• Two-phase mine plan has an after-tax net present value (10%) of $1,296 million and generates an 18% internal rate of return at $3.50 per pound copper ¹
• Phase I reflects a standalone operation on private land and patented mining claims over a 16-year mine life with average annual copper production of approximately 86,000 tonnes ⁱ at cash costs and sustaining cash costs of $1.15 and $1.44 per pound of copper ⁱⁱ , respectively, generating an after-tax net present value (10%) of $741 million and an internal rate of return of 17% ¹
• Phase I of the Copper World Complex includes a 60,000 ton per day sulfide concentrator, a 20,000 ton per day oxide heap leach, an SX/EW facility and a concentrate leach facility with an initial capital cost estimate of approximately $1.9 billion. The concentrator is intended to expand to 90,000 tons per day in Phase II
• The processing facilities are planned to have annual production capacity of 100,000 tonnes of copper cathode during Phase I and 125,000 tonnes of copper cathode during Phase II, and have been designed to reduce the project's carbon footprint to produce “Made in America” copper
• Supports U.S. copper supply through onshore production of copper cathode expected to be sold entirely to domestic customers and eliminates GHG and sulfur emissions associated with overseas shipping and processing
• Phase II expands mining activities onto federal land and extends the mine life to 44 years with average annual copper production of approximately 101,000 tonnes ⁱ at cash costs and sustaining cash costs of $1.11 and $1.42 per pound of copper ^{i i} , respectively. Phase II provides additional optionality with an after-tax net present value (10%) of $555 million and an internal rate of return of 49% (and a projected after-tax net present value (10%) of $2,806 million at the time of Phase II sanctioning) ¹
• Significant increase in copper contained in all mineral resource categories
• Hudbay is evaluating several opportunities to optimize the project, including the potential to expand Phase I beyond 16 years with additions to the company’s private land package for tailings and waste rock storage and the potential to accelerate Phase II if federal permits are received earlier than as outlined in the PEA

TORONTO, June 08, 2022 (GLOBE NEWSWIRE) -- Hudbay Minerals Inc. (“Hudbay” or the “company”) ( TSX, NYSE: HBM) today announced the results of the preliminary economic assessment (“PEA”) of its 100%-owned Copper World Complex in Arizona, which includes the recently discovered Copper World deposits along with the Rosemont deposit. All dollar amounts are in US dollars, unless otherwise noted.

¹ The valuation metrics presented in this news release are based on a preliminary economic assessment that includes an economic analysis of the potential viability of mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. This preliminary economic assessment is preliminary in nature, includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty the preliminary economic assessment will be realized. See “Qualified Person and NI 43-101” below.

“The Copper World Complex PEA represents the next leg of copper growth at Hudbay, generating significant value for all of our stakeholders with robust project economics and many benefits for the community and local economy in Arizona,” said Peter Kukielski, Hudbay’s President and Chief Executive Officer. “We have been successfully executing an alternative Arizona strategy since 2019 to deliver this attractive project, which is significantly de-risked and has the potential to nearly double our annual copper production while maintaining Hudbay’s first quartile cash cost positioning. Phase I represents an attractive standalone operation on our private land and Phase II provides significant long-term growth potential in this prolific district. Through applying our core competencies of exploration, mine planning and project development, the Copper World Complex is expected to be the next major copper operation in the United States, delivering the copper needed to meet domestic electrification and decarbonization supply chain needs.”

Successfully Executing an Alternative Strategy

Hudbay has been evaluating alternative options to unlock value from its Arizona mineral assets since the July 2019 ruling from the U.S. District Court to vacate the final record of decision (“FROD”) issued by the U.S. Forest Service relating to its Rosemont copper deposit. The FROD was based upon a standalone development plan for the Rosemont deposit utilizing federal land as set forth in Hudbay’s 2017 feasibility study and technical report (the “2017 Feasibility Study”).

Discovering New Mineralization on Patented Mining Claims

In the fall of 2019, the company began pursuing a private land development plan, including exploring nearby patented mining claims in the historic Helvetia mining district. The company initiated a drill program in 2020 to confirm historical drilling in this past-producing region, and the drill program was further expanded throughout 2021 after continuing to receive encouraging results. Four deposits were discovered in early 2021 with oxide and sulfide mineralization occurring at shallow depths on Hudbay’s wholly-owned patented mining claims. By September 2021, the exploration program had identified seven mineral deposits (referred to at the time as the “Copper World deposits”) over a seven-kilometre strike area, as shown in Figure 1. An initial mineral resource estimate was declared at the Copper World deposits in December 2021, which was larger and at a higher level of geological confidence than expected.

