zone is a ramp-access deposit located within the existing mining infrastructure at the past producing New Britannia mine.
The New Britannia mill development plan contemplates construction activities occurring between June 2020 and August 2021, with plant commissioning and ramp-up occurring during the fourth quarter of 2021. This timing assumes no delays or deferrals due to the impact of the COVID-19 coronavirus or related liquidity considerations, which remains a risk we continue to prudently assess and monitor. All key environmental permits for the project have been obtained.
Snow Lake Mine Plan
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | LOM | |||||||||||||
| Lalor Base Metal Ore | ||||||||||||||||||||||||
| tonnes Ore Mined (000s) | 1,575 | 1,506 | 1,035 | 997 | 1,035 | 1,035 | 1,035 | 738 | 521 | 518 | 176 | 10,170 | ||||||||||||
| Ore Mined tpd | 4,351 | 4,160 | 2,859 | 2,754 | 2,859 | 2,859 | 2,859 | 2,038 | 1,438 | 1,431 | 485 | - | ||||||||||||
| Cu Grade % Cu | 0.64% | 0.65% | 0.61% | 0.57% | 0.60% | 0.55% | 0.61% | 0.63% | 0.73% | 0.75% | 0.29% | 0.62% | ||||||||||||
| Zn Grade % Zn | 5.60% | 5.36% | 5.74% | 5.67% | 4.51% | 5.01% | 5.65% | 4.78% | 4.83% | 4.19% | 5.70% | 5.25% | ||||||||||||
| Au Grade g/t Au | 2.55 | 3.28 | 2.72 | 2.86 | 2.70 | 2.76 | 3.86 | 3.83 | 3.91 | 3.75 | 1.51 | 3.08 | ||||||||||||
| Ag Grade g/t Ag | 26.68 | 28.21 | 31.38 | 30.84 | 26.34 | 32.34 | 33.37 | 30.55 | 23.55 | 25.77 | 21.62 | 29.00 | ||||||||||||
| Lalor Gold Ore | ||||||||||||||||||||||||
| tonnes Ore Mined (000s) | - | 69 | 540 | 540 | 540 | 540 | 540 | 540 | 537 | 540 | 459 | 4,845 | ||||||||||||
| Ore Mined tpd | - | 191 | 1,492 | 1,492 | 1,492 | 1,492 | 1,492 | 1,492 | 1,484 | 1,492 | 1,267 | - | ||||||||||||
| Cu Grade % Cu | - | 1.12% | 0.81% | 0.99% | 0.91% | 0.83% | 0.83% | 0.85% | 1.55% | 1.54% | 0.62% | 1.00% | ||||||||||||
| Zn Grade % Zn | - | 0.38% | 0.48% | 0.92% | 0.78% | 0.35% | 0.62% | 0.95% | 0.63% | 0.47% | 0.69% | 0.65% | ||||||||||||
| Au Grade g/t Au | - | 5.83 | 6.62 | 6.19 | 5.33 | 6.42 | 7.37 | 5.41 | 6.70 | 6.71 | 7.15 | 6.41 | ||||||||||||
| Ag Grade g/t Ag | - | 20.69 | 26.67 | 22.08 | 24.37 | 23.52 | 32.91 | 26.54 | 29.33 | 26.66 | 28.24 | 26.59 | ||||||||||||
| Total Ore - Lalor | ||||||||||||||||||||||||
| tonnes Ore Mined (000s) | 1,575 | 1,575 | 1,575 | 1,537 | 1,575 | 1,575 | 1,575 | 1,278 | 1,058 | 1,058 | 634 | 15,015 | ||||||||||||
| Ore Mined tpd | 4,351 | 4,351 | 4,351 | 4,246 | 4,351 | 4,351 | 4,351 | 3,530 | 2,923 | 2,923 | 1,753 | - | ||||||||||||
| Cu Grade % Cu | 0.64% | 0.67% | 0.68% | 0.72% | 0.71% | 0.65% | 0.68% | 0.72% | 1.15% | 1.15% | 0.53% | 0.74% | ||||||||||||
| Zn Grade % Zn | 5.60% | 5.14% | 3.94% | 4.00% | 3.23% | 3.41% | 3.93% | 3.16% | 2.70% | 2.29% | 2.08% | 3.77% | ||||||||||||
| Au Grade g/t Au | 2.55 | 3.39 | 4.06 | 4.03 | 3.60 | 4.02 | 5.06 | 4.50 | 5.33 | 5.26 | 5.58 | 4.16 | ||||||||||||
| Ag Grade g/t Ag | 26.68 | 27.88 | 29.77 | 27.76 | 25.66 | 29.31 | 33.21 | 28.85 | 26.49 | 26.22 | 26.41 | 28.22 |
| 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | LOM | ||||||||||
| WIM Ore | ||||||||||||||||||
| tonnes Ore Mined (000s) | 104 | 414 | 438 | 438 | 401 | 316 | 288 | 49 | 2,448 | |||||||||
| Ore Mined tpd | 286 | 1,133 | 1,200 | 1,200 | 1,100 | 867 | 788 | 134 | - | |||||||||
