PERU – The directors of Toronto’s HudBay Minerals have approved the US$1.5 billion investment needed to fund the development of the Constancia copper mine 100 km south of Cusco. The project is estimated to generate an internal rate of return of 14.5% and a net present value of US$571 million (8% discount).
To cover the cost of Constancia development as well as the Lalor and Reed mines in Manitoba, HudBay is arranging a new US$600-million credit facility from a syndicate of Canadian and international banks. Completing all three mines will necessitate spending US2.0 billion. HudBay has US$710 million in cash on hand, cash flows from operating mines, and the money from the sale of its precious metals streams to Silver Wheaton of Vancouver.
HudBay has sold its precious metals stream to Silver Wheaton for an immediate payment of US$500 million plus two further payments of US$125 million each.. In return, Silver Wheaton will receive 100% of the silver output from HudBay’s 777 mine in Manitoba and 100% of the life-of-mine silver output from the Constancia project. Silver Wheaton will also receive all of the gold production from the 777 mine until the Constancia mine satisfies a completion test, or the end of 2016. At that point, Silver Wheaton’s share of gold production from the 777 mine will be reduced to 50% for the remainder of the mine life.
When completed, the Constancia project will have an annual output of 85,000 tonnes of copper. Learn more at HudBayMinerals.com.