Mr. David Garofalo reports
HUDBAY RELEASES FOURTH QUARTER 2012 RESULTS
HudBay Minerals Inc. today released its fourth-quarter 2012 financial results. In the fourth quarter of 2012, HudBay recorded a profit and earnings per share of $7.4-million and four cents, respectively, compared with a profit and earnings per share of $34.3-million and 21 cents, respectively, in the fourth quarter of 2011.
- Production of all metals in concentrate and overall unit operating costs
met full-year 2012 guidance.
- Fourth-quarter operating cash flow before stream deposit and change in
non-cash working capital decreased to $6.0-million, mainly due to lower
realized metals prices, the impact of the precious metal stream
transaction on cash proceeds received for gold and silver sold in the
quarter, and unusually high sales volumes in the comparable 2011 period.
- Profit and earnings per share in the fourth quarter of 2012 were $7.4-million and four cents, respectively.
- The development of three new mines is proceeding well, with first full quarter
of ore production from the ventilation shaft at Lalor, full-scale civil
works under way at Constancia and ramp development advancing well at
- Lalor project estimated capital expenditures increased by $90-million to
$794-million as scope changes, including a 20-per-cent increase in grinding
capacity to 5,400 tonnes per day, as well as improved estimation from
completion of basic engineering, are incorporated.
- Drilling at Constancia's higher-grade Pampacancha satellite deposit
continued to expand the known deposit, raising the possibility of
further grade enhancements early in the mine life.
- Semi-annual dividend of 10 cents per share declared.
The fourth quarter of 2012 profit was affected by, among other things, the tabulated items.
gain (loss) gain (loss) Per share
($ millions) ($ millions) ($/share)
Impairments and mark-to-market
adjustment related to junior mining
investments (4.1) (4.1) (0.02)
Gain on mark to market of embedded
derivative related to long-term debt 1.9 1.9 0.01
Impact on deferred tax expense of
translation of Peruvian tax basis - 2.7 0.02
Impact on deferred taxes of change in
discount rates on decommissioning and
restoration liabilities - 1.1 0.01
Foreign exchange gain 9.1 8.5 0.05
(Loss) as a result of provisional
pricing adjustments (3.5) (2.2) (0.01)
(Loss) on forward zinc purchase
contracts related to fixed-price
customer sales (0.6) (0.4) -
"For the sixth consecutive year, HudBay met its production guidance, which is a testament to our operating team and our reliable Northern Manitoba assets," said David Garofalo, HudBay's president and chief executive officer. "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."
HudBay's board of directors has declared a semi-annual dividend in the amount of 10 cents per common share, payable on March 28, 2013, to shareholders of record on March 18, 2013.
Financial and operating results
Total revenue for the fourth quarter of 2012 was $181.0-million, $73.3-million lower than the same period in 2011. This decrease was primarily due to lower sales volumes compared with the fourth quarter of 2011, when the company drew down on unusually high copper concentrate inventory. Lower gold prices in the fourth quarter of 2012 reflect, in part, the effect of the precious metals stream agreement. For the full-year 2012, revenue was $702.6-million, $188.2-million lower than in 2011, mainly as a result of lower sales volumes, primarily due to the reason described above and lower metals prices.
Fourth-quarter 2012 ore production at HudBay's Manitoba business was 20 per cent lower than the prior year's fourth quarter due to the planned permanent closures of the Trout Lake and Chisel North mines in June, 2012, and September, 2012, respectively, offset partly by the start of production at Lalor. Overall mine operating costs per tonne were 13 per cent lower than the prior year's quarter with the closure of the higher-cost Trout Lake and Chisel North mines. In addition, the operating cost per tonne of ore processed at the Flin Flon and Snow Lake concentrators increased in the fourth quarter of 2012 as a result of reduced feed to the Flin Flon concentrator and costs associated with the new Snow Lake copper circuit and preparations for the ramp-up of Lalor mine production. Production of all metals in concentrate and overall unit operating costs met full-year guidance.
Operating cash flow before the stream deposit and change in non-cash working capital was $6.0-million for the fourth quarter of 2012, a $76.2-million decrease compared with the same period in 2011, mainly as a result of lower sales volumes and reduced gold and silver receipts as a result of the stream transaction.
For the full-year 2012, operating cash flows before the stream deposit and change in non-cash working capital were $143.0-million, reflecting a decrease of $109.2-million compared with 2011, mainly as a result of the lower sales volumes and reduced gold and silver receipts as a result of the stream transaction.
Cash and cash equivalents decreased by $161.9-million during the quarter to $1,337.1-million as at Dec. 31, 2012, mainly as a result of capital expenditures of $180.7-million, primarily on HudBay's growth initiatives.