Expanding Private Land Package

Hudbay has been acquiring additional private land in the area to support an operation entirely on private land. The company now holds approximately 4,500 acres of private land and patented mining claims, which are enough to support the first 16 years of production at the Copper World Complex. Please refer to Figure 2 for a map of the company’s private land package.

Unlocking District Potential

Following the recent exploration success on patented mining claims and ongoing litigation uncertainty regarding the project design set forth in the 2017 Feasibility Study, Hudbay began to evaluate alternative design options to unlock value within this prospective district. This included remodeling the 2017 mineral resources, incorporating the new mineral resources from successful exploration results and completing new metallurgical testing work, which led to a comprehensive review of the mine plan, process plant design, tailings deposition strategies and permitting requirements for the new project.

Advancing State-Level Permitting

In June 2021, Hudbay initiated the state-level permitting process for the project with an application for its Mined Land Reclamation Plan (“MLRP”), which was subsequently approved by the Arizona State Mine Inspector in October 2021. The MLRP approval included a requirement for reclamation cost bonding prior to initiating work on the company’s private lands and represented the first step in the permitting process for a private land operation.

An aquifer protection permit and air quality permit are the remaining key state-level permits required for a private land operation, which, along with other minor permits, are expected to be advanced in the second half of 2022. Hudbay previously received aquifer protection and air quality permits for the 2017 design of the Rosemont project and these permits have been successfully upheld through litigation.

Hudbay does not believe any federal permits are required for Phase I of the mine plan for the Copper World Complex (see “Simplified Permitting Process” below).

2022 PEA Summary

The Copper World Complex PEA contemplates a two-phased mine plan with the first phase reflecting a standalone operation with processing infrastructure on Hudbay’s private land and mining occurring on patented mining claims. Phase I is expected to require only state and local permits and reflects a 16-year mine life. Phase II extends the mine life to 44 years through an expansion onto federal land to mine the entire deposits. Phase II would be subject to the federal permitting process.

Phase I contemplates average annual copper production of up to 100,000 tonnes ⁱ over a 16-year mine life, including approximately 86,000 tonnes ⁱ of copper from mined resources at average cash costs and sustaining cash costs of $1.15 and $1.44 per pound of copper ^{i i} , respectively. At a copper price of $3.50 per pound, the after-tax net present value of Phase I using a 10% discount rate is $741 million and the internal rate of return is 17%. Phase II contemplates an expansion of the processing facilities which would increase average annual copper production up to approximately 125,000 tonnes ⁱ over the remaining mine life, including approximately 101,000 tonnes ⁱ of copper from mined resources at average cash costs and sustaining cash costs of $1.11 and $1.42 per pound of copper ^{i i} , respectively. With the inclusion of Phase II and assuming a copper price of $3.50 per pound, the after-tax net present value of the total project using a 10% discount rate increases to $1,296 million and the internal rate of return is 18%. The valuation metrics are highly sensitive to the copper price and at a price of $4.00 per pound, the after-tax net present value of Phase I and LOM, using a 10% discount rate, increases to $1,193 million and $1,903 million, respectively, and the internal rate of return in Phase I and LOM increases to 21% and 22%, respectively.

A summary of key valuation, production and cost details from the PEA can be found below. For further details, including operating and cash flow metrics provided on an annual basis, please refer to Exhibit 1 at the end of this news release. For further details regarding the preliminary nature of the PEA and its limitations, please refer to “Qualified Person and NI 43-101” below.

Note: “LOM” refers to life-of-mine total or average.
¹ Calculated assuming the following commodity prices: copper price of $3.50 per pound, copper cathode premium of $0.01 per pound (net of cathode transport charges), silver stream price of $3.90 per ounce and molybdenum price of $11.00 per pound. Reflects the terms of the existing Wheaton Precious Metals stream, including an upfront deposit of $230 million in the first year of Phase I construction in exchange for the delivery of 100% of silver produced.
² EBITDA is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please refer to the company's most recent Management's Discussion and Analysis for the three months ended March 31, 2022.
³ The mine plan assumes external concentrate is sourced in years when spare capacity exists at the SX/EW facility in order to maximize the full utilization of the facility. Copper cathode production from mined resources excludes the production from external concentrate. Average annual copper cathode production from external concentrates is approximately 12,000 tonnes in Phase I and 22,000 tonnes in Phase II. There remains the potential to replace external copper concentrate with additional internal feed.
⁴ Cash cost and sustaining cash cost, net of by-product credits, per pound of copper produced from internally sourced feed and excludes the cost of purchasing external copper concentrate, which may vary in price or potentially be replaced with additional internal feed. By-product credits calculated using the following commodity prices: molybdenum price of $11.00 per pound, silver stream price of $3.90 per ounce and amortization of deferred revenue as per the company’s approach in its quarterly financial reporting. By-product credits also include the revenue from the sale of excess acid produced at a price of $145 per tonne. Sustaining cash cost includes sustaining capital expenditures and royalties. Cash cost and sustaining cash cost are non-IFRS financial performance measures with no standardized definition under IFRS. For further details on why Hudbay believes cash costs are a useful performance indicator, please refer to the company's most recent Management's Discussion and Analysis for the three months ended March 31, 2022.

