What we've learned today in the update.
First, thanks very much for having me here today, Lawson. There's a bunch of questions that I need to unpack. Fundamentally what today's announcements represented was more gold in the near term, more gold in the long term, and lots more opportunity ahead beyond what we see in the reserves and the resources that we have. What we announced today was essentially an increase of 60% of our life of mine gold assets in Snow Lake, Manitoba. It represents also steady production at about 185,000 ounces per year for the next five years in reserves, and we think significantly beyond that. What we've done really is 150,000 ounces of gold relative to the 2021 mine plan. If you think of that in terms of margin and value, that's close to $ 1 billion of value that we've added today.
What's not included in the announcement really but we touch on it is some of the opportunities that lie ahead of us in Snow Lake, specifically one of them being the Britannia Gold Project. Britannia Gold Project, a series of deposits sort of anchored by what came along with the New Britannia Mill, which was the New Britannia Mine at the time. There's a resource down there. It was mined until the early 2000s when it was shut down because of gold price. We think if you look at the resource that's there and you couple it with some of the other resources that are almost contiguous with it, we think that there may be a fault structure that actually links those assets, so we need to do some exploration.
This is all additive to what we release as resources and reserves. On the question of what this means longer term for Hudbay and where gold sits in the portfolio. We used to always get asked the question, does gold belong in your portfolio? In those days, gold really was a counter-cyclical investment for us. Today it seems to be running in parallel with copper almost. Today it's providing very, very significant free cash flow to us, which funds our very well. When we were asked maybe five years ago, "Does it really belong in your portfolio? Should you sell it? You're not getting the right multiples." Our answer was, we want to identify some of the upside first. We don't want to give it away. I still feel the same.
There's so much upside in this camp that unless somebody wants to come and just give us a knockout preemptive offer for it's going to continue to drive cash flows which aid our ability to invest in the business and to deliver cash flows back to our shareholders in terms of sustainable dividends.
You touched on, in your response to that last question, exactly the next thing I wanted to talk about, which is you mentioned gold funding the copper growth. Among your tremendous copper growth assets is Copper World. As we sit here today, we're anticipating in very short time a final investment decision and then an update on the CapEx milestones that the community focused on as we approach that. How do you think about the level of inflation versus that original $1.7 billion total CapEx figure for the project as we head into that news release?
I mean, we're super excited about what lies ahead. I think we expect to issue the definitive feasibility study weeks ahead, certainly before our Q3 results. When we deliver the definitive feasibility study, that'll be accompanied by a final investment decision. Our final investment decision really is moving along in sync with our partner, Mitsubishi Corporation, who has their own series of internal approvals and will conduct those at roughly the same time. The key milestones will be obviously the final investment decision, which will come forward in the next several weeks. We'll continue then with detailed engineering. We'll place orders for all of the long lead items, get going on the construction, be a 2.5-year build. So we would complete the project or construction completion in third quarter of 2029, ramp up through the remainder of 2029, full production in 2030.
Projects always have interim milestones that'll be interesting for our shareholders, but the ones that people really need to focus on right now are final investment decision and then completion of construction.
And then-
Oh, the question was about-
Yes, the question that-
inflation.
myself as an analyst covering your stock, how to frame the inflation associated with the updated CapEx figure for the life of mine and the upfront.
Yeah. For people in the audience who do not know the project, the preliminary feasibility study was issued back in October of 2023. The capital estimate at the time was $1.5 billion, of which $200 million represented equipment financing. So $1.3 billion net of equipment financing, but the headline number is $1.5 billion. In those three years, we have seen escalation, we have seen some inflation associated with the current environment. We have seen tariffs, which of course have added to the cost of some of the imported components. We have seen an increase of about a couple of hundred percent in the cost of steel. So that all accumulates to the concept that, of course, there is going to be escalation and inflation in the estimate.
You have to remember that in the interim, the copper price has moved from $3.75 in our PFS to, I have no idea what it is today, but it is approaching $7. So regardless of what the final capital estimate is, this is a project that is likely more robust than it was in 2023. I do not have a number today because we have not issued the definitive feasibility study, but I think you get where I am coming from. I think that it is fair to say that there will be a fairly significant of escalation, but nothing beyond what is expected by our analyst community. I think we are well in line with what is expected by the analyst community. Then if you layer that on with the escalation of the copper price in the meanwhile, you have a project that is going to deliver a value and an IRR of 20%+ .
