2014 Annual and CSR Report Switch to Spanish Language
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Development

Our expertise in finding mineral deposits is matched by our experience in bringing them into production. With the Lalor and Reed mines achieving commercial production in 2014, we have now developed and operated 28 mines in Manitoba since 1927. In Peru, that experience served us well, as Constancia, our first major development project outside of Manitoba, was completed on time and began producing copper concentrate in the fourth quarter of 2014.

The development phase provides a strong foundation for our relationships with regulators and local communities. We believe that regulatory approvals are a broad process of collaborating with regulators to establish confidence that regulatory requirements are being, and will continue to be, met. Our track record of responsible operations has helped reinforce that confidence.  The development phase is also a time of significant change and opportunity for communities and we believe our approach to corporate responsibility is critical in the implementation of our projects.

With construction effectively completed by the end of 2014, Constancia is on track for commercial production in the second quarter of 2015. The mine is expected to average 82,000 tonnes of annual copper production over a 22-year mine life. Initial production will be mining softer, supergene ore from the main Constancia pit, which is projected to average copper grades 30% above the overall reserve grade in the first five years.

Key personnel from Constancia and Lalor will bring their project expertise to our Rosemont project in Arizona. Situated in an area with a number of large porphyry-type producing copper mines, Rosemont is a copper/molybdenum/silver porphyry/skarn deposit and, like Constancia, is planned as an open pit mine. The project was added to our development portfolio in July 2014, when Hudbay acquired Augusta Resource Corporation.

2014 Performance

  • Lalor – We received the Environment Act licence for the Lalor mine in March 2014, enabling the start of operations of a major underground mine, with an anticipated 15-year mine life. Commercial production from the production shaft was achieved in the third quarter of 2014, on time and under budget. Commissioning of the upgraded Snow Lake concentrator to process the Lalor ore was also completed.
Lalor project snapshot Life of mine1
Ownership 100%
Daily ore throughput 3,300 tonnes per day
Average annual zinc production2 59,000 tonnes
Average annual gold equivalent production2 43,000 ounces
Average annual copper production2 5,000 tonnes
Cash cost per pound of zinc3 $(0.07)/pound
Mine and mill unit cost4 $58/tonne
Average annual sustaining capital $23 million
Mine life 15 years

Source: Hudbay company disclosure, Wood Mackenzie

  1. Life of mine (LOM) as per NI 43-101 “Pre-Feasibility Study Technical Report on Lalor Deposit” dated March 29, 2012, with the exception of cash costs (see note 4).
  2. Production represents contained metal in concentrate; silver converted to gold at a rate of 50:1.
  3. Wood Mackenzie LOM average from 2015 to 2027; cash costs per pound of zinc, net of byproduct credits.
  4. Combined mine and mill unit operating costs per tonne of ore processed. 2014 combined mine and mill unit operating cost at Lalor was C$121/tonne of ore. 2015 combined mine and mill unit operating cost guidance for the entire Manitoba Business Unit is forecasted to be C$73–$88/tonne ore.
  • Reed – The Reed mine achieved commercial production at the end of the first quarter of 2014, ahead of guidance and under budget. It is a small, high-grade copper deposit close to Flin Flon, with an anticipated mine life of four years. The two-year construction program was completed with no lost time accidents.
Reed project snapshot Life of mine1
Ownership 70%
Daily ore throughput 1,300 tonnes per day
Average annual copper production2 15,000 tonnes
Cash cost per pound of copper3 $1.64/pound
Mine and mill unit cost4 $90/tonne
Average annual sustaining capital $10 million
Mine life 4 years

Source: Hudbay and VMS Venture Inc. company disclosure

  1. LOM as per NI 43-101 “Pre-Feasibility Study Technical Report on the Reed Copper Deposit” dated April 2, 2012 as filed by VMS Ventures Inc., shown on a 100% basis.
  2. Production represents contained metal in concentrate.
  3. Cash costs per pound calculated using the life of mine model supporting the NI 43-101 report.
  4. Combined mine and mill unit operating costs per tonne of ore processed.
  • Constancia – Physical construction of the Constancia project was effectively completed and the first copper concentrate was produced in the fourth quarter of 2014. Commissioning activities are ongoing and the project is expected to achieve commercial production during the second quarter of 2015 and full production in the second half of the year.
Constancia project snapshot Life of mine1
Ownership 100%
Daily ore throughput 80,000 tonnes per day
Average annual copper production2 82,000 tonnes
Cash cost per pound of copper3 US$1.25/pound
Mine and mill unit cost4 US$7.48/tonne
Average annual sustaining capital US$47 million
Mine life 22 years

Source: Hudbay company disclosure

  1. LOM as per NI 43-101 “Technical Report on the Constancia Project” dated October 15, 2012 and subsequent updates to project estimates in public disclosure.
  2. Production is contained metal in concentrate.
  3. Net of byproducts. Includes impact of silver and gold streams. Assumed metal prices per the Silver Wheaton stream agreement are as follows: gold US$400/oz, silver US$5.90/oz. Other metal price assumptions include: molybdenum 2014 – US$12/lb, 2015 – US$13/lb, 2016 – US$13/lb, long-term – US$13.50/lb; gold 2014 – US$1,350/oz, 2015 – US$1,325/oz, 2016 – US$1,300/oz, 2017 – US$1,275/oz, long-term – US$1,250/oz. Excludes profit sharing.
  4. Combined mine and mill unit operating costs per tonne of ore processed. 2015 combined mine, mill and G&A operating cost guidance is US$9.0 – $10.9/tonne of ore.
development-01

First shipment of concentrate from Constancia’s commercial production in early 2015. 

  • Rosemont – Permitting was a major focus at Rosemont in 2014 and into 2015. Required key permits still to be obtained include the final Record of Decision from the US Forest Service and the Clean Water Act Section 404 Permit from the US Army Corps of Engineers. Hudbay supports rigorous permitting processes, which demonstrate that public policy priorities are considered and addressed when a permit is granted.  In the meantime, the Company has undertaken a detailed engineering program to put us in a position to start construction once the regulatory process is successfully completed.