My Take on Snow Lake - Nov. 30, 2018

Overhaul of Snow Lake Mine mill will help process ore from Lalor, Hudbay says

At the end of last month, Hudbay Minerals announced their third quarter 2018 results and in doing so laid out several decisions affecting their operations. Notably, after the completion of trade-off studies, the company deemed the overhaul of the Snow Lake Mine mill as the most advantageous way of processing gold and copper-gold ore from the Lalor deposit. As well, they entered into an agreement to acquire Mason Resources for approximately $15 million U.S.

Hudbay also announced per share earnings of $0.09 and cash from operating activities of $113.8 million in the third quarter of 2018, and record mill throughput and copper recoveries at their Constancia project in Peru.

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In respect to the decision on Lalor Gold, the company advised that test mining and added infill drilling support refurbishment of the Snow Lake Mine mill, with the added upside of processing ore from nearby satellite deposits.

“Over the past few months, Hudbay has continued drilling and test mining in the gold rich Lens 25, confirming the existence of a continuous high grade core of mineralization within the wider lower grade mineral resource estimates reported in the 2017 NI 43-101 technical report for Lalor,” read the release. “In parallel, Hudbay has revised its geological model of the copper-gold rich Lens 27, which better reflects the orientation of the mineralization observed during core logging. This reinterpretation indicates that there is a simpler and more consistent and reliable mineralized envelope that is expected to result in an increase in tonnage of this high grade mineralization.”

Based on work completed over the last year, Hudbay believes revamping the mill, and adding a copper flotation circuit, will prove to be the optimal processing scenario. The company believes there are some promising nearby satellite deposits, in addition to encouraging exploration targets in the area. Included in these are their Snow Lake Mine, Squall Lake and Wim deposits, as well as other potential exploration targets in the region.

They will continue updating mineral reserve/resource estimates, as well as related technical work to confirm assumptions and determine an optimal configuration of the Snow Lake Mine mill. The company expects to provide more details in this respect during the first quarter of 2019.

In relation to Hudbay’s acquisition, the company entered into an Oct. 31 agreement to acquire Mason Resources. Under the agreement, that company’s shareholders will receive C$0.40 for each common share owned. If approved by Mason shareholders, the transaction should close in December 2018.

“Mason’s Ann Mason project is a large greenfield copper deposit located in the historic Yerington District of Nevada and is one of the largest undeveloped copper porphyry deposits in North America,” Hudbay said of the purchase. “Mason’s measured and indicated resources are comparable in size to Constancia and Rosemont, and Hudbay is acquiring the asset for an enterprise value (net of its current ownership) of approximately $15 million, a cost that is approximately 30 per cent of its 2018 exploration budget.”

The company views the purchase as a “long-term option for potential future development after Rosemont, and a strong addition to the company’s pipeline of long-term growth opportunities.” The project will become one of Hudbay’s high priority exploration initiatives in North America and they plan to implement work that could enhance the feed grade of a future milling operation.

Still on Hudbay, back in the Oct. 26 column, I reported that Hudbay Minerals announced that Waterton Global Resource Management (WGRM) had requisitioned a special meeting of the company’s shareholders for the purposes of considering an advisory resolution with respect to certain potential transactions. On Nov. 13, the company announced that it has set Feb. 28, 2019 for a special shareholders meeting. Hudbay advised that shareholders will receive information about the meeting and how to vote in a management information circular to be mailed in advance of the meeting.

They also note, “Hudbay’s Board welcomes constructive engagement with all shareholders, and members of the Board have met with Waterton to discuss their concerns. The Board remains committed to its disciplined approach to driving long-term and sustainable value creation, in the best interests of the company and all of its shareholders.”

In other news, the Snow Lake Curling Club held their first bonspiel of the season,  a mixed affair, on Nov. 24. The results were: first - the rink of Jodi Brasch, Kelly Peterson, Terry Hornyak and Judy Peterson; second – the foursome of Ross Schellenberg, Suzanne Kluke, Adrienne Spence and Christine Evans; third – the team of Jenna Wiwcharuk-Roy, Judd Fey, Janelle Grant and Jonathon Young. Christine Evans won the putt to the button contest and with it a propane smoker donated by Stittco Energy. A great weekend of curling was enjoyed by all who took part.

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