CANADIAN PERSPECTIVE: HudBay charts new course

In the aftermath of its failed takeover bid for Lundin Mining and a shakeup in the executive offices, HudBay Minera...

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In the aftermath of its failed takeover bid for Lundin Mining and a shakeup in the executive offices, HudBay Minerals is charting a new course, again under the steady hand of CEO Peter Jones.

 

Jones outlined the company's strategic plan at the annual general meeting on June 19. His is a two-pronged approach.

 

First, the company will optimize its operations in Manitoba. HudBay will seek opportunities to grow through local exploration, project development and acquisitions. Nonetheless, the company will shutter the Flin Flon copper smelter by July 1, 2010, and the White Pine copper refinery in Michigan shortly after. The Flin Flon concentrator and zinc plant will continue to operate at full capacity.

 

The 80-year-old copper smelter is no longer economic to operate given its design, location and expected shortage of copper concentrates. Neither can such an old facility meet the regulations for lower emissions in the future.

 

Northern Manitoba presents several possibilities for increasing ore production. One is the development of the Lalor deposit near Snow Lake. Another is the reopening of the Chisel North mine. Either of these options will depend in part on the closure date of the Trout Lake mine. The Lalor property hosts two ore zones, one zinc and the other gold, that would probably be mined and treated separately. There are also numerous exploration properties in the Flin Flon Greenstone Belt. It is geology the company knows well.

 

Second, HudBay is actively pursuing growth through acquisitions and project development. Having purchased Sky Resources in August 2008, the company is committed to development of the Fenix (formerly Eximbal) nickel project in Guatemala. Construction has stalled in recent months due to the severe slump in metals prices, but will restart when they improve. Meanwhile, HudBay is looking for a low-cost power supply for the project.

 

While not a radical shift in the direction HudBay will take, Jones's commitment to rational growth is admirable. And with a reported $800 million cash-in-hand plus several avenues of additional financing possible, he has a company that is positioned to grow without further missteps.

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