HudBay thriving on better metal prices, exploration success

Shipment of copper and zinc concentrates to Hudson Bay Mining & Smelting’s (TSE) aging metallurgical complex here should pick up significantly in the remaining months of 1988. And long-term supplies seem assured, judging from the dedicated exploration effort for base metals under way in the area.

HudBay, by far the most active explorer in the area, plans to spend $7.5 million per year over the next 10 years to maintain reserves of base metal ore in the camp at the 17-million-ton level, according to Alastair Walker, vice-president of exploration.

Any gold properties the company encounters are independently evaluated by Derry, Michener, Booth & Wahl, then dealt to Mingold Resources, which is jointly held by HudBay’s parent, Inspiration Resources (TSE), and the Minorco group.

At Chisel Lake, HudBay has outlined 2.7 million tons of probable ore reserves (diluted to 15%) grading 9% zinc and 0.2%-0.3% copper down plunge from the orebody now being mined in Snow Lake, Walker tells The Northern Miner. Two drills are actively probing the deposit from surface.

“Although a feasibility study has not been done, it would appear that to exploit this deposit, a new (750-m) shaft would have to be driven,” Walker says.

Mine contractors Erickson and Smook are stripping close to four million cu yd of clay overburden from the crown pillar of the Chisel Lake mine in an $18-million project designed to prepare the deposit for open-pit mining. Reserves there total 1.1 million tons grading 10.5% zinc. HudBay will soon decide whether to contract out that mining work or perform the work itself.

That ore will go to feed the mill at Snow Lake which currently gets its ore from four smaller mines in the area — the underground portion at Chisel Lake, the Stall Lake mine, the Rod mine and the Spruce Point mine.

Striking miners at the Ruttan copper/zinc mine in Leaf Rapids, Man., just north of here, are back on the job this week with a new 3-year contract. The 373 mine and mill workers will be taking home paycheques fattened by a $1.53- per-hour wage increase.

The mine, purchased by HudBay in July, 1987, supplies the Flin Flon smelter with about 40% of its copper concentrates and 16% of its zinc concentrates. Workers were on strike for three months. The rest of HudBay’s concentrates come from the Snow Lake mill and a mill in Flin Flon.

The mill in Flin Flon gets its ore from the Flin Flon mine (the 68-million-ton orebody that started the mining activity in the area back in 1920) and the Trout Lake mine, which is owned jointly by HudBay, Granges Exploration (TSE), Manitoba Mineral Resources and Outokumpu Oy of Finland.

A 560-m shaft being driven on the Trout Lake property should be completed by the end of 1988. But ramping and development work on the bottom level of the mine will take another year to complete before ore can be hoisted. Contracts for that work have not been let yet, according to Mine Superintendent Brian Murphy. In the meantime, ore will continue to be hauled up the ramp by Toro 40-cu-yd trucks.

“There were no proven reserves to justify the decision to drive the ($18-million) shaft,” Walker admits, “but the company continued on the strength of probable and possible reserves (five or six holes below the 450-m level). Detailed drilling will be carried out from the bottom level in the mine next year.”

The Flin Flon deposit, which is on its last legs, will be replaced in 1989 by production from the Callinan deposit, one mile north of the North Main Shaft (one of two shafts servicing the Flin Flon mine). Underground drilling there, since 1979, has outlined 2.6 million tons of proven reserves grading 4.1% zinc, 1.51% copper, 0.055 oz gold and 0.66 oz silver per ton, according to chief exploration geologist Ted Baumgartner.

Development drifts are being driven on the 2210 level and 2750 level in anticipation of production in the fourth quarter of 1989. Ore will be hauled to the South Main Shaft by high-speed rail haulage on the bottom level.

Some additional copper concentrate will come from the new nickel mine being developed jointly by HudBay (60%) and Outokumpu (40%) on the shores of Namew Lake, 65 km south of here. When The Northern Miner visited the site, crews were preparing to conduct a 3,000-gallon-per-minute pump test on a water-bearing fault which has been intersected on two levels in the mine. The test should tell the company how much it will cost to keep the mine pumped out. Production schedules, which had called for start-up in the fourth quarter have been set back by the delay.

Once the mine and mill are running at capacity in 1989, nickel concentrates will be trucked to a loadout facility yet to be built at Atik, Man. From there, HudBay’s share will go to Fort Saskatchewan, Alta., and Outokumpu’s share will go to Thompson, Man.

Total nickel production costs, including transportation and refining, are estimated by Ivan Oblensky of Josephthal and Company of New York to be $1.45(US) per lb. “We would sooner not comment on what we expect our costs to be,” project manager Evert Bron tells The Northern Miner. But with grades averaging 2.44% nickel, this $70-million mine will indubitably be a low-cost producer.

Settlement of the labor dispute at Ruttan, along with the mine development projects in the Snow Lake/Flin Flon Greenstone Belt area and high prices for base metals which appear to be firming up, is setting HudBay up for a profitable future.

It couldn’t have come at a better time for HudBay. Two years ago, Chairman Reuben Richards stated it was Inspiration Resources’ intention to reduce its dependence on base metals.

Today, two months after selling off it’s copper subsidiary in the U.S. for $125(US) million, the company’s Canadian subsidiary, HudBay, appears to be some distance from the auction block.

With some $60 million in debt pared from the company’s balance sheet, the Chisel Lake open pit in Snow Lake and a nickel/copper mine at Namew Lake gearing up for production, HudBay is well positioned to profit from high metals prices.