The company has invested approximately $326-million of the revised $794-million capital construction budget for its wholly owned Lalor project near Snow Lake, Man., to Jan. 31, 2013, and has entered into an additional $93-million in commitments for the project.
The mine portion of the project remains on time and on budget. Basic engineering of the new Lalor concentrator is complete.
Capital expenditures are expected to be approximately $90-million higher than the original budget of $263-million for the concentrator portion of the now $794-million project. Scope changes and improved estimation from completion of basic engineering account for the increase. The scope changes include an increase in the grinding capacity by 20 per cent to 5,400 tonnes per day to better match the potential production shaft capacity. The mine plan, as previously disclosed, contemplates an ore production rate of 4,500 tonnes per day at full production; however, the main production shaft is designed for 6,000 tonnes per day. The new concentrator design also incorporates a longer construction schedule, with concentrator start-up in late 2015. However, first ore production from the main production shaft is still projected to be on schedule in late 2014, at which time it will be processed at the Snow Lake and Flin Flon mills and a portion stockpiled for the new concentrator upon its commissioning.
During the fourth quarter of 2012, HudBay hoisted 58,000 tonnes of ore from the ventilation shaft at Lalor. Between August and December, 2012, HudBay hoisted 72,300 tonnes of ore and 79,830 tonnes of waste using the ventilation shaft. Underground project development has continued to advance, and HudBay's primary focus is to reach the 910-metre shaft station and continue to ramp to the 955-metre level. The main production shaft is now sunk to approximately 525 metres and is 53 per cent complete. HudBay expects shaft sinking to be completed in late 2013. Upon completion of sinking, the installation of the steel sets and guides, as well as the head-frame changeover, will begin.
HudBay is in the process of completing the final engineering work for the load-out facilities located at the 955-metre level, as well as completing the main pumping installations. The company is preparing for construction of the main intake fan systems and the main substation during 2013.
HudBay expects to submit the environmental act licence application for the new concentrator to the provincial government in the first half of 2013. The new design will incorporate a larger grinding circuit being fed from the surface stockpile. HudBay will hoist uncrushed ore up the Lalor shaft to be crushed on surface and then conveyed to the surface stockpile. The stockpile will feed a SAG mill and ball mill combination that has design capacity of 5,400 tonnes per day.
Reed copper project development progressing on schedule
During the fourth quarter, HudBay's focus for its 70-per-cent-owned Reed copper project near Flin Flon, Man., was underground ramp development and completion of surface infrastructure.
Of the company's $72-million capital construction budget, the company has invested approximately $26-million on the project to Jan. 31, 2013, and has entered into an additional $20.5-million in commitments for the project. Capital expenditures at Reed are expected to total approximately $44-million in 2013.
After completing the first portal development round in October, 2012, the underground ramp had advanced approximately 174 metres as of Jan. 31, 2013. In December, 2012, HudBay submitted to the provincial government the environmental act licence application for Reed, which, upon receipt, will allow for the commencement of full production.
HudBay expects initial production at the Reed copper project by the fourth quarter of 2013 and full production of approximately 1,300 tonnes of ore per day by the first quarter of 2014.
Construction progress at Constancia
On Aug. 8, 2012, HudBay's board of directors approved a $1.5-billion (U.S.) investment in the company's 100-per-cent-owned Constancia copper project in Peru. The Constancia development schedule contemplates nine quarters of construction, with initial production in late 2014 and full production commencing in the second quarter of 2015.
HudBay has invested approximately $351-million (U.S.) of its $1.5-billion (U.S.) capital construction budget on the project to Jan. 31, 2013, and has entered into an additional $631-million (U.S.) in commitments for the project. The company expects to incur capital expenditures of approximately $961-million on Constancia for 2013. The project site has sustained a higher than normal amount of rainfall, which has slowed project progress to date. HudBay believes that the impact on project schedule is recoverable, and the targets for initial production and full production remain unchanged. The project's forecasted final costs remain on budget.
Site activity to date includes the completion of 3,500 beds in the construction camp. The tailings management facility, haul roads and water diversion infrastructure are under construction. HudBay expects to complete the access roads for heavy haulage in the second quarter of 2013 and the waste rock facilities in the third quarter of 2013.
The Pampacancha feasibility study is under way, and HudBay will incorporate further characterization of geotechnical and hydrogeological information in the study.
Structural steel delivery is scheduled to commence in May, 2013, and the major steel erection for the plant site is expected to commence in June, 2013. HudBay has secured major long-lead items, including flotation cells, pumps, regrind mills, SAG mills and crushers, and expects to begin receiving these items in March, 2013. The primary crusher mechanical installation is anticipated in the fourth quarter of 2013. The company has also secured the mine fleet with 18 haul trucks scheduled for delivery from March, 2013, through August, 2014. Tire procurement is under way with a number of tires purchased and contracts arranged to meet fleet requirements. HudBay expects the arrival of the three hydraulic shovels in June, July and December, 2013, respectively, and to begin prestripping activities late in 2013.
