HudBay Minerals capped weeks of local speculation with another "hurry up and wait" news release and a follow-up conference call on Aug. 7. Their second quarter results were more notable to Snow Lake for what they didn't say, than for what they did.
Sure there is the investment in the Back Forty property in Michigan, which is no doubt real good news for folks down that way. And of course there is the talk of a share buyback plan that likely has more than a few supporters. But as far as Snow Lake and more specifically the Lalor deposit ... there were no drill results and little more than talk about the possibility of when, or in fact if, it will ever get going.
Prior to taking questions during the conference call, CEO Peter Jones advised listeners and participants that HudBay was advancing their Lalor deposit with an ongoing diamond drill program to try and better understand the extent and quality of the gold mineralization, as well as evaluate an access method for the deposit. "This work is progressing rapidly and with priority," he said. "We expect to make a further announcement regarding the Lalor mineral resource and our deposit access plans prior to the end of this year."
Of course we have heard that before, from Alan Palmiere. As a matter of fact, we heard it shortly after they struck on this baby, didn't we? Jones did mention several times that the Lalor deposit is a priority and is one of the most promising organic growth prospects the company has. However, the same was also said of their Guatemalan Fenix project. One wonders which will see the push in the coming year - perhaps both? Regardless, Jones finished the initial portion of the call stating that he looks forward to reporting before year-end on their progress on Lalor.
One of the first questioners out of the blocks was Adam Schatzker of RBC Capital Markets. In addition to queries about the longevity and grades at Trout Lake Mine, he asked HudBay executives to comment on what the zinc price would have to be before Chisel North would be deemed profitable? "There are a number of factors we are considering, so zinc prices is one," chief operating officer, Michael Winship answered. "Clearly we have seen a good run up on the zinc price of late, but we'd want to insure that was sustainable. Also, we'd look at the strategic fit with the zinc concentrate going to our zinc plant in Flin Flon. And the other factor would be the fit with Chisel North and the development of Lalor. The primary factor is a sustainable zinc price ("north of 80 cents," Jones stated later in the call).
The always-sharp Onno Rutten of UBS Securities was next with a question, he noted that it had been previously stated that by late 2009, HudBay would have some access options defined for Lalor. He asked if that meant that the company would then give the go ahead and actually start drifting over or sinking a shaft to the deposit, or would there be another engineering design phase required in 2010 before going ahead with construction? "The way that we see this going forward, is firstly we want to clarify the access methodology," Jones replied. "The two choices are directly going to a shaft or alternately going to a ramp system from our nearby Chisel North Mine. We are currently clarifying which would be the best method. Following that, we will likely move to a pre-feasibility, which we would hope to complete prior to the end of 2009. Then we would go into feasibility, then final design, etc. That would take several months following the end of 2009.
"Now this does not necessarily mean that we would not do an early approval for site preparation, or start the access ramp, or something like that," Jones added. "That would obviously be subject to our board being aligned with such an early move, but the normal sequence is as I just described, with some opportunity of an early approval of a portion of that access."
In answer to a supplementary question from Rutten, Jones stated that production at Lalor could be achieved by 2013 with a ramp from Chisel. Jones also revealed that Chisel North has additional mineralization over and above published reserves. "It is not in reserves, because it is lower grade, but with a higher Zinc price there could be significant additional reserves at that mine," said the CEO.
Rutten then asked how long sinking a shaft for Lalor would take. To which Jones replied that to sink a shaft they would also have to laterally develop the deposit in order to go into production - that could easily take four plus years.
The VMS Reed Lake deposit was also touched upon, when Jones advised that HudBay continues to be in contact with VMS, but have no news to report at this point.
