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TORONTO,
ONTARIO--(Marketwire - Aug. 6, 2009) - HudBay Minerals Inc.
("HudBay", "the company") (TSX:HBM) today released
its unaudited second quarter 2009 results. Net earnings in the second
quarter were $89.4 million compared with $33.2 million in the second
quarter of 2008. The higher earnings primarily reflect a gain of $99.9
million arising from the disposition in May 2009 of HudBay's
shareholding in Lundin Mining Corporation ("Lundin Mining").
Partially offsetting this gain was the impact of significantly lower
realized prices for copper and zinc in 2009 compared to the same
quarter in 2008 and a foreign exchange loss of $14.7 million resulting
from Canadian dollar appreciation.
Operationally, strong production from HudBay's 777 mine and overall
solid operating cost performance offset challenging mining conditions
in the Trout Lake mine. HudBay has also made significant progress
strategically, outlining its strategic plan to grow the company in June
2009 and also announcing today a new subscription, option and joint
venture agreement with Aquila Resources Inc. ("Aquila") to
further explore and develop Aquila's Back Forty project in Michigan.
Financially, HudBay's cash position was strengthened during the quarter
by $235.7 million in proceeds from the Lundin Mining disposition,
leaving HudBay with a total of $846.0 million in cash and cash
equivalents and no debt, a strong base from which to carry out HudBay's
strategic plan.
HudBay's board of directors has also approved a normal course issuer
bid ("NCIB") on the Toronto Stock Exchange which, subject to
regulatory approval, would enable HudBay to take advantage of
opportunities that may arise from time to time to acquire its own
shares at attractive prices.
The NCIB is expected to permit HudBay to acquire up to approximately
13.7 million common shares or up to 9.0% of the total common shares
outstanding of HudBay during the 12 months following approval of the
filing by the Toronto Stock Exchange. The filing of the NCIB does not
commit HudBay to repurchase a fixed number of its common shares;
rather, HudBay intends to utilize the NCIB opportunistically to repurchase
shares from time to time. HudBay's management and board remain
committed to pursuing growth organically and through acquisitions, as
outlined in the company's strategic plan.
"During the past quarter we made good progress in all aspect of
our business," said Peter R. Jones, HudBay's chief executive
officer. "Our management and board transition is complete, and we
are focused on executing the initiatives set out in our strategic plan.
HudBay is well positioned to grow organically through the Lalor and
Fenix projects and our growth profile has been enhanced with the
acquisition of the joint venture opportunity with Aquila."
Financial Highlights ---------------------------------------------------------------------------- ($000s except per Three Months Ended June 30 Six Months Ended June 30 share amounts) -------------------------------------------------------- 2009 2008 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue 197,657 284,035 359,441 555,672 ---------------------------------------------------------------------------- Earnings before tax 104,705 64,542 99,425 111,139 ---------------------------------------------------------------------------- Net earnings 89,415 33,202 85,457 54,754 ---------------------------------------------------------------------------- EBITDA(1),(2) 28,598 86,351 44,091 157,316 ---------------------------------------------------------------------------- Operating cash flow(1),(3) 28,865 70,721 42,837 141,372 ---------------------------------------------------------------------------- Basic earnings per share 0.58 0.26 0.56 0.43 ---------------------------------------------------------------------------- Cash, cash equivalents and short-term investments(4) 845,956 728,986 845,956 728,986 ---------------------------------------------------------------------------- Total assets(4) 1,972,198 1,562,927 1,972,198 1,562,927 ---------------------------------------------------------------------------- (1) EBITDA and operating cash flow before changes in non-cash working capital are non-GAAP measures and may not be comparable to similar data presented by other mining companies. See "Non-GAAP Measures" in our Management's Discussion and Analysis for the second quarter of 2009 (2) EBITDA represents earnings before interest, taxes, depreciation and amortization, loss on derivative instruments, exploration, and interest and other income (3) Operating cash flow before changes in non-cash working capital (4) At June 30
Flin
Flon Copper Smelter Anticipated Closure
On June 18, 2009, HudBay announced that we expect to close our Flin
Flon copper smelter before July 1, 2010, and the White Pine Copper
Refinery ("WPCR") shortly thereafter. The impact on HudBay's
ongoing financial results is expected to be minimal, as the processing
costs from the sale of concentrates are expected to be similar to
existing costs. Further, the smelter is part of an integrated complex
and reclamation costs, which have been fully accounted for on the
company's balance sheet, will occur only when the entire Flin Flon
metallurgical complex ultimately shuts down. HudBay anticipates
employee reductions as a result of the closure to be approximately 225
in Flin Flon and 65 at the WPCR, and has accrued a severance provision
of approximately $6.1 million in June 2009 corresponding with the
estimated contractual obligations upon severance. Actual severance
costs may vary significantly from this amount depending on the
implementation of employee reductions. In addition, the carrying values
of the smelter and copper refinery at June 30, 2009 were $29.3 million
and $20.1 million respectively; HudBay has increased the rates of
depreciation so that these carrying values, net of salvage values, are
fully depreciated by the respective closure dates.
