TORONTO,
ONTARIO--(Marketwire - March 4, 2009) - HudBay Minerals Inc.
("HudBay", "the company") (TSX:HBM) today released
its fourth quarter and annual 2008 financial results. Net earnings in
the fourth quarter of 2008 were $15.8 million compared with $28.5
million in 2007. Earnings in the fourth quarter were significantly
impacted by sharply lower copper and zinc prices, offset in part by a
foreign exchange gain in the fourth quarter in 2008. Notwithstanding
the difficult economic conditions, HudBay's Manitoba operations
continued to generate strong results, with operating cash flow of $38.8
million before changes in non-cash working capital generated in the
fourth quarter. HudBay maintained one of the strongest balance sheets
in its Canadian peer group, with $700.9 million in cash (less debt) at
December 31, 2008.
"The fourth quarter of 2008 was unprecedented in terms of the
deterioration in metals prices and the economic environment," said
Allen J. Palmiere, HudBay's chief executive officer. "Throughout
this period of uncertainty, HudBay's management and board of directors
have remained focused on HudBay's strategic priorities of growth by acquisition,
organic growth, operational efficiency, and the maintenance of our
financial strength.
"We pursued our acquisition strategy through the proposed
acquisition of Lundin Mining. We advanced our organic growth potential
through the announcement of new gold mineralization at the Lalor
deposit. And operationally, we delivered strong operating performance
from our key production assets and made the difficult but necessary
decisions to suspend construction on the Fenix Project and operations
at Snow Lake. HudBay's management and board of directors continue to
work to ensure that the company not only weathers the current economic
storm, but emerges into the eventual recovery stronger than
before."
Financial Highlights ---------------------------------------------------------------------------- ($000s except per Three Months Ended Dec.31 Year Ended Dec.31 share amounts) --------------------------------------------------- 2008 2007 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue 178,781 242,596 981,894 1,269,841 ---------------------------------------------------------------------------- Earnings before tax 24,614 31,722 169,651 365,456 ---------------------------------------------------------------------------- Net earnings 15,819 28,459 73,353 227,139 ---------------------------------------------------------------------------- EBITDA (1,2) 46,300 72,014 292,249 483,066 ---------------------------------------------------------------------------- Operating cash flow (2,3) 38,805 83,809 234,661 477,890 ---------------------------------------------------------------------------- Basic EPS (4) 0.10 0.22 0.54 1.79 ---------------------------------------------------------------------------- Cash, cash equivalents and short-term investments 704,668 757,574 704,668 757,574 ---------------------------------------------------------------------------- Total assets 1,918,353 1,551,627 1,918,353 1,551,627 ---------------------------------------------------------------------------- (1) EBITDA represents earnings before interest, taxes, depreciation and amortization, loss on derivative instruments, exploration, interest and other income, asset impairment losses and share of losses of equity investee. (2) EBITDA and operating cash flow before changes in non-cash working capital are non-GAAP performance measures and may not be comparable to similar data presented by other mining companies. See "Non-GAAP Performance Measures" in our Management's Discussion and Analysis for the year ended December 31, 2008. (3) Operating cash flow before changes in non-cash working capital. (4) Earnings per share.
2009
Guidance
Production
As a result of suspended operations at the Balmat and Chisel North
mines, zinc production will be lower in 2009 than in 2008. In addition
to its own concentrates, the company also expects to process less
purchased copper concentrates in 2009 than in 2008, resulting in lower
copper, gold and silver production.
--------------------------------------------------------------- From Total (1) HudBay Sources --------------------------------------------------------------- --------------------------------------------------------------- Zinc (000s tonnes) 90 - 110 75 - 90 Copper (2) (000s tonnes) 50 - 60 45 - 55 Gold (2) (000s oz.) 80 - 95 80 - 95 Silver (2) (000s oz.) 1,000 - 1,200 850 - 950 --------------------------------------------------------------- (1) Includes metal produced from HudBay's own concentrates and metal produced from concentrate purchased from others. (2) Production excludes recycled spent anode and represents non-recycled anode production only.
Capital
Expenditures
In response to weak metal prices, HudBay has taken steps to reduce its
capital expenditure budget, while ensuring the production capacity of
the existing assets is sustained. HudBay's capital program in 2009 is
expected to be approximately $122.0 million, consisting of sustaining
capital of $71.9 million, expenditures associated with the preparations
for future sale of concentrates of $23.7 million, and growth capital of
$6.9 million for the Lalor Project and $19.5 million for the Fenix
Project, including $9.4 million of carryover from 2008 to wind down the
construction project. This capital program will support ongoing strong
levels of production from the Company's mines and processing
facilities.
