Hudbay increases stake in Arizona Sonoran to 9.99%

Hudbay Minerals (TSX, NYSE: HBM) has upped its stake in Arizona Sonoran Copper (TSX: ASCU, OTCQX: ASCUF) with the purchase of 11.85 million shares under a private placement.

The Arizona Sonoran shares in the deal are priced at $1.68 each, representing a total investment of about $19.91 million. The stock opened Thursday’s session 13% higher at $1.61 apiece. They were 1¢ lower on Friday for a market capitalization of $222.6 million.

Arizona Sonoran is to use the proceeds to advance its main Cactus project 80 km southeast of Phoenix. Cactus has three porphyry copper deposits and one stockpile within a 5.5-km trend, including the past-producing Sacaton mine. The company’s aim is to develop Cactus and become a mid-tier copper producer with low operating costs.

“This investment increases our exposure to another high-quality development project in the region as we continue to advance our Copper World project,” Hudbay CEO Peter Kukielski said on Thursday. He called Cactus “exciting.”

Hudbay recently secured all necessary permits for Copper World, which is about 200 km southeast of Phoenix, near the Mexico border. Shares in Hudbay gained 2.1% on Thursday before easing 1.2% on Friday morning in Toronto to $12.80 apiece. It’s market cap is $5.1 billion. 

Low risk

Arizona Sonoran CEO George Ogilvie welcomed Hudbay’s increased investment.

“It is the company’s objective to develop Cactus to be a significant producer of copper cathodes for direct use by industry in the state of Arizona and the larger U.S. supply chain,” Ogilvie said in a release. 

In 2024, Arizona Sonoran released an updated preliminary economic assessment (PEA) on Cactus that confirmed its potential to become a low-risk copper mine project. It raised the project’s after-tax net present value at an 8% discount by four-fold to US$2 billion, with an increased internal rate of return of 24%.

The PEA was based on a modified mine plan that envisioned a standalone open-pit operation with a mine life of 31 years, producing a total of 5.3 billion lb. of copper cathodes. The new mine plan was able to drive down both its cash cost to US$1.82 per lb. and all-in sustaining cost to US$2 per lb. Its initial capital cost is estimated at US$668 million, with a payback of about five years.

“There can’t be many lower-risk copper development projects than Arizona Sonoran Copper’s Cactus,” Ogilvie said at the time of the PEA release. “This project is absolutely going into production as a standalone business case.”

The Cactus project currently hosts a porphyry copper resource totalling 632.6 million measured and indicated tonnes grading 0.58% copper for 7.3 billion lb. of metal, and 474 million inferred tonnes at 0.41% copper for 3.8 billion lb.