Hudbay Reaches Agreement To Purchase Rosemont's Minority Joint Venture Interest
March 13 2019 - 7:30AM
Hudbay Minerals Inc. (“Hudbay” or the “company”)
(TSX, NYSE: HBM) announced today that it
has reached an agreement with United Copper & Moly LLC (“UCM”)
to purchase UCM’s 7.95% interest in the Rosemont project, and to
terminate all of UCM’s remaining earn-in and off-take rights, for
upfront cash consideration of US$45 million, plus three annual
installments of US$10 million per year, commencing July 1, 2022. In
connection with the transaction, Hudbay has agreed to release UCM
from any and all obligations in relation to the Rosemont project,
including project loans representing its proportionate share of
joint venture expenditures incurred beyond its initial earn-in
investment. UCM is jointly owned by Korea Resources Corporation and
LG International Corp.
“This transaction simplifies the ownership
structure and improves our financial flexibility for the
development of Rosemont,” said Alan Hair, Hudbay’s president and
chief executive officer. “There is continued positive momentum at
Rosemont as we recently received our section 404 water permit and
we look forward to advancing the project into construction as we
finalize a prudent financing strategy. As part of our financing
strategy, we will shortly launch a process to seek a development
joint venture partner for Rosemont. We expect there will be
substantial interest in a minority stake given recent precedent
transactions and Rosemont’s unique status as a world-class,
shovel-ready copper project in the United States.”
In addition to simplifying the ownership
structure, the transaction also removes the current governance
structure with UCM, which was inherited from the previous owner of
Rosemont. This allows Hudbay to have greater strategic flexibility
with respect to capital structure and project financing options,
and Hudbay intends to evaluate a variety of options, including the
addition of a new, committed joint venture partner for the
development of Rosemont. The company expects to carry out this
process in parallel with advancing the initial development of
Rosemont, with the objective to ultimately hold an approximate 70%
interest in the project and maintain operatorship.
The UCM transaction is expected to close not
later than April 25, 2019, subject to the approval of the parties’
respective boards of directors and the execution of a definitive
agreement.
Rosemont is one of the world’s best undeveloped
copper projects delivering a 15.5% after-tax unlevered IRR at a
copper price of $3.00 per pound based on the 2017 Feasibility Study
published by Hudbay. Rosemont is expected to produce approximately
127,000 tonnes of copper annually at a cash cost of $1.14 per pound
(net of by-product credits) over the first 10 years of
operations.
CIBC Capital Markets acted as Hudbay’s financial
advisor on the purchase of UCM’s interest in the Rosemont
project.
Forward-Looking Information
This news release contains forward-looking
information within the meaning of applicable Canadian and United
States securities legislation. Forward-looking information
includes, but is not limited to, the completion of the acquisition
of the minority joint venture interest of Rosemont and a planned
process to seek a joint venture partner and commence development of
Rosemont. Forward-looking information is not, and cannot be, a
guarantee of future results or events. Forward-looking information
is based on, among other things, opinions, assumptions, estimates
and analyses that, while considered reasonable by the company at
the date the forward-looking information is provided, inherently
are subject to significant risks, uncertainties, contingencies and
other factors that may cause actual results and events to be
materially different from those expressed or implied by the
forward-looking information.
The material factors or assumptions that Hudbay
identified and were applied by the company in drawing conclusions
or making forecasts or projections set out in the forward-looking
information include, but are not limited to, obtaining the final
permits for Rosemont and obtaining any required joint venture
partner approvals to advance the project, the timing and possible
outcome of pending litigation related to the Rosemont permits, no
significant unanticipated litigation or delays to the development
of Rosemont and the availability of financing to develop
Rosemont.
The risks, uncertainties, contingencies and
other factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking information
may include, but are not limited to, risks generally associated
with the mining industry, such as economic factors (including
future commodity prices, currency fluctuations, energy prices and
general cost escalation), as well as the risks discussed under the
heading “Risk Factors” in Hudbay’s most recent Annual Information
Form.
Should one or more risk, uncertainty,
contingency or other factor materialize or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking information.
Accordingly, you should not place undue reliance on forward-looking
information. Hudbay does not assume any obligation to update or
revise any forward-looking information after the date of this news
release or to explain any material difference between subsequent
actual events and any forward-looking information, except as
required by applicable law.
About Hudbay
Hudbay (TSX, NYSE: HBM) is an integrated mining
company primarily producing copper concentrate (containing copper,
gold and silver), molybdenum concentrate and zinc metal. With
assets in North and South America, the company is focused on the
discovery, production and marketing of base and precious metals.
Directly and through its subsidiaries, Hudbay owns three
polymetallic mines, four ore concentrators and a zinc production
facility in northern Manitoba and Saskatchewan (Canada) and Cusco
(Peru), and copper projects in Arizona and Nevada (United States).
The company’s growth strategy is focused on the exploration and
development of properties it already controls, as well as other
mineral assets it may acquire that fit its strategic criteria.
Hudbay’s vision is to be a responsible, top-tier operator of
long-life, low-cost mines in the Americas. Hudbay’s mission is to
create sustainable value through the acquisition, development and
operation of high-quality, long-life deposits with exploration
potential in jurisdictions that support responsible mining, and to
see the regions and communities in which the company operates
benefit from its presence. The company is governed by the Canada
Business Corporations Act and its shares are listed under the
symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange
and Bolsa de Valores de Lima. Further information about Hudbay can
be found on www.hudbay.com.
For further information, please contact:
Candace BrûléDirector, Investor Relations(416)
814-4387candace.brule@hudbay.com
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