Billion dollar Rosemont very similar to Oroco’s Santo Tomas
SANTO TOMAS COMPARABLE
Hudbay’s Rosemont project has been favourably compared to the Santo Tomas Project. Today’s news release by Hudbay is noteworthy in regard to Rosemont’s valuation.
Hudbay Reaches Agreement To Purchase Rosemont’s Minority Joint Venture Interest
March 13, 2019
TORONTO, March 13, 2019 (GLOBE NEWSWIRE) — Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE: HBM) announced today that it has reached an agreement with United Copper & Moly LLC (“UCM”) to purchase UCM’s 7.95% interest in the Rosemont project, and to terminate all of UCM’s remaining earn-in and off-take rights, for upfront cash consideration of US$45 million, plus three annual installments of US$10 million per year, commencing July 1, 2022. In connection with the transaction, Hudbay has agreed to release UCM from any and all obligations in relation to the Rosemont project, including project loans representing its proportionate share of joint venture expenditures incurred beyond its initial earn-in investment. UCM is jointly owned by Korea Resources Corporation and LG International Corp.
“This transaction simplifies the ownership structure and improves our financial flexibility for the development of Rosemont,” said Alan Hair, Hudbay’s president and chief executive officer. “There is continued positive momentum at Rosemont as we recently received our section 404 water permit and we look forward to advancing the project into construction as we finalize a prudent financing strategy. As part of our financing strategy, we will shortly launch a process to seek a development joint venture partner for Rosemont. We expect there will be substantial interest in a minority stake given recent precedent transactions and Rosemont’s unique status as a world-class, shovel-ready copper project in the United States.”
In addition to simplifying the ownership structure, the transaction also removes the current governance structure with UCM, which was inherited from the previous owner of Rosemont. This allows Hudbay to have greater strategic flexibility with respect to capital structure and project financing options, and Hudbay intends to evaluate a variety of options, including the addition of a new, committed joint venture partner for the development of Rosemont. The company expects to carry out this process in parallel with advancing the initial development of Rosemont, with the objective to ultimately hold an approximate 70% interest in the project and maintain operatorship.
The UCM transaction is expected to close not later than April 25, 2019, subject to the approval of the parties’ respective boards of directors and the execution of a definitive agreement.
Rosemont is one of the world’s best undeveloped copper projects delivering a 15.5% after-tax unlevered IRR at a copper price of $3.00 per pound based on the 2017 Feasibility Study published by Hudbay. Rosemont is expected to produce approximately 127,000 tonnes of copper annually at a cash cost of $1.14 per pound (net of by-product credits) over the first 10 years of operations.
CIBC Capital Markets acted as Hudbay’s financial advisor on the purchase of UCM’s interest in the Rosemont project.
