HudBay Minerals has approved a $1.5 billion investment to fund the development and construction of its Constancia copper mine in Peru. The company has also entered into a precious metals transaction where Silver Wheaton Corp. will provide for upfront deposit payments of $750 million. The Constancia mine is estimated to generate an unlevered internal rate of return of 14.5% and a net present value of $571 million, assuming a discount rate of 8% and long-term copper prices of $2.75/lb.
“The decision to proceed with the development of the Constancia project is a significant milestone for Hudbay as we pursue our goal of becoming a leading mid-tier diversified metals producer with long-life, low-cost operations in investment-grade countries,” said David Garofalo, president and CEO, Hudbay.
Hudbay is also arranging a new $600 million credit facility from a syndicate of Canadian and international banks. With approximately $2 billion of capital spending remaining on the Constancia, Lalor and Reed projects, Hudbay expects to fund this requirement with a combination of $710 million in cash, operating cash flow, and the funds received under the precious metals transaction and credit facility.