When Callinan Mines launched a lawsuit against Hudbay in 2007, the implications for Flin Flon were potentially serious.
It’s not that Hudbay’s future was at stake. With profitable mines and a stable workforce, the company was going to survive whatever litigation threw its way.
No, where the lawsuit drew the most concern, at least from a community standpoint, was in relation to a mineral deposit known as the War Baby claim.
War Baby is viewed as key to possibly extending the life of 777 mine, Flin Flon’s last active mineral project. As the Mining Newsletter website put it last year, War Baby “sits directly in the middle” of the 777 mine ore body and therefore “has to be acquired by Hudbay as the source of mill feed most convenient to and in the way of Hudbay’s operations in the region.”
Callinan Mines, now known as Callinan Royalties Corp., owns War Baby. And although the company’s lawsuit against Hudbay was not connected to the claim, War Baby gives Callinan a supersized bargaining chip in any dispute with Hudbay.
Not surprisingly, when Callinan and Hudbay announced an end to the years-old lawsuit last week, integral to the settlement was a deal that gives Hudbay the chance to obtain full ownership of War Baby.
At 777 mine, Hudbay has been conducting underground drilling with the aim of lengthening the life of the development. Access to War Baby and its exploration data lets the company enlarge its exploration platform.
Scott Brubacher, director of corporate communications for Hudbay, says War Baby has the potential to be a down-dip extension of 777.
Hudbay, he adds, plans to use its exploration and geophysics expertise “to maximize the potential of this claim.”
Overall, the Callinan-Hudbay settlement is worth at least $6.5 million, in which case Hudbay must return War Baby to Callinan. If Hudbay opts to buy all of War Baby, the settlement is valued at $19 million.
To assume full ownership of War Baby, Hudbay must meet certain milestones over a four-year period, including incurring $7 million in exploration and development expenditures on the property.
Other terms include Hudbay’s provision of
$7 million in payments and granting Callinan a royalty on the claim.
Naturally, the settlement involves risk for both sides.
If War Baby isn’t all it’s cracked up to be – which happens all the time in mining – Hudbay is the loser. If War Baby turns out to be a mineral bonanza, Callinan may wish it had driven a harder bargain.
But those are concerns for deep-pocketed companies. For the average Flin Flon area resident, it’s great news that the question marks around access to War Baby have finally been erased.
It’s no guarantee of mineral riches, mind you, but it’s certainly a very promising development.
Local Angle runs Fridays.