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Leading Base Metals Mining Company - Exploration, Mining, Metal Production and Sales
Message: Releases Fourth Quarter and Year End 2008 Financial Results
| March 4, 2009 | |||||||
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HudBay Minerals Releases Fourth Quarter and Year End 2008 Financial Results
For a full discussion of results, the audited Consolidated Financial Statements, Management's Discussion & Analysis, and mine statistics, please visit the Company's website, www.hudbayminerals.com. |
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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
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($000s except per Three Months Ended Dec.31 Year Ended Dec.31
share amounts) ---------------------------------------------------
2008 2007 2008 2007
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Revenue 178,781 242,596 981,894 1,269,841
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Earnings before tax 24,614 31,722 169,651 365,456
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Net earnings 15,819 28,459 73,353 227,139
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EBITDA (1,2) 46,300 72,014 292,249 483,066
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Operating cash flow (2,3) 38,805 83,809 234,661 477,890
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Basic EPS (4) 0.10 0.22 0.54 1.79
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Cash, cash equivalents
and short-term
investments 704,668 757,574 704,668 757,574
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Total assets 1,918,353 1,551,627 1,918,353 1,551,627
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(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.
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
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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
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(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.
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.)
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Three Months Ended Dec. 31 Year Ended Dec. 31
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2008 2007 2008 2007
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Production
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Zinc (1) tonnes 25,943 31,383 125,323 126,269
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Copper (2) tonnes 18,859 23,194 74,682 89,995
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Gold (2) troy oz. 30,102 26,222 108,527 102,587
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Silver (2) troy oz. 702,173 385,698 2,293,862 1,446,738
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Metal Sold
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Zinc (3) tonnes 25,807 34,313 126,172 132,994
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Copper tonnes 18,272 18,558 77,021 87,003
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Gold troy oz. 32,760 18,680 103,511 96,847
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Silver troy oz. 667,035 247,077 1,870,179 1,270,791
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(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).
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 $3.27/lb in 2007), lower copper sales volumes due to recycling of spent anode and reduced purchased concentrate production, and appreciation of the Canadian dollar compared to 2007. Partially offsetting these factors was a higher average realized gold price and higher silver sales volumes. Realized Metal Prices (1) and Exchange Rate ----------------------------------------------------------------------------
HudBay Realized HudBay Realized
Prices (1) Prices (1)
Q4 2008 Three Months Ended 2008 Year Ended
Average ------------------ Average ----------------
Prices Dec 31 Dec 31 Prices Dec 31 Dec 31
(2) 2008 2007 (2) 2008 2007
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Prices in US$
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Zinc US$/lb. 0.54 0.62 1.29 0.85 0.93 1.56
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Copper US$/lb. 1.77 1.78 3.23 3.16 3.13 3.27
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Gold US$/troy oz. 795 764 758 872 845 682
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Silver US$/troy oz. 10.20 10.09 13.84 15.02 13.85 13.39
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Prices in C$
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Zinc C$/lb. 0.65 0.75 1.26 0.91 0.97 1.68
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Copper C$/lb. 2.15 2.12 3.12 3.37 3.26 3.51
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Gold C$/troy oz. 963 928 739 930 907 733
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Silver C$/troy oz. 12.36 12.23 13.53 16.03 14.76 14.42
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Exchange
rate US$1 to C$ 1.21 1.20 0.97 1.07 1.05 1.08
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(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.
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)
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Tonnes Au (g/t) Ag (g/t) Cu (%) Zn (%)
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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
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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
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Total Reserves 16,552,500 2.15 26.60 2.34 4.64
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(1) Diluted, recovered and economically tested.
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 (%)
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Proven 8,700,000 1.81
Probable 32,700,000 1.58
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Total Reserve 41,400,000 1.63
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As disclosed in Technical report filed on November 19, 2008.
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/hb... Financial Statements: http://media3.marketwire.com/docs/hb... Fourth Quarter 2008 comparative financial statements: http://media3.marketwire.com/docs/hb... 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. (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. |
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