Exploration Expenditures
In addition, HudBay has also reduced its planned exploration
expenditures from the $45.7 million incurred in 2008 to $20.0 million
planned for 2009, consistent with the weaker economic environment. Of
this amount, $6.9 million is expected to be spent in 2009 on the Lalor
Project.
Financial and Operating Results
Net Earnings
For the fourth quarter, net earnings were $15.8 million, reflecting a
$12.7 million decrease from the fourth quarter of 2007. Significant
variances affecting net earnings for the quarter were:
- Lower revenues decreased earnings before tax by $63.8 million;
- Lower operating costs increased earnings before tax by $4.5 million;
- Changes in foreign exchange gains and losses increased earnings
before tax by $37.3 million;
- Decreases in other expenses increased earnings before tax by $1.6
million, mainly due to decreases in depreciation, depletion and
amortization of $5.3 million, partially offset by increases in general
and administrative expense of $3.4 million, which arose largely due to
merger and acquisition activities;
- Lower asset impairment losses increased earnings before tax by $17.0
million;
- Other items decreased earnings before tax by $3.7 million, largely
due to lower interest and other income; and
- Higher tax expenses decreased net earnings by $5.6 million despite
lower earnings before tax. Income tax expenses in the fourth quarter of
2007 reflected the recognition of previously unrecognized tax assets,
which resulted in a lower effective tax rate.
For the full year 2008 net earnings of $73.4 million reflected a $153.7
million decrease from 2007. Significant variances affecting net
earnings were:
- Lower revenues decreased earnings before tax by $287.9 million;
- Lower operating costs increased earnings before tax by $45.1 million;
- Changes in foreign exchange gains and losses increased earnings
before tax by $64.9 million;
- Increases in other expenses decreased earnings before tax by $6.6
million. This was largely due to increases in general and
administrative expense of $12.4 million, which arose mainly from
executive retirement and severance costs of $6.0 million and merger and
acquisition activities, partially offset by decreases in depreciation,
depletion and amortization of $6.4 million;
- Higher asset impairment losses decreased earnings before tax by $10.3
million;
- As a result of equity accounting arising from HudBay's
pre-acquisition ownership of HMI Nickel, the Company's share of losses
incurred by HMI Nickel during the period prior to acquisition decreased
earnings before tax by $3.9 million;
- Other items increased earnings before tax by $2.9 million, including
decreases in exploration expenses of $7.5 million following the
decision to capitalize Lalor Project exploration costs and decreases in
interest and other income of $7.5 million; and
- Lower tax expenses increased net earnings by $42.0 million and
resulted mainly from lower earnings before tax in 2008. Income tax
expenses in 2007 reflected the recognition of previously unrecognized
tax assets, which resulted in a lower effective tax rate.
Production and Sales
Zinc production in the fourth quarter of 2008 was lower than 2007
mainly as a result of the suspension of operations at the Balmat mine.
Although production of copper from domestic sources rose in the fourth
quarter of 2008 compared to the prior year, this was more than offset
by lower volumes of purchased copper concentrate. Gold production
increased as higher amounts of domestic copper were treated and silver production
also increased, primarily from a specific purchased concentrate source.
For the fourth quarter of 2008, HudBay's cash cost of zinc sold, net of
by-product credits from copper, precious metals, zinc oxide and other
associated revenue, was US$0.17/lb, excluding Balmat and HMI Nickel.
(Please refer to "Non-GAAP Performance Measures" on page 45
of HudBay's 2008 MD&A.)
---------------------------------------------------------------------------- Three Months Ended Dec. 31 Year Ended Dec. 31 ---------------------------------------------------- 2008 2007 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Production ---------------------------------------------------------------------------- Zinc (1) tonnes 25,943 31,383 125,323 126,269 ---------------------------------------------------------------------------- Copper (2) tonnes 18,859 23,194 74,682 89,995 ---------------------------------------------------------------------------- Gold (2) troy oz. 30,102 26,222 108,527 102,587 ---------------------------------------------------------------------------- Silver (2) troy oz. 702,173 385,698 2,293,862 1,446,738 ---------------------------------------------------------------------------- Metal Sold ---------------------------------------------------------------------------- Zinc (3) tonnes 25,807 34,313 126,172 132,994 ---------------------------------------------------------------------------- Copper tonnes 18,272 18,558 77,021 87,003 ---------------------------------------------------------------------------- Gold troy oz. 32,760 18,680 103,511 96,847 ---------------------------------------------------------------------------- Silver troy oz. 667,035 247,077 1,870,179 1,270,791 ---------------------------------------------------------------------------- (1) Production includes Balmat payable metal in concentrate shipped. (2) Production in 2008 excludes recycled spent anode and represents non-recycled anode production only. (3) Zinc sales include sales to HudBay's Zochem facility and the Balmat payable metal in concentrate shipped (including to HBMS).