| Cu Grade % Cu | 1.22% | 1.62% | 1.47% | 1.72% | 1.71% | 1.71% | 1.67% | 1.70% | 1.63% | |||||||||
| Zn Grade % Zn | 0.09% | 0.18% | 0.32% | 0.42% | 0.28% | 0.17% | 0.13% | 0.13% | 0.25% | |||||||||
| Au Grade g/t Au | 0.76 | 1.24 | 1.55 | 1.74 | 1.82 | 1.82 | 1.68 | 1.87 | 1.60 | |||||||||
| Ag Grade g/t Ag | 4.64 | 6.01 | 5.66 | 6.51 | 6.67 | 6.92 | 6.76 | 6.86 | 6.31 | |||||||||
| 3 Zone Ore | ||||||||||||||||||
| tonnes Ore Mined (000s) | - | - | - | - | 38 | 219 | 219 | 187 | 662 | |||||||||
| Ore Mined tpd | - | - | - | - | 103 | 600 | 600 | 511 | - | |||||||||
| Cu Grade % Cu | - | - | - | - | - | - | - | - | - | |||||||||
| Zn Grade % Zn | - | - | - | - | - | - | - | - | - | |||||||||
| Au Grade g/t Au | 3.40 | 4.17 | 4.17 | 4.46 | 4.21 | |||||||||||||
| Ag Grade g/t Ag | - | - | - | - | - | - | - | - | - | |||||||||
| Total Ore - Satellite Deposits | ||||||||||||||||||
| Ore Mined tonnes | 104 | 414 | 438 | 438 | 438 | 535 | 507 | 235 | 3,110 |
| (000s) | |||||||||
| Ore Mined tpd | 286 | 1,133 | 1,200 | 1,200 | 1,203 | 1,467 | 1,389 | 645 | - |
| Cu Grade % Cu | 1.22% | 1.62% | 1.47% | 1.72% | 1.56% | 1.01% | 0.95% | 0.35% | 1.28% |
| Zn Grade % Zn | 0.09% | 0.18% | 0.32% | 0.42% | 0.26% | 0.10% | 0.07% | 0.03% | 0.20% |
| Au Grade g/t Au | 0.76 | 1.24 | 1.55 | 1.74 | 1.96 | 2.78 | 2.76 | 3.93 | 2.15 |
| Ag Grade g/t Ag | 4.64 | 6.01 | 5.66 | 6.51 | 6.10 | 4.09 | 3.84 | 1.42 | 4.97 |
Note: Tonnes per day (“tpd”) assumes 365 operating days a year. LOM refers to life-of-mine.
Snow Lake Metallurgical Recoveries
| LOM Average | |||
|---|---|---|---|
| Base Metal Ore Through Stall | |||
| Average Lalor Ore Recoveries | |||
| Cu | 83.6% | ||
| Au | 52.9% | ||
| Ag | 53.3% | ||
| Zn | 93.2% | ||
| Gold Ore Through New Britannia | |||
| Average Lalor Ore Recoveries | |||
| Cu | 93.9% | ||
| Au | 93.3% | ||
| Ag | 77.8% | ||
| Average WIM Ore Recoveries | |||
| Cu | 97.7% | ||
| Au | 88.4% | ||
| Ag | 69.8% | ||
| Average 3 Zone Ore Recoveries | |||
| Au | 85.0% |
Snow Lake Production Profile
| Lalor Mine | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | LOM | |
| Production | |||||||||||||
| Cu tonnes (000s) | 8 | 9 | 9 | 10 | 10 | 9 | 9 | 8 | 11 | 11 | 3 | 97 | |
| Zn tonnes (000s) | 81 | 74 | 55 | 52 | 43 | 48 | 54 | 32 | 23 | 20 | 9 | 492 | |
| Au ounces (000s) | 74 | 102 | 158 | 151 | 136 | 154 | 192 | 139 | 146 | 146 | 103 | 1,501 | |
| Ag ounces (000s) | 783 | 829 | 956 | 851 | 828 | 914 | 1,087 | 778 | 665 | 625 | 382 | 8,698 |
| WIM Mine | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | LOM | |
| Production | ||||||||||
| Cu tonnes (000s) | 1 | 7 | 6 | 7 | 7 | 5 | 5 | 1 | 39 | |
| Zn tonnes (000s) | - | - | - | - | - | - | - | - | - | |
| Au ounces (000s) | 2 | 14 | 19 | 22 | 21 | 17 | 14 | 3 | 110 | |
| Ag ounces (000s) | 10 | 56 | 54 | 65 | 61 | 50 | 44 | 8 | 347 |
| 3 Zone Mine | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | LOM | |
| Production | ||||||||||
| Cu tonnes (000s) | - | - | - | - | - | - | - | - | - | |
| Zn tonnes (000s) | - | - | - | - | - | - | - | - | - | |
| Au ounces (000s) | - | - | - | - | 3 | 25 | 25 | 23 | 76 | |
| Ag ounces (000s) | - | - | - | - | - | - | - | - | - |
Note: Production includes metal contained in concentrate and doré.
