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TORONTO,
ONTARIO--(Marketwire - Aug. 6, 2009) - HudBay Minerals Inc. ("HudBay",
"the company") (TSX:HBM) today announced that it has entered
into an agreement with Aquila Resources Inc. ("Aquila")
(TSX:AQA) granting HudBay the right to acquire a majority interest in
Aquila's Back Forty Project (the "Project"), located in
Menominee County, Michigan.
Under the agreement, HudBay has agreed to subscribe for 12,141,051
common shares of Aquila, a 14.9% ownership interest, at a price of
CDN$0.1827 per share for an investment of CDN$2.2 million. Completion
of the subscription is subject to receipt of approval from the Toronto
Stock Exchange. Upon completion of the subscription, HudBay will obtain
an option to acquire a 51% ownership interest in the Project through the
expenditure of US$10 million within three years and the right to
further increase its ownership to 65% by completing a feasibility
study, submitting an application for permitting the Project and making
certain option payments. Upon HudBay acquiring a 51% interest in the
Project, a joint venture will be formed between the parties. HudBay
will act as operator for the joint venture and will have marketing
rights to the metal production from the Project.
The Back Forty Project includes an advanced exploration-stage
volcanogenic massive sulfide ("VMS") deposit containing zinc,
gold, copper and silver. An updated NI 43-101 compliant resource
estimate announced on January 15, 2009 by Aquila consists of 8.5
million tonnes in the measured and indicated category and an additional
1.2 million tonnes in the inferred category. Much of the deposit can be
mined using open pit methods, which could allow for faster, lower cost
mine development compared to underground mining. The Project also
includes an exploration land package of approximately 9,600 acres which
will allow HudBay to use its award winning exploration techniques for
VMS deposits.
"This is an excellent opportunity for HudBay to advance the
Project towards production, and is a close fit with our strategic plan,"
said Peter R. Jones, HudBay's chief executive officer. "HudBay
brings experience in mining 27 VMS deposits in northern Manitoba,
together with local operating knowledge in Michigan at its White Pine
copper refinery. As a significant potential open pit zinc mine the
Project may also supply concentrate to our Flin Flon metallurgical
plant."
"Aquila's strong relationship with the local community mirrors
HudBay's commitment to positive stakeholder engagement and will help
support Project permitting," added Mr. Jones. "This agreement
presents a win-win for both HudBay and Aquila, and we look forward to
advancing the Project toward production."
Thomas O. Quigley, President and CEO of Aquila commented: "HudBay
brings to the Project its development and operating expertise, as well
as financial resources and marketing expertise for the products to be
produced at Back Forty. The transaction announced today is a strong fit
with the Aquila strategy of working to create shareholder value by
participating in building and maintaining economically sound,
environmentally responsible operations with a focus on safety and
social responsibilities."
Discovered in 2002, the Back Forty Project is comprised of discrete
zones of massive sulfide, stringer, and gold only mineralization, each
with high-grade components. Massive sulfide has been traced along
strike for nearly 1 kilometre and to a vertical depth of 500 meters. Numerous
gold enriched zones occur in close proximity to the massive sulfides. A
number of zones at the Back Forty deposit remain open.
The January 2009 NI 43-101 compliant resource statement released by
Aquila, and available at www.sedar.com, is summarized in the table below.
