Like a fortunate flock of migratory fowl, Canadian copper miner HudBay Minerals
Proposing to snatch up Canadian-based developer Norsemont Mining with a cash and stock offer valued at $520 million, HudBay Minerals has moved decisively to gain a foothold in one of the more prolific global hot spots for copper production: Peru.
Norsemont's flagship Constancia property is perched between the southern Peruvian cities of Cuzco and Arequipa, at elevations that are perhaps best-suited for the birds (as high as 15,400 feet above sea level!). Once constructed, the operation is expected to support a 15-year mine life with annual production of 172 million pounds of copper. Thanks to strong by-product credits of molybdenum and silver, Constancia is conservatively expected to permit cash operating costs of less than $1 per pound of copper.
Although I do consider the acquisition a plainly positive development for shareholders of both companies, I must take issue with one aspect of HudBay CEO David Garofalo's recent statement. I do agree that "this transaction helps solidify HudBay's position as one of the leading mid-tier mining companies with an enhanced growth pipeline," but I do not consider Peru to be a "stable, mining-friendly" jurisdiction.
Now that workers at Freeport-McMoRan Copper & Gold's
I am not at all averse to mining investment in Peru, so long as these factors are well understood. Peru is replete with opportunity for growing copper production, and already places second to neighboring Chile among the world's top producers. Antamina, a single mine in which major miners BHP Billiton
Mining equipment manufacturers like Joy Global
With that said, I remain resolutely bullish on the price outlook for copper, and I consider HudBay Minerals one of several attractive producers for Fools to consider within the space.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Freeport-McMoRan Copper & Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.