Hudbay seeking Rosemont Mine joint venture partner after receiving key federal Clean Water Act permit

Just days after obtaining a key federal Clean Water Act permit for its Rosemont open-pit copper project, Toronto-based Hudbay Minerals Inc. announced Wednesday it is seeking a new minority partner to take up to a 30 percent share in the $1.9 billion project.

“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,” Alan Hair, Hudbay’s president and CEO, said in a statement.

The announcement comes at the same time Hudbay said it is ending its joint venture partnership with Korean-based United Copper and Moly, LLC (UCM), which holds a 7.95% share in the Rosemont project. UCM is jointly owned by Korea Resources Corporation, a South Korean government-controlled investment arm, and LG International Corp.

UCM invested $70 million into the Rosemont project in Sept. 2010 when it was controlled by Vancouver, B.C.-based Augusta Resource Corporation. Hudbay purchased Augusta in 2014, assuming control of the Rosemont project. The 2010 joint venture agreement called for UCM to invest an additional $106 million in Rosemont to fund construction once all permits were in place.

The additional investment would have increased UCM’s stake in Rosemont to 20 percent in a project projected to generate billions of dollars in profits over the 20-plus year life of the open-pit mine. UCM also agreed to purchase 30% of the copper concentrates and molybdenum concentrates produced annually by Rosemont.

Hudbay states it will buy out UCM’s stake with a $45 million cash payment and three $10 million annual payments beginning in July 2022. The transaction is expected to close before April 25. The $75 million buyout “simplifies the ownership structure and improves our financial flexibility for the development of Rosemont,” Hair stated.

Hudbay’s deal comes after recent news reports of financial troubles for Korea Resources Corp., the Arizona Daily Star reported Wednesday. UCM is facing financial pressure after Korea Resources suffered losses from poor investments. The Korean mining ministry announced plans to sell off all of the company’s overseas assets under a phased restructuring scheme, Business Korea reported last year.

UCM’s departure from the project provides Hudbay an opportunity to find a potential 30% junior partner that will bring in far more cash for a stake in the multi-billion dollar project.

The Section 404 Clean Water Act permit is the last major permit needed to begin construction on the Rosemont project that would be built in the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

The mine would have a devastating impact on the Santa Rita Mountains and regional watershed. Waste rock and mine tailings would destroy more than 2,500 acres of Coronado National Forest and the mile-wide, half-mile deep open pit threats to drain water from rare desert riparian resources, including Las Cienegas National Conservation Area.

Hudbay still needs the U.S. Forest Service to issue a final mine plan of operations, which is expected in about a month. Hudbay’s board of directors has not yet made a decision on whether to proceed with construction of the project.

Hudbay also needs to overcome significant legal challenges from mine opponents, who have already filed three federal lawsuits seeking to stop the project and intend to file additional litigation challenging the Corps’ decision last week to issue the 404 permit.

“We are extremely disappointed that the Corps of Engineers apparently rejected the recommendation from their own District Engineer and years of technical analysis by the Corps, EPA, and many other agencies and entities,” said David Steele, spokesperson for Save the Scenic Santa Ritas.

“Make no mistake about it – the PR spin and regulatory gymnastics that occurred to get to this decision do not change the fact that this mine is bad for southern Arizona,” Steele stated in a March 8 press release. “We are committed to continuing to fight it.”

Three federal lawsuits already have been filed seeking to stop the project.

The Center for Biological Diversity filed a lawsuit in September 2017 alleging the U.S. Fish and Wildlife Service violated the Endangered Species Act when it issued a biological opinion approving the mine.

Two months later, four environmental and conservation groups filed a lawsuit alleging the U.S. Forest Service violated the National Environmental Policy Act when it issued a Record of Decision (ROD) approving the mine.

Three Native American Tribes filed a lawsuit in April 2018 alleging the Forest Service violated federal laws including the Forest Service Organic Act, the National Environmental Policy Act, and the National Historic Preservation Act when it issued the ROD.

The Chairman of the U.S. House of Representatives Natural Resources Committee is also warning that Hudbay failed to provide government regulators with a plan to “adequately mitigate the environmental impacts of the mine on the aquatic ecosystem.”

Natural Resources Committee Chairman Raul Grijalva and Arizona Rep. Ann Kirkpatrick, in whose Congressional District the mine is located, warned the Corps in a Jan. 23 letter  that Hudbay’s mitigation plan does not pass legal muster.

Hudbay “has not presented to the American people a legally and technically sound mitigation plan that addresses the massive destruction of wetlands, springs, and seeps, and other important aquatic resources, including Cienega Creek and its tributaries,” the joint letter states.