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Jonathon Naylor Editor Hudbay is slashing exploration by a quarter this year as the company's attention shifts to its next three mines. The company has budgeted $40 million for exploration in 2013, down 26 per cent from the $54 million allotted in 2012. 'Our focus in 2013 is on execution at our three mines currently under development: Lalor, Reed and Constancia,' said John Vincic, vice-president of investor relations and corporate communications for Hudbay. But Vincic said this year's exploration program will still be 'robust,' with slightly more than half of the money, $20.2 million, dedicated to the Flin Flon-Snow Lake area. Leverage 'Our focus in Manitoba will be to explore near active and historical mining areas,' he said. 'This will result in more exploration in and around the Flin Flon area in an effort to discover economic deposits that will allow us to leverage our existing workforce and infrastructure in the region.' Hudbay plans to spend another $18.2 million on the search for ore in South America, including Peru, home of its massive Constancia copper project, as well as Chile and Colombia. The remaining $1.6 million will fund non-Manitoba exploration within North America. Hudbay expects to conduct about 55,000 metres of drilling in the Flin Flon-Snow Lake Greenstone Belt. Another roughly 10,000 metres are to be drilled in Peru, with a further 10,000 metres, approximately, between the rest of South and North America. See 'Nearly...' on pg. 6 Continued from pg. 1 The roughly 75,000 metres projected this year represent a drop of more than 40 per cent over the 130,000-plus metres to be drilled last year. In Peru, Hudbay is set to continue exploration activities at Constancia, where its goal is to expand the current resource. The company also expects to keep drilling a target and geophysical anomaly where it says 'favourable geology' has been intersected. In terms of production in 2013, Hudbay expects to glean ore from three mines: 777 (including its recent expansion, 777 North), Lalor and Reed. Of the 2,089,000 tonnes of ore to be mined, 777 is projected to account for 1,620,000 tonnes, or 78 per cent. Another 418,000 tonnes, or 20 per cent, are to come from preliminary production at Lalor, near Snow Lake. The remaining 51,000 tonnes, or two per cent, are to come from early production at Reed, also outside Snow Lake. All metal grades are expected to be higher at 777 than at Lalor, with the exception of zinc. Lalor's anticipated zinc grade for the year is 9.89 per cent, more than double the 4.41 per cent at 777. For copper, 777's projected grade of 2.18 per cent far exceeds the 0.54 per cent at Lalor. Gold output at 777 is expected to total 1.94 grams per tonne compared to 1.23 g/t at Lalor. Silver at 777 is to be 30.89 g/t versus 17.70 g/t at Lalor. Anticipated grades at Reed _ 3.43 per cent copper, 1.18 per cent zinc, 0.72 g/t of gold and 8.80 g/t of silver _ lag behind the two much larger mines. Lalor costs more On the financial front, Hudbay is projected to spend as much as 250 per cent more to extract ore from Lalor as compared to 777. Whereas the company expects to spend $38 to $42 per tonne at 777, the cost at Lalor will be between $75 and $95 a tonne. But it's not a trend that should continue as Lalor moves toward full production in 2015. 'Over time we expect these costs will come down significantly once the main production shaft is commissioned and the new (Snow Lake) concentrator is built and operational,' said Vincic. 'At that time, we expect both the mining and milling costs at Lalor to be comparable to those at 777.' Anticipated tonnage costs at Reed were not available. Hudbay expects the Flin Flon concentrator will process a bit less ore this year compared to 2012, but again it's not seen as a long-term situation. 'This was anticipated with the closure of Trout Lake (mine) in the middle of 2012,' Vincic said. 'However, we expect this will be a short-term phenomenon as increased production from 777 North and future production from Reed beginning in the fourth quarter of 2013 help us return to recent historical mining levels that will improve utilization at the concentrator.' Once Reed hits full production in 2014, Vincic said, the company expects throughput rates at the Flin Flon concentrator to return to the levels of recent years. At the Flin Flon zinc plant, domestic zinc production, together with total year-end zinc concentrate inventory of about 18,000 tonnes, is expected to result in production at levels consistent with 2012. Hudbay does not project the need for new third-party purchased concentrate to achieve these production levels at the zinc plant. Overall, the Toronto-based company believes operating costs this year will be similar to those of the past several years thanks to what it calls 'ongoing productivity efforts.' 'As in past years, costs in the first and fourth quarters are expected to be higher due to additional heating and other seasonal costs,' the company said in a news release.
