Nickel a new aspect to Hudson Bay’s long history

His company’s 813,267 common shares (as of December, 1987) carry no general voting rights in the affairs of the base metals miner itself. Instead, each share entitles the holder to one vote in Hudbay’s parent, Inspiration Resources (TSE) of New York, a diversified agricultural product company which has about 42.7 million common shares outstanding.

So, to get control of Hudbay, a takeover artist would have to swallow the bigger parent. That’s why Nilsen doesn’t lose any sleep thinking about “poison pills.”

That’s not to say Hudbay’s a giant nickel producer. Far from it. When, in the second quarter of 1989, the company’s 60%-held nickel mine at Namew Lake, Man., starts producing at the planned rate of 2,100 tons per day, Hudbay’s share should amount to just 14 million lb of nickel in concentrates per year. By comparison, Inco Ltd. produced 430 million lb in 1987.

If nickel was to defy all economic projections and stay at the current price of $6.75(US) per lb for all of 1989, Hudbay would make enough money to repay the whole $70 million it took to build the mine and mill. As it turns out, Outokompu Oy of Finland put up the $70 million to earn a 40% inter est in the mine. So Hudbay’s share will be profit, pure and simple. Total production costs are expected to be about $1.60(US) per lb. Other new mines in ’89

While nickel production will be something new to Hudbay in 1989, copper, zinc, gold and silver production will be old hat. (Although there are on average 0.479 g palladium and 0.651 g platinum in every tonne of Namew Lake ore, there are no plans to recover the precious metals from the nickel concentrates.)

Hudbay has been a significant copper, zinc, gold and silver producer in northern Manitoba since 1920. That’s when the 70-million- ton, massive sulphide Flin Flon deposit was brought into production. Since then, Hudbay has found and mined several more copper/ zinc deposits in the belt of Archean metavolcanic and sedimentary rocks. These stretch from Snow Lake in the east to Flin Flon in the west. Some detailed stratigraphic mapping by the Manitoba government has helped Hudbay’s exploration geologists pinpoint where in the volcanic sequence they are more likely to find mineable massive sulphide deposits. A lesson they’ve learned very well.

And the company is developing two more new mines — an open pit at Chisel Lake, to mine the crown pillar there, and an underground mine (Callinan) in Flin Flon to replace production from that dwindling deposit. Both are scheduled to begin producing in 1989. A third deposit, the Chisel Lake extension, looks like a potential producer for the 1990s. As for 1989, the Chisel open pit will provide the company with some very low cost zinc.

Extensions of existing mines are shaping up, too, for Hudbay. Deep drilling at the Trout Lake mine, a joint venture operated by Hudbay (which has a 44% interest), is generating considerable optimism in Hudbay’s exploration office. A 560-m production shaft being sunk there and lateral development work on the bottom level should be completed by late 1990. About 800,000 tons of ore were trucked up the ramp at Trout Lake in 1988, more than in any previous year since the mine began production in 1981. Metallurgical modernization

If the federal and Manitoba governments grant the company the loans Nilsen has requested, to finance a $130-million plant modernization at Flin Flon, even Noranda might become interested in the company’s assets.

Once the modernization is completed, after a construction period of about 2 1/2 years, it would give Hudbay an efficient, low-cost zinc and copper metallurgical complex. And more importantly for the federal and Manitoba governments, it would live up to the Manitoba government’s commitment to reduce sulphur dioxide emissions by 25% by 1994.

“The government has all the necessary information to make a decision,” Nilsen told The Northern Miner. “And I fully expect to get the loans ($43 million from the federal government and the same amount from the provincial government).”

Inspiration’s 60% ownership by two South African mining giants (Anglo American Corp., 39% and DeBeers Consolidated, 21%) is not an issue in the decision, Nilsen has been told. So there is every reason to expect a decision in Hudbay’s favor, he said.

But in the meantime, Nilsen expects the aged metallurgical complex in Flin Flon to produce up to capacity in 1989. That means 150 million lb of copper, 185 million lb of zinc, 70,000 oz of gold and 1.4 million oz of silver should be produced. And if prices for these metals remain buoyant throughout 1989, the company will indubitably have a profitable year, perhaps comparable with 1987 when profits were nearly $40 million.

“Our forecasts indicate prices will remain high in the early part of the year, then fall slightly, ending the year better than the past 5-year average,” Nilsen said.

Temporary maintenance problems and a major strike had a detrimental effect on the company’s bottom line in 1988. The tank house floor which collapsed in 1988 has been replaced and various maintenance problems in the copper plant have been corrected, Nilsen said. So those maintenance problems at least are behind the company. What new ones will crop up in the 60- year-old plant is anyone’s guess.

One thing is certain. There are no labor contracts up for renegotiation in 1989 at either Flin Flon or Snow Lake. So a strike should not disrupt production as a 3-month walkout at the Ruttan mine, north of Flin Flon, did in 1988.

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