Strong Production Continues as Aggressive Exploration Program Advances
WINNIPEG, MANITOBA, May 6, 2008 (Marketwire via COMTEX News Network) --
Highlights
- Revenues of $271.6 million, representing an increase of 12% over Q4 2007
- Operating cash flow(1) of $70.7 million contributes to cash position of $781 million at March 31, 2008
- Net earnings of $21.6 million or $0.17 per share
- Aggressive 2008 exploration program underway with $7.9 million expenditure in Q1 2008
- Continued positive assay results from HudBay's Lalor Lake zinc discovery
HudBay
Minerals Inc. (TSX:HBM) (HudBay or the Company) today released its
first quarter 2008 results. Net earnings in the first quarter were $21.6
million compared with $63.1 million in the first quarter of 2007. The
lower earnings primarily reflect the significant year over year
appreciation in the Canadian dollar versus the U.S. dollar, lower
in-quarter sales volumes associated with shipping delays, a change in
processing spent copper anodes, and
higher costs for purchased copper concentrates. HudBay had a strong
quarter operationally, with production consistent with its full year
2008 expectations.
"Our strategy is all about leveraging our
significant strengths as a base metal mining company, and we made good
progress through the first quarter, both in terms of production and
exploration" said Allen Palmiere, President & CEO. "While reported
earnings for the quarter were negatively impacted by a strong Canadian
dollar as well as shipping delays and a change in processing spent
anodes, our underlying operations are generating good cash flows and we
are very well positioned to build value going forward."
FINANCIAL HIGHLIGHTS
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Three Months Ended March 31
-----------------------------
($000's except per share amounts) 2008 2007
-----------------------------
Revenue 271,637 349,142
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Earnings before tax 46,597 117,515
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Net Earnings 21,552 63,076
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Basic EPS(2) 0.17 0.50
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EBITDA(3) 70,965 152,519
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Operating cash flow(1) 70,651 142,500
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Cash and cash equivalents(4) 781,048 517,772
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Total Assets(4) 1,576,209 1,391,841
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(1) Operating cash flow before changes in non-cash working capital.
(2) Earnings per share
(3) Earnings before interest, taxes, depreciation & amortization, loss/gain
on derivative instruments, interest and other income and exploration.
EXPLORATION
HudBay is advancing one of the most aggressive
exploration programs in Canada and is targeting to spend approximately
$43 million on exploration in 2008, which follows the Company's $41
million expenditure in 2007.
Total exploration spending in the
quarter was $7.9 million, which was comparable to spending levels in Q1
2007. Exploration activities continue to focus on the Company's Lalor
Lake zinc discovery as well as surface drilling at Talbot Lake and other
locations. In-mine exploration accounted for approximately $1.8 million
of the Company's exploration spending in the quarter and is aimed at
expanding HudBay's in-mine reserves and resources once again in 2008.
In
2007, HudBay discovered the Lalor Lake deposit and subsequently
announced a conceptual estimate for the deposit of a potential of 18 to
20 million tonnes at 7.7% to 8.8% zinc(5).
In March 2008(6), the Company announced additional assays that indicated
the potential for significant precious metals in the deposit. Also,
certain of the drill hole results have assayed higher grades of copper.
HudBay is continuing to drill at Lalor Lake with five rigs to define the
extent and to improve confidence in the interpretation of the deposit.
Work continues to complete a National Instrument 43-101 (NI 43-101)
compliant resource estimate, expected near the end of the first half of
2008.
PRODUCTION AND SALES
HudBay's production in the
first quarter of 2008 was consistent with the Company's expectations for
its overall 2008 production targets. Zinc production increased by 10.5%
compared with the first quarter of 2007. Copper and gold production
were lower by 11.3% and 5.0%, respectively, due to HudBay's planned
lower copper smelter production levels in 2008, which
are necessary to meet the Government of Canada's 2008 air release
targets. Silver production increased 24.0% owing to higher silver
content in the purchased concentrates processed in Q1 2008.
