Market Overview

Hudbay Announces Second Quarter 2019 Results

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  • Delivered a solid operating quarter, which included record mine production at Lalor and record throughput at the Stall concentrator
  • 777 and Lalor ore mined increased by 35% and 21%, respectively, in the second quarter of 2019 compared to the same period in 2018
  • Second quarter 2019 results are on track to meet all production and cost guidance for 2019
  • Following the previously announced U.S. court decision suspending construction work at Rosemont, Hudbay intends to appeal the decision and is evaluating options for advancing the project
  • Announced an initial National Instrument ("NI") 43-101 resource estimate for the recently discovered zinc-rich 1901 deposit near Lalor
  • Progressed other key strategic initiatives, including engineering and permitting for the Lalor Gold strategy and community negotiations near Constancia
  • Cash generated from operating activities increased to $107.0 million in the second quarter of 2019 from $97.0 million in the same quarter of 2018, while operating cash flow before change in non-cash working capital decreased to $81.1 million in the quarter from $131.6 million in the same quarter of 2018 as a result of lower realized prices and sales volumes
  • Cash and cash equivalents increased from $485.9 million at March 31, 2019 to $489.5 million at June 30, 2019, as free cash flow from operations more than funded the $45.0 million upfront cost to acquire the Rosemont minority joint venture interest and $50.0 million of capital expenditures

TORONTO, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Hudbay Minerals Inc. ("Hudbay" or the "company") ((TSX, NYSE:HBM) today released its second quarter 2019 financial results. All amounts are in U.S. dollars, unless otherwise noted.

Figure 1: 1901 Deposit Underground Location
3D view of resource location versus Lalor and Chisel infrastructures



Figure 2: 1901 Deposit Remains Open
Mineralization remains open along strike



Figure 3: 1901 Deposit Longitudinal Section
Significant gold intersections in the footwall of the zinc mineralization (gold intersection in hole CH1934 is hidden by zinc lens on this view)



"Hudbay delivered strong operating results in the second quarter, including record mine production at Lalor, record throughput at the Stall concentrator and successful semi-annual maintenance activities at the Constancia mill," said Peter Kukielski, Interim President and Chief Executive Officer. "Based on these results, we are on track to achieve our full year 2019 production and cost guidance."

"We were surprised and disappointed by the court's decision on Rosemont, which we intend to appeal," stated Mr. Kukielski. "Rosemont aside, we continue to execute our strategy. In Snow Lake, we are pleased to announce the initial resource estimate for the 1901 deposit, a mere six months from the initial discovery. In the second half of the year, we will continue advancing the WIM, Pen II and New Britannia zones to upgrade them to a reserve classification, while advancing feasibility work on the 1901 deposit. In Peru, our focus will continue to be on accessing the high-grade Pampacancha satellite deposit while advancing discussions with the communities to the northwest to explore the other satellite properties."

Net loss and loss per share in the second quarter of 2019 were $54.1 million and $0.21, respectively, compared to a net profit and earnings per share of $24.7 million and $0.09, respectively, in the second quarter of 2018.

Net loss and loss per share in the second quarter of 2019 were affected by, among other things, the following items:

                 
      Pre-tax gain (loss)   After-tax gain (loss)   Per share gain (loss)  
      ($ millions)   ($ millions)
  ($/share)  
                 
  Non-cash deferred tax adjustments   (15.1)   (0.06)  
  Write down of UCM receivable (26.0)   (26.0)   (0.10)  
  Costs associated with recent proxy contest (3.0)   (2.2)   (0.01)  
                 

As previously disclosed, as part of the orderly acquisition of the remaining interest in the Rosemont copper project on April 25, 2019, Hudbay, immediately prior to closing the acquisition, agreed to release United Copper & Moly LLC ("UCM") from its repayment obligations under the Rosemont project loan in exchange for an increase in equity interest in Rosemont. As a result, the loan receivable balance was written down in the income statement and other capital reserves, a component of shareholder's equity, was subsequently increased.

Cash generated from operating activities increased to $107.0 million in the second quarter of 2019 from $97.0 million in the same quarter of 2018. Operating cash flow before change in non-cash working capital was $81.1 million during the second quarter of 2019, reflecting a decrease of $50.5 million compared to the second quarter of 2018. The decrease in operating cash flow is primarily the result of lower realized copper and zinc prices and lower sales volumes of copper and zinc, compared to the second quarter of 2018. Copper-equivalent production in the second quarter of 2019 decreased by 14% compared to the same period in 2018, primarily as a result of lower mine grades at Constancia, as planned, and the closure of the Reed mine.

In the second quarter of 2019, consolidated cash cost per pound of copper produced, net of by-product credits1, was $1.27, an increase compared to $0.96 in the same period last year. Cash costs per pound of copper produced, net of by–product credits, increased as a result of lower copper and zinc production and lower realized zinc prices. Incorporating sustaining capital, capitalized exploration, royalties, selling, administrative and regional costs, consolidated all-in sustaining cash cost per pound of copper produced, net of by-product credits1, in the second quarter of 2019 was $2.26, which increased from $1.50 in the same period last year, driven mainly by higher cash costs and increased sustaining capital expenditures.

Net debt1 decreased by $3.8 million from March 31, 2019 to $487.7 million at June 30, 2019, as the upfront payment to acquire the Rosemont minority joint venture interest and other capital expenditures was offset by free cash flow from operations. At June 30, 2019, total liquidity, including cash and available credit facilities, was $910.7 million, down from $940.3 million as at March 31, 2019 due to additional letters of credit posted to support reclamation obligations.

1Cash cost, all-in sustaining cash cost per pound of copper produced, net of by-product credits, and net debt are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see page 9 of this news release.

Financial Condition ($000s) Jun. 30, 2019 Dec. 31, 2018
Cash and cash equivalents 489,527 515,497
Total long-term debt 977,196 981,030
Net debt1 487,669 465,533
Working capital 428,078 445,228
Total assets 4,737,938 4,685,635
Equity 2,130,719 2,178,856

1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please see page 9 of this news release.

  Financial Performance Three months ended Six months ended
  ($000s except per share and cash cost amounts) Jun. 30 Jun. 30
    2019  2018 2019  2018
  Revenue 329,414 371,288 621,672 757,944
  Cost of sales 286,271 278,827 526,718 544,712
  Profit before tax (loss) (43,931) 49,797 (62,044) 122,900
  Profit (loss) (54,145) 24,673 (67,562) 66,118
  Basic and diluted (loss) earnings per share  (0.21) 0.09 (0.26) 0.25
  Operating cash flow before change in non-cash working capital  81,146 131,635 170,740 263,428



Production and Cost Performance Three months ended Three months ended
  Jun. 30, 2019 Jun. 30, 2018
    Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1          
    Copper tonnes 24,232 6,131 30,363 26,818 10,807 37,625
    Gold oz 3,794 24,305 28,099 5,190 27,290 32,480
    Silver oz 551,807 260,000 811,807 596,570 355,091 951,661
    Zinc tonnes - 31,838 31,838 - 33,170 33,170
    Molybdenum Tonnes 334 - 334 141 - 141
Payable metal in concentrate sold            
    Copper tonnes 25,778 7,393 33,171 25,409 10,062 35,471
    Gold oz 4,056 26,482 30,538 3,764 25,932 29,696
    Silver oz 504,259 300,042 804,301 438,532 250,952 689,484
 
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