-- Revenue Exceeds $1 Billion for First Time in Company's History --
Q4 2006 Financial Highlights
- Earnings increase 277% to $165.8 million
- Basic earnings per share grows 154% to $1.32
- Operating cash flow before non-cash working capital changes, climbed to $148.5 million
- Revenue increases 81% to $313.1 million
- Cash (less debt) $362.6 million at December 31, 2006
- Cash cost per pound of zinc sold, net of by-product credits "negative" US$0.21
2006 Financial Highlights
- Earnings increase 562% to $564.0 million
- Basic earnings per share grows 412% to $5.32
- Operating cash flow before non-cash working capital changes, climbed to $490.8 million
- Revenue increases 73.2% to $1.129 billion
- Cash cost per pound of zinc sold, net of by-product credits "negative" US$0.43
Corporate Highlights
- Tender offer to purchase remaining senior secured notes – 94% successful
- $37 million 2007 exploration program launched to drive future organic growth
- $8.5 million Bur deposit expenditure launched for feasibility study
- Annual 2006 production in line with guidance
- Option on Jason mineral property exercised
- January 1, 2007 Reserves and Resources replaces 2006 production
Winnipeg, Manitoba – March 8, 2007 - HudBay Minerals Inc.
(TSX:HBM) (HudBay or the Company) today announced a 277% increase in
earnings to $165.8 million or $1.32 per share on revenue of $313.1
million for the quarter ended December 31, 2006 (Q4 2006). This
compares with earnings of $43.9 million on revenue of $173.1 million
during the fourth quarter of 2005 (Q4 2005). Operating cash flow,
before non-cash working capital changes, for Q4 2006 increased by 359%
to $148.5 million compared to Q4 2005.
"The fourth quarter and 2006 have been remarkable for our Company," said
Peter Jones, President & CEO. "In an environment of record high
metal prices, we have delivered production results that are in-line with
our guidance, and translate into financial performance that is
unprecedented in our history. Our financial condition allows HudBay to
consider ongoing organic growth as well as merger and acquisition
opportunities."
The bracketed values that follow denote the comparative figures
for the respective periods in 2005.
Q4 2006 Financial Results
Total revenue for Q4 2006 was $313.1 million ($173.1 million) from sales
of 29,047 tonnes of zinc, including sales of 6,834 tonnes to our Zochem
division, for production of zinc oxide (29,598 tonnes), 19,901 tonnes
of cathode copper (17,644 tonnes), 22,112 ounces of gold (21,783
ounces), and 295,545 ounces of silver (358,434 ounces).
Realized metal prices in Q4 2006 averaged US$1.93/lb for zinc
(US$0.51/lb); US$3.16/lb for copper (US$2.04/lb); US$603/oz. for gold
(US$496/oz); US$11.59/oz. for silver (US$8.51/oz). The Canadian to US
dollar exchange rate averaged $1.14 per US$1.00.
Operating costs for Q4 2006 were $163.7 million, an increase of
approximately 34% compared with the same period in 2005. The increase
is due primarily to an increase in concentrate purchase costs, higher
employee profit sharing expenses and generally higher costs associated
with production. HudBay's cash cost per pound of zinc sold, net of
by-product credits was negative US$0.21 (positive US$0.23). A
reconciliation of this non-GAAP measure is provided in the Company's
2006 MD&A.
Full Year 2006 Financial Results
For 2006 earnings increased by 562% to $564 million equating to basic
earnings per share of $5.32 which is up 412% from a year earlier. In
addition, operating cash flow, before non-cash working capital changes
for the year increased 298% to $490.8 million compared to $123.2 million
for the same period in 2005.
Total revenue for 2006 was $1,129 million ($652.0 million) from sales of
114,646 tonnes of zinc, (114,682 tonnes) including sales of 32,468
tonnes to our Zochem division, for production of zinc oxide, 79,395
tonnes of cathode copper (78,070 tonnes), 82,921 ounces of gold (95,511
ounces), and 1,195,142 ounces of silver (1,321,784 ounces).
Realized metal prices in 2006 averaged US$1.53/lb for zinc (US$0.65/lb);
US$3.15/lb for copper (US$1.72/lb); US$603/oz. for gold (US$445/oz);
US$11.13/oz. for silver (US$7.28/oz). The Canadian to US dollar
exchange rate averaged $1.13 per US$1.00.
