In an industry beset with low commodity prices and a dearth of capital, something unusual has occurred in northern Manitoba -- a mine has come on stream ahead of schedule and under budget.
HudBay Minerals and its joint venture partners, VMS Venture Inc. say the Reed copper mine 45 kilometres west-southwest of Snow Lake, hit commercial production levels at the end of March, sooner than expected.
And of the $72 million in estimated capital cost, only $66 million was required, with another $4 million budgeted as sustaining capital costs over the life of the mine.
Brandon-based John Roozendaal, president of VMS, which is a 30 per cent partner with HudBay on the project, said the expeditious development of the mine speaks highly of the work of HudBay's team.
"It's an anomaly in the mining business to be under budget and on time and not have any lost time due to accident," he said. "It's very unique."
The mine currently employs about 70 people, close to the maximum expected of about 77 when production hits its peak in the coming months.
In a conference call with analysts Thursday, HudBay CEO David Garofalo said during the quarter ending March 31, the Reed open-pit operation mined 71,236 tonnes of ore producing copper and zinc.
During its development, HudBay has been keen on the relatively hassle-free development of Reed, owing to the fact the ore body is close to surface, the site is close to the highway and it is well within trucking distance to HudBay's Flin Flon processing operations.
Company-wide, HudBay Minerals Inc. reported a loss of $24.1 million for the quarter ending March 31, 2014, compared to net earnings of $7.9 million for the same period last year.
Part of that was due to a significant accumulation of unsold copper and precious metals in Flin Flon, which suffered from similar conditions that have contributed to a bottleneck in Prairie grain distribution this winter.
"Extreme cold weather in the quarter affected railway service from HudBay's Manitoba operations," Garofalo said.
The Toronto-based mining company, which has significant operations in northern Manitoba, is charging ahead with the Reed mine as well as the much larger Lalor mine just outside Snow Lake.
Garofalo said Lalor, a large copper/zinc/gold mine, is on budget and on schedule to double production capacity and increase production rates in the second half of 2014.
Of the total mine construction budget of $441 million, not including the construction of a new concentrator, HudBay has invested about $390 million and has entered into an additional $42 million in commitments.
HudBay has also completed about 70 per cent of its $1.7-billion copper mine in Peru and is in the midst of a $400-million takeover attempt of Augusta Resource Corp., which controls a copper-molybdenum property in Arizona.
The success of HudBay's Lalor and Reed projects belies the lacklustre state of the mineral-development scene in Manitoba.
Ed Huebert, executive vice-president of the Mining Association of Manitoba, said while HudBay has done phenomenal work at Lalor and Reed, there is not much to look forward to in the mining business in Manitoba.
"You're always looking for what's next," Huebert said. "You're always looking for the next mine, and on that front, it is slow right now."
According to Natural Resource Canada's annual statistics on exploration and deposit-appraisal expenditures, there is only $51.8 million of exploration work on the books for Manitoba in 2014, down from a high of $140 million as recently as 2011.
And of that, Huebert said the spending intentions of the junior exploration companies in 2014 is only $10.7 million. That number has been as high as $90 million in the past.
"A couple of things have come together in a very real, meaningful way," Huebert said. "There has been low and weak commodity prices and the other is the availability of capital."