Snow Lake Unit Operating Costs and Cash Costs
| Unit Operating Costs | LOM Average |
|---|---|
| Mining – Lalor C$/tonne | $110.20 |
| Mining – WIM C$/tonne | $73.44 |
| Mining – 3 Zone C$/tonne | $68.41 |
| Milling – Stall C$/tonne | $28.01 |
| Milling – New Britannia C$/tonne | $39.01 |
Note:
1. Unit operating costs exclude general and administrative costs related to shared services incurred in Flin Flon and allocated between 777 and Lalor mines.
2. Mining costs include costs to truck approximately 1,000 tonnes per day from Lalor to Flin Flon until New Britannia is operating in 2022.
| Gold Cash Costs | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2022-2029 | ||
| Avg. | |||||||||||||
| ounces Gold Production (000s) | 74 | 102 | 158 | 151 | 136 | 154 | 192 | 139 | 146 | 146 | 153 | ||
| Cash Costs US$/oz | ($95) | $151 | $371 | $507 | $584 | $524 | $387 | $624 | $434 | $456 | $480 | ||
| Sustaining Cash US$/oz Costs | $966 | $980 | $848 | $805 | $882 | $720 | $460 | $685 | $443 | $466 | $657 | ||
| 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2030-2037 | LOM Avg. | ||||
| Avg. | |||||||||||||
| ounces Gold Production (000s) | 105 | 14 | 19 | 22 | 24 | 41 | 39 | 25 | 36 | 94 | |||
| Cash Costs US$/oz | $669 | $154 | $309 | $160 | $212 | $263 | $312 | $346 | $410 | $423 | |||
| Sustaining Cash US$/oz Costs | $815 | $1,312 | $855 | $175 | $709 | $728 | $583 | $346 | $700 | $697 |
Note:
1. Production includes metal contained in concentrate and doré.
2. Cash costs include all onsite (mining, milling and general and administrative) and offsite costs associated with Lalor, WIM and 3 Zone and are reported net of by-product credits. By-product credits calculated using the following assumptions: zinc price (includes premium) of $1.18 per pound in 2020, $1.08 per pound in 2021 to 2023, $1.17 per pound long-term; copper price of $2.65 per pound in 2020, $3.00 per pound in 2021, $3.10 per pound in 2022 and long-term; silver price of $16.00 per ounce in 2020, $16.50 per ounce in 2021 to 2023, and $17.00 per ounce long-term; C$/US$ exchange rate of 1.30 for current and longterm.
3. Sustaining cash costs incorporate all costs included in cash costs calculation plus sustaining capital expenditures.
4. 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 year ended December 31, 2019.
Snow Lake Capital Expenditures
| Capital Expenditures | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |||||||||||
| Sustaining Capital | |||||||||||||||||||||
| Lalor Sustaining Capital | C$ millions | $102 | $111 | $98 | $58 | $53 | $39 | $18 | $11 | $2 | $2 | ||||||||||
| Total Sustaining Capital | US$ millions | $79 | $85 | $75 | $45 | $41 | $30 | $14 | $8 | $1 | $1 | ||||||||||
| Growth Capital | |||||||||||||||||||||
| New Britannia Capital | C$ millions | $105 | $48 | - | - | - | - | - | - | - | - | ||||||||||
| Total Growth Capital | US$ millions | $80 | $37 | - | - | - | - | - | - | - | - |
| Capital Expenditures | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | ||||||||||
| Sustaining Capital | |||||||||||||||||||
| WIM Sustaining Capital | C$ millions | - | $20 | $21 | $13 | - | - | - | - | - | |||||||||
| 3 Zone Sustaining Capital | C$ millions | - | - | - | - | - | $16 | $25 | $14 | - | |||||||||
| Total Sustaining Capital | US$ millions | - | $15 | $16 | $10 | - | $12 | $19 | $10 | - | |||||||||
| Growth Capital | |||||||||||||||||||
| WIM Development | C$ millions | $50 | - | - | - | - | - | - | - | - | |||||||||
| 3 Zone Development | C$ millions | - | - | - | - | - | - | - | - | - | |||||||||
| Total Growth Capital | US$ millions | $39 | - | - | - | - | - | - | - | - |
Note: Totals may not add up correctly due to rounding. ”LOM” refers to life-of-mine. Canadian dollar capital expenditures converted to U.S. dollar capital expenditures at an exchange rate of 1.30 C$/US$.
