Record-setting Quarterly Revenue Performance Contributes to Strong Cash flow Generation
- Revenue increases 68% to $349.1 million
- Operating cash flow(1) nearly doubles to $142.5 million
- Cash of $517.8 million at March 31, 2007
- Earnings before tax increases 91% to $117.5 million
- Significant tax pools continue to shelter cash income taxes
- Net earnings of $63.1 million versus $76.0 million in Q1 2006
- 2007 $45.2 million exploration program well underway
- Overall production on plan for quarter; Balmat achieves commercial production Jan. 1, 2007
- Balmat operations certified to ISO 14001:2004 and OHSAS 18001:1999
- Cash cost per pound of zinc sold, net of by-product credits "negative" US$0.33
WINNIPEG, MANITOBA, May 9, 2007 (CCNMatthews via COMTEX News Network)
-- HudBay Minerals Inc. (TSX:HBM) (HudBay or the Company) today
announced a 68% increase in revenue to $349.1 million, compared to the
first quarter of 2006 (Q1 2006), contributing to earnings of $63.1
million or $0.50 per share while operating cash flow increased by 83% to
$142.5 million, for the quarter ended March 31, 2007 (Q1 2007).
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
Three months ended March 31
($000's except per share amounts) --------------------------------
2007 2006
---------------------------------------------------------------------------
Revenue 349,142 207,963
---------------------------------------------------------------------------
Earnings before tax 117,515 61,643
---------------------------------------------------------------------------
Net Earnings 63,076 75,986
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Basic EPS(2) 0.50 0.89
---------------------------------------------------------------------------
EBITDA(3) 144,770 77,727
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Operating cash flow before changes
in working capital 142,500 77,973
---------------------------------------------------------------------------
Cash and cash equivalents 517,772 127,364
---------------------------------------------------------------------------
Total assets(4) 1,391,841 1,318,515
---------------------------------------------------------------------------
(1) Operating cash flow excluding changes in non-cash working capital.
(2) Earnings per share
(3) Earnings before interest, taxes, depreciation and amortization,
loss/gain on derivative instruments, interest and other income and
other.
(4) 2007 at March 31st ; 2006 at December 31st.
The bracketed values that follow denote the comparative figures for Q1 2006.
Results
for Q1 were firmly in line with our expectations, said Peter Jones,
President & CEO. Production was on plan and higher metal prices and
solid sales grew revenue by 68% and operating cash flow by 83% to
$142.5 million, compared to Q1 last year.
OPERATING HIGHLIGHTS
---------------------------------------------------------------------------
($000's except per share amounts) Three months ended March 31
---------------------------------------------------------------------------
Production 2007 2006
---------------------------------------------------------------------------
Zinc(5) tonnes 31,408 29,906
---------------------------------------------------------------------------
Copper tonnes 21,724 23,686
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Gold troy oz. 24,213 26,511
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Silver troy oz. 352,447 390,230
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Metal Sold(6)
---------------------------------------------------------------------------
Zinc, including sales to Zochem(7) tonnes 31,857 30,172
---------------------------------------------------------------------------
Copper tonnes 24,662 18,932
---------------------------------------------------------------------------
Gold troy oz. 29,716 14,846
---------------------------------------------------------------------------
Sliver troy oz. 383,919 232,456
---------------------------------------------------------------------------
Q1 2007 Financial and Operating Results
Earnings
Earnings
before tax in Q1 2007 increased strongly by 91% to $117.5 million
compared with $61.6 million in Q1 2006. The Company continues to benefit
from its significant tax pools and effectively no cash income taxes
were paid in Q1 2007. The benefit of these losses is expected to
continue for the balance of 2007, resulting in minimal cash income taxes
for 2007. The Company does expect to pay Manitoba mining taxes in 2007.
Net earnings were $63.1 million for the quarter, or $0.50 per
share, compared to $76.0 million for the same quarter in 2006, or $0.89
per share. Lower year-over-year net earnings is primarily attributable
to the draw-down of the tax asset resulting in a non-cash tax expense of
$41.9 million this quarter compared to a non-cash tax benefit of $15
million in the first quarter of 2006.
