ENP Newswire -
Release date- 02052014 -
In the first quarter of 2014, operating cash flow before change in non-cash working capital decreased to negative
Cash flow from operations, net earnings and cash cost per pound of copper were all negatively affected by a significant accumulation of unsold copper (29% of quantity produced in the quarter) and precious metals (44% of quantity produced in the quarter). As a result of rehabilitation work at the 777 mine that was successfully completed in
'Hudbay is poised to deliver growth in production, earnings and cash flows in the second half of this year as we approach the end of our
The Offer is currently open for acceptance until
Hudbay is arranging a
The facility is expected to have a term of four years, with any drawdowns bearing interest at
Financial and Operating Results
Total revenue for the first quarter of 2014 was
First quarter 2014 ore production at Hudbay's
Costs during the first quarter of 2013 at Lalor were capitalized. Operating costs per tonne of ore in the first quarter of 2014 at Lalor improved by 12% when compared to the fourth quarter of 2013 as progress was made in replacing contractors with permanent employees. Further economies of scale are projected in the second half of 2014 when Lalor is expected to double its production capacity rate to 2,700 tonnes of ore per day.
The operating cost per tonne of ore processed in the first quarter of 2014 at the
Operating cash flows before change in stream deposit and non cash working capital were negative
Cash and cash equivalents increased by
During the last nine months of 2014, Hudbay anticipates making
In addition, Hudbay has a
At Hudbay's 100% owned Constancia copper project in
Hudbay continues to advance construction activities on the power transmission line from Tintaya to Constancia, with construction approximately 75% complete and completion is expected in
Significant progress has been achieved on construction of the concentrator. All fabricated structural steel is on site, and deliveries of fabricated mechanical steel and piping continue. The crusher, mills, flotation cells and other major mechanical equipment have been placed, and mechanical fit-out continues.
Water and tailings pipeline and water reclaim piping construction are advancing. Electrical and instrumentation installation is underway and electrical rooms are being delivered to site for installation. Dam construction on the east tailings embankment is well underway and on schedule, and water retention in the east tailings impoundment has commenced. Water capture to build operations water inventory began in
Constancia construction remains on track for first production in late 2014 and commercial production in the second quarter of 2015.
At Hudbay's 100% owned Lalor project in
Construction is proceeding well on the 910 and 955 metre levels on the mine dewatering systems, rock breakers and the loadout systems. Commissioning of the production shaft, completion of mine construction, doubling of the production capacity at the mine and concentrator to 2,700 tonnes per day and an increase to the production rate remain on schedule for
The completion of surface construction is expected late in 2014. Hudbay has recently received the Environment Act licence for Lalor, which will enable full production via the main shaft.
Hudbay's 70% owned Reed mine in
During the first quarter of 2014, Hudbay mined 71,236 tonnes of ore at a copper grade of 1.92% and a zinc grade of 2.14% from a combination of ore development and longhole stope mining.
Non-IFRS Financial Performance Measures
Operating cash flow per share and cash costs per pound of copper sold ('cash cost') are included in this news release because the company believes that, in the case of operating cash flow per share, it helps investors to evaluate changes in cash flow while taking into account changes in shares outstanding, and in the case of cash costs, they help investors assess the performance of the Company's operations.
These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and 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 per share
Cash cost per pound of copper sold
Cash cost per pound of copper sold is a non-IFRS measure that management uses as a key performance indicator to assess the performance of the company's operations. Hudbay's calculation designates copper as its primary metal of production as it is currently, and is expected to be, the largest component of revenues. The calculation is presented in two manners:
Cash cost per pound of copper sold, before by-product credits - This measure is gross of by-product revenues and is a function of the efforts and costs incurred to mine and process all ore mined. However, the measure divides this aggregate cost over only pounds of copper sold, Hudbay's primary metal of production.
This measure is generally less volatile from period to period, as it is not affected by changes in the price received for by-product metals. It is, however, significantly affected by the relative mix of metal sales, and an increase in production of a by-product metal will tend to result in an increase in cash costs under this measure, regardless of the profitability of the increased by-product metal production.
Cash cost per pound of copper sold, net of by-product credits - In order to calculate the cost to produce and sell copper, the net of by-product credits measure subtracts the revenues realized from the sale of the metals other than copper. The by-product revenues from zinc, gold and silver are significant and are integral to the economics of Hudbay. The economics that support Hudbay's decision to produce and sell copper would be different if the company did not receive revenues from the other significant metals being extracted and processed.
