Getting Ready

Snow Lake will soon be living up to its name as another Manitoba winter sets in, but regardless of the weather, it won’t slow things down for HudBay Minerals as it pushes on to get its $704-million Lalor project to start initial production by 2012.

Since HudBay’s Board made a full commitment to Lalor’s development in August 2010, the company has been working on a fast track to make the fully owned Lalor project its next major underground mine.

Located in the Chisel Basin of the Flin Flon Greenstone Belt (FFGB), a prolific zinc-copper-gold region in northern Manitoba where several other mines have been developed, the Lalor project has involved intense exploration that has identified separate and distinct zinc, gold and copper-gold zones.

Based on current data, Lalor is estimated to be the largest pre-production discovery in the 85-year history of the FFGB.

Drilling started in the spring of 2007, and continuously since then the ground at Lalor has been thoroughly punched with results confirming that the property features stacked multiple flat-lying zones (15- 35 degrees) ranging from 3-17 m thick with six base metal horizons, five gold bearing horizons, and one copper/gold horizon.

With HudBay’s production growth for copper expected to increase by 155% over the next five years, and gold by 105%, followed by zinc at 60%, HudBay’s timing for the Lalor mine is right on target to help meet expected worldwide demand for copper and zinc.

But the Lalor property has more going for it than simply a supply of popular metals; it also has location and an infrastructure that makes it the envy of many other producers.

Lalor has the strategic advantage of being only 3 km from HudBay’s existing Chisel North Mine, and because of that the company decided to construct an underground ramp from its Chisel North mine to enable early production in 2012 and allow for additional underground exploration.

Construction of a 3,200-m access ramp at Lalor and is now at 2,500 m and it remains on track to be completed in the second quarter of 2012.

Diamond drilling will then start from underground and proceed to the main production shaft location.

Obviously the go-ahead decision for all of the above was based on the resource identified and estimates of potential grades and quantities of the gold and copper-gold zone. In addition to making a construction decision at Lalor, the company also began trade-off studies to determine whether to refurbish the existing Snow Lake concentrator or to construct a new concentrator at the mine site.

These studies, completed in July 2011, supported an enhanced production rate of 4,500 tonnes per day made possible by the construction of a new concentrator and paste backfill plant.

These improvements are expected to increase the company’s overall capital expenditure investment by $144 million for a total of $704 million, which includes approximately $120 million spent to date.

The decision to build a new concentrator and paste backfill plant changed certain assumptions made in HudBay’s preliminary economic assessment with respect to Lalor, as disclosed when the company announced its full commitment to the project on August 4, 2010. These changes are outlined in the adjacent table.

In addition to advancing the Lalor project toward production, HudBay continues with its extensive exploration program at the site.

Recent exploration indicated significant potential for additional gold mineralization and raised the possibility of discovering new gold and copper-gold zones and extending existing zones. It also confirmed the continuity of the copper-gold zone, which remains open down plunge.

The Lalor project’s development and site construction are proceeding on schedule. Initial production from the ventilation shaft is scheduled in the second quarter of 2012 and commissioning and first production from the 985-m production shaft and new concentrator are anticipated in late 2014.

Construction of the 4,500 tpd concentrator is expected to begin in early 2013 and is scheduled for completion in late 2014 to coincide with the completion of the production shaft.

Further production optimization is expected as HudBay optimizes precious metal recoveries and also studies the possibility of using more of the production shaft, which will have a total capacity of 6,000 tonnes per day.

The company believes further metallurgical test work is warranted before finalizing the design of a precious metal recovery process with the new concentrator. However, once underground access to Lalor is achieved in 2012, the company says it will be able to support any analysis with actual ore production from its gold zones.

And that’s what makes HudBay’s Lalor project one of the more exciting and encouraging mining projects in Manitoba today