Hudbay makes $115 million deal on Snow Lake gold results

Hudbay has announced plans to pump over $100 million USD into its operations in Snow Lake.

The company announced May 7 that it had reached a deal with its lenders on a forward sale and prepay arrangement for revenues from gold production in the area.

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Hudbay’s deal was arranged in large part by National Bank Financial, one of Canada’s largest investment banks. Bank of Montreal, ING and the Canadian Imperial Bank of Commerce (CIBC) are listed in the agreement as counterparties.

In the deal, Hudbay will receive $115 million USD in upfront cash for delivering around 80,000 ounces of gold - an average of 3,331 ounces a month - in both 2022 and 2023. The payment, paid out without further conditions, was finalized May 11.

The forecasted amount of gold will equal around a full quarter of the company’s forecasted gold production for operations around Snow Lake once full operation is reached. The money received by Hudbay will go toward funding the rest of the refurbishment of the New Brittannia gold mill, a project which is expected to take 18 months to finish up. Hudbay anticipates an up-and-running and refurbished New Brit gold mill will increase gold production at Lalor to as much as 150,000 ounces a year, starting in 2022.

The deal is based on forecasted gold prices of about $1,682 USD per ounce. As of the morning of May 11, gold prices were higher than the forecasted price, coming in around $1,700 USD per ounce.

“We are pleased to bolster our liquidity position and prefund the entire capital budget for the New Britannia gold mill refurbishment, which is a low-risk, high-return investment with a short payback that is expected to more than double our gold production in Snow Lake to over 150,000 ounces per year by 2022,” said Hudbay president and CEO Peter Kukielski in a press release.

“This transaction allows us to take advantage of the strong gold price environment at a forward price that is significantly higher than our internal gold price forecasts used for reserve calculations and budgeting.”

In March, Hudbay released an update to gold reserves and resources for Manitoba operations including in Snow Lake, where the company included a 35 per cent increase in gold reserves at company properties in the area. In total, Hudbay believes there is as much as 2.2 million ounces of gold in the ground near Snow Lake.

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