Revenue
Total revenue for Q4 2008 was $178.8 million, compared to $242.6
million in 2007. Revenues in the fourth quarter reflect a lower average
realized zinc price (US $0.62/lb compared with US $1.29/lb in Q4 2007),
and a lower average realized copper price (US $1.78/lb compared with US
$3.23/lb in Q4 2007). These factors were partially offset by the impact
of a weaker Canadian dollar and higher gold and silver sales volumes.
Full year revenue was $981.9 million in 2008, down from $1,269.8
million in 2007. 2008 revenues reflect a lower average realized zinc
price (US $0.93/lb compared with US $1.56/lb in 2007), a lower average
realized copper price (US $3.13/lb compared with US $3.27/lb in 2007),
lower copper sales volumes due to recycling of spent anode and reduced
purchased concentrate production, and appreciation of the Canadian
dollar compared to 2007. Partially offsetting these factors was a
higher average realized gold price and higher silver sales volumes.
Realized Metal Prices (1) and Exchange Rate
---------------------------------------------------------------------------- HudBay Realized HudBay Realized Prices (1) Prices (1) Q4 2008 Three Months Ended 2008 Year Ended Average ------------------ Average ---------------- Prices Dec 31 Dec 31 Prices Dec 31 Dec 31 (2) 2008 2007 (2) 2008 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Prices in US$ ---------------------------------------------------------------------------- Zinc US$/lb. 0.54 0.62 1.29 0.85 0.93 1.56 ---------------------------------------------------------------------------- Copper US$/lb. 1.77 1.78 3.23 3.16 3.13 3.27 ---------------------------------------------------------------------------- Gold US$/troy oz. 795 764 758 872 845 682 ---------------------------------------------------------------------------- Silver US$/troy oz. 10.20 10.09 13.84 15.02 13.85 13.39 ---------------------------------------------------------------------------- Prices in C$ ---------------------------------------------------------------------------- Zinc C$/lb. 0.65 0.75 1.26 0.91 0.97 1.68 ---------------------------------------------------------------------------- Copper C$/lb. 2.15 2.12 3.12 3.37 3.26 3.51 ---------------------------------------------------------------------------- Gold C$/troy oz. 963 928 739 930 907 733 ---------------------------------------------------------------------------- Silver C$/troy oz. 12.36 12.23 13.53 16.03 14.76 14.42 ---------------------------------------------------------------------------- Exchange rate US$1 to C$ 1.21 1.20 0.97 1.07 1.05 1.08 ---------------------------------------------------------------------------- (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.
Expenses
For the fourth quarter of 2008, operating expenses were $155.6 million,
$4.5 million lower than for the same quarter last year. The lower
expenses reflect lower sales volumes caused mainly by lower volumes of
purchased concentrates, decreasing copper prices resulting in gains on
provisional pricing adjustments on purchased concentrate, lower net
profits interest expenses associated with the Callinan agreement and
lower profit sharing expenses. These reductions were partially offset
by the impact of a weaker Canadian dollar on U.S. dollar denominated
operating costs, costs associated with HMI Nickel, which was acquired
in August 2008 and higher processing costs.
For the full year, operating expenses were $685.6 million, $45.1
million lower than for 2007. Lower expenses were due mainly to lower
sales volumes related to reduced purchased concentrate volumes, lower
profit sharing expenses and lower costs for purchased zinc concentrate.
These were partially offset by higher costs of purchased copper
concentrates, higher mining and processing costs, costs associated with
HMI Nickel and higher net profits interest expenses associated with the
Callinan agreement.
Estimated Mineral Reserves (1) (January 1, 2009) ---------------------------------------------------------------------------- Tonnes Au (g/t) Ag (g/t) Cu (%) Zn (%) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 777 Proven 4,392,700 2.42 26.95 3.15 4.13 Probable 10,039,800 2.25 30.22 2.14 4.83 Trout Lake Proven 1,094,700 1.12 11.84 1.82 3.75 Probable 532,900 2.20 10.51 2.58 3.24 Chisel North Proven 284,300 - - - 8.74 Probable 208,100 - - - 8.90 --------------- Total Proven 5,771,700 2.05 22.76 2.74 4.29 Total Probable 10,780,800 2.20 28.66 2.12 4.83 --------------- Total Reserves 16,552,500 2.15 26.60 2.34 4.64 ---------------------------------------------------------------------------- (1) Diluted, recovered and economically tested.