Remember, this is the highest grade copper project in, or certainly the highest grade sulfide copper project in [audio distortion]. What is not to love about that? It is 20-year mine life in phase one. Phase two takes us to 40 years. I should also add that there are elements that need to be contemplated as we determine exactly what the cost is going to be, because there will be an element of scope change in all likelihood, because we are contemplating an expansion of the concentrator in the first five years. A couple of reasons. We [audio distortion] phase two, and it makes sense to do that. Our partners, Wheaton Precious Metals, have also agreed to pay us $70 million if we expand the concentrator in the first five years. So it certainly makes sense to do that.
Now, to do that, if we were to simply conduct phase one on its own and then in five years' time come back and expand, you would incur all kinds of disruptions. So what we are looking at, the trade-off that we are looking at right now is to expand the footprint of the concentrator a little bit, make a provision for concrete, make a provision for increased size of piping, perhaps some pumping capacity, and that will no doubt add to the capital estimate a little bit too.
That's fantastic. Very helpful color. I should note that, this is a project that was approved over 25 years ago, three copper cycles ago. So certainly if it worked in that copper price environment, it, to your point, likely works very well in this one and is very robust. Copper World's obviously not the only project in your portfolio. Cactus, you have Arizona, one in Nevada. You've previously described the sequencing as being Cactus, Nevada. Has anything changed in terms of the sequencing, your thoughts on timing or any other aspects of those two projects and that growth going forward?
Not in terms of sequencing, Lawson. No. We're thrilled to have acquired Arizona Sonoran, which we concluded the year investment in, or the acquisition we made, I think, of July this year. Cactus Project actually synchronizes almost perfectly with Copper World in the sense that we'll update the Cactus pre-feasibility study starting as soon as we complete the definitive for Copper World. That's probably a year's effort. 2027, we would complete a definitive feasibility study by, let's say, second half of 2028. So second half of 2028, we would, in theory, be ready with a final investment decision on Cactus, but we don't want to conduct two projects at the same time, or we don't want to construct two projects at the same time. So in all likelihood, the construction workforce coming off Copper World will move directly onto Cactus.
Cactus is much simpler because it's a heap leach and a SX-EW plant, so it's a shorter construction duration. The mine itself and the pre-stripping will be done by our own workforce, so we could start that a little bit earlier. So I think we have some flexibility with respect to when we bring it online. But the base case is Copper World comes into production in 2029. Cactus will come into production in 2031. We could improve on that depending on how the environment evolves. Mason is going through a pre-feasibility study [audio distortion] that in a lot, it's probably a year's effort. When we complete that pre-feasibility study, we will embark on the NEPA permitting process. That is in all likelihood a three to four-year process. So it's nice to think that Mason could come into production, let's say three or four years after Cactus.
What you have is, if you think of it from today to 2035-ish, let's say, we bring 90,000 tons of production in on with Copper World. We bring another 103,000 on with Cactus, and we bring another 110 or more with Mason. So with that, we actually bring, we develop, build a U.S.-based copper business of roughly 350,000 annual tons of copper. If you layer that on to our production in Canada and in Peru, you're talking about a half-million ton copper business by the middle of the next decade. There's a big Canadian mining copper producer that produces around about that today. So we're talking about really substantial, and that's aside from everything we're doing in Canada and in Peru.
You mentioned Canada. Let's maybe talk about Copper World a little. When you guys acquired the Copper World mine, there was a lot of potential opportunity for improvement. Where does it stand today, and what do you think the market maybe underappreciates about that asset?
Copper Mountain? We acquired Copper Mountain in 2023. It was a fixer-upper, no doubt. We always said that it was a three-year stabilization and optimization program, and we are nearing the end of those three years right now, and it is going absolutely according to plan. We are completing the stripping effort this year. We have put in place the improvements that were needed on the mill, including some repairs that we needed to do. The mill is now moving towards the nameplate capacity of 50,000 tons a day. This year, we expect to produce around 30,000 tons of copper. Next year, we expect to produce 60,000 tons of copper. Everything is going to clockwork. I think what has been underappreciated was that it was such a problematic asset that I think that it was very much a show-me story.
I think that by the end of this year, as we [audio distortion] cashflow inflection point, people will see next year, this mine is capable of delivering some $200 million of free cashflow. I think that is something that is not appreciated by our investors.