Adding back non-cash tax
expense to net earnings recognizes the significant value of HudBay's tax
pools. On this basis, net earnings were $105 million ($0.83 per share)
compared with $61 million ($0.71 per share) in Q1 2006, which represents
strong year over year growth of 72%.
Revenue
Total
revenue for Q1 2007 was $349.1 million ($208.0 million) from sales of
31,857 tonnes of zinc (30,172 tonnes), including sales of 6,505 tonnes
(8,771 tonnes) to the Company's Zochem division for zinc oxide and 3,949
tonnes of zinc metal sales contained in concentrate from the Company's
Balmat mine, 24,662 tonnes of copper (18,932 tonnes), 29,716 ounces of
gold (14,846 ounces), and 383,919 ounces of silver (232,456 ounces).
(5)
Production includes Balmat metal in concentrate and sales include
Balmat payable metal in concentrate shipped (including to HBMS).
(6) Excludes inventory changes prior to the contractual change with HudBay's joint venture company Considar Metal Marketing.
Through
the first quarter, the Company continued to receive attractive price
premiums for its finished metals that were above LME averages.
---------------------------------------------------------------------------
HudBay Realized Prices
Average Three Months
Three Ended Year Ended
Realized Metal Prices Month Mar 31, Mar 31, Dec 31,
& Exchange Rate Prices(7) 2007 2006 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Zinc US$/lb. 1.57 1.65 1.08 1.53
Copper US$/lb. 2.69 2.81 2.33 3.15
Gold US$/troy oz. 650 651 532 603
Silver US$/troy oz. 13.31 13.44 9.29 11.13
C$/US$
exchange rate 1.17 1.17 1.15 1.13
---------------------------------------------------------------------------
Operating Expenses
Operating costs for Q1 2007 were $184.5
million compared with $121.8 million during the same period in 2006. The
increase reflects a number of factors including higher metal sales
volumes and the costs of Balmat being included effective January 1, 2007
coincident with the achievement of commercial production. In addition,
generally higher costs associated with production, higher employee
profit sharing expenses and increased concentrate purchase costs all
contributed to the increase. HudBay's cash cost per pound of zinc sold,
net of by-product credits was negative US$0.33 (positive US$0.05). A
reconciliation of this non-GAAP measure is provided in the Company's Q1
2007 MD&A. Depreciation and amortization also increased in Q1 2007
to $21.9 million compared with $15.5 million in Q1 2006. This increase
reflects the inclusion of Balmat beginning Q1 2007 and increased
depreciation and amortization expense at the Trout Lake mine.
Tax Expense
Tax
expense in the first quarter of 2007 was $54.4 million compared with a
net tax benefit of $14.3 million in Q1 2006. The Q1 2007 tax expense is
comprised of $38.6 million of income tax expense and $15.8 of mining tax
expense. Importantly, the income tax portion is a non-cash expense due
to the draw down of the Company's tax asset, which was established in
2006 and is associated with past losses.
(7) LME average for zinc, copper and gold prices, London Spot US equivalent for silver prices.
OUTLOOK
Exploration & Increased Land Position
In
2007, we've targeted $45.2 million for exploration, including $8.5
million on the Bur deposit, which is a significant increase from 2006.
During the first quarter, approximately $7.7 million excluding
capitalized expenses, was spent on exploration activities, compared to
the $3.1 million spent in the first quarter of 2006.
Exploration
work increased in the Snow Lake and Flin Flon area during the quarter.
Land holdings at all locations continued to increase and now total
419,605 hectares, including 379,401 hectares in the Flin Flon Greenstone
Belt.
The results of a new exploration discovery at Lalor Lake,
close to our Chisel North mine property and our Snow Lake concentrator,
were announced in early March 2007. Drill hole DUB 168 intersected
massive sulfide mineralization that assayed 0.19% Cu and 17.26% Zn over a
core length of 16.45 metres. The intersection is encouraging, and the
mineralization is similar to that at the nearby Chisel North mine.