Snow Lake Mineral Reserves and Resources
Current mineral reserves and resources (exclusive of reserves) for Lalor and other Snow Lake satellite deposits as of January 1, 2020 are summarized below.
| Lalor Mine | Cu Grade | Zn Grade | Au Grade | Ag Grade | |
|---|---|---|---|---|---|
| Tonnes | |||||
| Mineral Reserve and Resource Estimates1,2,3,4 | (%) | (%) | (g/t) | (g/t) | |
| Base Metal Zone Reserves | |||||
| Proven | 7,276,000 | 0.57 | 6.27 | 2.42 | 29 |
| Probable | 1,739,000 | 0.60 | 4.15 | 3.83 | 31 |
| Gold Zone Reserves | |||||
| Proven | 1,748,000 | 1.37 | 1.11 | 6.70 | 24 |
| Probable | 4,251,000 | 0.83 | 0.42 | 6.21 | 27 |
| Total Proven and Probable | 15,015,000 | 0.74 | 3.77 | 4.16 | 28 |
| Base Metal Zone Resources | |||||
| Inferred | 454,000 | 0.34 | 7.32 | 2.16 | 21 |
| Gold Zone Resources | |||||
| Inferred | 3,945,000 | 1.31 | 0.31 | 4.69 | 26 |
Total Inferred 4,399,000 1.21 1.03 4.43 26 Note: totals may not add up correctly due to rounding.
1 Mineral resources are exclusive of mineral reserves and do not have demonstrated economic viability.
2 Mineral reserves and resources calculated using metal prices of $1.17 per pound zinc (includes premium), $1,375 per ounce gold, $3.10 per pound copper, $17.00 per ounce of silver.
3 Mineral reserves are estimated at an NSR cut-off of $101 per tonne for waste filled mining areas and a minimum of $113 per tonne for paste filled mining areas.
4 Mineral resources are estimated at a minimum NSR cut-off of $101 per tonne.
| Snow Lake Regional Deposits - Gold | Cu Grade | Zn Grade | Au Grade | Ag Grade | |
|---|---|---|---|---|---|
| Tonnes | |||||
| Mineral Reserve and Resource Estimates | (%) | (%) | (g/t) | (g/t) | |
| Probable Reserves1 | |||||
| WIM | 2,448,000 | 1.63 | 0.25 | 1.6 | 6.3 |
| 3 Zone | 662,000 | - | - | 4.2 | - |
| Total Probable (Gold) | 3,110,000 | 1.28 | 0.20 | 2.2 | 5.0 |
| Inferred Resources2 | |||||
| Birch | 569,000 | - | - | 4.4 | - |
| New Britannia | 2,753,000 | - | - | 4.5 | - |
| Total Inferred (Gold) | 3,222,000 | - | - | 4.5 | - |
Note: totals may not add up correctly due to rounding.
1 WIM mineral reserves are estimated at a minimum net smelter return (“NSR”) cut-off of C$150 per tonne, assuming processing recoveries of 98% for copper, 88% for gold and 70% for silver, and using long-term prices of $3.10 per pound copper, $1,375 per ounce gold and $17.00 per ounce silver. 3 Zone mineral reserves are estimated at a minimum NSR cut-off of C$150 per tonne, assuming processing recoveries of 85% for gold, and using a long-term price of $1,375 per ounce gold.
2 Mineral resources are exclusive of mineral reserves and do not have demonstrated economic viability. New Britannia mineral resource estimates have been reported at a minimum true width of 1.5 metres and with a cut-off grade varying from 2 grams per tonne (at the lower part of New Britannia) to 3.5 grams per tonne (at the upper part of New Britannia).
| Snow Lake Regional Deposits – Base Metals | Cu Grade | Zn Grade | Au Grade | Ag Grade | |
|---|---|---|---|---|---|
| Tonnes | |||||
| Mineral Reserve and Resource Estimates1 | (%) | (%) | (g/t) | (g/t) | |
| Indicated Resources | |||||
| Pen II | 469,000 | 0.49 | 8.89 | 0.35 | 6.8 |
| Total Indicated (Base Metals) | 469,000 | 0.49 | 8.89 | 0.35 | 6.8 |
| Inferred Resources | |||||
| 1901 | 2,065,000 | 0.25 | 9.67 | 0.87 | 30.3 |
| Watts | 3,153,000 | 2.34 | 2.58 | 0.95 | 31 |
| Pen II | 132,000 | 0.37 | 9.81 | 0.3 | 6.9 |
| Total Inferred (Base Metals) | 5,350,000 | 1.48 | 5.49 | 0.9 | 30.1 |
Note: totals may not add up correctly due to rounding.
