TORONTO, ONTARIO--(CCNMatthews - March 31, 2005) - HudBay Minerals Inc.
(TSX:HBM)
Highlights:
- Acquisition of Hudson Bay Mining and Smelting Co., Limited (HBMS).
- Strong cash position with $65 million at year end.
- Cash operating costs of US$0.16 per pound of zinc, net of by-product
credits.
- First full year of HBMS operations after completion of the $435
million 777 capital expenditure program.
HudBay Minerals Inc. (TSX: HBM) (HudBay) incurred a net loss for 2004 of
$9.92 million compared to a loss of $5.46 million in 2003. Operating
costs increased in 2004 largely in connection with the acquisition of
the Balmat mine which was purchased in September 2003 and is currently
on care and maintenance but under evaluation for re-activation. As well,
additional costs were incurred in conjunction with the acquisition of
HBMS on December 21, 2004. Financing of the acquisition was completed
favourably, enabling HudBay to close the year with $65 million available
cash.
The consolidated financial statements of HudBay for the year ended
December 31, 2004 are available on SEDAR at www.sedar.com and on our
website at www.hudbayminerals.com.
HBMS Results:
HudBay completed the purchase of HBMS from Anglo American International
S.A. on December 21, 2004 and HBMS is now a wholly owned subsidiary of
HudBay, contributing all of HudBay's production. HudBay's 2004 audited
results incorporate HBMS results for only the ten-day period ended
December 31, 2004. The following information is provided for HBMS,
covering the twelve-month periods ending December 31, 2004 (unaudited)
and 2003 (audited):
/T/
HBMS
For the years ended
Dec 31/04 Dec 31/03
C$000 C$000
(Unaudited) (Audited)
Revenue 527,354 417,914
Operating Costs (479,302) (511,626)
Asset Impairment --- (269,000)
-------------------------------
Operating Earnings 48,052 (362,712)(1)
Net Earnings 50,132 (330,103)
Cash Flow from Operations 93,836 (3,739)
Investing Activities (85,081) (118,366)
Financing Activities 35,666 121,629
Net Cash Flow 44,421 (476)
1) Includes asset impairment of $269,000 in 2003.
/T/
In 2004 HBMS achieved operating cash costs of US$0.16 per pound of zinc,
net of by-product credits. The US$0.28 per pound improvement over 2003
was primarily related to an impairment in 2003 in realized metal prices
as well as completion of the $435 million capital expenditure on the 777
group of projects, which were all in full production during 2004.
/T/
Non GAAP Reconciliation
Non GAAP Reconciliation of Cash Cost per pound of Zinc, Net of
By-Product credits.
Non GAAP Reconciliation(1)(2)
2004 2003
C$000 C$000
(Unaudited) (Audited)
Operating Costs per financial statements 479,302 511,626(1)
Non-cash operating costs
Depreciation and amortization (52,100) (70,700)
Accretion and other non-cash (4,578) (2,078)
-------------------------
422,624 438,848
Less: By-product credits (372,514) (277,260)
-------------------------
Cash cost net of by-products C$50,110 C$161,589
Exchange rate (C$/US$) 1.30 1.40
-------------------------
Cash cost net of by-products US$38,546 US$115,419
Zinc sales 245,347 261,444
Cash cost per pound of zinc,
net of by-product credits US$0.16 US$0.44
-------------------------
-------------------------
(1) Excluding asset impairment.
(2) By-product credits include the Company's proportionate share of
by-product sales by CMM (2004: $21.6 million, 2003: $19.6 million)
and the premium on zinc oxide sales (2004: $17.8 million, 2003:
$10.24 million).
/T/
Cash cost per pound of zinc, net of by-product credits is furnished to
provide additional information and is a non-GAAP measure. This measure
should not be considered in isolation as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles and is not necessarily indicative of operating expenses as
determined under generally accepted accounting principles. This measure
is intended to provide investors with information about the cash
generating capabilities of HBMS's operations. HBMS uses this information
for the same purpose. Mining operations are capital intensive. This
measure excludes capital expenditures. Capital expenditures are
discussed throughout the MD&A and the consolidated financial statements.
Revenue
HBMS earned revenues of approximately $527.4 million for the year ended
December 31, 2004 from sales of approximately 73,900 tonnes of copper,
111,300 tonnes of zinc (including sales to Zochem), 38,700 tonnes of
zinc oxide, 75,600 ounces of gold, and 1,055,000 ounces of silver. For
the year, realized metal prices averaged US$1.35/lb copper, US$0.49/lb
zinc, US$387/troy oz gold, and US$6.66/troy oz silver. The Canadian to
US dollar exchange rate averaged 1.30 for the year.