HudBay's
$8.5 million Bur deposit project continues to advance. The Company is
in the process of completing an underground decline, 10,000 tonne ore
sample and feasibility study. The Bur deposit is only 22 kilometers from
HudBay's Snow Lake concentrator and can be easily accessed. A
production decision continues to be anticipated for late 2007.
A
portion of our $45.2 million 2007 exploration program, is allocated to
exploration drilling in our operating mines to potentially increase our
ore reserves and extend the life of our existing mines.
Production
Production for the year is expected to be on target with earlier guidelines.
Costs
Operating
costs in 2007 are generally expected to be similar to 2006, with the
exception of the Balmat and Trout Lake mines. As Balmat commenced
commercial production on January 1, 2007, the Company will incur
additional operating costs, which will be at a higher unit cost during
the production ramp up. We also expect higher unit costs for the Trout
Lake mine because a greater proportion of its 2007 production will be
from the pillar extraction project. Other cost increases are expected
from inflation on consumables and labour.
Capital Spending
The
estimated capital spending for 2007 increased by $9.0 million due
largely to the requirement for increased ventilation at the Balmat mine
of $3.5 million, $4.5 million for an additional plant to increase the
water treatment capacity of Chisel North mine and an increase of
approximately $2.7 million associated with the expansion of the
cellhouse, and installation of a solution control facility at White Pine
Copper Refinery.
CORPORATE HIGHLIGHTS
2007 Aggressive Exploration Program Underway
HudBay's
$45.2 million 2007 exploration program is well underway. The program
is targeting approximately $34 million for exploration in the prolific
Flin Flon Greenstone Belt including $8.5 million for advanced
exploration at the Bur deposit. During the quarter, exploration work
increased with $7.7 million expended versus $3.1 million in 2006. Land
holdings also continued to increase and now total 419,605 hectares
including 379,401 in the Flin Flon Greenstone Belt.
In March
2007, HudBay announced results from its first Lalor Lake surface drill
hole located 2.4 km from its Chisel North mine site and 15 km from its
Snow Lake concentrator. Drill hole DIB 168 intersected massive sulphide
mineralization that assayed 0.19% Cu and 17.26% Zn over a core length
of 16.45 meters. The intersection is encouraging and the mineralization
is similar to that at the nearby Chisel North mine.
Bur Deposit Progressing on Plan
HudBay's
$8.5 million Bur Deposit project continues to advance. The Company is
in the process of completing an underground decline, 10,000 tonne ore
sample and feasibility study. During the quarter, a price protection
program on the deposit was implemented and is approximately 80%
complete. As previously disclosed, the program ensures the economic
viability of the deposit above long-term prices. The program consists of
45,900 tonnes of zinc swaps with an average price of US$1.32/lb. and
14,400 tonnes of copper swaps at an average price of US$2.44/lb.,
protecting approximately 80% of the Bur expected production between 2008
and 2010. The Bur deposit is only 22 kilometers from HudBay's Snow Lake
concentrator and can be easily accessed. A production decision
continues to be anticipated for late 2007.
Rockcliff Option Agreements
In
March 2007, HudBay's wholly-owned subsidiary, Hudson Bay Exploration
and Development Company Limited (HBED), entered into agreements with
Rockcliff Resources Inc. (Rockcliff) respecting seven properties
covering approximately 15,800 hectares in the Snow Lake area of
Manitoba. The agreements build on HudBay's own $45.2 million exploration
program for 2007 and further leverage the Company's exploration
opportunities in the prolific Flin Flon Greenstone Belt. HudBay has
previously entered into several other option agreements to increase
exploration spending in the Flin Flon Greenstone Belt.
A Focus on Safety and the Environment
Lost
time accident frequency for the first quarter of 2007 of 1.3 is
unchanged from the same quarter in 2006. There were no significant
environmental non-compliances during the quarter.
