Hudbay Minerals (TSX, NYSE: HBM) and Japan’s Mitsubishi have approved construction of the $2.1-billion Copper World project in southern Arizona despite a 59% surge in construction costs.
Scope changes since a 2023 prefeasibility study have resulted in $200 million of additional capital costs, Hudbay said Wednesday in a statement. Hudbay expects to contribute about $500 million, less than one-quarter of the initial investment, with its first installment deferred until 2028. Capital costs were previously estimated at $1.3 billion in the 2023 study.
“The Copper World sanction decision is a positive step towards Hudbay’s medium term growth plans, although the share price reaction may be limited as the scope of the project and initial capex estimates are largely as expected,” RBC Capital Markets mining analyst Sam Crittenden said Wednesday in a note.
The move, which follows the completion of a definitive feasibility study (DFS), clears the way for one of the largest new copper mines in the United States to start producing in the second half of 2029. Copper World, located about 50 km southeast of Tucson, is expected to help double Hudbay’s consolidated annual copper production to about 250,000 tonnes, alongside growth initiatives at the company’s existing operations.
Hudbay shares rose 0.2% to C$33.34 Wednesday morning in Toronto, valuing the company at about C$14.8 billion ($10.6 billion). The stock has traded between C$20.26 and C$44.48 in the past year.
Base case
Using a long-term copper price of $5 per lb. and an 8% discount rate, Copper World has an after-tax net present value (NPV) of $1.2 billion, an internal rate of return (IRR) of 17% and a payback period of 5.4 years, Hudbay said. If copper averages $6 per lb., the NPV rises to $2.3 billion and the IRR to 22%.
“The expectation was that there would be significant capex inflation,” Jefferies mining analyst Fahad Tariq said in a note. “Copper World is highly leveraged to copper prices.”
The base case for Copper World contemplates a 15-year mine life based on proven and probable reserves of 390 million tonnes grading 0.47% copper. Annual copper production would average 102,000 tonnes during the first decade of operations, an 11% increase from the 92,000 tonnes projected in 2023.
Average cash costs are estimated at $1.65 per lb. during the first decade.
The development plan includes adding an in-pit crushing and conveying system in year four and expanding the concentrator to 90,000 tonnes from 60,000 tonnes per day in the fifth year of operations. That would lift annual copper production to about 120,000 tonnes during years six through 10 – a 43% increase from the 84,000-tonne average of the first five years.
Copper World holds measured and indicated resources of 1.2 billion tonnes grading 0.40% copper for contained metal of 4.99 million tonnes, Hudbay says. Inferred resources are estimated at 275 million tonnes grading 0.3% copper for 927,000 tonnes of contained copper.
Expansion scenario
A separate expansion scenario, requiring federal permits, could more than double the mine life to 37 years. Based on a $5 per lb. copper price, the extension would deliver an NPV of $2.5 billion, an IRR of 19% and an initial payback period of 5.4 years, Hudbay says.
Funding for the project “is not expected to be an issue,” National Bank Financial mining analyst Don DeMarco said Wednesday in a note.
Sources of cash include Mitsubishi’s initial $600 million contribution to the joint venture, $230 million in stream financing from Wheaton Precious Metals (TSX, NYSE, LSE: WPM), an anticipated $650 million project debt facility and subsequent pro-rata equity contributions from both Hudbay and Mitsubishi.
Hudbay is well-positioned to fund capital contributions from its existing cash balance of $915 million, its revolving credit facility and projected free cash flow from its other operations during Copper World’s development, DeMarco added.
Long history
Copper World incorporates the former Rosemont copper deposit, now known as the East deposit, and additional deposits identified through exploration beginning in 2020.
Hudbay reconfigured the project after legal and permitting challenges complicated development of Rosemont, shifting its initial mine plan onto private land and patented mining claims to avoid the need for federal permits.
A preliminary economic assessment released in 2022 established the phased development strategy, followed by an enhanced prefeasibility study in 2023.
Hudbay subsequently secured key Arizona environmental permits, including aquifer protection and air quality approvals.
Mitsubishi acquired a 30% stake in the project through a $600-million investment completed in January 2026. That left Hudbay with 70% ownership.
Copper World is expected to create more than 1,000 construction jobs and 500 permanent operating positions.
Concentrate facility
Hudbay is also evaluating a fully permitted concentrate leach facility that could produce copper cathode domestically, reducing reliance on overseas smelting and refining. It has the potential to add about $377 million to Copper World’s after-tax NPV, Hudbay says.
The project will strengthen U.S. copper supplies as demand grows from manufacturing, infrastructure, electrification and national security industries, Hudbay says.
“Copper World is one of the most attractive copper growth projects in the Americas, offering some of the highest copper grades, lowest cash costs and favourable capital intensity,” Hudbay CEO Peter Kukielski said in the statement.
“This project adds more than 100,000 tonnes of annual copper production over the first 10 years, and the DFS demonstrates the full potential of the project in the extension case, delivering higher annual copper production for more than 30 years.”