NEW YORK HudBay Minerals Inc. returned to profitability in the second quarter due in part to higher copper sales.
The Vancouver, British Columbia-based mining company posted net income of $252,000 for the three months ended June 30 in contrast to a $52.6-million loss in the same period last year on sales that increased 6.6 percent to more than $139.3 million.
However, the company reported a negative impact on earnings due to rising inventories of unsold copper concentrate and refined zinc due to poor rail service availability following "extreme winter conditions" earlier in the year and recent flooding in Manitoba, the location of its Flin Flon smelter.
HudBay in July completed the acquisition of Augusta Resource Corp., which owns the Rosemont copper mine project in Pima County, Ariz. (amm.com, July 30).
"The successful acquisition of the Rosemont project provides HudBay with another meaningful source of medium-term copper production growth, complementing our already sector-leading production increases expected over the next year," president and chief executive David Garofalo said in a statement accompanying the companys earnings report.
While there would be "more than enough financial capacity through internal or external sources" for Rosemont, the project had not been "sufficiently engineered" by Augusta, which is one area where HudBay would focus on in the near future, along with setting up a business base in Arizona, Garofalo said during an earnings conference call.
Despite the successful acquisition, permitting uncertainties and an earn-in agreement by Augusta could delay the Rosemont project. "We would like permitting to be as quick as possible, we want to respect the process," Garofalo said during the conference call. "But the expectation is that (the permits) will take longer than the timeline Augusta was expecting."
HudBay expects to refinance about $117 million in loans made to Augusta by Red Kite Mine Finance Trust, repayable in September.
The company warned that "the development of the Rosemont project may not occur as planned," as the project is subject to a joint-venture agreement with South Korea-based United Copper & Moly LLC (UCM), under which Augusta will require UCMs consent for "a number of important project decisions" and any disagreement with UCM will "hinder (HudBays) ability to successfully develop the project," it said in a U.S. Securities and Exchange Commission filing.
The Constancia copper project in Peru was 85-percent complete as of June 30 and remains on track for production in the fourth quarter of 2014 and commercial production in the first quarter of 2015, the company said.