Mineral Resource Statement(1) for the Back Forty Deposit, Michigan, U.S.A., SRK Consulting, January 12, 2009. ---------------------------------------------------------------------------- Grade ---------------------------------------------------------------------------- Resource Category Tonnes Gold (g/t) Zinc (%) Silver (g/t) Copper (%) Lead (%) ---------------------------------------------------------------------------- Open Pit Resources(2) ---------------------------------------------------------------------------- Measured 4,660,000 2.04 3.64 29.2 0.68 0.08 ---------------------------------------------------------------------------- Indicated 1,260,000 4.03 5.63 47.3 0.37 0.30 ---------------------------------------------------------------------------- Measured & Indicated 5,920,000 2.46 4.06 33.1 0.61 0.13 ---------------------------------------------------------------------------- Inferred 620,000 3.68 2.46 46.5 0.15 0.44 ---------------------------------------------------------------------------- Underground Resources(3) ---------------------------------------------------------------------------- Measured 1,060,000 1.21 9.23 26.5 0.39 0.86 ---------------------------------------------------------------------------- Indicated 1,510,000 1.51 9.11 24.0 0.19 0.47 ---------------------------------------------------------------------------- Measured & Indicated 2,580,000 1.39 9.16 25.0 0.28 0.63 ---------------------------------------------------------------------------- Inferred 550,000 2.03 6.62 36.4 0.28 0.67 ---------------------------------------------------------------------------- Combined Open Pit & Underground ---------------------------------------------------------------------------- Measured & Indicated 8,500,000 2.13 5.61 30.6 0.51 0.28 ---------------------------------------------------------------------------- Inferred 1,170,000 2.90 4.42 41.7 0.21 0.55 ---------------------------------------------------------------------------- (1) Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures have been rounded to reflect the relative accuracy of the estimates. The cut-off grades are based on metal price assumptions of US$0.79 per pound zinc, US$1.89 per pound copper, US$0.55 per pound lead, US$678 per troy ounce gold and US$10 per troy ounce silver. Metallurgical recoveries were determined and used for each of eight metallurgical domains determined for the deposit. (2) Cut off grades for each of eight metallurgical domains based on NSR values, average cut-off grade for open pit resource contained within an optimized pit shell US$20. (3) Cut off grades were determined for each of eight metallurgical domains based on NSR values, average cut-off grade for underground resources outside of an optimized pit shell is US$62.
The January 2009 mineral resource
statement places the Back Forty deposit in the top 20 percent in terms
of size and contained zinc when compared to 137 Canadian VMS deposits
with reported production and reserves, and in the top 10 percent of
Canadian VMS deposits in terms of contained gold in the mineral
resource. When compared to published geologic tonnages for 846 VMS
deposits worldwide, Back Forty ranks in the top 18 percent for size,
the top 16 percent for contained zinc, and the top 10 percent for contained
gold (Source: Geological Survey of Canada, Mineral Deposits of Canada:
Synthesis of mineral deposits knowledge, Volcanogenic-Associated
Massive Sulfide Deposits, Appendix 1).
Michigan has a long history of mining activity with base metal and iron
ore mines. The state passed a new mining law in 2004, which provides a
clear framework for permitting the Project. Most local, regional, and
state stakeholders appear to be very receptive to the new economic
activity that this development could provide.
Additional information on the Project is available at Aquila's web site
at www.aquilaresources.com.
Key terms of the subscription, option and joint venture agreement (the
"Agreement") with Aquila are as follows:
- HudBay will subscribe for 12,141,051 common shares of Aquila, a 14.9%
undiluted ownership interest, at a price of CDN$0.1827 per share for an
investment of CDN$2.2 million, subject to regulatory approval. The
shares issued to HudBay will be subject to a four month hold period.
- While HudBay maintains at least a 10% ownership interest, HudBay will
have the right to nominate a director to Aquila's board of directors
and will have pre-emptive rights to maintain its ownership interest. HudBay
has also agreed to provisions related to the orderly disposition of its
interest in Aquila, should HudBay choose to make such a disposition.
- To acquire a 51% ownership interest in the Project, HudBay must
complete expenditures of US$10 million on the Project prior to the
third anniversary of the Agreement, made up of US$3 million by the
first anniversary, US$3 million by the second anniversary, and the
final US$4 million by the third anniversary. HudBay is not obliged to
make those expenditures if it chooses not to exercise its option, and
HudBay may accelerate the expenditures if it chooses.
- HudBay may increase its interest in the Project from 51% to 65% by
(i) funding and completing a feasibility study; (ii) funding and
submitting a permitting application; and (iii) making outstanding
specified option payments, if any. Expenditures on these activities can
also contribute towards HudBay's requirement to spend US$10 million to
acquire a 51% interest.
- Once a feasibility study is complete and permitting applications are
submitted, if HudBay elects to put the Project into production, Aquila
will have 90 days to arrange financing for its share of Project costs. If
Aquila is unable or elects not to obtain such financing, HudBay, by
assuming the obligation to finance 100% of the development costs, will
increase its ownership in the Project by a further 10% to 75%. Aquila's
25% share of the development costs would then be deducted from Aquila's
share of distributable cash flow from the Project.
