TORONTO, ONTARIO, Aug 6, 2009 (Marketwire via COMTEX News Network) --
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)
SOURCE: HudBay Minerals Inc.
HudBay Minerals Inc.
John Vincic, Vice President,
Investor Relations and Corporate Communications
(416) 362 0615
Email: john.vincic@hudbayminerals.com
Website: www.hudbayminerals.com
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