Hudbay reopens Constancia 
after brief suspension

Hudbay Minerals (TSX: HBM; NYSE: HBM) announced on Nov. 8 that it had suspended operations at its Constancia copper mine in Peru for safety reasons after trespassers entered the open-pit area.

The mining company said many of the trespassers were from the district of Chamaca, about an hour’s drive from the mine. Hudbay also noted that within the previous two weeks, Chamaca had signed an agreement with national and local governments and Hudbay Peru “confirming areas of social cooperation,” and that the trespassers “have yet to present specific demands.”

Hudbay declined a request for an interview about the closure. In an email, the company’s director of corporate communications Scott Brubacher said that “we have nothing more to add since the press release.”

Operations at the mine got back to normal on Nov. 11, however. In a brief statement, the mining company said it had resumed operations “following the negotiation — with support from the Peruvian government — of a peaceful resolution of the occupation in the open pit.”

In a research note after news that Hudbay had reopened the mine, Stefan Ioannou of Haywood Securities said that “the action spoke to growing frustration in the region, which follows concerns centered on concentrate trucking traffic [frequency, noise, dust, etc.] raised at [MMG’s] Las Bambas in October, and was likely designed to garner government attention in the context of a regional anti-mining protest.

“We are under the impression that meetings with the community will now follow later this month to better communicate the benefits of a recently signed agreement confirming areas of social cooperation between the district of Chamaca, local and national governments, and Hudbay Peru.”

Some familiar with Peruvian politics say the country’s new president, Pedro Pablo Kuczynski (PPK) — an economist educated at Oxford and Princeton who was elected in June — has his work cut out for him governing the country. His party Peruanos por el Kambio — a play on his initials — holds only 18 of the 130 seats in Congress, while the party of his strongest opponent, Keiko Fujimori, the daughter of former president Alberto Fujimori, has 73 seats.

The president’s resume includes stints at the World Bank, investment banking on Wall Street and previous posts in Peru’s government, including minister of economy and finance and minister of energy and mines. Kuczynski has said he will implement policies that favour investment in the mining sector and also plans to enhance and streamline the formalization process for a sub-sector of artisanal miners.

Louis James, senior investment strategist at Casey Research, says he is “hopeful that PPK will do Peru some good, but actions speak louder than words.”

While James was encouraged, for example, that the bureaucracy recently approved Dynacor Gold Mines’ (TSX: DNG; US-OTC: DNGDF) Chala plant “in very short order, despite the change of administration, which often paralyzes bureaucracies for long periods of time,” there are still reasons to remain wary about the future of open-pit projects in the country.

“Facing down widespread discontent — such as has caused so much trouble for the big open-pit projects under development in Peru — is never going to be easy for a politician, even one seen as pro-business, the way PPK is,” he writes in an email. “Sending in the army might alleviate flashpoints and get some things going, but it will create more resentment and future problems. It seems PPK sees this. Not sure there really is a solution, until the positive impact of new policies can start creating benefits the people can see, and change their attitudes.

“Until then I am, frankly, not interested in any big open-pit project in Peru,” he says. “High-grade underground seems to work out well enough when handled properly, so stories like that interest me.”

Hudbay acquired 100% of the Constancia project through its 2011 acquisition of Norsemont Mining.

Production at the mine in southern Peru’s province of Chumbivilcas began during the fourth quarter of 2014, and the mine achieved commercial production on Apr. 30, 2015.

Constancia has a mine life of 22 years, based on current reserves.

The mine produced 218 million lb. copper in concentrate in the first nine months of 2016.