Hudbay boosts Snow Lake gold output 60% to 2.8M oz

Hudbay Minerals (TSX, NYSE: HBM) has increased forecast life-of-mine gold production at its Snow Lake operations in Manitoba by 60% to 2.8 million oz. under an updated mine plan.

The new forecast issued on Monday compares with 1.8 million oz. in Hudbay’s 2021 technical report, while increased proven and probable reserves extend the operation’s mine life by two years to 2043. That brings the total mine-life extension announced this year to six years.

Snow Lake is expected to produce an average of 185,000 oz. of gold annually from 2026 through 2030, supported by increased throughput at the New Britannia mill and higher recoveries at the Stall operation. The updated plan represents a 37% increase in production over the five-year period, adding about 250,000 oz. compared with the 2021 plan.

“This enhanced Snow Lake mine plan unlocks roughly 60% more gold production over the mine life and maintains an average of 185,000 ounces over the next five years,” CEO Peter Kukielski said in a release. “Transitioning this operation from a zinc-rich operation to a leading Canadian gold operation over the last five years has been transformative for Hudbay.”

The expanded plan provides cash flow as the company advances its copper growth pipeline in Arizona and elsewhere.

Shares in Hudbay Minerals fell 1.7% to $37.02 apiece in Toronto on Monday morning, valuing the company at $16.4 billion. Wider markets also declined on concerns about the Iran War and rising bond yields.

Higher output

Snow Lake’s proven and probable reserves now total 27 million tonnes containing 2 million oz. gold, a 38% increase in tonnage from the January estimate. The reserve base includes maiden reserves at the Talbot and Rail satellite deposits.

Production growth will come partly from increasing the mining rate to about 5,000 tonnes per day as the 1901 deposit and satellite deposits supplement Lalor. The 1901 deposit is expected to reach full production in late 2027.

New Britannia throughput is planned to increase to 2,300 tonnes per day beginning in 2027 from more than 2,000 tonnes currently, while Stall is expected to rise to 3,000 tonnes per day by 2030 from about 2,300 tonnes.

Hudbay is also developing a hot-tailings leaching project at Stall for commissioning in early 2028. The project is intended to lift gold recoveries closer to the roughly 90% achieved at New Britannia.

Desjardins Securities analyst Bryce Adams called the new plan positive, noting that the five-year production average of 185,000 oz. is 18% above consensus forecasts and 15% higher than the brokerage’s estimates. Snow Lake accounts for about 20% of Desjardins’ estimate of Hudbay’s asset-level net asset value.

Further growth could come from converting Snow Lake’s 1.5 million oz. of inferred gold resources, where Hudbay has historically achieved a roughly 90% resource-to-reserve conversion rate. Other opportunities include deeper extensions at Lalor, additional mineralization at 1901, tailings reprocessing and a potential restart of the former New Britannia mine.

Cash flow

Hudbay forecasts average gold cash costs of US$821 per oz. from 2026 through 2030, with sustaining cash costs averaging US$1,379 per oz. over the same period.

Desjardins estimates the updated plan could generate more than US$500 million in annual free cash flow at Snow Lake over the next five years, compared with its previous estimate of US$403 million. Over 10 years, the brokerage estimates cumulative free cash flow could be about US$850 million above consensus expectations.

“The strong margins and steady gold production will ensure Snow Lake continues to be a meaningful free cash flow contributor and provide complementary gold exposure for Hudbay,” Kukielski said.

That cash generation is increasingly important as Hudbay prepares for a major expansion of its copper business in the U.S. Southwest.

The company plans to develop Copper World and Cactus in Arizona as an integrated copper district. Hudbay has said it can build Copper World without issuing equity, using a financing package that includes a $600-million investment from Mitsubishi, $230 million from Wheaton Precious Metals (TSX, NYSE, LSE: WPM), about $500 million in project debt and cash generated by its existing mines.

Hudbay acquired Cactus through its $1.48-billion takeover of Arizona Sonoran Copper in June and plans to advance the project after Copper World.

Snow Lake produced 173,453 oz. gold and 9,249 tonnes copper last year, making the Manitoba operation an increasingly important source of cash as Hudbay expands its copper portfolio.

“Transitioning this operation from a zinc-rich operation to a leading Canadian gold operation over the last five years has been transformative for Hudbay and we look forward to sustainable production in the decades ahead,” Kukielski said.