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HudBay Minerals Inc.
(TSX:HBM)(NYSE:HBM) -
Highlights
-- 2011 production and operating cost targets achieved with strong fourth quarter operating results. Fourth quarter operating cash flow before changes in non-cash working capital(i) increased 42% to $52.2 million compared with the same period last year. -- Lalor project construction and development proceeding well with first ore production remaining on schedule for mid-2012. New copper-gold mineralization discovered approximately 400 metres northeast of the main Lalor deposit. -- Key construction permits for Reed copper project received as site construction commences slightly ahead of schedule, with first ore production still expected by the fourth quarter of 2013. -- Front-end engineering and design of the Constancia project is well advanced with some long-lead orders secured. A further project update is expected by the end of the first quarter of 2012. -- Exploration success continues at the high-grade Pampacancha deposit adjacent to the Constancia project as recent drill results have expanded the deposit to the north and west and demonstrated higher grades in the middle of the deposit. -- Semi-annual dividend of $0.10 per share declared.
HudBay Minerals Inc.
("Hudbay" or the "company") today released its fourth
quarter 2011 financial results. The company reported a profit of $34.3
million, or $0.21 per share, in the fourth quarter of 2011, compared to a
profit of $7.9 million, or $0.07 per share in the fourth quarter of 2010.
Operating cash flow before changes in non-cash working capital(i) increased
42% to $52.2 million, or $0.30 per share, in the fourth quarter of 2011 from
$36.7 million, or $0.25 per share, in the fourth quarter of 2010 mainly as a
result of higher revenue from increased sales volumes as excess copper
concentrate inventories were sold, partly offset by lower copper and zinc
prices.
(i)Refer to "Non-IFRS Measures" at the conclusion of this press
release
"Consistent operating performance from our reliable northern Manitoba
operations enabled us to meet our production targets in 2011 for the fifth
consecutive year," said David Garofalo, Hudbay's president and chief
executive officer. "Our focus in 2012 is on our robust portfolio of development
assets, which are expected to provide significant copper, gold and zinc
production growth once they are brought into production."
Hudbay's board of directors has declared a semi-annual dividend in the amount
of $0.10 per common share, payable on March 30, 2012 to shareholders of
record on March 20, 2012.
The company also announced that, after 34 years of exceptional service, Tom
Goodman, Senior Vice President and Chief Operating Officer will retire
effective June 2012 and will stand for election to the company's board of
directors at its next Annual Meeting of Shareholders. Alan Hair, currently
Senior Vice President, Business Development and Technical Services and a
16-year veteran of the company, will assume the role of Chief Operating Officer
upon Mr. Goodman's retirement.
Strong Financial Results Driven by Higher Sales Volumes, Steady Production
and Cost Control
Revenues increased to $254.3 million in the fourth quarter of 2011 compared
to $184.6 million in the fourth quarter of 2010, which represents a 38%
increase, due to higher copper concentrate sales volumes, partly offset by
lower copper and zinc prices.
Hudbay continued to achieve good cost control at its operations during the
fourth quarter. Operating costs per tonne at the 777 mine were 2% lower
compared to the same period last year, primarily due to lower operating
development costs. The Flin Flon concentrator and zinc plant also reduced
costs in the fourth quarter, with unit operating costs decreasing by 8% and
3% respectively, compared to the same period in 2010.
Strong Cash Flow Generation
Operating cash flow before changes in non-cash working capital(i) increased
to $52.2 million, or $0.30 per share, in the fourth quarter of 2011 from
$36.7 million, or $0.25 per share, in the same period in 2010, mainly as a
result of higher sales volumes. Capital expenditures increased to $84.7
million during the fourth quarter of 2011 compared to $35.5 million in the
fourth quarter of 2010 due to increased project activity at Lalor and Constancia,
partly offset by reduced sustaining capital expenditures.
