Hudbay to Purchase Minority JV Interest Rosemont Copper Mine for $75 Million, Arizona
Published: March 15, 2019 |
Hudbay Minerals Inc. has reached an agreement with United Copper & Moly LLC (UCM) to purchase UCM’s 7.95 percent interest in the Rosemont project, and to terminate all of UCM’s remaining earn-in and off-take rights, for upfront cash consideration of $45 million, plus three annual installments of $10 million per year, commencing July 1, 2022.
In connection with the transaction, Hudbay has agreed to release UCM from any and all obligations in relation to the Rosemont project, including project loans representing its proportionate share of joint venture expenditures incurred beyond its initial earn-in investment. UCM is jointly owned by Korea Resources Corporation and LG International Corp.
“This transaction simplifies the ownership structure and improves our financial flexibility for the development of Rosemont,” said Alan Hair, Hudbay’s president and chief executive officer.
“There is continued positive momentum at Rosemont as we recently received our section 404 water permit and we look forward to advancing the project into construction as we finalize a prudent financing strategy. As part of our financing strategy, we will shortly launch a process to seek a development joint venture partner for Rosemont. We expect there will be substantial interest in a minority stake given recent precedent transactions and Rosemont’s unique status as a world-class, shovel-ready copper project in the United States,” added Hair.
In addition to simplifying the ownership structure, the transaction also removes the current governance structure with UCM, which was inherited from the previous owner of Rosemont. This allows Hudbay to have greater strategic flexibility with respect to capital structure and project financing options, and Hudbay intends to evaluate a variety of options, including the addition of a new, committed joint venture partner for the development of Rosemont. The company expects to carry out this process in parallel with advancing the initial development of Rosemont, with the objective to ultimately hold an approximate 70 percent interest in the project and maintain operatorship.
Rosemont is one of the world’s best undeveloped copper projects delivering a 15.5 percent after-tax unlevered IRR at a copper price of $3.00 per pound based on the 2017 feasibility study published by Hudbay. Rosemont is expected to produce approximately 127,000 tonnes of copper annually at a cash cost of $1.14 per pound (net of by-product credits) over the first 10 years of operations.
Hudbay is an integrated mining company producing copper concentrate (containing copper, gold and silver), molybdenum concentrate and zinc metal. With assets in North and South America, the company is focused on the discovery, production and marketing of base and precious metals. Through its subsidiaries, Hudbay owns three polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and a copper project in Arizona (United States).
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