HudBay Minerals Inc. (TSX:HBM) shares surged after the miner announced a $600 million strategic investment from Mitsubishi for a 30% joint venture interest in the Copper World project in Arizona.
Announced alongside its Q2 earnings, the deal includes an initial cash investment of $420 million, with $180 million to follow within 18 months.
It aims to produce 85,000 tonnes of copper annually and create over 1,000 jobs.
“Securing Mitsubishi as a 30% partner in Copper World is an important milestone for Hudbay as we establish a long-term strategic partnership to advance this high-quality copper project towards sanctioning and to unlock significant value in our copper growth portfolio," Hudbay CEO Peter Kukielski said in a statement.
For Q2, Hudbay reported a 26% year-over-year increase in revenue to $536.4 million.
Adjusted earnings were $75.5 million or $0.19 per share, above Wall Street estimates of $0.11.
Production during the quarter included 29,956 tons of copper and 56,271 ounces of gold. The company also reaffirmed its full-year consolidated production guidance of 117,000 to 149,000 tonnes of copper and 247,500 to 308,000 ounces of gold.
Jefferies analysts raised their price target on Hudbay following its report and the Mitsubishi investment announcement, upping it to C$18 from C$17.
“More important than the Q2 results, which were strong along with better cost guidance, is that Mitsubishi will invest $420 million cash on closing to become a 30% joint venture partner in Copper World,” they wrote. “This implies a $1.4 billion net asset value (NAV) for Copper World versus the $1.2 billion consensus estimate.”
They note that Hudbay’s remaining equity contribution will be $200 million, less than the $250 million to $350 million previously guided, but this could change.
Shares of Hudbay traded up 18.2% at C$16 late morning on Wednesday.