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HudBay Minerals expects to escape ‘trough’

Keywords: Tags  HudBay Minerals, copper, zinc, gold, earnings report, Constancia, Lalor, Reed David Garofalo

NEW YORK — HudBay Minerals Inc. closed out 2012 with a sharp drop in fourth-quarter revenue compared with the same period a year earlier, but the company anticipates a nearly 400-percent increase in copper production as its Lalor and Reed projects in Manitoba and Constancia project in southern Peru come online over the next three years.

The Toronto-based company posted fourth-quarter net income of nearly Canadian $7.44 million ($7.3 million) vs. C$34.29 million a year earlier on revenue that tumbled 28.8 percent to C$180.99 million ($177.7 million).

HudBay said that the declines were due to lower metal prices and lower sales volumes compared with the fourth quarter of 2011, when the company drew down on an unusually large inventory of copper concentrate.

The company posted a full-year net loss of C$21.17 million ($20.78 million) vs. a C$163.59-million loss in 2011 on revenue that slid 21.1 percent to C$702.55 million ($689.76 million).

The last three months of 2012 was the company’s first full quarter since the closure of its Trout Lake and Chisel North mines in Manitoba, HudBay president and chief executive officer David Garofalo noted during a Feb. 21 conference call with analysts and investors. The company expects to experience a "trough" in copper production in the first half of 2013 similar to that in the fourth quarter of 2012.

However, Garofalo said that copper and zinc production will increase significantly over the coming years, with copper output alone expected to rise 390 percent by 2015.

"Our focus in 2013 is to continue to advance our robust portfolio of development assets, which we expect to provide significant copper, gold and zinc production growth over the next two years as they are brought into production," he said.

HudBay has boosted its Lalor zinc and copper mine capital expenditure forecast by C$90 million to a total of C$794 million as the company is increasing grinding capacity with a new concentrator design. The company still projects ore production from the main production shaft to start in late 2014.

HudBay also expects its Constancia project to reach initial production in late 2014 and full production in the second quarter of 2015, despite greater-than-expected rainfall in the area which has delayed the project’s progress.

"HudBay believes that the impact on project schedule is recoverable and the targets for initial production and full production remain unchanged," the company said.

HudBay said that initial production at its Reed copper project would begin in the fourth quarter of 2013 and that it is expected to reach full production by the first quarter of 2014.

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