Hudbay and Marubeni Sign Flin Flon Option Agreement to Advance Exploration Partnership
Hudbay Minerals Inc. announces an option agreement with Marubeni Corporation to explore projects in Flin Flon, Manitoba, aiming to unlock potential value in the region. Marubeni will fund C$12 million in exploration expenditures over five years, with the potential to form a joint venture with Hudbay.
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Signing of an option agreement with Marubeni Corporation to explore projects in Flin Flon, Manitoba.
Marubeni to fund C$12 million in exploration expenditures over five years.
Potential joint venture formation with Hudbay upon successful completion of earn-in obligations.
Focus on three projects in Flin Flon region with past producing mines and high prospectivity.
Opportunity to utilize Hudbay's idle processing infrastructure in Flin Flon for potential mine production.
Partnership aims to leverage technical expertise and successful track record in the region.
The recent option agreement between Hudbay Minerals Inc. and Marubeni Corporation marks a strategic move within the mining industry, aimed at leveraging Hudbay's established infrastructure and Marubeni's financial investment to potentially unlock new value from the Flin Flon Greenstone Belt—a region known for its rich base metal deposits. The commitment of C$12 million by Marubeni for exploration over five years indicates a substantial investment into the potential joint venture, signaling confidence in the region's resource prospects.
From an industry perspective, such partnerships are critical for risk-sharing and capital-intensive exploration activities. The Flin Flon region has a historical pedigree for high-grade base and precious metal mining and the earmarked C$7 million for the 2025 winter exploration program demonstrates an aggressive pursuit of discovery. If successful, the utilization of Hudbay's idle processing facilities could lead to cost efficiencies and a shorter timeline to potential production, given the proximity of the projects to the milling complex.
However, the inherent risks of exploration must be noted—there is no guarantee of discovery and even with positive findings, the path to production can be lengthy and fraught with regulatory and market challenges. The potential long-term benefits for both companies and the local economy could be substantial, with job creation and increased economic activity. Yet, stakeholders should remain aware of the volatility of commodity markets, which could impact the feasibility of future production.
The financial implications of the option agreement for Hudbay Minerals Inc. and its shareholders could be significant. The injection of C$12 million in exploration funding from Marubeni mitigates some of Hudbay's capital expenditure risks and aligns with industry trends towards collaborative exploration and development efforts. This strategic partnership approach can be a catalyst for unlocking shareholder value by potentially extending the life of Hudbay's operations in the Flin Flon region without proportionately increasing their capital burden.
For Marubeni, the agreement represents a calculated entry into one of the world's most prospective VMS (volcanogenic massive sulfide) camps, with the potential for high returns on investment if the exploration yields commercially viable deposits. The structure of the deal, where Marubeni earns a 20% stake upon completion of its funding obligation, aligns Marubeni's interests with successful exploration outcomes while providing Hudbay with the operational lead. This could reassure investors of Hudbay's continued control and expertise in project management.
It is critical for investors to monitor the progress of the exploration program and subsequent developments, as these will provide further insights into the potential impact on Hudbay's revenue and profitability. Should the joint venture progress to production, the use of existing Hudbay infrastructure could significantly reduce capital and operational expenditures, enhancing the project's overall economics and potentially providing a boost to Hudbay's stock performance.
The exploration and potential development of the Flin Flon projects will be subject to rigorous environmental and regulatory scrutiny. The region's historical mining activities necessitate a comprehensive understanding of the environmental baseline and potential impacts of new exploration. The agreement between Hudbay and Marubeni must account for the environmental due diligence and adherence to Canadian mining regulations, which are among the strictest in the world.
Stakeholders should consider the environmental assessment processes, indigenous consultations and permitting requirements that will precede any exploration and development activities. These processes can be lengthy and complex, impacting project timelines and costs. The partnership's commitment to regulatory compliance and sustainable mining practices will be critical in maintaining a social license to operate and minimizing the risk of project delays due to environmental concerns.
Moreover, the potential future use of Hudbay's idle Flin Flon milling complex for processing ore would require an assessment of the environmental impact and the updating of any lapsed permits. The successful navigation of these regulatory landscapes will be essential for the joint venture's long-term viability and could serve as a benchmark for environmental stewardship in the mining industry.