Disposition of Lundin Mining Shares
On May 26, 2009, HudBay completed the previously announced sale of its
16.7 per cent stake in Lundin Mining to GMP Securities L.P., for cash
proceeds of approximately $235.7 million, representing a gain of
approximately $99.9 million.
Financial and Operating Results
Net Earnings
For the second quarter of 2009, HudBay recorded net earnings of $89.4
million, reflecting a $56.2 million increase from the second quarter of
2008. The principal reason for the increase was a gain of $99.9 million
on the disposition of our interest in Lundin Mining. Other significant
variances affecting net earnings were:
- Lower revenues decreased earnings before tax by $86.4 million;
- Lower operating costs increased earnings before tax by $42.9 million;
- Changes in foreign exchange gains and losses decreased earnings
before tax by $14.9 million;
- Reduced tax expense in the second quarter of 2009, as a result of
reduced operating income and other factors, increased net earnings by
$16.1 million.
Year-to-date 2009 net earnings of $85.5 million reflected a $30.7
million increase from year-to-date 2008. Significant variances were:
- Lower revenues decreased earnings before tax by $196.2 million;
- Lower operating costs increased earnings before tax by $93.7 million;
- Changes in foreign exchange gains and losses decreased earnings
before tax by $11.0 million;
- Decreases in other expenses increased earnings before tax by $2.3
million, mainly due to decreases in depreciation and amortization of
$2.8 million and decreases in stock-based compensation of $4.8 million,
partially offset by increases in general and administrative expense of
$4.9 million, which related to merger and acquisition activity,
severance and other corporate activities;
- Other items increased earnings before tax by $99.5 million, including
the Lundin Mining disposition gain of $99.9 million, decreases in
interest and other income of $11.5 million and decreases in exploration
expenses of $9.9 million; and
- Reduced tax expense in 2009, as a result of reduced operating income
and other factors, increased net earnings by $42.4 million.
Operations
Production is on track to meet overall 2009 targets, although zinc
production from HudBay sources is expected to be at the lower end of
the previously announced guidance of 75,000 - 90,000 tonnes in 2009.
Mine production for the second quarter was 576,779 tonnes of ore,
compared to 767,005 tonnes for the same quarter in 2008 due to the
lower production from the Chisel North and Balmat mines resulting from
the suspension of both operations. Ore grade for zinc was 3.46%, and
for copper was 2.08%, as compared to 5.49% for zinc and 1.72% for
copper for the same quarter in 2008. Lower production from Balmat and
Chisel North negatively impacted average zinc grades and positively
impacted average copper grades.
In line with the reduced mine output, second quarter production from
our zinc plant decreased to 23,999 tonnes, compared to 26,436 tonnes in
the same quarter of 2008. Unit operating costs decreased by 5% to 31.3
cents/lb., reflecting lower costs for consumables and other cost
containment efforts.
Non-recycled copper production in the second quarter was lower by 11%
due primarily to lower availability of economic purchased concentrate.