Covenant Defeasance of Outstanding 9 5/8% Senior Secured Notes
On
February 21, 2007, HBMS completed the covenant defeasance of HBMS
outstanding 9 5/8% Senior Secured Notes due 2012 (the "Notes"). The
covenant defeasance involved the irrevocable deposit in trust by HBMS
with The Bank of New York, as trustee, of approximately US$3.3 million
of U.S. government securities, such amount being sufficient to pay the
principal of US$2.9 million, 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
was released.
Balmat Operation Receives Certification
In March 2007, HudBay's wholly owned subsidiary, St. Lawrence Zinc
Company, LLC (the "Balmat operations") was certified to ISO 14001:2004
and OHSAS 18001:1999 - internationally recognized standards and
specifications relating to environmental and health & safety
management systems. HudBay requires all of its operations to be
certified to these important environmental and safety standards. The
White Pine Copper Refinery, acquired by HudBay on January 1, 2006 is
expected to be certified later in 2007, which will make HudBay certified
at all of its operational facilities.
For further information,
please see attached hereto selected financial information for the
quarters ended March 31, 2007 and 2006. Please also see HudBay's
financial statements together with Management's Discussion and Analysis
of Operations and Financial Condition for the quarter ended March 31,
2007. A copy of HudBay's financial statements for the quarters ended
March 31, 2007 and March 31, 2006 as well as its MD&A for the
quarter ended March 31, 2007 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
exploration program and plans with respect to the Bur deposit.
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, 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, 2006, 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.
(HBM-F)
To view the Management's Discussion and Analysis, please click the following link:
http://www.ccnmatthews.com/docs/hbmmdaQ107.pdf
To view the Financial Statements, please click the following link:
http://www.ccnmatthews.com/docs/hbmifsQ107.pdf
HudBay Minerals Inc.
Consolidated Statements of Earnings
Unaudited
(In thousands of Canadian dollars, except share and per share amounts)
Three months ended
March 31
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
Revenue (note 14) $ 349,142 $ 207,963
---------------------------------------------------------------------------
Expenses:
Operating 184,508 121,782
Depreciation and amortization 21,874 15,542
General and administrative 4,573 3,677
Stock-based compensation (note 10e) 4,709 2,251
Accretion of asset retirement obligation 789 660
Foreign exchange loss (gain) 2,044 (1,268)
---------------------------------------------------------------------------
218,497 142,644
---------------------------------------------------------------------------
Operating earnings 130,645 65,319
(Loss) gain on derivative instruments (10,979) 4,331
Interest and other income 5,962 1,172
Interest expense (399) (4,754)
Exploration (7,749) (3,134)
Other 35 (1,291)
---------------------------------------------------------------------------
Earnings before income tax 117,515 61,643
Tax expense (benefit) (note 9) 54,439 (14,343)
---------------------------------------------------------------------------
Net earnings for the period $ 63,076 $ 75,986
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Earnings per share:
Basic $ 0.50 $ 0.89
Diluted $ 0.49 $ 0.70
Weighted average number of common shares
outstanding (note 10f)
Basic 126,138,341 85,392,988
Diluted 128,232,455 108,179,593
See accompanying notes to interim consolidated financial statements.
HudBay Minerals Inc.
Consolidated Statements of Retained Earnings
Unaudited
(In thousands of Canadian dollars)
Three months ended
March 31
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
Retained earnings, beginning of period $ 642,723 $ 78,732
Net earnings for the period 63,076 75,986
Transition adjustment financial instruments (1,005) -
---------------------------------------------------------------------------
Retained earnings, end of period $ 704,794 $ 154,718
---------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
Unaudited
(In thousands of Canadian dollars)
Three months ended
March 31
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
Net earnings for the period $ 63,076 $ 75,986
Other comprehensive income (loss),
net of tax (note 11) (4,942) -
---------------------------------------------------------------------------
Comprehensive income for the end period $ 58,134 $ 75,986
---------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements.
HudBay Minerals Inc.