03/13/2024 - 06:30 AM
TORONTO, March 13, 2024 (GLOBE NEWSWIRE) -- Hudbay Minerals Inc. (“Hudbay” or the “company”) ( TSX, NYSE: HBM) is pleased to announce the signing of an option agreement (the “Agreement”) with Marubeni Corporation (“Marubeni”), pursuant to which Hudbay has granted Marubeni’s wholly-owned Canadian subsidiary an option (the “Option”) to acquire a 20% interest in three projects located within trucking distance of Hudbay’s processing facilities in Flin Flon, Manitoba, as shown in Figure 1 and further described below. In order to exercise the Option, amongst other things, Marubeni will fund at least C$12 million in exploration expenditures over a period of approximately five years with Hudbay acting as operator and carrying out the exploration activities. Upon successful completion of Marubeni’s earn-in obligations, a joint-venture will be formed to hold the selected projects with Hudbay, acting as operator, holding an 80% interest and Marubeni holding the remaining 20% interest. The execution of the Agreement follows the signing of a memorandum of understanding between the parties that set out the framework for a multi-year exploration partnership, as previously announced in July 2023.
“This exploration partnership with Marubeni represents a significant milestone towards unlocking potential future value in the Flin Flon region,” said Peter Kukielski, Hudbay’s President and Chief Executive Officer. “This arrangement allows us to partner with Marubeni and leverage our operational and exploration expertise to test our large Flin Flon land package to potentially bring another mine into production and utilize Hudbay’s idle processing infrastructure in Flin Flon. Hudbay has discovered and operated 29 mines in our nearly 100-year history in Manitoba and we have the potential to continue that success with this renewed focus on exploration in Flin Flon.”
Masafumi Ichigetsu, General Manager, Copper Mining Dept., Marubeni, commented, “The signing of an option agreement with Hudbay gives us access to the Flin Flon Greenstone Belt, one of the most prospective base metal VMS camps in the world. We see tremendous opportunity to partner with Hudbay’s technical expertise and proven track record of successful discovery, development and operation of many mines in the region. This is our first step to a long-lasting and prosperous relationship with Hudbay that will undoubtedly yield exceptional results.”
Highlights of the Agreement
During the earn-in period, Marubeni will fund exploration expenditures of up to C$12 million across three highly prospective projects over five years. A significant budget of C$7 million has been agreed to for the 2025 winter exploration program. Upon successful completion of Marubeni’s earn-in obligations, Marubeni may exercise its Option to form a joint venture with Hudbay for any of the designated projects. The joint venture will allow both parties to jointly pursue development of the projects, with Hudbay holding an 80% interest and Marubeni holding the remaining 20% interest. After formation of the joint venture, all subsequent costs for exploration and development of the properties will be funded by each member in proportion to their respective participating interest. Hudbay will act as the joint venture operator and manage work programs to progress the exploration and development efforts. Should any of the projects advance to production, the parties may discuss the utilization of Hudbay’s idle Flin Flon milling complex to process ore. Flin Flon Projects
The Agreement focuses on three projects in the Flin Flon region, namely Cuprus-White Lake, Westarm and North Star, which were selected by Marubeni following a period of detailed due diligence. All three properties hold past producing mines that generated meaningful production with attractive grades of both base metals and precious metals. The properties remain highly prospective with potential for further discovery based on the attractive geological setting, limited historical deep drilling and promising geochemical and geophysical targets. Cuprus-White Lake, Westarm and North Star are all within 20 kilometres of Hudbay’s Flin Flon milling complex.
Cuprus-White Lake
The Cuprus-White Lake project is located about 10 kilometres southeast of Flin Flon, consisting of 3,384 hectares including 94 claims. Historically, the area included the Cuprus mine, which produced 463,000 tonnes at grades of 3.25% copper and 1.3 grams per tonne gold in the early 1950s and the White Lake mine, which produced 850,000 tonnes at grades of 1.98% copper and 0.72 grams per tonne gold over ten years in the 1970s and 1980s. The geology in the area hosts favourable juvenile arc rocks on several parallel horizons, and most historical drilling was done without modern geophysical targeting.
Westarm
The Westarm project is located 14 kilometres south of Flin Flon, with three primary claims covering 727 hectares. The region saw production of over 1.4 million tonnes from the 1970s to 1990s, with average grades of 3.2% copper and 1.58 grams per tonne gold. A compilation of historical work programs outlined 210 surface drillholes with only 16% of the holes at depths below 300 metres, and numerous VTEM anomalies.
North Star
The North Star area is located 17 kilometres east of Flin Flon and includes 22 claims consisting of 406 hectares. The region had two historical producing mines, the North Star mine with production of over 242,000 tonnes with average grades of 6.11% copper and 0.34 grams per tonne gold, and the Don Jon mine with production of 79,000 tonnes at 3.09% copper and 0.96 grams per tonne gold. Both were in operation in the 1950s, with the region having seen limited modern exploration techniques. The area has had an IP survey over half the property with favourable chargeability anomalies that warrant further investigation.