1 Mineral resources are exclusive of mineral reserves and do not have demonstrated economic viability. 1901 mineral resources are estimated at a minimum NSR cut-off of $170 per tonne, assuming processing recoveries of 73% for copper, 94% for zinc, 48% for gold and 47% for silver, and using long-term prices of $3.10 per pound copper, $1,260 per ounce gold, $1.10 per pound zinc and $18.00 per ounce silver. Watts mineral resources are estimated at a minimum NSR cut-off of $150 per tonne, assuming processing recoveries of 87% for copper, 80% for zinc, 65% for gold and 64% for silver, and using long-term prices of $3.10 per pound copper, $1,375 per ounce gold, $1.10 per pound zinc and $17.00 per ounce silver. Pen II mineral resources are estimated at a minimum NSR cut-off of $75 per tonne and assume that the Pen II mineral resources would be amenable to processing at the Stall mill.
Phase Three of Snow Lake Gold Strategy and Exploration Upside
Exploration efforts at the Lalor mine were highly successful in 2019 with the definition of additional mineral resources at Lalor. The updated resource model at Lalor includes 4.4 million tonnes of inferred mineral resources, which have the potential to extend the Lalor mine life beyond the current estimate of ten years. A new copper-gold rich lens, called Lens 17, is included in the updated inferred mineral resource estimate for Lalor. Lens 17 contains an inferred mineral resource of 0.8 million tonnes at 3.0% copper, 3.7 grams per tonne gold and 18 grams per tonne silver. Please refer to Figure 2 for a 3D image of Lens 17, including the location of the drill holes and a conceptual development plan. Lens 17 and other lenses at Lalor, including the copper-gold rich Lens 27, remain open down plunge and offer opportunities to further expand Lalor’s resource base once suitable underground drilling platforms have been established over the next two years.
In addition, the mineral resources at Hudbay’s satellite gold deposits in the Snow Lake region, such as Birch and the New Britannia deposit, could provide feed for the New Britannia processing facilities and further extend the mine life. New Britannia and Birch are mineralized zones at the past producing New Britannia gold mine that would be accessible with some investment in the existing mining infrastructure.
The 1901 deposit is located approximately half-way between the former Chisel North mine and the Lalor mine at a depth between 500 metres to 700 metres and within 1,000 metres of the existing haulage ramp to Lalor. The 1901 deposit could provide additional feed for the processing facilities in Snow Lake. On August 8, 2019, Hudbay published an initial inferred mineral resource estimate for the zinc-rich 1901 deposit discovered six months earlier. Since August 2019, the company has considered various options to develop the 1901 deposit and is completing a drill program aimed at converting a significant portion of the inferred mineral resources to an indicated category and to define an initial inferred mineral resource for the gold mineralization previously intersected between two lenses of zinc-rich mineralization. Hudbay intends to provide an update on the mineral resource estimates and development options for the 1901 deposit with its annual reserve and resource update in March 2021.
The Watts and Pen II deposits present additional opportunities to further optimize the Snow Lake operations. Confirmatory drilling conducted during 2019 at the 100% owned Watts deposit supported an initial inferred mineral resource estimate of approximately 3.2 million tonnes at 2.34% copper, 2.58% zinc, 0.95 grams per tonne gold and 31 grams per tonne silver. The Watts deposit is located approximately 95 kilometres from the Stall concentrator and is in close proximity to roads and power lines. Please refer to Figure 1 for a map of the location of the Watts deposit. Watts was discovered by the company in 1982 with the majority of the drilling being conducted between 1996 and 2008. Considering the available processing capacity at the Stall concentrator and recent drilling successes which expanded the volume of high-grade copper mineralization at Watts, Hudbay is now confident that the potential for economic extraction of the Watts deposit has been established to a level sufficient to report an initial inferred mineral resource estimate.
Pen II is a low tonnage and high-grade zinc deposit that starts from surface and is located within trucking distance of the Stall mill. In 2019, Hudbay defined an indicated resource estimate of 0.5 million tonnes at 8.9% zinc. Pen II could constitute a supplemental source of feed for the Stall mill. Hudbay expects to continue metallurgical testing, infill drilling and technical studies in an attempt to confirm the technical and economic viability of the resource.
In 2020 and 2021, additional technical studies and exploration activities will be conducted to confirm how the Lalor inmine exploration targets and the regional gold and base metal satellite deposits could be incorporated in the consolidated business plan of the Snow Lake operations.