¹ Net present value and internal rate of return are shown on an after-tax basis.
² EBITDA is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please refer to the company's most recent Management's Discussion and Analysis for the three months ended March 31, 2022.

Overview of Proposed Operation

The Copper World Complex is planned to be a traditional open pit shovel and truck operation with a copper sulfide mineral processing plant and an oxide leach processing facility producing copper cathode, molybdenum concentrate and silver doré.

The overall mining operation is expected to consist of four open pits in Phase I with two of the pits expanding onto federal land in Phase II, as shown in Figure 3. Phase I contemplates exploitation of the pits and use of associated infrastructure within a footprint that requires only state and local permits for its 16 years of operation, plus one year of pre-stripping. During this period, all waste and tailings will be disposed on, and leach pads will be located on, Hudbay’s private land. In Phase II, it is assumed that all necessary federal permits will be obtained in order to mine and deposit tailings and waste on unpatented mining claims.

A majority of the newly discovered deposits are intended to be mined in Phase I and these deposits have a lower strip ratio and would contribute approximately 50% of the resources mined, as shown in Figure 4. In the first five years, including the year of pre-stripping, 90% of the mineral resources are intended to be extracted from the Peach-Elgin, Copper World (now referred to as “West”) and Broadtop Butte pits. The Rosemont (now referred to as “East”) pit would become a major contributor in year five and the primary source of feed in Phase II.

The processing facilities and saleable mineral products are fundamentally different from what was contemplated in the 2017 Feasibility Study. The processing facilities for the Copper World Complex include an oxide leach and solvent extraction and electro-winning (“SX/EW”) facility, a sulfide concentrator, a concentrate leach facility and an acid plant. The capacity of the sulfide concentrator during Phase I is 60,000 tons per day while the tonnage of the run-of-mine leached material is 20,000 tons per day. In year 17, the sulfide throughput will increase to 90,000 tons per day for the duration of Phase II. The pregnant leach solution from the concentrate leach facility will be combined with the solution from the oxide leaching circuit and treated in the SX/EW facility to produce copper cathode. The concentrate leach facility will also produce sulfur which will be processed into sulfuric acid at the acid plant and then used on the oxide leach pads. When the sulfur production from the concentrate leach process is insufficient to support the sulfuric acid requirements of the project, sulfur will be purchased at local market price; conversely, when sulfuric acid production exceeds the operation’s leaching requirements, it will be sold.

The capacity of the contemplated processing facilities allows for the opportunity to process third party feed in certain years when the copper from resources mined may be lower due to grade variability. The PEA assumes third-party concentrate will be sourced in certain years to maximize the utilization of the SX/EW facility, which will have annual production capacity for 100,000 tonnes of copper cathode during Phase I and 125,000 tonnes of copper cathode during Phase II.

The PEA contemplates the construction of three tailings storage facilities for Phase I and an additional larger tailings facility for Phase II. Conventional tailings deposition is planned for Phase I. Dry stack tailings deposition is intended to occur in Phase II, as per the original design set forth in the 2017 Feasibility Study.

Total project capital costs are estimated to be $1.9 billion for Phase I, including all costs associated with the construction of the onsite facilities as managed by the EPCM contractor, such as the sulfide concentrator, the concentrate leach facility, the oxide leach and SX/EW plant. Phase I project capital costs include $572 million of owner’s costs associated with mining equipment, pre-stripping activities as well as all operating costs capitalized prior to the start of production. Phase II project capital costs of $885 million include costs associated with the expansion of the crushing facility and flotation plant to accommodate the higher sulfide throughput, as well as $264 million of owner’s costs related to the construction of a new tailings facility. Contingency costs have been applied to direct capital costs at 20% for Phase I due to many components being at an advanced level of engineering, and at 40% for Phase II due to the long lead time of 15 years before the start of