Hudbay and Mitsubishi approve $2.1 billion Copper World mine

Hudbay Minerals and Mitsubishi have sanctioned the construction of the Copper World project in southern Arizona, a development that marks one of the largest new copper mining initiatives in the United States. The joint venture has approved a total capital investment of $2.1 billion, or C$2.9 billion, despite a significant 59 per cent surge in construction costs since the project’s initial planning stages. The decision follows the completion of a definitive feasibility study and clears the path for the mine to begin production in the second half of 2029.

The increase in capital costs is attributed to scope changes identified since the 2023 prefeasibility study, which added $200 million to the budget. Capital costs were previously estimated at $1.3 billion in that earlier study. Hudbay expects to contribute approximately $500 million to the initial investment, representing less than one-quarter of the total, with its first payment deferred until 2028. Mitsubishi, which holds a 30 per cent stake in the project, has already completed a $600 million investment in January 2026, leaving Hudbay with 70 per cent ownership.

Analysts have noted that the capital expenditure inflation was anticipated given the current market conditions. Sam Crittenden, a mining analyst at RBC Capital Markets, stated that while the sanction is a positive step for Hudbay’s medium-term growth, the share price reaction may be limited as the project scope and initial capital estimates were largely in line with expectations. Fahad Tariq of Jefferies highlighted that the project is highly leveraged to copper prices, while Don DeMarco of National Bank Financial indicated that funding is not expected to be an issue for the company.

Copper World is located approximately 50 kilometres southeast of Tucson, Arizona. The base case for the project contemplates a 15-year mine life based on proven and probable reserves of 390 million tonnes grading 0.47 per cent copper. Annual copper production is projected to average 102,000 tonnes during the first decade of operations, an 11 per cent increase from the 92,000 tonnes projected in 2023. Average cash costs are estimated at $1.65 per pound during this initial period. The development plan includes adding an in-pit crushing and conveying system in year four and expanding the concentrator capacity to 90,000 tonnes per day in the fifth year, which would lift annual production to about 120,000 tonnes during years six through 10.

Financial modelling using a long-term copper price of $5 per pound and an 8 per cent discount rate indicates an after-tax net present value of $1.2 billion, an internal rate of return of 17 per cent, and a payback period of 5.4 years. If copper prices average $6 per pound, the net present value rises to $2.3 billion and the internal rate of return increases to 22 per cent. The project incorporates the former Rosemont copper deposit, now designated as the East deposit, along with additional deposits identified through exploration since 2020. Hudbay reconfigured the project to shift the initial mine plan onto private land and patented mining claims, thereby avoiding the need for federal permits that had previously complicated development.

Funding sources for the project include Mitsubishi’s initial contribution, $230 million in stream financing from Wheaton Precious Metals, an anticipated $650 million project debt facility, and subsequent pro-rata equity contributions from both partners. Hudbay is positioned to fund its capital contributions from its existing cash balance of $915 million, its revolving credit facility, and projected free cash flow from other operations. The project is expected to create more than 1,000 construction jobs and 500 permanent operating positions. Hudbay is also evaluating a fully permitted concentrate leach facility that could produce copper cathode domestically, potentially adding about $377 million to the project’s after-tax net present value.