Cash and cash equivalents increased to $899.1 million at December 31, 2011
from $871.1 million at September 30, 2011. Strong operating cash flow
generation and proceeds from the US$15.1 million disposition of Zochem during
the fourth quarter more than offset capital expenditures. Together with its
unused credit lines, Hudbay has available liquidity of approximately $1.1
billion and no debt. The company is pursuing long-term debt financing to
maintain financial flexibility in anticipation of a formal decision to
commence full scale construction at Constancia.
Lalor Development and Construction Advancing Well; Initial Production on
Track for Mid-2012
At the 100% owned Lalor project, the planned 3,200 metre access ramp from the
Chisel North mine to the Lalor project was completed during the fourth
quarter on schedule and on budget. Initial production up the ventilation
shaft remains on track for mid-2012.
The ventilation shaft is now sunk to approximately 500 metres and is expected
to reach its ultimate depth of 835 metres by July 2012. Project development
on the 810 metre level has been completed as have the undercut and
development for the ventilation shaft breakthrough.
Diamond drilling commenced in January 2012 from the 810 metre level,
delineating the first ore production zone in the base metal lens number 10.
This represents the first time the company has been able to conduct
underground drilling at Lalor. This drilling has enabled confirmation of the
ore body location, grades and thicknesses, which allow for the development of
the detailed mining plan and sequencing.
Construction on the main site is progressing well. The headframe has been
substantially completed and the main production hoist has been commissioned.
The production hoist will be used to sink the main shaft, beginning late in
March 2012, and will also be used for production when the main shaft has been
commissioned, eliminating the cost and time delay associated with changeover
from sinking to production. Other site activities included completion of the
site warehouse and surface shop and the commissioning of the water treatment
plant and temporary sewage plant. Basic engineering for the concentrator is
well underway as the company expects to place procurement orders for the
surface crusher and the sag and ball mills by the end of the first quarter of
2012. Full production at Lalor is expected to remain on track for late 2014.
New Lalor Copper-Gold Mineralization Discovered
Hudbay also announced results from its recent surface exploration drill
program at Lalor, including a new copper-gold occurrence located
approximately 400 metres northeast of the main Lalor deposit. Hole DUB283
intersected 8.26% copper and 5.91 g/t gold over a core length of 6.12 metres.
A follow-up hole DUB283W02 intersected 7.79% copper and 2.49 g/t gold over a
core length of 5.55 metres. Drilling continues in the area with hole DUB287,
which was started in late February. Two other drills are testing targets
approximately two kilometres south of Lalor. To view a plan map of the recent
drill results please visit Our Business - Development - Lalor at www.hudbayminerals.com.
Highlights from the drill program at Lalor include:
---------------------------------------------------------------------------- Core HOLE Length(1)(m) From (m) To (m) Cu (%) Au (g/t) Ag (g/t) Zn (%) ---------------------------------------------------------------------------- DUB283 6.12 1241.50 1247.62 8.26 5.91 31.63 0.09 ---------------------------------------------------------------------------- includes 2.81 1242.69 1245.50 10.77 9.60 46.79 0.11 ---------------------------------------------------------------------------- DUB283W02 5.55 1270.75 1276.30 7.79 2.49 34.24 0.31 ---------------------------------------------------------------------------- (1) Intersection assays are either a single assay of a sample of the entire intersection length or a composite ---------------------------------------------------------------------------- NAD83 Zone 14 NAD83 Zone 14 HOLE Status Core Size East North ---------------------------------------------------------------------------- DUB283 Complete NQ 427260 6081519 ---------------------------------------------------------------------------- DUB283W02 Complete NQ 427260 6081519 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Grid Elevation Grid HOLE (m) Length (m) Direction Azimuth Dip ---------------------------------------------------------------------------- DUB283 303 1488 50 7 -82.0 ---------------------------------------------------------------------------- DUB283W02 303 1418 50 7 -82.0 ----------------------------------------------------------------------------
Current Phase of Project
Optimization at Constancia is Ongoing; Full Project Update Expected by the
End of March 2012
Capital expenditures on the 100% owned Constancia project were $43.6 million
in 2011 and the company's board of directors has approved an additional $107
million for pre-construction activities during the first quarter of 2012.
