Hudbay has no plans to shut down its Flin Flon metallurgical complex and is exploring other sources of feed to offset the eventual closure of 777 mine, says the head of the company’s Manitoba operations.
In an address that countered gloomy public speculation, Rob Winton also said Hudbay’s northern Manitoba exploration department is alive and vital, and that an upcoming staff change will be promising for prospecting.
Winton fielded a series of questions from the media and civic leaders at Tuesday’s Flin Flon and District Chamber of Commerce meeting. He was asked about speculation that the metallurgical complex would fully or partially shut down following the closure of 777 mine in about five years.
He said 777 mine is the “lifeblood” of the complex as the company faces the reality that 777 and its 4,000 tonnes of ore a day, and Reed mine and its 1,300 tonnes a day, are nearing the end of their lives.
“The metallurgical facility, however, is not tied directly to 777,” Winton said. “There are opportunities to bring concentrate to Flin Flon. Those are being explored as we speak. Also, different opportunities [exist] with respect to purchasing ore. There’s lots of [junior companies] in the area that are busy. Not a lot of them have [had] a great deal of success, but we have five years with which to find ore to supplement the feed here in town.”
Winton pointed out that the zinc plant, which is part of the metallurgical complex, has the ability to operate at tonnages lower than current levels.
“It’s finding that sweet spot,” he said. “Basically our entire 2016 is [about] understanding what the future looks like, through studies, through understanding what the markets can bear or not bear. Can we find concentrate? Is it economical to bring it to Manitoba? What does the government have to offer with respect to tax incentives or regimes, because right now we pay more for bringing concentrate into site than we would if it was locally sourced, which is very concerning for a metallurgical complex.”
Winton said it’s up to Manitoba’s new PC government to consider policies to help metallurgical complexes survive, adding, “Mines open and close. Metallurgical complexes are what communities can thrive on.”
To underscore his point, Winton said Hudbay’s Flin Flon infrastructure “comes along once in a lifetime…so getting rid of it is not in our plans.”
Optimistic
That said, the eventual closure of 777 mine has spawned a sky-is-falling mentality among a number of area residents. Winton addressed that sentiment.
“I hear the sky is falling, and there are some optimistic people,” he said. “I’m a glass-is-half-full kind of guy, so there [are] opportunities, and those are the opportunities that we have to chase. If I was a glass-half-[empty person], I would just stop. It would be a lot easier to shut everything down and move on with our lives, but I’m not going to take the easy way out. The hard way is to do what’s right, both as an organization, as a community, as a member of northern Manitoba. Doing the right thing is what we’re going to do from a business unit perspective. And that’s my battle I have to have in my boardroom with my bosses, is to ensure that we create an environment where capital money can come to Manitoba.”
Paste plant
Winton said capital dollars are indeed flowing to northern Manitoba as Hudbay has a detailed plan for a paste plant in Snow Lake. The plant would take tailings from the Stall concentrator and mix them with cement, creating paste to be used underground at Lalor mine.
He called this plant “the biggest project we have in northern Manitoba and in the company,” one that “will really drive a lot of economic improvements to the business unit.
“With economic improvements you deliver more opportunities to drill and to find [junior companies] to partner with, et cetera, et cetera. But we do need some help from the markets in order to have the metal price that’s sustainable for the long term.”
Hudbay is also studying the feasibility of reopening the former New Britannia gold mill, which it purchased last year, and “truly understanding what the Lalor ore body has to offer with respect to gold,” said Winton.
The potential of gold mining at Lalor and a revamped New Britannia mill would open up a new frontier for Hudbay.
“We have never gone out looking for gold properties,” said Winton, adding that Hudbay’s goal is to fill the processing capacity at all of its mills.
If Lalor does expand beyond base metals and into gold, Winton does not foresee a significant increase in underground employees. He said there would likely be a need for more workers on the milling end of the operation.
“And I don’t even have a guess as to how many employees that would take, as we’re sort of understanding the mechanical and electrical [factors] of that and not yet the operation of how we’re going to actually run [the New Britannia mill] when we get it going,” he said.
Exploration
With nearly 30 people on hand at the Friendship Centre restaurant, Winton faced further queries about Hudbay’s exploration plans for the Flin Flon area in light of reductions to its prospecting department last year.
He said Hudbay did not eliminate exploration but did switch that department’s focus this year to Lalor mine, where the company is testing two gold-containing zones.
“We’re understanding the metallurgy of those two zones and understanding how we’re going to mine them,” Winton said. “We’re upgrading that resource to understand exactly how much gold we have available to us. That’s going to [be] key [to] our financing plans going forward.”
With a retirement pending in the exploration department, he said Hudbay is rehiring a former employee to run that operation. This, he said, “will do very good things for the local area, both in Snow Lake and Flin Flon.”
Still on exploration, Winton said junior companies have ability to access capital that he does not. He cited the potential for option agreements.
“That is what we’re focusing on with respect to our [mineral] target generation in the Flin Flon immediate area,” he said.
Hudbay has been talking about 777 mine closing around 2020, but in his Tuesday address Winton referred to the figure of five years, which would take the mine to 2021.
Asked whether 777 could last beyond five years, he said that is possible based on factors such as metal prices, costs and ore grade, but “we’re not going to add 10 years of life to 777.”
Workforce
With respect to the workforce, Winton mentioned that crushing in the Snow Lake area is currently contracted out and that Hudbay wants to bring that facet of operations in house.
He said Hudbay has hired a significant number of young people in recent years, adding there are many retirements to come given the “big wave” of employees in the 55- to 58-year age range.
Winton shared his belief that the company must create more economic opportunities for First Nations people in the region.
An ongoing question regarding Hudbay revolves around whether significant numbers of employees who work in Snow Lake will eventually move to that community rather than commute from Flin Flon, as is now common practice.
Though he called Snow Lake a “beautiful community,” Winton doesn’t foresee mass relocations.
“A camp is probably going to be [in place for] the life of Snow Lake [operations] for the foreseeable and long-term future,” he said. “And it’s then finding that ability to incent people to want to move to town, because everybody gets sick of travelling after some period of time.”
Prices
The past year has been challenging for the mineral sector in Canada and beyond, with low metal prices taking a toll on existing mines and delaying plans for future mines.
Winton said most people believe the market will rebound in another two years, “which is a significant amount of time…to be in cost-cutting mode.”
He said cost reductions are difficult on employees, noting Hudbay declined to give staff members pay raises this year since the alternative was to lay people off.
Hudbay by the numbers
$500 to $550 million: Amount of money Hudbay spends in Manitoba in a given year. Roughly $200 million is for labour.
$35 million: Savings Hudbay has committed to finding in Flin Flon and Snow Lake. Winton said some of the savings are being realized through revamped arrangements with vendors. He said the company talked to its main vendors last year “to share how we’re doing in Manitoba and how we needed to change some of our relationships with our vendors,” a move “that is starting to reap some reward with respect to cost containment.”
650: Hudbay employees working at the Flin Flon metallurgical complex that the company plans to maintain. This is about 48 per cent of the company’s total Flin Flon-Snow Lake workforce.
265: Hudbay employees working at 777 mine. This represents about 20 per cent of the company’s Flin Flon-Snow Lake labour force.
15: Years remaining at Lalor mine, though there is “lots of upside potential,” according to Winton.
5: Years remaining at 777 mine.
3: Years remaining at Reed mine.