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Three months ended March 31
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Production 2008 2007
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Zinc(7) tonnes 34,710 31,408
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Copper tonnes 19,272 21,724
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Gold troy oz. 22,999 24,213
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Silver troy oz. 436,913 352,447
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Metal Sold
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Zinc(8) tonnes 32,916 31,857
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Copper tonnes 20,602 24,662
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Gold troy oz. 19,808 29,716
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Silver troy oz. 283,467 383,919
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(5) The estimate of potential tonnes and grade of the Lalor Lake potential
mineral deposit are conceptual in nature. There has been insufficient
exploration to define a mineral resource and it is uncertain if further
exploration will result in the Lalor Lake deposit being delineated as
a mineral resource. Further details are available in HudBay's news
release dated October 23, 2007.
(6) Further details are available in HudBay's news release dated March
3, 2008.
(7) Production includes Balmat payable metal in concentrate shipped.
(8) Zinc sales include sales to Zochem and the Balmat payable metal in
concentrate shipped (including to HBMS).
Sales volumes of zinc increased by 3.3% to 32,916 tonnes in Q1 2008
while sales of copper, gold and silver were lower than in Q1 2007. To
take advantage of excess processing capacity and to further optimize
financial performance, in Q1 2008, HudBay began shipping spent copper
anodes from its copper refining operation in White Pine Michigan back to
Flin Flon, Manitoba. Previously, spent anodes were sold directly to a
third party. Through this new process, HudBay is able to realize
finished metal premiums on the recycled anodes as well as save on
reduced external refinery costs.
During the first quarter, the
Company also received higher than anticipated shipments of purchased
copper concentrate and faced a shortage of available rail cars to ship
the copper anodes to the Company's copper refinery as a result of winter
storms in the US that disrupted the rail network. The
combination of initiating a program to recycle spent copper anode with
changes to the timing of purchased concentrate receipts and rail
transport constraints resulted in an accumulation of anode inventory in
transit, yielding lower sales quantities of copper, gold and silver for
the quarter.
FINANCIAL AND OPERATING RESULTS
The bracketed values that follow denote the comparative figures for the respective periods in 2007.
Earnings
Net
earnings were $21.6 million in the first quarter, or $0.17 per share
($63.1 million, or $0.50 per share). Q1 2008 net earnings were
negatively affected by the significant year over year appreciation in
the Canadian dollar versus the U.S. dollar, which is estimated to have
reduced Q1 2008 pre-tax earnings by an estimated $24.6 million. Other
key factors contributing to the lower earnings in the first quarter
included:
-
Decreased revenues due to a lower average realized price of zinc and
lower sales volumes of copper, gold and silver, partially offset by
higher average realized prices for the latter three metals.
-
Generally higher operating expenses related to higher pricing on
purchased copper concentrates, increased unit operating costs at the
Company's copper smelter and zinc plant and increased net profits
interest payments associated with the Callinan agreement. Unit operating
cost performance for the Company's mines and concentrators was largely
unchanged from Q1 2007.
- Increased depreciation and amortization charges and retirement and severance costs.
These
negative impacts were partially offset by a number of positive year
over year variances associated with exploration, interest income and
derivative instruments. Tax expense was also lower in Q1 2008 due to
lower earnings
before tax.
Revenue
Total revenue for Q1 2008 was $271.6
million ($349.1 million). Revenues in the first quarter reflect a lower
average realized zinc price of US$1.18/lb compared with US$1.65/lb in
the first quarter of 2007. The appreciation in the Canadian dollar
reduced revenue by an estimated $45.3 million, and sales volumes of
copper, gold and silver were lower. Partially offsetting the negative
influences on revenue during the quarter were higher zinc sales volumes
and higher realized prices for copper, gold and silver.
Realized Metal Prices(1) and Exchange Rate
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HudBay Realized Prices (1)
Three Months Ended
Q1 2008 --------------------------
Average Mar 31 Mar 31
Prices (2) 2008 2007
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Prices in US$
Zinc US$/lb. 1.10 1.18 1.65
Copper US$/lb. 3.54 3.50 2.81
Gold US$/troy oz. 927 840 651
Silver US$/troy oz. 17.68 15.65 13.44
Prices in C$
Zinc C$/lb. 1.11 1.19 1.94
Copper C$/lb. 3.55 3.51 3.29
Gold C$/troy oz. 931 843 758
Silver C$/troy oz. 17.75 15.70 15.66
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C$/US$ exchange rate 1.00 1.00 1.17
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(1) Realized prices are before refining and treatment charges and only on
the sale of finished metal.
(2) London Metals Exchange 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.