In addition, HudBay has executed a contract for the construction of the 70-kilometre power transmission line from the Tintaya substation. The company is finalizing negotiations on the power purchase agreements with long-term pricing expected to be consistent with its original expectations. The principal port operator has provided further assurances that the concentrate shipments will be accommodated, and HudBay is considering the short-term and long-term solutions to best serve the project's needs.
In accordance with the agreements HudBay has entered into with local communities, relocation of affected families is under way, and the construction of new housing is in progress. HudBay has delivered new homes to 13 families, and the remaining 23 families are scheduled to be relocated in 2013.
Permitting and regulatory efforts remain on schedule with the approval and receipt of the mining permit in December, 2012. This approval followed in the normal course the beneficiation concession that was awarded in June, 2012.
The next major permit is the operating permit, which HudBay expects to receive in the normal course upon commissioning of the mine, which is scheduled for early 2015. The company has also received approval for the early refund of value-added tax on purchases with retroactive effect to December, 2012.
Constancia exploration update
In Peru, exploration is continuing at the Constancia project with three diamond drills. One drill is focused on Pampacancha infill drilling, while the two others are concentrated on Pampacancha West.
HudBay's objective for the first quarter of 2013 is to drill Pampacancha West, which includes a group of geophysical anomalies located approximately 500 metres west of the main Pampacancha deposit. New drilling has yielded positive results, including drill hole PO-12-142, which intersected 14.8 metres at 0.85-per-cent-copper-equivalent grade (at a depth from 11.2 metres to 26 metres) and almost 28 metres at 0.51-per-cent-copper-equivalent grade (at a depth from 91.4 metres to 119.75 metres).
These intersections indicate that magnetite skarn mineralization exists in this western area, and exploration of this area will continue to be a priority to understand if a meaningful resource can be delineated.
In addition, HudBay anticipates recent drilling will have a positive impact on the grade and tonnage at the main Pampacancha deposit for consideration in the new Pampacancha feasibility study. This resource will provide the company with an opportunity to continue to optimize the mine plan with potential to extend higher grades in the mine plan beyond the first five years of production. Among recent drilling results, infill drill hole PO-12-134 in the southern portion of the resource extended mineralization at depth of 108.10 metres at a 2.62-per-cent-copper-equivalent grade (at a depth from 88 metres to 196.1 metres). Drill hole PO-12-129 intersected almost 65 metres at a 1.17-per-cent-copper-equivalent grade (at a depth from 23 metres to 88 metres) at the western margin of the Pampacancha resource, which remains open to the west. A total of 16,593 metres were drilled during 2012, and HudBay plans on drilling 3,000 metres in the first quarter of 2013, targeting extensions to the northwest and west of the Pampacancha resource and the Pampacancha West mineralization.
Chilloroya South drilling in 2012 yielded interesting results with the presence of some gold mineralization. Geological modelling for future exploration considerations is continuing. The geophysical anomaly immediately west of the Constancia pit was not fully tested. Two drill holes failed to pierce a significant fault structure to properly test the geophysical anomaly. Near the fault some porphyry mineralization was encountered, and further review is required. The opportunity remains to pierce through the faulted structure utilizing a larger and more powerful drill.
Highlights from the drill program are tabulated.