Preconstruction activity is continuing, including ongoing engineering and
procurement activity, hydrogeological drilling and camp construction. Orders
were placed for the grinding mills in late 2011 and will be placed for mobile
equipment during the first quarter of 2012. Other ongoing activities include
monitoring of applications for key permits governing beneficiation, mining
and water. These permits are expected to be awarded in the ordinary course in
the second quarter of 2012, as Constancia received its key environmental
permit in late 2010.
Optimization and front end engineering and design are well-advanced and
Hudbay expects to provide a further project update by the end of the first
quarter of 2012. Among the project scope changes the company is considering
are incorporating high grade Pampacancha ore into the mine plan, adding
tailings capacity to accommodate a significant increase in the in-pit reserve
and maximizing mill throughput.
While capital and operating cost estimates for Constancia have not been
finalized, these scope changes, along with local currency appreciation and
general cost escalation common to other mining projects globally, are
expected to result in capital costs higher than the US$920 million cost
estimate released by Norsemont Mining Inc. in February 2011. Hudbay is
incorporating scope changes and a new resource model on the main pit into a
new project economic model and mine plan. Initiatives to arrange long-term
debt financing for Constancia are well-advanced and expected to be complete
before a formal project recommendation is made to Hudbay's board of
directors. The project schedule currently remains unchanged, with first
production expected in 2015 and full production in 2016.
Pampacancha Deposit Expanded to the North and West; Initial Resource Estimate
by end of March 2012
Hudbay also announced exploration results from the high-grade Pampacancha
deposit, which is 2.5 kilometres from the proposed Constancia open pit.
Recent drill results have expanded the deposit to the north and west. In
addition, hole PO-11-097, with 1.07% copper and 0.44 g/t gold over 38.9
metres, demonstrates significantly higher grades than other previously
released intersections from the middle of the deposit.
Highlights from the drill program at Pampacancha included:
---------------------------------------------------------------------------- Core Length HOLE (m) From (m) To (m) Cu (%) Au (g/t) Ag (g/t) Cu Eq(1)(%) ---------------------------------------------------------------------------- PO-11-094 86.70 147.00 233.70 1.78 0.65 12.74 2.31 ---------------------------------------------------------------------------- PO-11-097 38.90 207.00 245.90 1.07 0.44 7.77 1.48 ---------------------------------------------------------------------------- PO-11-101 46.90 170.00 216.90 0.85 0.63 5.02 1.28 ---------------------------------------------------------------------------- PO-11-107 28.10 191.15 219.25 1.23 0.33 25.87 1.88 ---------------------------------------------------------------------------- (1) Calculated using commodity prices of US$1,100/oz Au, US$22.00/oz Ag, US$2.75/lb Cu and US$13.00/lb Mo. Copper cut-off reported as 0.2%. Composited intersections are reported as core length and do not represent true width. ---------------------------------------------------------------------------- HOLE East North Elevation Azimuth Dip Total Depth ---------------------------------------------------------------------------- PO-11-094 204,621.00 8,397,424.00 4312.2 25 -75 370.75 ---------------------------------------------------------------------------- PO-11-097 204,791.00 8,397,403.00 4270.8 270 -85 344.4 ---------------------------------------------------------------------------- PO-11-101 204,617.00 8,397,427.00 4312.2 85 -75 352.4 ---------------------------------------------------------------------------- PO-11-107 204,737.00 8,397,602.00 4328.1 242 -75 413.05 ---------------------------------------------------------------------------- Note: Collar coordinates, National Grid UTM coordinates based on the Provisional South America 1956 (PSAD56) datum 19S
These results are being
incorporated into an initial resource estimate for Pampacancha, which will
form part of a corporate reserve and resource update expected to be released
in late March 2012. Following a focus on hydrogeological drilling,
exploration is scheduled to restart in the second quarter of 2012 with the
aim of expanding the Pampacancha deposit and exploring targets in the
Chilloroya South prospect. To view a plan map of the recent drill results
please visit Our Business - Development - Constancia at www.hudbayminerals.com.