Operating costs for 2006 were $598.1 million, an increase of
approximately 25% compared with the same period in 2005. The increase
is due primarily to an increase in concentrate purchase costs, higher
employee profit sharing expenses, and generally higher costs associated
with production. HudBay's cash cost per pound of zinc sold, net of
by-product credits was negative US$0.43 (positive US$0.16). A
reconciliation of this non-GAAP measure is provided in the Company's
2006 MD&A.
Future Income and Mining Tax Assets
As a result of earnings over the last three years, in the fourth quarter
of 2006, the Company fully recognized the future tax asset with the
exception of timing differences for long-term obligations that relate
primarily to closure. In 2007, as the Company utilizes the remaining tax
pools, the benefit of which is shown as a future tax asset on the
balance sheet, the value of this asset is expected to draw down and
reflected as a non-cash income tax expense on the Company's income
statement.
In the fourth quarter of 2006, the Company also recognized a mining tax
asset based on three future years of its earnings. Three years are
considered appropriate due to the uncertainties of future longer-term
metal prices, exchange rates, the magnitude of prior losses, net
operating earnings from non-Manitoba sources and the restricted rate of
deductions for mining tax purposes. Factors to recognize a mining tax
asset will continue to be reviewed as circumstances change. Similar to
the above, the mining tax asset is expected to be drawn down during 2007
and that reduction will be reflected as a non-cash income tax expense.
For the year, the Company recorded a net benefit of taxes of $121.5
million, primarily related to the further increase in the income tax
asset of $118.7 million, a recognition of a $28.1 million mining tax
asset, and a benefit from the renunciation of $3.6 million flow-through
shares, offset by a current mining tax expense of $28.9 million. In
2006, the mining tax pools sheltered approximately $51 million of mining
tax, and the corporate income tax pools, after giving consideration to
the deduction for additional mining taxes, sheltered approximately $167
million of income tax.
Corporate Highlights
Debt Repayment
In December 2006, HudBay successfully completed a tender offer for the
majority of its outstanding 9 5/8% Senior Secured Notes due 2012 ("the
Notes") of which approximately 94% were tendered to the offer. In
February 2007, the Company defeased the remaining outstanding notes.
The covenant defeasance involved the irrevocable deposit in trust by
HBMS with The Bank of New York, as trustee, of approximately U.S. $3.3
million of U.S. government securities, such amount being sufficient to
pay the principal of, and interest and premium on, the outstanding Notes
to the redemption date of January 15, 2009. Pursuant to the terms of
the indenture governing the Notes, the collateral securing the Notes
will be released.
2007 Exploration Program
In December 2006, HudBay announced the launch of its 2007 exploration
program with a budget of $45.2 million including advanced exploration on
the Bur deposit, making it one of the largest exploration programs in
Canada. The main focus of the program is the prolific Flin Flon
greenstone belt that surrounds HudBay's Manitoba and Saskatchewan
operations. Here the Company holds approximately 380,000 hectares and
targets include electromagnetic anomalies, known mineral deposits and
drilling of structural re-interpretations of previously mined orebodies.
Outside the Flin Flon Greenstone Belt, exploration will aim to expand
mineral reserves within the Balmat mine and to discover new ore bodies
in the Balmat district where HudBay holds approximately 20,000 hectares.
Exploration is also planned in the Yukon and in SW Ontario. Also
included in the $45.2 million expenditure will be further exploration in
the Company's four operating mines to continue to grow those orebodies.
Bur Deposit
In the fourth quarter, HudBay announced an investment of $8.5 million to
advance its Bur deposit, near the Company's Snow Lake concentrator. The
completion of the Bur project underground decline, 10,000 tonne ore
sample and feasibility study is expected late in 2007. Based on
exploration updates from March 20, 2006 and September 27, 2006, and
assuming a positive feasibility study and production decision, the Bur
deposit is targeted to provide incremental feed to HudBay's Snow Lake
concentrator and the Flin Flon metallurgical plants for up to three
years, producing an additional annual refined metal production of
approximately 6,000 tonnes of copper, 20,000 tonnes of zinc, 2,000 oz.
of gold and 45,000 oz. of silver.
Jason Property
In the first quarter of 2007, HudBay exercised its option to acquire
100% of the Jason lead/zinc mineral property (Jason Property) in the
Yukon Territory from MacPass Resources Limited (MacPass). Under the
terms of the option agreement entered into in 2006, HudBay made an
initial payment of C$100,000 to MacPass with the balance of $0.9 million
payable on exercise of the option to purchase during a six month due
diligence period.
