A milestone in Peru, a change of plans in northern Manitoba and a quarterly loss to start 2015.
That’s where things stood for Hudbay as the company summarized its business position last week.
Hudbay confirmed that its Constancia copper mine in Peru – now representing over half of its business – achieved commercial production on April 30.
“Reaching commercial production on schedule at the Constancia mine is a major milestone for Hudbay,” said David Garofalo, president and CEO, in a news release. “This achievement strengthens our position as a low-cost, high-quality copper and zinc producer. Constancia has allowed us to broaden our skills as a mine developer, and given its ongoing ramp-up, we continue to expect to meet our corporate production and cost guidance for 2015.”
Hudbay reports the Constancia mine and concentrator are operating at or above capacity. Ocean shipments of copper concentrate from the mine began in April.
Peru’s largest mining union has approved an indefinite strike to start next week, but Hudbay spokesman Scott Brubacher said that won’t impact the company.
“We do not have any employees who are members of the union(s) involved,” he said in an email.
No new mill
The company also announced that due to its purchase of the New Britannia mine mill in Snow Lake, it no longer plans to build a new concentrator at the Lalor mine site.
Hudbay completed its purchase of the New Brit mill Monday, May 4, spending about US$11 million in net cash consideration plus a contingent payment of US$5 million.
“The New Britannia mill is currently on care and maintenance,” the company said. “If refurbished, it has the potential to process about 2,000 tonnes per day of gold zone ore from the Lalor mine, and includes an existing carbon-in-pulp circuit that has historically produced gold doré [a gold and silver alloy] on site.”
Hudbay still expects a paste backfill plant for Lalor will be required in addition to a potential refurbishment of the New Brit mill.
Ore from Lalor will continue to be processed at the existing Snow Lake concentrator as engineering work is carried out on the proposed restart of the New Brit mill, the company said.
Hudbay expects the results of a technical study on the New Brit mill, including the estimated costs and timing of a possible restart, to be available in 2016.
In 2011, Hudbay unveiled plans to spend $144 million on a new concentrator at Lalor, but over time those plans appeared increasingly unlikely.
Net loss
The news out of Peru and Snow Lake comes as Hudbay records a net loss of $23.7 million for the first quarter of 2015, a modest improvement over the same quarter of 2014.
Hudbay attributed the latest loss to factors such as provisional pricing adjustments, foreign currency translation losses and non-cash deferred tax adjustments.
Ore processed at Manitoba operations was 14 per cent higher compared to the same period in 2014, primarily due to increased production at Reed and Lalor, which entered full production last year.
Compared to the first quarter of 2014, copper grades in Manitoba were 18 per cent higher as a result of increased production at Reed, which had higher copper head grades, and normal mine sequencing at the other mines.
Recoveries of copper, zinc and gold in Manitoba were marginally higher in the first quarter of 2015 compared to the previous year. Hudbay credited steady operations at Reed and Lalor.
But unsold copper and gold hindered earnings and copper production costs.
The company reports having about 6,000 tonnes of unsold copper in concentrate as a result of logistical and other issues, as well as about 9,000 ounces of unstreamed gold produced in the first quarter of 2015 that went unsold.
Earnings were also negatively affected by higher depreciation costs stemming from commercial production at Reed and Lalor, and revised mine planning assumptions at 777.
In the second quarter, Hudbay expects to begin seeing “substantial cash flow” from sales of copper from Constancia, and to receive tax refunds from the Peruvian government of about US$38 million.
Exploration
On the exploration front, Hudbay said it has drilled 14 holes, totaling over 4,500 metres, to better define the copper-gold zones at Lalor.
Preliminary results indicate the high-grade copper-gold mineralization as drilled from underground is of similar quantity and quality as indicated by surface drilling, the company said.
Based on the preliminary results, Hudbay will proceed with a 400-metre exploration ramp extension to the north.
Drill platforms from the exploration ramp will allow testing of the copper-gold zones down plunge, and step out drilling to the east and west, the company said.
Further exploration drilling is expected to proceed upon completion of the exploration ramp extension in the second half of this year.
Hudbay said the ongoing work will maintain a drift size capable of accommodating future mine equipment and related infrastructure for mining the copper-gold zones.
In a news release on the quarterly results, Hudbay reiterated its plan to maintain Flin Flon-Snow Lake operations throughout IAM Local 1848’s ongoing strike.
“Hudbay anticipates that operations will continue under a comprehensive contingency plan during the IAM’s strike,” the release said. “Negotiations with the other six unions are ongoing.”