Reed Copper Project Construction Commences
Key permits required for construction at the 70% owned Reed copper project
have been received slightly ahead of schedule and site preparation is
currently underway. The ramp decline is anticipated to commence in the second
half of 2012.
Two exploration drills are operating within a few kilometres of the Reed
copper project testing known mineralized horizons and geophysical anomalies.
A 4,000 metre exploration drill program is planned at the Reed deposit for
2012 to test possible down plunge extensions of the known mineralized zones.
An additional 4,000 metres is planned to test regional geophysical anomalies
and to follow up on the Reed North mineralization in Hole RLE006, which
intersected 7.18 metres of 7.44% copper at a property under option to the
company, which is two kilometres northeast from the Reed deposit.
Additional drill results at Reed North include 3.95 metres of 9.31% copper,
1.87% zinc, 3.59 g/t gold and 35.53 g/t silver from Hole RLE021 and 4.15
metres of 2.16% copper, 0.18% zinc, 0.71 g/t gold and 8.01 g/t silver from
Hole RLE022.
Key Financial Results
---------------------------------------------------------------------------- ($000s except per share amounts) Three Months Ended Year Ended December 31 December 31 ---------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenue 254,314 184,607 890,817 781,032 ---------------------------------------------------------------------------- Profit before tax 69,813 26,594 209,025 108,669 ---------------------------------------------------------------------------- Profit from continuing operations 34,286 13,694 75,196 40,415 ---------------------------------------------------------------------------- Basic and diluted (loss) earnings per share(1) 0.21 0.07 (0.92) 0.16 ---------------------------------------------------------------------------- Profit (loss) for the period 34,286 7,868 (163,588) 21,017 ---------------------------------------------------------------------------- Operating cash flow(2,3) 52,194 36,713 220,313 140,482 ---------------------------------------------------------------------------- Operating cash flow per share(2,3) 0.30 0.25 1.31 0.93 ---------------------------------------------------------------------------- Cash and cash equivalents 899,077 901,693 899,077 901,693 ---------------------------------------------------------------------------- Total assets 2,448,820 2,083,544 2,448,820 2,083,544 ---------------------------------------------------------------------------- 1 Attributable to owners of the company 2 Refer to "Non-IFRS measures" at the conclusion of this press release. 3 Before changes in non-cash working capital.
Non-IFRS Measures
Operating cash flow before changes in non-cash working capital and operating
cash flow per share, are included in this news release because these measures
are performance indicators that it uses to monitor performance. Hudbay uses
these measures to assess how well it is performing relative to plan and to
assess the overall effectiveness and efficiency of mining, processing and
refining operations. Hudbay believes that the inclusion of these measures in
the news release helps an investor to assess performance "through the
eyes of management" and that certain investors use these measures to
assess Hudbay's performance. These measures do not have a meaning presented
by IFRS and should not be considered in isolation or as a substitute for
measures prepared in accordance with IFRS. These measures are not necessarily
indicative of operating profit or cash flow from operations as determined
under IFRS. Other companies may calculate these measures differently.
Operating cash flow before changes in non-cash working capital and operating
cash flow per share
The following table presents calculations of cash flows for the three months
and year ended December 31, 2011 and December 31, 2010.