Compared to 2003, total sales revenue in 2004 increased by 26%, largely
related to improved realized metal prices for copper and zinc, in US$,
which improved by approximately 57% and 26% respectively over 2003.
Average realized gold and silver prices also improved by 14% and 38%
respectively. The impact of improved metal prices was partly offset as
the Canadian to US exchange rate strengthened from an average of 1.40 in
2003 to 1.30 in 2004.
Copper and zinc sales quantities in 2004 were approximately 92% and 94%,
respectively, compared to sales quantities in 2003 reflecting the
metallurgical treatment of greater quantities of concentrates from HBMS
owned mines and a planned maintenance summer shutdown of the copper
smelter.
Operating Earnings
Operating earnings for the year ended December 31, 2004 was
approximately $48.1 million. Compared to 2003, operating earnings in
2004 increased by $411 million, of which $269 million relates to an
asset impairment charge in 2003.
HBMS mined a total of 2.55 million tonnes of ore in 2004 and tonnage
mined increased at all mines compared to 2003, with the largest increase
at the new 777 Mine which reached commercial production as of January 1,
2004. In total, tonnage mined was up by 15% in 2004 and both copper and
zinc grade improved by 16% and 4% respectively compared to 2003.
During 2004, the Copper Smelter processed a total of 284,100 tonnes of
copper concentrates, producing 76,900 tonnes of copper metal. For the
same period, the Zinc Plant processed a total of 223,000 tonnes of zinc
concentrates, producing 110,200 tonnes of zinc metal. In addition to the
concentrates produced from HBMS owned mines, the Flin Flon metallurgical
plants processed some 98,700 tonnes of copper concentrate and 3,500
tonnes of zinc concentrate purchased from third parties.
Improved production from our mines in 2004 reduced our requirement for
purchased concentrate, and, as a result, processing of copper and zinc
concentrate purchased from third parties decreased by some 10,100 and
42,800 tonnes respectively compared to 2003. Production of copper metal
in 2004 was approximately 92% of 2003 largely from processing greater
volumes of concentrate from HBMS mines and a planned summer maintenance
shut down. Cast zinc metal production in 2004 was approximately 94%
compared to 2003 primarily due to a drawdown of cathode inventory in
2003 which boosted cast metal by some 3,400 tonnes, and by the deferral
of the bi-annual maintenance shutdown from 2003 into 2004.
Depreciation and amortization totalled $52.1 million in 2004 compared to
$70.7 million in 2003, with the decrease relating primarily to the
impairment charge taken at the end of 2003.
Net Earnings
Net earnings for the year ended December 31, 2004 was approximately
$50.1 million compared to a loss of $330.1 million for 2003. Excluding
the impact of the asset impairment in 2003, net earnings for 2004
increased by $111.3 million over 2003. The increase is comprised of
$141.8 million in operating profit net of $30.5 million additional
expense, which is essentially the absence of a foreign exchange gain
that was realized in 2003.
Cash Flow from Operations
Cash flow from operations in 2004 increased by approximately $97.5
million compared to 2003, primarily as a result of improved metal prices
and the commencement of commercial production at the 777 Mine.
Investing Activities
HBMS capital expenditure for 2004 totalled $69.5 million, with $15.7
million of the total required to complete the 777 group of projects,
$40.7 million for mine development, and the balance required for various
stay-in-business projects. This represents a decrease of 41% compared to
2003, which included $65.5 million for the 777 projects, $28.4 million
mine development, and the balance for stay-in-business.
In December 2004, $13 million was placed in trust for the governments of
Manitoba and Saskatchewan as financial assurance for our asset
retirement obligations. The requirement to maintain this trust value
will be determined from the outcome of a study to be completed during
2005.
Financing Activities
In 2004, HBMS entered into capital leasing (sales and leaseback)
arrangements that contributed $14.4 million to financing cash flow. On
December 21, 2004, HBMS issued US $175 million Senior Secured Notes
bearing interest at 9.625% per annum with interest payable semi-annually
in arrears on January 15 and July 15 of each year, commencing on July
15, 2005. The Notes will mature on January 15, 2012.
As of March 24, 2005, HudBay agreed to guarantee HBMS' Notes. The HudBay
guarantee is unsecured and ranks subordinate in right of payment to all
senior indebtedness of HudBay. The guarantee will terminate on the date
upon which HudBay owns less than a majority of the voting shares of HBMS.
The net inflow from financing activities is the net result of the above,
offset by amounts advanced to HudBay in connection with the acquisition.
A conference call will be held on Friday, April 1, 2005 at 10:00 a.m.