The Jason Property is located close to the Yukon-Northwest Territories
border, approximately 400 km east of Whitehorse and is on the North
Canol Road. The Jason Property is close to HudBay's 100% owned Tom
Valley lead/zinc mineral property and the properties share a common
airstrip. Both properties are at an advanced exploration stage and the
Company anticipates completing the requirements of National Instrument
43-101 ("NI 43-101") and reporting the mineral resources of the two
properties in the coming months.
Mineral Reserves and Resources
On January 31, 2007 HudBay announced its January 1, 2007 mineral
reserves and mineral resources estimated in accordance with NI 43-101.
Mineral reserves aggregate 22,785,000 tonnes. Separately, inferred
mineral resources aggregate 3,244,000 tonnes. Both our mineral reserves
and inferred mineral resources are contained in operating mines and
have historically grown substantially as they are mined. This trend
continued again with January 1, 2007 reserves and resources replacing
the Company's 2006 production.
Select Financial and Operating Information
The following table sets out a summary of selected information for the
Company as at and for the three-month periods ended December 31, 2006
and 2005, as well as for the year ended December 31, 2006, and 2005.
- Cash flow from operations of $423,926 excluding $66,871 of
changes in non-cash working capital. Operating cash flow per common
share is considered a non-GAAP measure.
- Non-GAAP reconciliation of cash cost per pound of zinc sold,
net of by-product credits is available in the Company's 2006 MD&A.
- Production includes Balmat metal in concentrate and sales
include Balmat payable metal in concentrate shipped (including to HBMS)
for which proceeds are credited to capital as pre-commercial production
revenues, and therefore not included in metals sold for financial
reporting purposes.
- Excludes inventory changes prior to the contractual change with CMM.
- Cash and cash equivalents of $385,864 less current and long
term portion of senior secured notes, Province of Manitoba loan and
capital leases ($3,379, $10,835, and $9,011 respectively).
For
further information, please see attached hereto, HudBay's 2006
financial statements together with Management's Discussion and Analysis
of Operations and Financial Condition for the year ended December
31,2006. A copy of HudBay's 2006 financial statements as well as its
MD&A are available under the profile of HudBay on SEDAR at
www.sedar.com and on the HudBay website at
www.hudbayminerals.com.
About HudBay Minerals Inc.
HudBay Minerals Inc. is an integrated mining company operating mines,
concentrators and a metal production facility in northern Manitoba and
Saskatchewan. HudBay also owns a zinc oxide production facility in
Ontario, the White Pine copper refinery in Michigan and the Balmat zinc
mine operations in New York state. HudBay is a member of the S&P/TSX
Composite Index.
Forward Looking Information
This news release contains "forward-looking information", within the
meaning of applicable Canadian securities legislation. Forward-looking
information includes, but is not limited to, statements with respect to
HudBay's future income and mining tax assets, exploration program, plans
with respect to the Bur deposit and the Jason property. Generally,
forward-looking information can be identified by the use of
forward-looking terminology such as "plans", "seeks", "expects",
"budget" or variations of such words or state that certain actions,
events or results "may", "could", "will", "will be", "would be" or "is
expected to be". Forward-looking information is subject to known and
unknown risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of HudBay to be
materially different from those expressed or implied by such
forward-looking information, including risks associated with the mining
industry such as economic factors, government regulation and approvals,
environmental risks, success of exploration activities, future commodity
prices, capital expenditures, risks related to acquisitions, changes in
tax policy, requirements for additional capital, changes in project
parameters as plans continue to be refined, conclusions of economic
evaluations as well as those factors discussed in the section entitled
"Risk Factors" in HudBay's Annual Information Form for the year ended
December 31, 2005, available on www.sedar.com. Although HudBay has
attempted to identify important factors that could cause actual results
to differ materially from those contained in forward-looking
information, there may be other factors that 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
information. Accordingly, readers should not place undue reliance on
forward-looking information. HudBay does not undertake to update any
forward-looking information, except in accordance with applicable
securities laws.
To view the Management's Discussion and Analysis, please click the following link: http://www.ccnmatthews.com/docs/hbmmda7.pdf
To view the Financial Statements, please click the following link: http://www.ccnmatthews.com/docs/hbmifs.pdf