The
2009 estimated mineral reserves have been prepared under the
supervision of Rob Carter P.Eng. Senior Mining Analyst who is employed
by HBMS and who is a Qualified Person under NI 43-101 and Kim Proctor,
B.Sc., P.Geo., who is employed by HBMS as Superintendent, Mining
Technical Services and who is a Qualified Person under NI 43-101.
Mineral reserves associated with the 777 and Trout Lake mines declined
in 2008 as a result of depletion from mining. Reserves at the Balmat
mine have been reclassified to resources. Reserves at the Chisel North
mine decreased as a result of depletion from mining and a review of
mine planning assumptions and the likely recovery from certain zones,
which led to the reclassification of some reserves to resource.
Long term metal prices, including premiums used to determine economic
viability of the 2009 mineral reserves were US$1 to C$1.10, US$700/oz.
gold, US$12.00/oz. silver, US$2.00/lb. copper and US$0.85/lb. zinc. In
addition, there are inferred mineral resources more detailed discussion
of reserve and disclosure of resources will follow in the 2008 AIF.
--------------------------------------------- Fenix Project Tonnes Ni (%) --------------------------------------------- Proven 8,700,000 1.81 Probable 32,700,000 1.58 -------------- Total Reserve 41,400,000 1.63 --------------------------------------------- As disclosed in Technical report filed on November 19, 2008.
There
is no material change to the Fenix project mineral reserve and
resource. The project remains on suspension, as published in the
Company's third quarter 2008 results. For full disclosure on the
Mineral Reserve and Mineral Resource Statement, please refer to the
November 19, 2008 Technical Report as filed on the SEDAR website at www.sedar.com.
Please also see HudBay's consolidated financial statements and related
notes together with Management's Discussion and Analysis of Operations
and Financial Condition for the year ended December 31, 2008. A copy of
HudBay's consolidated financial statements for the years ended December
31, 2008 and December 31, 2007 as well as its MD&A for the year
ended December 31, 2008 are available under the profile of HudBay on
SEDAR at www.sedar.com
and on the HudBay website at www.hudbayminerals.com. Supplemental information on
HudBay's fourth quarter 2008 financial results is also available on the
HudBay website.
Website Links
HudBay Minerals Inc.
www.hudbayminerals.com
Management's Discussion and Analysis:
http://media3.marketwire.com/docs/hbmmdaQ408.pdf
Financial Statements:
http://media3.marketwire.com/docs/hbmifsQ408.pdf
Fourth Quarter 2008 comparative financial statements:
http://media3.marketwire.com/docs/hbmComparativeFinancials2008.pdf
Conference Call and Webcast
Allen J. Palmiere, chief executive officer, Michael D. Winship,
president and chief operating officer, and David S. Bryson, vice
president finance and chief financial officer, will host a conference
call to discuss the company's fourth quarter and year end results on
Thursday, March 5, 2009. The details are as follows:
Date: Thursday, March 5, 2009 Time: 10:00 a.m. (Eastern Time) Webcast: www.hudbayminerals.com Dial in: 416-644-3423 or 800-594-3790 Replay: 416-640-1917 or 877-289-8525 Replay Passcode: 21298189#
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 increase shareholder value through efficient
operations, organic growth and accretive acquisitions, all while
maintaining its financial strength. A member of the S&P/TSX
Composite Index and the S&P/TSX Global Mining Index, HudBay
Minerals 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 HudBay's 2009 guidance respecting production, capital
expenditures and exploration expenditures, potential plans for Lalor
and the Fenix nickel project, as well as 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 court and/or other regulatory
approval, action by an intervening party or parties, future agreements
reached with third parties, changes in market conditions, variations in
ore grade or recovery rates, risks relating to international
operations, fluctuating metal prices and currency exchange rates,
changes in project parameters, the possibility of project cost overruns
or unanticipated costs and expenses, labour disputes and other risks of
the mining industry, failure of plant, equipment or processes to
operate as anticipated as well as those risk factors discussed in the
Company's Management's Discussion and Analysis of Results of Operations
and Financial Condition for the year ended December 31, 2008, 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. The reader is
cautioned not to place undue reliance on forward-looking information.
This news release and the information contained herein does not
constitute an offer of securities for sale in the United States and
securities may not be offered or sold in the United States absent
registration or exemption from registration.
(HBM-F)
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