Creating a Global Footprint:
The Fenix Nickel Project in Guatemala
Our 98.2 per cent owned Fenix brownfield nickel laterite project in Guatemala has 41.4 million tonnes of mineral reserves, and is an opportunity to build our growth pipeline with approximately 50 million pounds of nickel per year. Once constructed, Fenix is expected to have competitive operating costs, long reserve life, and provide both metal and geographic diversification. Environmental and construction permits have been received and detailed engineering is well-advanced.
Although the company limited expenditures in November 2008 until economic conditions improve, HudBay continues to explore lower cost power supply solutions and transportation options, and to develop infrastructure, such as upgrading the access road. We are also actively involved with the local community and all levels of government to ensure the project provides benefits to the people of Guatemala, as well as HudBay’s shareholders. Fenix is a significant nickel project and a key growth opportunity for HudBay.
Community Engagement
HudBay reaches out to the community in Guatemala by conducting information, liaison and awareness programs in the Fenix vicinity. We are upgrading a 37-kilometre highway from El Estor to Río Dulce, which should be complete in 2009 at a cost of approximately US $10 million. This will not only be a road for heavy truck traffic to our project, but a pathway for communication that benefits local agriculture, commerce, and tourist ventures.
HudBay spent US $687,000 during 2008 on environmental protection and compliance, including land reclamation, environmental baseline studies, and sampling. HudBay’s Guatemalan subsidiary also operates a tree nursery that can deliver up to 40,000 trees annually for reforestation.
In 2008, the company completed the first phase of a medical centre to provide health care to the community, and through the Raxche΄ Foundation, the company initiated 66 projects in 20 communities around the Fenix project in health, education, culture and environment.
Background to the Fenix Project
The Fenix operation, on care and maintenance since 1980, is a substantial brownfield nickel laterite mine and process plant located in eastern Guatemala that became part of HudBay as a result of its business combination with Skye Resources in August 2008. A technical report dated September 15, 2007 and entitled “Technical Report on an Update to the Fenix Project, Izabal Guatemala” is available on SEDAR.
The Fenix nickel laterite deposits are located near El Estor in Izabal, Guatemala. The mineral rights to most of the deposits are held under a 25-year renewable exploitation licence with the remainder held under an exploration licence. Compañia Guatemalteca de Níquel S.A. (CGN), a Guatemalan company, holds both the licences. HMI Nickel Inc. (a wholly-owned subsidiary of HudBay Minerals Inc.) owns approximately 98.2% of CGN’s shares, while the Guatemalan government owns the balance of 1.8%. For further information on CGN, please visit its Spanish website: http://www.cgn.com.gt.
The project’s principal mineral reserves are located on the Sierra de Santa Cruz in eastern Guatemala at elevations from 400 to 800 metres above sea level. The nickel laterite ores are formed by intensive tropical weathering of ultramafic rocks. A limonite layer is the top and most intensely weathered layer and the saprolite ore is the lower and less weathered layer with an irregular transitional boundary separating the two.
At steady state operation the mine is expected to provide 1,464,000 tonnes of saprolite and transition ore annually to the process plant. The open pit mine’s average stripping ratio is expected to be 1.1 tonnes of waste for each tonne of ore mined. The average grade of the saprolite will be 1.63% over the 30 year mine life, although higher grade is expected to be mined in the early years. The general mining sequence will begin with the removal and storage of soil that will be used for future rehabilitation of the mined areas. Following the removal of the soil the limonite layer will then be removed and placed in previously mined or other designated storage areas. The transition zone and saprolite ore will then be removed and loaded into off-road haul trucks for transportation to the process plant. The soil will then be replaced over the mined areas and reforested.
The existing 25 million pound per year process plant will be upgraded to approximately 50 million pounds and the process flowsheet will consist of a coal-fired dryer, two calcine/reduction kilns, a 90 MW electric arc furnace, and a ladle refinery to produce a 35% ferro-nickel product. The existing process plant was well maintained and many of the components will be reused. The dryer, one kiln, and the refinery will be new. The existing furnace will be upgraded with new technology to achieve the required capacity.
Production over the 30-year project life is estimated to be 1.3 billion pounds of nickel. The average production for the first 20 years after start of full production is planed to be 48.5 million pounds per year of nickel contained in ferro-nickel.