- HudBay will have exclusive marketing rights to sell production to
HudBay or third parties on commercial terms. While HudBay retains the
largest ownership interest in the Project, HudBay will also be the
operator.
- If the feasibility study is not completed and all applications for
permitting are not submitted on or before the fourth anniversary of the
Agreement, Aquila has the right to re-acquire HudBay's 51% JV interest
by reimbursing HudBay 50% of its total expenditures in respect of the
Project incurred from the execution of the Agreement. If the Project is
not brought into commercial production within four years from the grant
of mining permits, Aquila may re-acquire HMI's 65% JV interest by
reimbursing HudBay 50% of its total Project expenditures incurred after
execution of the Agreement.
HudBay is developing a work plan for the Project. The resource
contained within the potential pit shell is well delineated. However,
some additional near surface exploration drilling may be carried out to
follow up on a recent gold mineralization discovery by Aquila in their
most recent exploration campaign. Baseline environmental work is
expected to be completed this month and detailed environmental studies
initiated shortly thereafter. A priority will be to complete a scoping
study on the Project to confirm the concepts of mining, processing,
environmental protection, and infrastructure.
With the continued support of Aquila and subject to confirmation of the
technical, commercial and financial viability of the Project and the
receipt of permits on a timely basis, HudBay is expecting to develop a
new polymetallic mine on the Back Forty property within the next three
to four years.
Qualified Person
The data herein and the contents of this news release have been
reviewed by Cashel Meagher, Director, Technical Services and
Exploration with HudBay, who is a Qualified Person within the meaning
of NI 43-101, with the ability and authority to verify the authenticity
and validity of the data.
HudBay Minerals Inc.: Strength to Build the Future
HudBay Minerals Inc. (TSX:HBM) is a Canadian integrated mining company
with assets in North and Central America principally focused on the
discovery, production and marketing of base metals. The company's
objective is to maximize shareholder value through efficient
operations, organic growth and accretive acquisitions, while
maintaining its financial strength. A member of the S&P/TSX
Composite Index and the S&P/TSX Global Mining Index, HudBay is
committed to high standards of corporate governance and sustainability.
Forward Looking Information
This news release and its attachments contain "forward-looking
information" within the meaning of applicable securities laws. Forward
looking information includes but is not limited to information concerning
the agreement entered into with Aquila and the performance of Aquila
under the agreement, potential exploration and development plans for
the Back Forty Project, metal supply to HudBay's metallurgical
facilities, and HudBay's strategies and future prospects. Generally,
forward-looking information can be identified by the use of
forward-looking terminology such as "plans",
"expects", or "does not expect", "is
expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates",
"understands" or "does not anticipate", or
"believes" or variations of such words and phrases or
statements that certain actions, events or results "will",
"may", "could", "would",
"might", or "will be taken", "occur", or
"be achieved". Forward-looking information is based on the
views, opinions, intentions and estimates of management at the date the
information is made, and is based on a number of assumptions and
subject to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from those
anticipated or projected in the forward-looking information (including
the actions of other parties who have agreed to do certain things and
the approval of certain regulatory bodies).
Many of these assumptions are based on factors and events that are not
within the control of HudBay and there is no assurance they will prove
to be correct. Factors that could cause actual results or events to
vary materially from results or events anticipated by such
forward-looking information include risks associated with the mining
industry such as economic factors (including future commodity prices,
currency fluctuations and energy prices), failure of plant, equipment,
processes and transportation services to operate as anticipated, dependence
on key personnel and employee relations, environmental risks,
government regulation, actual results of current exploration
activities, possible variations in ore grade or recovery rates,
permitting timelines and conditions, capital expenditures, reclamation
activities, land titles, and social and political developments and
other risks of the mining industry, as well as those risk factors
discussed in the company's Annual Information Form dated March 30,
2009, which risks may cause actual results to differ materially from
any forward-looking statement.
Although HudBay has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking information, there may be other factors
that cause actions, events or results not to be anticipated, estimated
or intended. There can be no assurance that forward-looking information
will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. HudBay
undertakes no obligation to update forward-looking information if
circumstances or management's estimates or opinions should change
except as required by applicable securities laws, or to comment on
analyses, expectations or statements made by third parties in respect
of HudBay, its financial or operating results or its securities. The
reader is cautioned not to place undue reliance on forward-looking
information.
(HBM-G)
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