Next Steps
The exploration work will begin in the summer of 2024 with various geochemical and mapping programs. The 2025 winter exploration program is expected to be significant with up to 20,000 metres of drilling and several geophysical programs to generate additional drill targets on the properties.
Figure 1: Map of Three Projects Selected for the Option Agreement
Hudbay has granted Marubeni an option to acquire a 20% interest in three projects located within trucking distance of Hudbay’s processing facilities in Flin Flon, Manitoba. The exploration activities will be funded by Marubeni and carried out by Hudbay. All three properties hold past producing mines that generated meaningful production with attractive grades of both base metals and precious metals. The properties remain highly prospective with potential for further discovery based on the attractive geological setting, limited historical deep drilling and promising geochemical and geophysical targets.
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 exercise of the Option, the entry by the parties into joint venture agreement in the event that the Option is exercised and the potential timing related thereto; the final and definitive terms of such agreement; Hudbay’s expectations regarding exploration in Flin Flon and the potential for future discoveries on Hudbay’s land claims; and Hudbay’s strategies regarding the applicable projects. 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 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, the risk that Marubeni does not exercise the Option, the risk that the parties are not able to negotiate a mutually acceptable definitive joint venture agreement in the event that the Option is exercised, risks generally associated with the mining industry and the current geopolitical environment, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), risks associated with the permitting process with respect to our projects, uncertainties related to the development and operation of our projects, as well as the risks discussed under the heading “Risk Factors” in Hudbay’s most recent Annual Information Form and under the heading “Financial Risk Management” in Hudbay’s most recent management’s discussion and analysis.
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 Marubeni
Marubeni Corporation is a major Japanese integrated trading and investment business conglomerate that handles products and provides services in a broad range of business activities across wide-ranging fields. Marubeni and its consolidated subsidiaries use their broad business networks, both within Japan and overseas, to conduct importing and exporting (including third country trading), as well as domestic business, encompassing a diverse range of business activities across wide-ranging fields including lifestyle, IT solutions, food, agri business, forest products, chemicals, metals & mineral resources, energy, power, infrastructure project, aerospace & ship, finance, leasing & real estate business, construction, industrial machinery & mobility, next generation business development and next generation corporate development. Additionally, the Marubeni Group offers a variety of services, makes internal and external investments, and is involved in resource development throughout all of the above industries.
About Hudbay
Hudbay (TSX, NYSE: HBM) is a copper-focused mining company with three long-life operations and a world-class pipeline of copper growth projects in tier-one mining-friendly jurisdictions of Canada, Peru and the United States.
Hudbay’s operating portfolio includes the Constancia mine in Cusco (Peru), the Snow Lake operations in Manitoba (Canada) and the Copper Mountain mine in British Columbia (Canada). Copper is the primary metal produced by the company, which is complemented by meaningful gold production. Hudbay’s growth pipeline includes the Copper World project in Arizona (United States), the Mason project in Nevada (United States), the Llaguen project in La Libertad (Peru) and several expansion and exploration opportunities near its existing operations.
The value Hudbay creates and the impact it has is embodied in its purpose statement: “We care about our people, our communities and our planet. Hudbay provides the metals the world needs. We work sustainably, transform lives and create better futures for communities.” Hudbay’s mission is to create sustainable value and strong returns by leveraging its core strengths in community relations, focused exploration, mine development and efficient operations.
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A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/869d2f9e-b504-47f2-abaa-afd6b2f19f85
What is the agreement between Hudbay Minerals Inc. and Marubeni Corporation about?
The agreement involves Marubeni's funding of C$12 million in exploration expenditures over five years for three projects in Flin Flon, Manitoba, with the potential to form a joint venture.
How will the joint venture between Hudbay and Marubeni work?
Upon successful completion of Marubeni's earn-in obligations, a joint venture will be formed with Hudbay holding an 80% interest and Marubeni holding the remaining 20% interest.
What are the highlights of the agreement?
Highlights include Marubeni funding exploration expenditures, potential joint venture formation, and joint development efforts with Hudbay in the Flin Flon region.
Which projects are focused on in the Flin Flon region?
The Cuprus-White Lake, Westarm, and North Star projects are the main focus, all within 20 kilometers of Hudbay's Flin Flon milling complex.
What is the potential benefit of utilizing Hudbay's idle processing infrastructure?
The potential benefit is to process ore from any advanced projects, should they progress to production, using Hudbay's idle Flin Flon milling complex.