Operating Expenses
- Operating expenses were $186.7 million in
Q1 2008 compared with $184.5 million in Q1 2007. The Company's Q1 2008
operating expenses include higher costs due to higher prices for
purchased copper concentrates, increased input costs for the Company's
copper smelter and zinc plant and higher net profits interest payments
associated with the Callinan agreement. These increases were largely
offset by the effect of the appreciation of the Canadian dollar versus
the US dollar, which favourably affected US dollar denominated operating
costs, together with reduced costs from lower sales volumes and lower
year over year profit sharing expense. Unit operating cost performance
for the Company's mines and concentrators was largely unchanged from Q1
2007.
Tax Expense
Tax expense in Q1 2008 was $25.0 million
compared with $54.4 million in the first
quarter of 2007. The decrease reflects lower taxable income in Q1 2008
versus Q1 2007 partially offset by a higher effective tax rate. The
higher effective tax rate in Q1 2008 relates to the non-deductibility of
certain expenses and valuation allowance adjustments related to
expenses incurred in the quarter. Q1 2008 tax expense consists of $17.4
million of income tax expense ($38.6 million) and $7.6 million of mining
tax expense ($15.8 million). Importantly, the income tax portion of the
Q1 2008 tax expense was largely non-cash due to the draw-down of the
Company's tax asset, which was recognized primarily in 2006.
PURCHASED COPPER CONCENTRATE AGREEMENTS
HudBay
processes copper concentrates from its mines in northern Manitoba as
well as from concentrates it purchases from other suppliers. In 2007,
68% of the concentrate treated at HudBay's facilities was sourced from
HudBay's own mines. Owing to current low market prices for treating
copper concentrates, HudBay has not been able to obtain economic terms
beyond 2008 and subsequent to March 31, 2008 the Company exercised early
termination rights on contracts that were originally scheduled to
extend into 2009 and beyond.
HudBay will continue to purchase
concentrates from these suppliers for 2008 and some limited amounts in
2009 which were priced previously and on favourable terms. No changes to
HudBay's 2008 production targets are expected as a result of these
agreements ending. The remaining purchases in 2008, together with
existing inventory and concentrates from HudBay's own mines will support
achievement of the Company's 2008 copper production targets.
HEALTH, SAFETY, ENVIRONMENT AND PRODUCT QUALITY
HudBay's
operations, including contractors, recorded a Lost Time Accident
frequency rate of 0.4 per 200,000 hours worked for the first quarter of
2008, compared to 1.3 from the same quarter in 2007. There were no
significant environmental non-compliances during the quarter.
For
further information, please see the attached selected financial
information for the quarters ended March 31, 2008 and 2007. Please also
see HudBay's consolidated financial statements together with
Management's Discussion and Analysis of Operations and Financial
Condition for the quarter ended March 31, 2008. A copy of HudBay's
consolidated financial statements for the quarters ended March 31, 2008
and 2007 as well as its MD&A for the quarter ended March 31, 2008
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 and the S&P/TSX
Global Mining 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, information with respect to HudBay's
future production, exploration program and planned expenditures,
concentrate purchases, possible results with respect to Lalor Lake as
well as HudBay's strategies and future prospects. 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,
actual results of exploration activities, future commodity prices,
capital expenditures, possible variations in ore reserves, resources,
grade or recovery rates, 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, 2007, 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 information 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://media3.marketwire.com/docs/hbmmdaQ108.pdf
To view the Financial Statements, please click the following link: http://media3.marketwire.com/docs/hbmifsQ108.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
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2008 2007
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Revenue (note 16) $ 271,637 $ 349,142
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Expenses:
Operating 186,703 184,508
Depreciation and amortization 24,233 21,874
General and administrative 9,853 4,573
Stock-based compensation
(note 11c,d) 4,528 4,709
Accretion of asset retirement
obligations 904 789
Foreign exchange (gain) loss (1,316) 2,044
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224,905 218,497
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Operating earnings 46,732 130,645
Exploration (6,096) (7,749)
Interest and other income 7,952 5,997
Loss on derivative instruments (1,741) (10,979)
Interest expense (250) (399)
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Earnings before tax 46,597 117,515
Tax expense (note 10a) 25,045 54,439
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Net earnings for the period $ 21,552 $ 63,076
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Earnings per share:
Basic $ 0.17 $ 0.50
Diluted $ 0.17 $ 0.49
Weighted average number of common shares
outstanding (note 11e):
Basic 126,464,822 126,138,341
Diluted 127,556,958 128,232,455
See accompanying notes to interim consolidated financial statements.
