HudBay bulks up on Back Forty

HudBay Minerals (HBM-T) likes what it sees at the Back Forty project in Michigan and has chosen to exercise its option on the property far ahead of schedule.

The company has been working on the project in Michigan’s Upper Peninsula through a joint-venture with Aquila Resources (AQA-T) but is now set to take over as operator by moving up to a 51% interest.

Back Forty is an advanced-stage exploration project hosting a zinc-and gold-rich volcanogenic massive sulphide (VMS) deposit. The project currently has an indicated resource of 8.5 million tonnes grading 2.13 grams gold, 30.6 grams silver, 5.61% zinc and 0.51% copper.

But with strong drill results coming from the property in June — highlighted by an intercept of 122.4 metres grading 2 grams gold and 5.5% zinc — those resource numbers could be set to climb significantly when the companies put out an updated resource estimate at the end of this year.

Once the new total is in, HudBay says it will build off of it as it works on a feasibility study. It says that an important mine permit application will likely be submitted in the fourth quarter of 2011.

That mining permit is key because once submitted to the state of Michigan, in conjunction with a completed feasibility study, Hud- Bay’s interest in the project will move up to 65%.

Lest there be any doubt about the company’s commitment to follow through on those plans, it should be considered that it spent the $10 million it needed to get to a 51% interest two years ahead of schedule.

“The Back Forty project is an excellent fit with our strategy of acquiring and developing VMS and porphyry deposits with strong exploration potential in mining friendly jurisdictions,” David Garofalo, HudBay’s president and chief executive, said in a statement.

Despite its reduced heft at the project, Aquila’s president and chief executive, Tom Quigley, said the project is still the “cornerstone asset of the company.”

Aquila will continue to provide support for both the exploration and project development activities at the project.

In Toronto on Sept. 10 — the day the news was released — HudBay shares were up 2¢ to $14.96 on 737,000 shares traded while Aquila shares were also up 2¢ or 5% to 41¢ on 273,000 shares traded.