GOLD NEWS

Hudbay to fast-track Lalor gold-zinc project

The miner said exploration successes at the site suggest the beginnings of a much-bigger find

Author: Cameron French (Reuters)
Posted: Friday , 09 Oct 2009

TORONTO (Reuters) - 

HudBay Minerals (HBM.TO: Quote) on Thursday said it would put development of its Lalor gold-zinc deposit in Manitoba on a fast track, and that exploration successes at the site suggested the beginning of a much-bigger find.

Shares of HudBay jumped after it said it would spend C$85 million ($81 million) to access Lalor through a ramp from its nearby Chisel North mine in order to begin mining by early 2012. That's ahead of the expected completion date of a separate Lalor shaft in 2014.

"Our top focus is now on development of Lalor on a fast-track basis," HudBay Chief Executive Peter Jones said on a conference call.

The company, which mines mainly zinc and copper in western Canada, discovered zinc at Lalor two years ago. It has since struck a gold zone and recently hit a deeper copper-gold zone.

The company released an updated resource estimate showing an indicated resource of 12.3 million tonnes of zinc grading 8.7% zinc and an inferred resource of 5 million tonnes at 9.4% zinc.

In terms of gold, HudBay expects to uncover 3 million ounces at the first two zones. It's too early to get a sense of the extend of the newer gold-copper zone, but HudBay said the deposit may just be the beginning of a much larger find.

"We are now asking ourselves if this entire deposit of 3 distinct zones... if it has the possibility of becoming a much more significant deposit yet," said Cashel Meagher, HudBay's director of technical services and exploration.

The company's stock charged to a 16-month high, helped by the news and by strong metals prices. By mid-afternoon, the shares were up 8%, to C$1.09, at C$14.79 on the Toronto Stock Exchange.

MORE DETAILS BY END OF YEAR

HudBay, which expects to spend C$450 million to develop Lalor under its current plan, expects to have a pre-feasiblity study out by the end of the year and a feasibility study out next year.

It plans to initially mine the zinc first, but could change that plan in the next two years. It expects the ramp from Chisel will allow it to do underground exploration that will be more revealing than above-ground drilling.

Chisel, a zinc mine with about two year's worth of reserves remaining, was suspended earlier this year due to plunging zinc prices and tight financial markets.

Since then zinc prices have rebounded, and HudBay CEO Peter Jones said the company will now consider restarting the mine and using its remaining ore to feed the nearby Snow lake zinc concentrator before the Lalor feed starts to arrive in 2012.

GUATEMALA ISSUES

Lalor is one of two large development projects for HudBay. The other is the Fenix nickel project in Guatemala, which was put on hold shortly after it was acquired last year, due to weak nickel prices.

The property, has long been the site of tension between mine ownership and locals who live illegally on the land.

Most recently, one man was killed and several were injured by gunfire when security guards clashed with protesters.

HudBay officials said on Thursday they have secured a commitment from the Guatemala government to establish a military garrison in the region that will assist in security at the property.

($1=$1.05 Canadian) (Reporting by Cameron French)

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