---------------------------------------------------------------------------- Three Months Ended Year Ended --------------------------------------------------- Dec. 31 Dec. 31 Dec. 31 Dec. 31 ($000s except share and per share amounts) 2011 2010 2011 2010 ---------------------------------------------------------------------------- Cash generated by operating activities, per financial statements 97,103 42,270 250,219 195,163 Adjustments: Changes in non-cash working capital 4,910 (2,367) (15,791) (7,619) Changes in non-cash taxes receivable/payable (49,819) (3,190) (14,115) (47,062) ---------------------------------------------------------------------------- Operating cash flow before changes in non- cash working capital 52,194 36,713 220,313 140,482 Weighted average shares outstanding 171,905,912 149,219,230 167,863,427 150,636,835 ---------------------------------------------------------------------------- Operating cash flow per share 0.30 0.25 1.31 0.93 ----------------------------------------------------------------------------
This measure is intended to
provide an indication of Hudbay's operating cash flow generation prior to the
impact of fluctuations in working capital accounts, including taxes payable
and receivable (but excluding the effect of other comprehensive income items
and other adjustments). Under Canadian GAAP, "Changes in non-cash
working capital" in the statement of cash flows included changes in
taxes payable and receivable (but excluding the effect of other comprehensive
income items and other adjustments), whereas IFRS presentation requires that
taxes paid be presented separately in the statement of cash flows. This
non-IFRS measure generates results that are comparable to Hudbay's previous
non-GAAP presentation of operating cash flow before changes in non-cash
working capital.
Website Links
Hudbay:
www.hudbayminerals.com
Management's Discussion and Analysis:
http://media3.marketwire.com/docs/MDAHBMYE2011.pdf
Financial Statements:
http://media3.marketwire.com/docs/FSHBMYE2011.pdf
Conference Call and Webcast
Date: Thursday, March 8, 2012 Time: 10 a.m. ET Webcast: www.hudbayminerals.com Dial in: 416-644-3416 or 877-974-0446 Replay: 416-640-1917 or 877-289-8525 Replay Passcode: 4515197#
The conference
call replay will be available until midnight (Eastern Time) on March 22,
2012. An archived audio webcast of the call also will be available on
HudBay's website.
Qualified Person
The technical and scientific information for Hudbay's Manitoba operations in
this news release has been prepared by or under the supervision of Robert
Carter, P.Eng. The technical and scientific information in this news release
for the Constancia project has been prepared by or under the supervision of
Cashel Meagher, P.Geo. Each of Mr. Carter and Mr. Meagher is a
"qualified person" for the purposes of National Instrument 43-101
Standards of Disclosure for Mineral Projects.
For additional detail on Hudbay's Lalor and Constancia projects, including
data verification and quality assurance/quality control processes, refer to
Hudbay's "Technical Report, Lalor Deposit, Snow Lake, Manitoba,
Canada" dated October 9, 2009 available under Hudbay's profile at www.sedar.com and Norsemont
Mining Inc.'s technical report entitled "Norsemont Mining Constancia
Project Technical Report" dated February 21, 2011, available under
Norsemont's profile at www.sedar.com.
Forward-Looking Information
This news release contains "forward-looking information" within the
meaning of applicable Canadian and United States securities legislation.
Forward-looking information includes, but is not limited to, information with
respect to the company's ability to develop its Lalor, Constancia and Reed
projects and its other properties, the ability of management to execute on
key strategic and operational objectives and meet production forecasts,
exploration expenditures and activities and the possible success of such
exploration activities, the timing and amount of estimated future production,
costs of production, capital expenditures, costs and timing of the
development of new deposits, mineral pricing, mine life projections, and
business and acquisition strategies. Often, but not always, forward-looking
information can be identified by the use of forward-looking words like
"plans", "expects", or "does not expect",
"is expected", "budget", "scheduled",
"estimates", "forecasts", "intends",
"understands", "anticipates", or "does not
anticipate", or "believes" or variations of such words and
phrases or statements that certain actions, events or results
"may", "could", "would", "might", or
"will be taken", "occur", or "be achieved".
Forward-looking information is based on the opinions and estimates of
management as of the date such information is provided and is subject to
known and unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of Hudbay to
be materially different from those expressed or implied by such
forward-looking information, including the ability to receive permits
required to achieve production at Lalor, Constancia and Reed, develop and
operate its key projects on an economic basis and in accordance with
applicable timelines, geological and technical conditions, the ability to
meet required solvency tests to support a dividend payment, risks associated
with the mining industry such as economic factors (including future commodity
prices, currency fluctuations and energy prices), failure of plant,
equipment, processes and transportation services to operate as anticipated,
dependence on key personnel and employee relations, environmental risks,
government regulation, actual results of current exploration activities,
possible variations in ore grade or recovery rates, permitting timelines,
capital expenditures, reclamation activities, land titles, and social and
political developments and other risks of the mining industry as well as
those risk factors discussed or referred to in Hudbay's Annual Information
Form under the heading "Risk Factors".