Length From To Cu Mo Ag Au (1)
Hole (m) (m) (m) (%) (%) (g/t) (g/t) (%)
PO-12-117 58.00 -- 58.00 0.55 0.05 12.14 0.26 1.15
16.50 181.25 197.75 0.96 0.01 17.10 0.27 1.41
PO-12-119 10.00 215.80 225.80 0.40 .01 7.54 0.38 0.76
20.00 266.40 286.40 0.74 .01 8.35 0.41 1.13
PO-12-121 No significant mineralization
PO-12-122 16.00 2.00 18.00 0.25 .01 1.76 0.15 0.38
39.00 34.00 73.00 0.36 0.01 6.33 0.35 0.74
15.50 81.50 97.00 0.32 0.05 1.01 0.13 0.66
34.55 146.15 180.70 0.74 .01 12.66 0.24 1.07
52.00 189.00 241.00 0.49 .01 6.51 0.16 0.70
8.25 250.75 259.00 0.52 0.06 7.00 0.34 1.13
PO-12-123 28.05 12.75 40.80 0.66 0.05 4.88 0.21 1.10
9.35 95.60 104.95 1.03 0.01 11.59 0.26 1.41
13.20 257.00 270.20 0.71 .01 8.14 0.27 1.03
7.30 278.50 285.80 0.32 .01 2.42 0.08 0.43
PO-12-124 No significant mineralization
PO-12-125 No significant mineralization
PO-12-126 No significant mineralization
PO-12-127 No significant mineralization
PO-12-128 Results pending
PO-12-129 65.00 23.00 88.00 0.80 0.01 2.46 0.38 1.17
PO-12-130 15.95 90.25 106.20 1.19 .01 4.41 0.73 1.77
PO-12-131 No significant mineralization
PO-12-132 9.35 106.70 116.05 0.26 .01 1.70 0.18 0.41
35.00 126.50 161.50 1.73 0.05 7.26 0.76 2.60
PO-12-133 Results pending
PO-12-134 108.10 88.00 196.10 1.76 0.08 7.73 0.50 2.62
PO-12-135 27.90 49.70 77.60 0.31 .01 1.54 0.21 0.51
39.00 85.00 124.00 0.36 .01 1.62 0.14 0.50
19.00 131.00 150.00 1.23 .01 20.27 0.27 1.67
28.75 201.25 230.00 1.30 .01 12.75 0.35 1.72
PO-12-136 Results pending
PO-12-137 21.40 59.60 81.00 0.35 0.05 1.70 0.08 0.67
PO-12-138 Results pending
PO-12-139 22.15 78.00 100.15 0.27 0.05 11.52 1.76 1.82
18.85 169.25 188.10 1.08 .01 17.36 0.31 1.53
17.75 284.15 301.90 1.32 .01 14.90 1.34 2.41
PO-12-140 16.00 31.00 47.00 0.22 0.02 1.52 0.09 0.40
9.00 131.00 140.00 0.33 .01 6.06 0.13 0.51
17.50 248.50 266.00 0.59 .01 8.32 0.71 1.21
PO-12-141 No significant mineralization
PO-12-142 14.80 11.20 26.00 0.29 .01 17.43 0.47 0.85
28.35 91.40 119.75 0.31 .01 8.14 0.14 0.51
SO-12-027 12.00 30.00 42.00 0.00 -- 0.62 0.28 0.20
18.00 80.00 98.00 0.09 -- 4.46 0.38 0.40
SO-12-030 9.60 60.40 70.00 0.09 -- 4.79 0.28 0.34
SO-12-031 11.00 97.00 108.00 0.08 -- 3.86 0.52 0.47
(1) Calculated using commodity prices of $1,250 (U.S.) per ounce
gold, $25.00 (U.S.) per ounce silver, $2.75 (U.S.) per pound
copper and $14 (U.S.) per pound molybdenum. The copper cut-off is
reported as 0.2 per cent. Composited intersections are reported as
core length and do not represent true width.
KEY FINANCIAL RESULTS
(in thousands of dollars, except per-share and cash cost amounts)
Three months ended Year ended
Dec. 31, Dec. 31,
2012 2011 2012 2011
Revenue $180,994 $254,314 $702,550 $890,817
Profit before tax 23,335 69,813 52,149 209,025
Profit (loss) from continuing
operations 7,438 34,286 (21,170) 75,196
Basic and diluted earnings
(loss) per share (1) 0.04 0.21 (0.11) (0.92)
Profit (loss) for the period 7,438 34,286 (21,170) (163,588)
Operating cash flow (2) 6,002 82,208 142,957 252,154
Operating cash flow per share (3) 0.03 0.48 0.83 1.50
Cash cost per pound of copper
sold (3) 2.05 0.54 1.07 0.45
Cash and cash equivalents 1,337,088 899,077 1,337,088 899,077
Total assets 3,487,824 2,455,004 3,487,824 2,455,004
(1) Attributable to owners of the company.
(2) Before stream deposit and change in non-cash working capital.
(3) Non-IFRS (international financial reporting standard) financial
Conference call and webcast:
Date: Thursday, Feb. 21, 2013
Time: 10 a.m. ET
Webcast: At the company's website
416-644-3415 or 877-974-0445
Replay: 416-640-1917 or 877-289-8525
Replay passcode: 4587283 followed by the pound sign
The conference call replay will be available until midnight (Eastern Time) on March 7, 2013. An archived audio webcast of the call also will be available on HudBay's website.
The technical and scientific information in this news release has been approved by Cashel Meagher, PGeo, HudBay's vice-president, South America business unit, a qualified person pursuant to National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
Quality control and data verification
The processes that were used to verify the exploration data contained in this news release and the quality assurance and quality control measures that were applied during the execution of the work being reported on are the same as those described in the technical report titled "National Instrument 43-101, Technical Report, Constancia Project, Province of Chumbivilcas, Department of Cusco, Peru," dated effective Oct. 15, 2012, a copy of which is available on SEDAR and EDGAR.
We seek Safe Harbor.