For additional details on the Lalor mine and the company’s Snow Lake operations, refer to the technical report titled “NI 43-101 Technical Report, Lalor and Snow Lake Operations, Manitoba, Canada”, effective January 1, 2019, which was filed on March 28, 2019 on Hudbay’s profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
777 Mine
Based on the most recent estimate of mineral reserves, the 777 mine life has been extended to the end of the second quarter of 2022.
Current mineral reserves and resources (exclusive of reserves) for 777 as of January 1, 2020 are summarized below.
| 777 Mine | Cu Grade | Zn Grade | Au Grade | Ag Grade | |
| Tonnes | |||||
| Mineral Reserve and Resource Estimates1 | (%) | (%) | (g/t) | (g/t) | |
| Mineral Reserves | |||||
| Proven | 2,122,000 | 1.44 | 4.55 | 2.01 | 27 |
| Probable | 459,000 | 1.11 | 4.11 | 1.75 | 26 |
| Total Proven and Probable | 2,581,000 | 1.38 | 4.47 | 1.96 | 27 |
| Mineral Resources | |||||
| Measured | 370,000 | 2.02 | 3.69 | 1.97 | 25 |
| Indicated | 140,000 | 1.02 | 3.85 | 1.57 | 26 |
| Total Measured and Indicated | 510,000 | 1.75 | 3.74 | 1.86 | 26 |
| Inferred | 210,000 | 1.48 | 5.22 | 3.11 | 40 |
Note: totals may not add up correctly due to rounding.
1 Mineral resources are exclusive of mineral reserves and do not have demonstrated economic viability. Mineral reserves and resources calculated using life-of-mine (2020-2022) average metal prices of $2.92 per pound copper, $1.11 per pound zinc (includes premium), $1,392 per ounce gold, $16.33 per ounce silver and using a C$/US$ exchange rate of 1.30.
Constancia Mine
In 2019, infill drilling and economic re-evaluations have provided the basis to convert measured and indicated mineral resources to mineral reserves which have largely offset 2019 mining depletion. As a result, an additional year has been added and the expected mine life has been maintained at 17 years. Inferred mineral resources have also increased in 2020 due to higher long-term price forecasts in the NSR cut-off value used for reporting.
Current mineral reserves and resources (exclusive of reserves) for Constancia as of January 1, 2020 are summarized below.
| Constancia Mine | Cu Grade | Mo Grade | Au Grade | Ag Grade | |
|---|---|---|---|---|---|
| Tonnes | |||||
| Mineral Reserve and Resource Estimates1 | (%) | (g/t) | (g/t) | (g/t) | |
| Constancia Reserves | |||||
| Proven | 408,800,000 | 0.28 | 85 | 0.035 | 2.76 |
| Probable | 77,500,000 | 0.27 | 70 | 0.044 | 3.58 |
| Total Proven and Probable - Constancia | 486,300,000 | 0.28 | 83 | 0.036 | 2.89 |
| Pampacancha Reserves | |||||
| Proven | 32,400,000 | 0.59 | 178 | 0.368 | 4.48 |
| Probable | 7,500,000 | 0.62 | 173 | 0.325 | 5.75 |
| Total Proven and Probable - Pampacancha | 39,900,000 | 0.60 | 177 | 0.360 | 4.72 |
| Total Proven and Probable | 526,600,000 | 0.30 | 90 | 0.061 | 3.03 |
| Constancia Resources | |||||
| Measured | 122,700,000 | 0.18 | 55 | 0.028 | 1.77 |
| Indicated | 154,300,000 | 0.20 | 65 | 0.033 | 1.87 |
| Inferred | 83,100,000 | 0.18 | 43 | 0.036 | 3.39 |
| Pampacancha Resources | |||||
| Measured | 11,400,000 | 0.41 | 101 | 0.245 | 4.95 |
| Indicated | 6,000,000 | 0.35 | 84 | 0.285 | 5.16 |
| Inferred | 10,100,000 | 0.14 | 143 | 0.233 | 3.86 |
| Total Measured and Indicated | 294,400,000 | 0.20 | 63 | 0.045 | 2.01 |
| Total Inferred | 93,200,000 | 0.18 | 54 | 0.057 | 3.44 |
Note: totals may not add up correctly due to rounding.
1 Mineral resources are exclusive of mineral reserves and do not have demonstrated economic viability. Mineral reserves and resources calculated using metal prices of $3.10 per pound copper, $11.00 per pound molybdenum, $17.00 per ounce silver and $1,375 per ounce gold. The Constancia and Pampacancha reserve pits consist of operational pits of proven and probable reserves and are based on metal prices noted, metallurgical recoveries applied by ore type (between 84.4% to 90.5%), and processing costs of $4.54 per tonne milled, general and administrative costs of $1.60 per tonne milled and mining costs of $1.30 and $1.35 per tonne moved (waste and ore, respectively).
