Hudbay stock on the move as sales, cash flows rise

TORONTO (miningweekly.com) – The TSX-listed stock of base metals producer Hudbay Minerals jumped as much as 17% on Friday to C$6.22 a share, following the company reporting strong sales growth despite lower metals prices during the March quarter.

The Toronto-based miner, with operations in Peru and Canada’s Manitoba province, reported a marginally smaller first-quarter net loss of $15.8-million, or $0.07 a share, as the company booked a $23-million interest expense that was no longer capitalised after its declaration of commercial production at the Constancia mine on April 30, 2015.

The quarter represented the company’s fifth consecutive quarterly loss in a year.

Hudbay advised that liquidity was expected to increase over the rest of 2016 at current metals prices, as it generated free cash flow from its operations at full production and benefit from ongoing cost reduction initiatives, all the while also collecting refundable Peruvian sales tax receivables.

Despite lower metals prices, revenues nearly doubled in the period to $253.6-million, $124.9-million higher than the same period in 2015. Higher sales volumes were partially offset by lower prices for copper and zinc, the company advised.

Realised prices for copper were slightly higher than the LME average for the quarter mainly owing to the timing of sales, which occurred in the latter part of the quarter when copper prices increased. The consolidated all-in sustaining cash cost, net of by-product credits, declined to $1.80/lb in, from $2.67/lb in the first quarter a year earlier.

“Since achieving commercial production last year, Constancia’s operating performance, coupled with our stable Manitoba operations, have enabled us to generate increasing cash flows, despite the sharp declines in metals prices. Based on our operating and cost performance to date, we are on track to meet the cost reduction targets of over $100-million we announced last quarter, as well as our production, operating and capital cost guidance,” CEO Alan Hair advised in a statement.

GROWING PAINS
Hudbay reported that during the first quarter, Constancia mining operations continued as planned and cost optimisation was underway. Ore milled decreased to 6.2-million tonnes from 7.4-million tonnes in the fourth quarter of 2015, owing to lower mill capacity during the replacement of the trunnions on one of the grinding circuits. The average milled copper grade had also declined somewhat to 0.57%.

Hudbay advised that the planned replacement of the damaged trunnions at the Constancia mill was completed without incident and ahead of schedule by late March, reducing plant down time.

Meanwhile, ore mined at Hudbay’s Manitoba mines increased by 12% year-over-year, as a result of increased production at the company’s Lalor and 777 mines, however, copper, zinc, gold and silver grades were lower than the first quarter of 2015. Hudbay advised that 777 grades were in line with mine plan expectations, but Lalor zinc grades were lower as a result of stope sequencing.

Hudbay said ore processed in Flin Flon was 8% lower than the same period in 2015 as a result of unscheduled maintenance, with the shortfall expected to be made up over the balance of 2016. Copper, zinc and silver recoveries at the Flin Flon concentrator were generally consistent in the first quarter of 2016 compared to the same period in 2015.