Although Hudbay has attempted to identify important factors that could cause
actual results to differ materially from those contained in forward-looking
information, there may be other factors that cause results not to be as
anticipated, estimated or intended. In addition, certain forward-looking
information in this news release relate to prospective results of operations,
financial position or cash flows based on assumptions about future economic
conditions or courses of action.
Such information is provided in attempt to assist the reader in identifying
trends and anticipated events that may affect Hudbay's business, results of
operations and financial position and may not be appropriate for other
purposes. There can be no assurance that forward-looking information will
prove to be accurate, as actual results and future events could differ
materially from those anticipated in such information. Accordingly, readers
should not place undue reliance on forward-looking information. Hudbay does
not undertake to update any forward-looking information, except as required
by applicable securities laws, or to comment on analyses, expectations or
statements made by third parties in respect of Hudbay, its financial or
operating results or its securities.
Note to United States Investors
Information concerning Hudbay's mineral properties has been prepared in
accordance with the requirements of Canadian securities laws, which differ in
material respects from the requirements of SEC Industry Guide 7. Under
Securities and Exchange Commission (the "SEC") Industry Guide 7,
mineralization may not be classified as a "reserve" unless the determination
has been made that the mineralization could be economically and legally
produced or extracted at the time of the reserve determination, and the SEC
does not recognize the reporting of mineral deposits which do not meet the
United States Industry Guide 7 definition of "Reserve".
In accordance with National Instrument 43-101 - Standards of Disclosure for
Mineral Projects ("NI 43-101") of the Canadian Securities
Administrators, the terms "mineral reserve", "proven mineral
reserve", "probable mineral reserve", "mineral
resource", "measured mineral resource", "indicated
mineral resource" and "inferred mineral resource" are defined
in the Canadian Institute of Mining, Metallurgy and Petroleum (the
"CIM") Definition Standards for Mineral Resources and Mineral
Reserves adopted by the CIM Council on December 11, 2005.
While the terms "mineral resource", "measured mineral
resource", "indicated mineral resource" and "inferred
mineral resource" are recognized and required by NI 43-101, the SEC does
not recognize them. You are cautioned that, except for that portion of
mineral resources classified as mineral reserves, mineral resources do not
have demonstrated economic value. Inferred mineral resources have a high
degree of uncertainty as to their existence and as to whether they can be
economically or legally mined.
Under Canadian securities laws, estimates of inferred mineral resources may
not form the basis of an economic analysis. It cannot be assumed that all or
any part of an inferred mineral resource will ever be upgraded to a higher
category. Therefore, you are cautioned not to assume that all or any part of
an inferred mineral resource exists, that it can be economically or legally
mined, or that it will ever be upgraded to a higher category. Likewise, you
are cautioned not to assume that all or any part of measured or indicated
mineral resources will ever be upgraded into mineral reserves. You are urged
to consider closely the disclosure on the technical terms in Schedule A
"Glossary of Mining Terms" of Hudbay's annual information form for
the fiscal year ended December 31, 2010, available on SEDAR at www.sedar.com and
incorporated by reference as Exhibit 99.1 in Hudbay's Form 40-F filed on
March 31, 2011 (File No. 001-34244).
About Hudbay
Hudbay (TSX:HBM)(NYSE:HBM) is a Canadian integrated mining company with
assets in North and South America principally focused on the discovery,
production and marketing of base and precious metals. Hudbay's objective is
to maximize shareholder value through efficient operations, organic growth
and accretive acquisitions, while maintaining its financial strength. A
member of the S&P/TSX Composite Index and the S&P/TSX Global Mining
Index, Hudbay is committed to high standards of corporate governance and
sustainability. Further information about Hudbay can be found on www.hudbayminerals.com.
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