This measure provides management and investors with an indication of the minimum copper price consistent with positive operating cash flows and operating margins, assuming by-product metal prices are consistent with those prevailing during the reporting period. It also serves as an important operating statistic that management and investors utilize to measure Hudbay's operating performance versus that of its competitors. However, it is important to understand that if by-product metal prices decline alongside copper prices, the cash cost net of by-product credits would increase, requiring a higher copper price than that reported to maintain positive cash flows and operating margins.
Cash cost after by-product credits for the first quarter of 2014 was
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This news release contains 'forward-looking statements' and 'forward-looking information' (collectively, 'forward-looking information') within the meaning of applicable Canadian and
Often, but not always, forward-looking information can be identified by the use of words such as 'plans', 'expects', 'budget', 'guidance', 'scheduled', 'estimates', 'forecasts', 'strategy', 'target', 'intends', 'objective', 'goal', 'understands', 'anticipates' and 'believes' (and variations of these or similar words) and statements that certain actions, events or results 'may', 'could', 'would', 'should', 'might' 'occur' or 'be achieved' or 'will be taken' (and variations of these or similar expressions). All of the forward-looking information in this news release is qualified by this cautionary note.
Forward looking information includes, but is not limited to, statements with respect to the anticipated timing, mechanics, completion and settlement of the Offer, the market for and listing of the common shares Hudbay may issue pursuant to the Offer, the value of the Hudbay common shares that may be received as consideration under the Offer, Hudbay's ability to complete the transactions contemplated by the Offer, the permitting, development and financing of Augusta's
Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information.
The material factors or assumptions that Hudbay identified and were applied by the company in drawing conclusions or making forecasts or projections set out in the forward looking information include, but are not limited to:
the success of mining, processing, exploration and development activities;
the accuracy of geological, mining and metallurgical estimates;
the costs of production;
the supply and demand for metals Hudbay produces;
no significant and continuing adverse changes in financial markets, including commodity prices and foreign exchange rates;
the supply and availability of concentrate for Hudbay's processing facilities;
the supply and availability of reagents for Hudbay's concentrators;
the availability of third party processing facilities for Hudbay's concentrate;
the supply and availability of all forms of energy and fuels at reasonable prices;
the availability of transportation services at reasonable prices;
no significant unanticipated operational or technical difficulties;
the execution of Hudbay's business and growth strategies, including the success of Hudbay's strategic investments and initiatives;
the availability of financing for Hudbay's exploration and development projects and activities;
the ability to complete project targets on time and on budget and other events that may affect Hudbay's ability to develop Hudbay's projects;
the timing and receipt of various regulatory and governmental approvals;
the availability of personnel for Hudbay's exploration, development and operational projects and ongoing employee relations;
Hudbay's ability to secure required land rights to complete its Constancia project;
maintaining good relations with the communities in which Hudbay operates, including the communities surrounding the Constancia project and First Nations communities surrounding the Lalor project and Reed mines;
no significant unanticipated challenges with stakeholders at Hudbay's various projects;
no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;
no contests over title to Hudbay's properties, including as a result of rights or claimed rights of aboriginal peoples;
the timing and possible outcome of pending litigation and no significant unanticipated litigation;
certain tax matters, including, but not limited to current tax laws and regulations and the refund of certain value added taxes from the Canadian and Peruvian governments;
no significant and continuing adverse changes in general economic conditions or conditions in the financial markets;
the accuracy of Augusta's public disclosure;
that all conditions to the Offer will be satisfied or waived and
the timing and likelihood of entering into a standby credit facility and offtake arrangement in respect of Constancia.
The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, the impact of the issuance of Hudbay's common shares as consideration under the Offer on the market price of Hudbay's common shares, the development of the
Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, you should not place undue reliance on forward-looking information. Hudbay does not assume any obligation to update or revise any forward-looking information after the date of this news release or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law.
Information Concerning Augusta
Except as otherwise expressly indicated herein, the information concerning Augusta contained in this news release has been taken from and is based solely upon Augusta's public disclosure on file with the relevant securities regulatory authorities. Augusta has not reviewed this document and has not confirmed the accuracy and completeness of the information in respect of Augusta contained in this news release.
Although Hudbay has no knowledge that would indicate that any information or statements contained in this news release concerning Augusta taken from, or based upon, such public disclosure contain any untrue statement of a material fact or omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made, none of Hudbay's directors or officers have verified the accuracy or completeness of such information or statements or are aware of any failure by Augusta to disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information or statements.
Hudbay has no means of verifying the accuracy or completeness of any of the information contained herein that is derived from Augusta's publicly available documents or records or whether there has been any failure by Augusta to disclose events that may have occurred or may affect the significance or accuracy of any information. Except as otherwise indicated, information concerning Augusta is given based on information in Augusta's public disclosure available as of the date of the Offer.
Further information about Hudbay can be found on www.hudbayminerals.com
Tel: (416) 814-4387