Hudbay considering a partner for its Fenix nickel project

The Canadian miner said it may consider bringing in a JV partner to help finance the Guatemalan project

TORONTO (Reuters) - 

HudBay Minerals (HBM.TO: Quote) will consider taking on a joint venture partner to help finance construction of its Fenix nickel project in Guatemala, which could get the go-ahead by the middle of next year, the company's CEO said on Wednesday.

Speaking on a conference call to discuss the company's third-quarter results, Chief Executive Peter Jones said HudBay is currently working on a plan to develop a dedicated electricity source for the project in hopes of lowering its expected $1 billion price tag.

HudBay will update the market on the project early next year, and could make a decision on whether to proceed with construction around mid-2010.

"As we move forward we will ... look at various financing alternatives, including potential joint venture partners, offtake agreements and other strategic options that could make Fenix more attractive for HudBay," Jones said.

An offtake agreement is a long-term contract to sell processed ore to a specific customer.

Just before midday, the company's shares were up C$1.31, or 9.1%, at C$15.73 on the Toronto Stock Exchange, outperforming other Toronto-listed base metals miners, although the sector as a whole was stronger.

HudBay is also working on community relations at Fenix, which have long been testy as locals have occupied large expanses of company land near Lake Izabal in Guatemala, claiming the land belonged to their ancestors.

At times, violence has erupted at or around the property, and in September a man was killed.

Winnipeg, Manitoba-based HudBay acquired the project in mid-2008, but soon after it put the project on hold due to plunging nickel prices.

Late on Tuesday HudBay reported a slightly better than expected third-quarter profit, as lower costs helped offset the impact of weaker base metal production and prices.

Recent stock gains at the company have been due to strong drilling results at its Lalor zinc-gold deposit in Manitoba, which has become the company's main development project.

($1=$1.065 Canadian) (Reporting by Cameron French; editing by Rob Wilson)

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