The smelter's unit operating costs, which exclude recycled production,
decreased by 18% to 32.3 cents/lb. of copper produced, the impact of
lower production being more than offset by the reduction in costs for
heavy fuel oil.
Gold and silver production in the quarter decreased 15% and 6%,
respectively, due mainly to lower head grades.
For the quarter, our cash cost per pound of zinc sold, net of
by-product credits from copper, precious metals, zinc oxide and other
associated revenue, was negative US$0.06/lb. compared to negative
US$0.55/lb. in the same quarter of last year, excluding costs and sales
related to Balmat and HMI Nickel (refer to "Non-GAAP
Measures" on page 32 of HudBay's second quarter MD&A). The
increase was principally due to lower by-product copper credits arising
mainly from lower prices, offset in part by the benefit of a weaker
Canadian dollar.
Production and sales ---------------------------------------------------------------------------- Three Months Ended June 30 Six Months Ended June 30 -------------------------------------------------------- 2009 2008 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Production ---------------------------------------------------------------------------- Zinc(1) tonnes 23,999 33,672 49,639 68,382 ---------------------------------------------------------------------------- Copper(2) tonnes 15,521 17,384 31,760 36,656 ---------------------------------------------------------------------------- Gold(2) troy oz. 24,333 28,506 45,595 51,505 ---------------------------------------------------------------------------- Silver(2) troy oz. 490,966 524,608 1,055,841 961,521 ---------------------------------------------------------------------------- Metal Sold ---------------------------------------------------------------------------- Zinc(3) tonnes 24,473 34,802 51,422 67,718 ---------------------------------------------------------------------------- Copper tonnes 19,633 18,957 35,824 39,559 ---------------------------------------------------------------------------- Gold troy oz. 24,397 30,311 53,021 50,119 ---------------------------------------------------------------------------- Silver troy oz. 599,033 554,733 1,205,064 838,200 ---------------------------------------------------------------------------- (1) Production includes Balmat payable metal in concentrate shipped (2) Production excludes recycled spent anode and represents non-recycled anode production only (3) Zinc sales include sales to our Zochem facility and the Balmat payable metal in concentrate shipped (including to Hudson Bay Mining And Smelting Co., Limited)
Revenue
Total revenue for the second quarter was $197.7 million, $86.4 million
lower than for the same quarter last year. The decline in revenues was
mainly due to lower copper and zinc prices, which reduced revenues by
$76.7 million and $23.1 million, respectively, offset in part by a
weaker Canadian dollar, which increased our revenues denominated in US
dollars by $41.8 million. Revenues were also affected by lower Balmat
concentrate sales volumes and lower gold sales volumes.
Realized Metal Prices and Exchange Rate ---------------------------------------------------------------------------- HudBay Realized HudBay Realized Prices(1) Prices(1) Three Months Ended Six Months Ended Q2 2009 Q2 2008 ------------------------------------- Average Average Jun 30 Jun 30 Jun 30 Jun 30 Prices(2) Prices(2) 2009 2008 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Prices in US$ ---------------------------------------------------------------------------- Zinc US$/lb. 0.67 0.96 0.70 1.03 0.63 1.11 ---------------------------------------------------------------------------- Copper US$/lb. 2.12 3.83 2.22 3.79 1.98 3.64 ---------------------------------------------------------------------------- Gold US$/troy oz. 922 896 919 925 901 891 ---------------------------------------------------------------------------- Silver US$/troy oz. 13.73 17.17 13.55 17.75 12.97 17.04 ---------------------------------------------------------------------------- Prices in C$ ---------------------------------------------------------------------------- Zinc C$/lb. 0.78 0.97 0.82 1.04 0.76 1.12 ---------------------------------------------------------------------------- Copper C$/lb. 2.47 3.87 2.60 3.82 2.38 3.66 ---------------------------------------------------------------------------- Gold C$/troy oz. 1,076 905 1,077 937 1,099 899 ---------------------------------------------------------------------------- Silver C$/troy oz. 16.03 17.35 15.85 18.00 15.75 17.22 ---------------------------------------------------------------------------- Exchange rate US$1 to C$ 1.17 1.01 1.17 1.01 1.21 1.01 ---------------------------------------------------------------------------- (1) Realized prices are before refining and treatment charges and only on the sale of finished metal, excluding metal in concentrates. (2) London Metals Exchange ("LME") average for zinc, copper and gold prices, London Spot US equivalent for silver prices. HudBay's copper sales contracts are primarily based on Comex copper prices.
