Hudbay’s loss in Arizona could end up being a gain for northern Manitoba, according to the company’s recent second quarter results conference call.
The decision released by a United States district court preventing Hudbay from moving forward with their Rosemont project in Arizona might have sent their stock prices spiraling down, but it could mean extra investment for the company’s Manitoba properties.
Hudbay interim CEO and board chair Peter Kukielski explained the company will be exploring all options in appealing the recent Rosemont decision but expects the process to take anywhere from 12-24 months.
In the meantime, Kukielski mentioned money committed by Hudbay to the Rosemont project was put on hold, with over $80 million non-refundable, mostly in equipment orders. With some spare capital now free for the company, Hudbay is looking for a place to spend it.
“We think that there’s a number of organic growth opportunities inside the business already, that have some capital requirements associated with it,” Hudbay’s CFO David Bryson said.
One of those opportunities is with the recently discovered 1901 deposit in Snow Lake.
Along with the earnings report, Hudbay released an update on the 1901 deposit near the Lalor mine and the former Chisel mine site close to Snow Lake.
“We announced an initial resource estimate at the 1901 deposit in Snow Lake, only six months after its discovery in February of this year,” Kukielski said.
“In visiting recently with the team onsite, I have been impressed by the level of excitement around the 1901 deposit and significant upside potential that exists.”
According to Hudbay, the inferred resources at the 1901 deposit rank it in the top 10 deposits owned by the company in the Flin Flon/ Snow Lake, with potential for expansion.
“The deposit remains open in several directions,” Hudbay’s COO Cashel Meagher said.
“Exploration targets for new discrete lenses also exist in the immediate vicinity of 1901. We continue to test the limits of the deposit with two drills actively exploring in the area. We are also advancing feasibility studies to deliver the 1901 deposit with a focus on optimizing the net present value of the Manitoba business unit.”
Hudbay officials tried to project confidence despite the company’s setback in Rosemont. The 1901 deposit served as a positive point of emphasis for the company.
“Given our past history of successful mine life extension of Manitoba and the potential to grow through new lenses and the inclusion of the high great golden material, the 1901 deposit is to expected to become an important part of value creation in Manitoba,” Meagher said.
Some drilling results showed high concentrations of gold in the deposit, sitting between 550 and 650 meters underground. Meagher said this deposit might work well with Hudbay’s planned New Britannia gold processing plant, set to open in 2022.
“Those gold zones provided the foundation for the business case for the refurbishment of New Britannia,” Meagher said.
Kukielski said he was excited about the deposit, “stressing” the importance of the discovery.
“With respect to 1901 itself, it is higher grade zinc than what we’re currently mining at Lalor and what the future reserve at Lalor is,” Meagher said.
“We see the potential for it to replace some of the feed that Lalor is currently providing... and extending the life of the Snow Lake camp. So I think, given time, over the next several months, we’ll be able to put this story together for the most optimum plan.”
The call revealed more details on other Hudbay issues, including the company’s search for a permanent CEO and board chair. Kukielski confirmed that the search for a new chair and CEO are progressing, adding he was a candidate in the search for the permanent CEO position.
“This is a super bunch of people,” Kukielski said of the company.
“When you put good people in front of challenges, you get creative things happening. I think there is enormous opportunity ahead of this company and I think that having an interim CEO doesn’t change anything. I believe that the company’s strategy is pretty straightforward. Great people, good assets. I think the outlook is pretty positive.”