HUDBAY MINERALS INC.
Consolidated Balance Sheets
Unaudited
(In thousands of Canadian dollars)
----------------------------------------------------------------------------
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March 31, 2008 December 31, 2007
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Assets:
Current assets:
Cash and cash equivalents $ 781,048 $ 757,574
Accounts receivable 82,387 71,511
Inventories (note 4) 190,434 183,739
Prepaid expenses 6,864 7,646
Cash held in trust 3,355 -
Current portion of fair value of
derivatives (note 14c) 6,232 7,635
Future income and mining tax assets
(note 10b) 32,066 43,809
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1,102,386 1,071,914
Property, plant and equipment (note 5) 450,307 450,334
Other assets (note 6) 23,516 29,379
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$ 1,576,209 $ 1,551,627
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Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable and accrued liabilities $ 151,103 $ 142,994
Taxes payable 3,335 6,409
Current portion of other liabilities
(note 7) 52,513 41,605
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206,951 191,008
Long-term debt (note 8) - 3,208
Pension obligations 39,081 38,846
Other employee future benefits 71,468 70,153
Asset retirement obligations 35,588 35,046
Obligations under capital leases 404 1,611
Future income tax liabilities (note 10b) 745 718
Fair value of derivatives (note 14c) 28,469 19,804
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$ 382,706 $ 360,394
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Shareholders' equity:
Share capital:
Common shares (note 11b) $ 309,674 $ 311,143
Warrants 1 1
Contributed surplus (note 11d) 18,951 16,633
Retained earnings 883,124 868,857
Accumulated other comprehensive income
(loss) (note 12) (18,247) (5,401)
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1,193,503 1,191,233
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$ 1,576,209 $ 1,551,627
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Subsequent Event (note 17).
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
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----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net earnings for the period $ 21,552 $ 63,076
Items not affecting cash:
Depreciation and amortization 24,233 21,874
Stock-based compensation (note 11c,d) 4,528 4,709
Accretion expense on asset retirement
obligations 904 789
Foreign exchange (gain) loss (643) 472
Change in fair value of derivatives 478 12,483
Future tax expense (note 10a) 18,306 41,859
Other 1,293 (2,762)
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70,651 142,500
Change in non-cash working capital
(note 15a) (11,821) 13,391
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58,830 155,891
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Financing activities:
Repayment of obligations under capital
leases (1,056) (989)
Repurchase of common shares (10,999) -
Proceeds on exercise of warrants - 10
Proceeds of exercise of stock options 35 1,498
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(12,020) 519
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Investing activities:
Additions to property, plant and equipment (24,206) (23,961)
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Effect of exchange rate changes on cash
and cash equivalents 870 (541)
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Change in cash and cash equivalents 23,474 131,908
Cash and cash equivalents, beginning of
period 757,574 385,864
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Cash and cash equivalents, end of period $ 781,048 $ 517,772
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Cash and cash equivalents is composed of:
Cash on hand and demand deposits $ 54,360 $ 73,356
Short term money market instruments 726,688 444,416
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$ 781,048 $ 517,772
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For supplemental information, see note 15.
See accompanying notes to interim consolidated financial statements.
HUDBAY MINERALS INC.
Consolidated Statements of Earnings
Unaudited
(In thousands of Canadian dollars, except share and per share amounts)
Three months ended
March 31
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2008 2007
Retained earnings, beginning of period $ 868,857 $ 642,723
Net earnings for the period 21,552 63,076
Transition adjustment - financial
instruments - (1,005)
Share repurchases (7,285) -
----------------------------------------------------------------------------
Retained earnings, end of period $ 883,124 $ 704,794
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See accompanying notes to interim consolidated financial statements.
Consolidated Statements of Comprehensive Income
Unaudited
(In thousands of Canadian dollars)
Three months ended
March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------
Net earnings for the period $ 21,552 $ 63,076
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Other comprehensive income (loss), net
of tax (note 12):
Net losses on cash flow hedges (12,056) (2,950)
Net losses on investments (817) (1,985)
Net gains (losses) on currency
translation adjustments 27 (7)
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(12,846) (4,942)
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Comprehensive income for the period $ 8,706 $ 58,134
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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
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