Consolidated Balance Sheets
Unaudited
(in thousands of Canadian dollars)
March 31, 2007 December 31, 2006
---------------------------------------------------------------------------
Assets:
Current assets:
Cash and cash equivalents $ 517,772 $ 385,864
Accounts receivable 101,436 132,275
Inventories 174,460 163,842
Prepaid expenses 6,463 7,288
Current portion of fair value of
derivatives (note 12) 6,127 2,579
Future income and mining tax assets 118,393 154,063
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924,651 845,911
Property, plant and equipment (note 4) 445,293 444,044
Other assets (note 5) 21,897 28,560
---------------------------------------------------------------------------
$1,391,841 $1,318,515
---------------------------------------------------------------------------
Liabilities and Shareholders Equity:
Current liabilities:
Accounts payable and accrued liabilities $ 151,170 $ 139,922
Taxes payable 10,896 30,217
Current portion of other liabilities (note 6) 34,100 28,087
---------------------------------------------------------------------------
196,166 198,226
Long-term debt (note 7) 10,638 10,214
Pension obligations 41,741 41,675
Other employee future benefits 66,391 65,083
Asset retirement obligations 34,337 33,548
Fair value of derivatives (note 12) 16,966 -
Obligations under capital leases 4,254 4,979
Future income tax liabilities 577 582
---------------------------------------------------------------------------
$ 371,070 $ 354,307
---------------------------------------------------------------------------
Shareholders equity:
Share capital:
Common shares (note 10b) 303,226 308,441
Warrants (note 10c) 1 3
Contributed surplus (note 10e) 17,281 13,098
Cumulative translation adjustment - (57)
Retained earnings 704,794 642,723
Accumulated other comprehensive
income (loss) (note 11) (4,531) -
---------------------------------------------------------------------------
1,020,771 964,208
---------------------------------------------------------------------------
$1,391,841 $1,318,515
---------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements.
HudBay Minerals Inc.
Consolidated Statements of Cash Flows
Unaudited
(in thousands of Canadian dollars)
Three months ended
March 31
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net earnings for the period $ 63,076 $ 75,986
Items not affecting cash:
Depreciation and amortization 21,874 15,542
Future tax expense (benefit) 41,859 (14,939)
Unrealized foreign exchange gain 472 518
Amortization of deferred financing costs - 362
Accretion expense on asset retirement
obligation 789 660
Stock-based compensation 4,709 2,251
Unrealized portion of change in fair value
of derivatives 12,483 (3,159)
Other (2,762) 752
---------------------------------------------------------------------------
142,500 77,973
Change in non-cash working capital (note 13) 13,391 (51,847)
---------------------------------------------------------------------------
155,891 26,126
---------------------------------------------------------------------------
Financing activities:
Repayment of senior secured notes - (1,168)
Repayment of obligations under capital leases (989) (936)
Proceeds on exercise of stock options 1,498 1,180
Proceeds on exercise of warrants 10 4,269
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519 3,345
---------------------------------------------------------------------------
Investing activities:
Additions to property, plant and equipment (23,961) (27,003)
Acquisition of White Pine Copper Refinery,
Inc., net of cash acquired - (17,041)
Additions to environmental deposits - 15
---------------------------------------------------------------------------
(23,961) (44,029)
---------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (541) 262
---------------------------------------------------------------------------
Change in cash and cash equivalents 131,908 (14,296)
Cash and cash equivalents, beginning of
period 385,864 141,660
---------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 517,772 $ 127,364
---------------------------------------------------------------------------
Cash and cash equivalents is comprised of:
Cash on hand and demand deposits $ 73,356 $ 102,739
Money market instruments 444,416 24,625
---------------------------------------------------------------------------
$ 517,772 $ 127,364
---------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements
SOURCE: HudBay Minerals Inc.
HudBay Minerals Inc.
Brad Woods
Director Investor Relations
(204) 949-4272
Email: brad.woods@hbms.ca
Website: www.hudbayminerals.com
Copyright (C) 2007 CCNMatthews. All rights reserved.
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