Not by accident, I've left your flagship Constancia asset in Peru to close out the discussion of the various assets, but it has been the cornerstone of Hudbay's copper production for well over a decade. How do you see that operation evolving over the next decade or two, and where are the greatest opportunities for value creation?
If I go back to the evolution of our Snow Lake business, I think I've said many times that the Snow Lake team is a process improvement machine. I and the Hudbay board were in Peru the week before last, visiting Constancia, and I tell you what, that team, that is a process improvement team on steroids. It is the most incredible, young [audio distortion] that delivers over and over and over. I recall saying, reminding investors that the Pampacancha pit was going to. This was a high-grade copper and gold pit that we were mining for four years, was going to be depleted last year. Of course, some of our production would drop off a little bit this year.
It has not dropped off, and it is not going to drop off this decade because these guys find ways to improve throughput, and they find ways of doing it without increasing cost. You're going to see exactly the same thing continue. We will continue with roughly 90,000 tons per year of copper production. I am convinced that we will see this team continue to produce at that level well beyond the end of the decade. They'll find ways to do it. We have the pebble crushing circuit, which is being finished around about now. We've added the third flotation line, the rougher flotation line. They'll find other ways to continue to squeeze this asset. I think some of the opportunities to which you're alluding are the satellites around the Constancia mine, the Maria Reyna satellite deposit, the Caballito satellite deposit.
For those of you who don't know what these satellites are, these are potentially very high-grade assets within trucking distance of the Constancia milling infrastructure. Maria Reyna was drilled by Vale back in 2008, I believe it was. 11 drill holes, all of them intersected copper at surface. One intersected 160 meters of 1% copper equivalent. Caballito used Mitsui as the Katanga mine. Their cutoff grade was about 2%. The folks who, the informal miners who mined the Katanga deposit or the Caballito deposit now laugh at us, and they tell us that at Constancia, we mine road base. Super exciting to be able to get at the exploration process. Exploration, on the other hand, at least permitting in Peru is complex and takes time.
We have all the permits except the one final permit which remains to be completed, and that's the prior consultation permit with the indigenous communities. The provincial elections are happening in the next month or so. We think it'll be probably likely late next year before we get the permit through the system. But once we get it through the system, there's an 18-month drilling program, $40 million earmarked for that program. I'm sure we'll be releasing results before we complete that program. Then we'll go through the permitting process all over again. I don't think you'll see any of these assets in production much before the early 2030s. But with what I've said about the Constancia mine itself and [audio distortion] there, I don't think it's going to skip a beat.
You'll see Maria Reyna and Caballito and these other satellites actually become additive to Constancia production rather than simply replacing it. We're super excited about that.
You certainly have a strong balance sheet with which to fund all of this growth about which you speak here. How does capital return fit into this overall picture of capital allocation?
As we've matured as a company, credit very much to Eugene Lei, our President and Chief Financial Officer, for putting in place all of the steps that required prior to making a final decision on Copper World. One of those things that we said we wanted to do was make sure that we had the debt ratios in our balance sheet, and our balance sheet in strong shape. Our balance sheet today, we have no net debt. We have a very strong balance sheet. The question is often made to us, when a capital return is coming. We have long held the ambition to pay sustainable dividends to our shareholders after we build Copper World. I want to make sure that we are in a position to be able to build Copper World as well as to build Cactus without going back to our shareholders to issue equity.
That is priority number one and I see long-term sustainable dividends coming back to our shareholders once Copper World is completed. If something happens and we just make a fortune, we can recontemplate it. We have all of the tools in our chest to be able to do that. NCIB, we have all of those things. We did nominally increase our dividend this year, but it's just indicative of the direction that we're taking.
I think maybe where I'd like to close then is just your thoughts on the final major capital allocation decisions that mining companies often have to make acquisitions. How do you think about potentially attractive acquisitions, and then how does M&A fit within the portfolio going forward?
We're always looking for the next Copper Mountain. We're looking for something that we can work on and that is accretive for our shareholders. But I think you know we are a company. We have a highly capable corporate development team. We have very strong operating workforce, and we'll continue to look things that we can improve that add value to our shareholders and that enhance our portfolio.
Fantastic. Peter, thank you for being here today.
Thank you very much.
Nice to see you.
Thanks, Lawson.