Constancia North Drilling
Hudbay completed a drill program of seven holes in December 2019 to test a possible extension of copper porphyry and high-grade skarn mineralization occurring within 300 metres of the edge of the current Constancia pit. The location of the drill holes with respect to the existing Constancia pit is shown in Figure 3. The occurrence of highgrade skarn mineralization in two historical holes drilled in 2007 and 2008 was confirmed with this program, including seven new intersections of copper porphyry and high-grade copper-gold-silver skarn comparable to the mineralization currently mined at Constancia. These intersections warrant further exploration in 2020 to confirm if additional mineral resources could be defined and potentially support an extension of the Constancia pit to the north. Significant historical and recent drill intersections north of the Constancia pit are summarized below.
| Hole ID | From | To | Intercept1 | Cu2,3 | Au2,3 | Ag2,3 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (m) | (m) | (m) | (%) | (g/t) | (g/t) | |||||||
| CO-19-306 | 368.0 | 408.6 | 40.6 | 0.52 | 0.79 | 17.89 | ||||||
| CO-19-307 | 42.0 | 62.0 | 20.0 | 0.20 | 0.03 | 3.55 | ||||||
| CO-19-308 | 35.0 | 57.0 | 22.0 | 0.24 | 0.07 | 2.03 | ||||||
| CO-19-310 | 263.0 | 361.0 | 98.0 | 1.10 | 0.08 | 5.93 | ||||||
| CO-19-311 | 90.3 | 118.0 | 27.7 | 0.54 | 0.45 | 11.78 | ||||||
| CO-20-314 | 73.0 | 100.0 | 27.0 | 0.23 | 0.03 | 16.55 | ||||||
| CO-20-315 | 19.0 | 86.0 | 67.0 | 0.31 | 0.00 | 3.28 | ||||||
| CO-07-1094 | 305.0 | 348.0 | 43.0 | 1.54 | 0.23 | 3.28 | ||||||
| CO-08-2154 top | 24.0 | 59.9 | 35.9 | 0.25 | 0.21 | 11.47 | ||||||
| CO-08-2154 bottom | 217.3 | 346.0 | 128.7 | 0.82 | 0.05 | 13.56 |
1 True widths cannot be estimated at this stage given the uncertainties of the skarn mineralization geometry.
2 All copper, gold and silver values are uncut.
3 Specific gravity results are pending - assay results are length weighted.
4 Historical drill results from 2007 and 2008.
| Hole ID | From (m) | To (m) | Azimuth at Intercept | Dip at Intercept | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Core | |||||||||||||||
| Easting | Northing | Elevation | Easting | Northing | Elevation | Size | |||||||||
| CO-19-306 | 200,774 | 8,400,155 | 3,925 | 200,764 | 8,400,152 | 3,886 | 261 | -76 | HQ | ||||||
| CO-19-307 | 200,842 | 8,400,371 | 4,235 | 200,837 | 8,400,366 | 4,216 | 227 | -69 | HQ | ||||||
| CO-19-308 | 200,850 | 8,400,385 | 4,252 | 200,846 | 8,400,389 | 4,231 | 316 | -75 | HQ | ||||||
| CO-19-310 | 200,768 | 8,400,676 | 4,085 | 200,784 | 8,400,647 | 3,993 | 153 | -70 | HQ | ||||||
| CO-19-311 | 200,622 | 8,400,633 | 4,240 | 200,632 | 8,400,622 | 4,216 | 140 | -57 | HQ | ||||||
| CO-20-314 | 200,826 | 8,400,101 | 4,199 | 200,833 | 8,400,100 | 4,173 | 92 | -75 | HQ | ||||||
| CO-20-315 | 200,883 | 8,400,328 | 4,259 | 200,874 | 8,400,316 | 4,194 | 222 | -77 | HQ | ||||||
| CO-07-109 | 200,762 | 8,400,618 | 4,055 | 200,777 | 8,400,602 | 4,018 | 135 | -60 | HQ | ||||||
| CO-08-215 top | 200,889 | 8,400,237 | 4,256 | 200,877 | 8,400,237 | 4,222 | 270 | -70 | HQ | ||||||
| CO-08-215 bottom | 200,827 | 8,400,238 | 4,073 | 200,790 | 8,400,237 | 3,950 | 268 | -73 | HQ |
Constancia Regional Potential
Along with successfully reaching an agreement to acquire the surface rights at Pampacancha, Hudbay has continued to progress its negotiations to conclude community agreements granting exploration access to the past producing Caballito property and the highly prospective Maria Reyna and Kusiorcco properties. In 2019, Hudbay concluded an agreement with the Collana Vellile community for exploration access to two exploration targets located less than 10 kilometres southwest of the Constancia mine and has initiated baseline and exploration/technical activities required to access and conduct drilling on these properties. Also, after reaching an exploration agreement with the Quehuincha community in early 2019 and subsequently completing the required Consult Previa process, the company has obtained a drill permit to test a high-grade skarn target on the Quehuincha North property located 11 kilometers to the north of Constancia. Please refer to Figure 4 for a map highlighting the location of the regional targets within trucking distance to the Constancia mine and processing facilities.
