HudBay to put $313M into province next year

By: Murray McNeill

Posted: 14/12/2010 1:00 AM | Comments: 0

MANITOBA'S mining sector received a shot of good news Monday when HudBay Minerals Inc. announced plans to spend at least $313 million next year on mining and exploration projects in the province.

HudBay president and CEO David Garofalo said in an interview the mining giant plans to spend $280 million on capital expenditures and at least $33 million on exploration.

The capital expenditures would be roughly double what it's spent this year, while the exploration expenditures would be about the same.

But Garofalo said he wouldn't be surprised if exploration exceeds $33 million.

"If we encounter good drill results, we will invest more in exploration."

The Manitoba expenditures represent the bulk of the $348 million HudBay has earmarked for capital and exploration for 2011.

Ed Huebert, executive vice-president of Mining Association of Manitoba Inc,, said that kind of spending is good news for the province's mining sector -- especially the amount that's earmarked for exploration.

"Thirty-three million dollars is huge for Manitoba," Huebert said. "We get extremely excited when we hear that kind of money is being spent in our province."

He said exploration spending has been on the decline here since 2008, when it peaked at $152.1 million. And although the 10-year average is about $120 million, its estimated that only about $85 million will be spent this year.

"We should be higher and... hopefully we will be back over $120 million (in 2011)," he said. "The target set by HudBay should set a good base for that."

The lion's share of next year's capital -- about $163 million -- will be spent on developing HudBay's $560-million Lalor gold/zinc mine near Snow Lake.

"This is a big capital expenditure year for Lalor," Garofalo said, noting they'd be erecting more buildings at the mine site, will continue drilling the main mine shaft and ventilation shaft, and will continue building the underground ramp that will connect the Lalor site to the company's Chisel North mine, about three kilometres away.

The underground ramp, which is about half completed and will extend to a depth of 800 metres, will enable the company to begin hauling out ore two years before the main mine shaft is completed in 2014.

Garofalo said the plan is to extract about 1,200 tonnes of ore a day and create cash flow for the mine while work on the mine shaft continues. Once the main shaft is operational, production will jump to about 3,500 tonnes a day, with capacity to increase that to 6,000 tonnes if more deposits are found.

"The $560 million we're investing in Lalor is just a down payment," he said. "I think it's going to be a much bigger operation."

Another reason for building the underground ramp is that it will enable exploration crews to drill much deeper into the ground in search of new ore deposits.

"We still have a lot more ore to find here," Garofalo said, "and we'll be able to do that from the ramp platform."

He said the startup of production at Lalor should roughly coincide with the pending closing of the Chisel North mine, scheduled for sometime in 2012.

"We'll be able to move our workforce from Chisel North right into Lalor."

Chisel North is one of two HudBay mines that will be ceasing operations over the next couple of years. The Trout Lake mine near Flin Flon is expected to run out of ore and cease operations by the end of next year.

Garofalo said because those two mines are winding down, the bulk of the $105 million in sustaining capital expenditures for next year will be spent on the flagship 777 mine.

HudBay also said its production of zinc, copper, gold and silver next year should be about the same as this year.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition December 14, 2010 B6