Despite its best efforts, the "most likely scenario" is that in 2021, mining operations will cease in Flin Flon, Man., an internal memo to employees at Hudbay Minerals (TSX: HBM; NYSE: HBM) says.
While the company has extended the life of its 777 mine from 2019 to 2021, the memo notes, its efforts to find new sources of ore from 777 "did not turn out as we hoped."
That means that the Flin Flon mill will also cease operations, the memo states, and the "most likely outcome is that the zinc plant will also close in 2021.
"We have to be honest: after mining for 90 years in the Flin Flon area, we now know that we won't have an anchor mine to replace 777 and sustain operations in Flin Flon the same way they are today," Robert Assabgui, vice-president of Hudbay's Manitoba business unit, wrote to staff.
"In 2022, with only Lalor ore available, the zinc plant will have only 50% of the feed that it has today. It is unlikely we will be able to technically or commercially operate the plant at this reduced throughput."
The 777 zinc-copper-gold-silver mine began commercial production in 2004.
The company said it is working to figure out what this means for jobs, but doesn't have all the answers yet.
"I can tell you that we know there will be a need for more people at Stall mill and Lalor mine," Assabgui said. "We are also optimistic that there will be additional jobs at the New Brit gold mill once refurbished, and potentially at Pen, if this project moves forward.
"We are still working through these business scenarios, and since these studies are still ongoing, we cannot provide a definitive answer. We anticipate offering training to help people transition to future roles, but we also expect that job loss will be part of the outcome."
In 2015, Hudbay acquired a 100% stake in the New Britannia mine and mill in Snow Lake. The mill is on care and maintenance, but if refurbished, could process up to 1,500 tonnes per day of gold zone and copper-gold zone ore from Lalor, and could provide an alternative to moving Lalor ore to Flin Flon for processing. The New Britannia mill includes a carbon-in-pulp circuit that has historically produced gold dor?(C) on-site.
Hudbay's Lalor mine, in the Chisel basin, 208 km east of Flin Flon in Snow Lake, produces zinc, copper, gold and silver. Initial production began in August 2012 and the mine reached commercial production in the third quarter of 2014.
Hudbay's concentrator in Snow Lake processes ore from Lalor. The concentrator was refurbished in 2014 and processes 3,000 tonnes of mineralized material a day from the Lalor mine, and produces zinc and copper concentrates.
Hudbay's Reed copper mine, 120 km east of Flin Flon, produced its last ore in August and processing was completed in September. The mine started commercial production in the first quarter of 2014.