Operating
Expenses
For the second quarter of 2009, operating expenses were $145.5 million,
$42.9 million lower than the same quarter last year. Operating costs
declined mainly as a result of lower purchased concentrate prices, net
of the offsetting impact of a weaker Canadian dollar. Operating costs
also declined as a result of the suspension of operations at the Balmat
mine and the impact of weaker metals prices and earnings performance on
profit sharing and net profits interest expenses. In addition, $6.1
million in costs were recorded in the second quarter of 2009 associated
with employee reductions arising from the anticipated closure of the
Flin Flon copper smelter and WPCR in 2010.
Website Links HudBay Minerals Inc.: www.hudbayminerals.com Management's Discussion and Analysis: http://media3.marketwire.com/docs/hbmmdaQ209.pdf Financial Statements: http://media3.marketwire.com/docs/hbmifsQ209.pdf
Conference
Call and Webcast
Peter R. Jones, chief executive officer, Michael D. Winship, president
and chief operating officer, and David S. Bryson, senior vice president
and chief financial officer, will host a conference call to discuss the
company's second quarter results on Friday, August 7, 2009.
Second Quarter 2009 Results Conference Call and Webcast: Date: Friday, August 7, 2009 Time: 10:00 a.m. (Eastern Time) Webcast: www.hudbayminerals.com Dial in: 416-644-3425 or 800-595-8550 Replay: 416-640-1917 or 877-289-8525 Replay Passcode: 21310832#
The conference call replay
will be available until midnight (Eastern Time) on August 14, 2009. An
archived audio webcast of the call also will be available on HudBay's
website.
HudBay Minerals Inc.: Strength to Build the Future
HudBay Minerals Inc. (TSX:HBM) is a Canadian integrated mining company
with assets in North and Central America principally focused on the
discovery, production and marketing of base metals. The company'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.
Forward Looking Information
This news release and its attachments contain "forward-looking
information" within the meaning of applicable securities laws.
Forward looking information includes but is not limited to information
concerning the potential impact of changing economic conditions on
HudBay's financial results, potential plans for the Lalor project,
HudBay's exploration and development plans, and its strategies and future
prospects. Generally, forward-looking information can be identified by
the use of forward-looking terminology such as "plans",
"expects", or "does not expect", "is
expected", "budget", "scheduled",
"estimates", "forecasts", "intends",
"anticipates", "understands" or "does not
anticipate", or "believes" or variations of such words
and phrases or statements that certain actions, events or results
"will", "may", "could",
"would", "might", or "will be taken",
"occur", or "be achieved". Forward-looking information
is based on the views, opinions, intentions and estimates of management
at the date the information is made, and is based on a number of
assumptions and subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those anticipated or projected in the forward-looking
information (including the actions of other parties who have agreed to
do certain things and the approval of certain regulatory bodies).
Many of these assumptions are based on factors and events that are not
within the control of HudBay and there is no assurance they will prove
to be correct. Factors that could cause actual results or events to
vary materially from results or events anticipated by such forward-looking
information include 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 in the company's Annual
Information Form dated March 30, 2009, which risks may cause actual
results to differ materially from any forward-looking statement.
Although HudBay has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking information, there may be other factors
that cause actions, events or results not to be anticipated, estimated
or intended. 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. HudBay
undertakes no obligation to update forward-looking information if
circumstances or management's estimates or opinions should change
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. The
reader is cautioned not to place undue reliance on forward-looking
information.
(HBM-F)
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