Other Development Assets
Rosemont is a copper development project, located in Pima County, Arizona, approximately 50 kilometres southeast of Tucson. The Rosemont project is expected to be an open pit, shovel and truck operation and has an expected 19year mine life. There were no changes to Rosemont’s reserves and resources during 2019. In the first half of 2019, Rosemont received the Section 404 Water Permit from the U.S. Army Corps of Engineers and the U.S. Forest Service (“USFS”) approved Rosemont’s Mine Plan of Operations (“MPO”) following an extensive Environmental Impact Statement process. The issuance of the MPO was the final administrative step in the permitting process. On July 31, 2019, the U.S. District Court for the District of Arizona (“Court”) issued a ruling in two of the lawsuits challenging the U.S. Forest Service’s issuance of the Final Record of Decision (“FROD”) for the Rosemont project (the “US Mining Law Litigation”). The Court ruled to vacate and remand the FROD thereby delaying the expected start of construction of Rosemont. In December of 2019, Hudbay and the U.S. Department of Justice each filed a notice of appeal in respect of the Court’s decision in the US Mining Law Litigation to the U.S. Ninth Circuit Court of Appeals. Hudbay expects the appeals process to take approximately two years and remains committed to evaluating all options to advance the Rosemont project.
The Mason project is a large greenfield copper deposit located in the historic Yerington District of Nevada and is one of the largest undeveloped copper porphyry deposits in North America. The Mason project’s measured and indicated mineral resources have not changed over the past year and are comparable in size to Constancia and Rosemont. Hudbay views the Mason project as a long-term option for potential future development and a strong addition to its pipeline of long-term growth opportunities. In the fourth quarter of 2019, Hudbay acquired a prospective package of patented and unpatented mining claims contiguous to the Mason project. The land package, known as the Mason Valley properties, is an exploration stage project that includes past producing mines and has the potential to provide additional mineral resources to the Mason project. The company has also entered into an option agreement to acquire an 80% interest in the Gray Hills unpatented mining claims in Lyon County, Nevada, located approximately 25 kilometres southeast of the Mason project, as part of its land consolidation strategy in the Yerington district.
Corporate Update
As announced on March 20, 2020, the company initiated a temporary and orderly shutdown of operations at Constancia after the Peruvian government declared a state of emergency causing the manufacturing and transport of critical mining supplies to be restricted. The state of emergency in Peru has since been extended until April 12, 2020. A smaller workforce has been maintained at Constancia to oversee critical aspects of the operation, with the overarching goal of facilitating a quick and efficient ramp up back to normal levels once the regional situation improves.
In Manitoba, Hudbay’s mines continue to operate and ship concentrate and zinc metal. The team is actively engaging with its employees, contractors and the local communities to manage the evolving situation and is implementing its business preparedness plan, including planning activities in the event the company needs to reduce or cease operations or construction activities in the future. The company’s focus is on maintaining business continuity and a safe environment for its workers and the communities.
Hudbay continues to prudently manage its liquidity position and currently has approximately $300 million in cash and cash equivalents. The company proactively amended its credit facilities in February 2020 to provide additional nearterm flexibility and is evaluating a variety of liquidity and capital spending options if the current environment persists. The company has the ability to defer a majority of its 2020 growth capital expenditures at Pampacancha and the New Britannia gold mill. The company will continue to monitor the macro-environment and the status of its operations to assess the potential impacts on its annual guidance disclosure and expects to provide an update with its first quarter results.
The company also acknowledges that on March 23, 2020, Fitch Ratings has assigned a first-time Long-Term Issuer Default Rating of ‘B+’ to Hudbay and Hudbay Peru S.A.C., a 'BB+'/'RR1' rating to the company's senior secured revolving credit facilities and a 'B+'/'RR4' rating to the unsecured notes, and a “stable” outlook on its rating.
Non-IFRS Financial Performance Measures
Cash cost and sustaining and all-in sustaining cash cost per ounce of gold produced are shown because the company believes they help investors and management assess the performance of its Snow Lake operations, including the margin generated by the operations and the company. Unit operating costs are shown because the measures are used by the company as a key performance indicator to assess the performance of its mining and processing operations. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. For further details on these measures, including reconciliations of historical unit operating costs and cash costs per