As noted in an April 2 research note, HudBay Minerals Inc. (HBM:TSX; HBM:NYSE) released an updated mine plan and an updated mineral reserves/resources estimate for its Constancia mine, the former including a "revised production profile for both the Constancia and Pampacancha pits and new grade, recovery, capex and opex assumptions," reported Eight Capital analyst Jacques Wortman.
He indicated the new mine plan increased Eight Capital's value of Constancia, located in southern Peru, by 15%, increasing the net asset value per share to CA$12.97 from CA$11.56. He concluded the plan is "positive for HudBay, confirming the positive grade bias and boasting improved economics through higher recoveries and life-of-mine (LOM) metal production."
Additionally, Eight Capital increased its target price on HudBay to CA$16 per share from CA$15.50 per share, reflecting a projected return of about 75%. The Buy-rated mining company is currently trading at around CA$8.91 per share.
According to the mine plan, 105 thousand tons of contained copper would be produced annually between 2019 and 2023 at a cash cost of $1.09/lb and an all-in sustaining cost of $1.38/lb, excluding byproduct credits.
Compared to the 2016 report, the LOM now is longer, by one year, the period spanning 2018–2036. The new plan outlines 25% more production between 2022 and 2025 and 9.5% more production over the LOM. LOM copper recoveries, at about 86%, also are higher than the previous 81%.
As for the satellite deposit Pampacancha, mining should begin in 2019, having been delayed one year. "HudBay is still negotiating to secure surface rights for the Pampacancha deposits but was granted access to the land to carry out early-works activities," Wortman noted. In the meantime, the company would mine in the Constancia pit.
At Caballito, Maria Reyna and Kusiorcco, the newly acquired assets within 10 kilometers of Constancia, "early-stage permitting and community relations work is ongoing," wrote Wortman.
As for the annual mineral update, contained copper at Constancia and Pampacancha increased 12% and 13%, respectively, mostly due to higher grade assumptions, Wortman indicated. The reserves were calculated using $3 a pound ($3/lb) copper, $11/lb molybdenum, $18 per ounce ($18/oz) silver and $1,260/oz gold.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
Disclosures from Eight Capital, Hudbay Minerals Inc., Target Revision, Apr. 2, 2018
Conflicts of Interest: Eight Capital has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of Eight Capital. The Research Analyst compensation pool GFG Resources Inc. includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.
Eight Capital generally restricts any research analyst/associate and any member of his or her household from executing trades in the securities of a company that such research analyst covers, with limited exception.
Research Analyst Certification
Each Research Analyst and/or Associate who is involved in the preparation of this research report hereby certifies that:
- the views and recommendations expressed herein accurately reflect his/her personal views about any and all of the securities or issuers that are the subject matter of this research report;
- his/her compensation is not and will not be directly related to the specific recommendations or views expressed by the Research Analyst in this research report;
- they have not affected a trade in a security of any class of the issuer whether directly or indirectly through derivatives within the 30-day period prior to the publication of this research report;
- they have not distributed or discussed this Research Report to/with the issuer, investment banking at Eight Capital or any other third party except for the sole purpose of verifying factual information; and
- they are unaware of any other potential conflicts of interest.
The Research Analyst involved in the preparation of this research report does not have any authority whatsoever (actual, implied or apparent) to act on behalf of any issuer mentioned in this research report.
IIROC Rule 3400 Disclosures are available here.