(Toronto time) to discuss these results. You may join the call by
dialing 416-640-4127 or toll free 1-800-814-4890. The conference call
will be recorded and you can listen to a playback of the call after the
event by dialing 416-640-1917 or toll free 1-877-289-8525 and entering
the passcode 21119163#, at any time until midnight on Thursday, April 7,
2005. A webcast will be available at www.hudbayminerals.com.
HudBay Minerals Inc. is an integrated mining and metal producing company
that operates mines and concentrators in northern Manitoba and
Saskatchewan and a metal processing complex in Flin Flon, Manitoba. The
company also operates a zinc oxide production facility in Brampton,
Ontario and the former producing mines of Balmat in New York State and
Gays River in Nova Scotia that are being evaluated for re-opening.
Safe Harbour Statement under the United States Private Securities
Litigation Reform Act of 1995: Except for the statements of historical
fact contained herein, the information presented constitutes
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
based upon the opinions and estimates of management at the date the
statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the forward-looking
statements. These factors include the inherent risks involved in the
operation, development and exploration of mines and mineral projects,
future prices of zinc and copper, future foreign currency exchange rates
and the impact of environmental and other governmental regulation, as
well as those factors discussed in the section entitled "Risk Factors"
in the Company's annual information form for the year ended December 31,
2004 that is available at www.sedar.com. There may be additional factors
that could cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to
be accurate as actual results and future events could differ materially
from those anticipated in such statements. Accordingly, readers should
not place undue reliance on forward-looking statements.
/T/
Hudson Bay Mining and Smelting Co., Limited
Full Year Results
2004 2003
-----------------------
Mines:
Trout Lake: tonnes 916,097 872,654
Copper % 1.46 1.17
Zinc % 5.32 4.82
Gold g/tonne 1.47 1.78
Silver g/tonne 13.58 20.40
Konuto: tonnes 327,231 321,473
Copper % 4.07 3.73
Zinc % 2.08 1.82
Gold g/tonne 1.92 1.99
Silver g/tonne 9.60 9.50
7 7 7: tonnes 975,895 709,172
Copper % 2.89 2.80
Zinc % 4.50 3.96
Gold g/tonne 2.26 1.92
Silver g/tonne 23.14 21.81
Chisel North: tonnes 327,853 303,169
Copper % 0.16 0.20
Zinc % 9.99 11.32
Gold g/tonne 0.48 0.62
Silver g/tonne 25.47 20.26
Total Mines tonnes 2,547,076 2,206,468
Copper % 2.18 1.93
Zinc % 5.19 5.00
Gold g/tonne 1.71 1.70
Silver g/tonne 18.26 19.24
Concentrators:
Flin Flon Concentrator tonnes 2,156,051 1,902,743
Copper % 2.46 2.22
Zinc % 4.50 3.99
Gold g/tonne 1.89 1.89
Silver g/tonne 17.31 19.03
Copper Concentrate Produced tonnes 208,961 166,346
Grade % Cu 23.60 23.20
Zinc Concentrate Produced tonnes 152,453 121,160
Grade % Zn 50.42 49.60
Copper recovery to Cu conc % 93.0 91.5
Gold recovery to Cu conc % 69.7 46.7
Silver recovery to Cu conc % 68.1 47.9
Zinc recovery to Zn conc % 79.2 79.1
Snow Lake Concentrator tonnes 327,853 304,016
Copper % 0.16 0.20
Zinc % 9.99 11.32
Gold g/tonne 0.48 0.62
Silver g/tonne 25.47 20.26
Zinc Concentrate Produced tonnes 61,825 65,103
Grade % Zn 51.52 51.41
Zinc recovery to Zn conc % 97.3 97.3
Smelter:
Copper Conc Treated:
HBMS Mines tonnes 185,352 164,288
Purchased tonnes 98,748 108,762
-----------------------
Total tonnes 284,100 273,049
Zinc Plant:
Zinc Conc Treated:
HBMS Mines tonnes 219,561 182,190
Purchased tonnes 3,488 46,286
-----------------------
Total tonnes 223,049 228,476
Metal Produced:
From HBMS Mines:
Copper tonnes 43,653 42,055
Zinc tonnes 108,403 93,055
Gold oz 77,612 56,999
Silver oz 696,454 630,303
From Purchased Concentrates:
Copper tonnes 33,241 41,300
Zinc tonnes 1,815 24,790
Gold oz 1,408 3,624
Silver oz 418,115 460,482
Total Metal Produced:
Copper tonnes 76,894 83,355
Zinc tonnes 110,218 117,845
Gold oz 79,020 60,623
Silver oz 1,114,569 1,090,785
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
HudBay Minerals Inc.
Tom Goodman
Vice-President, Human Resources and Technical Services
(204) 687-2380
Email: tom.goodman@hbms.ca