Toronto-based Hudbay Minerals Inc. posted its sixth consecutive quarterly loss during the 2nd quarter ending June 30 and plans to “substantially” reduce spending on its Arizona Rosemont copper project during the rest of 2016.
Hudbay’s 2nd quarter loss of $5.7 million brings its total losses since the beginning of 2015 to $353 million, according to its 2nd quarter Management Discussion & Analysis report.
“Net loss and loss per share in the second quarter of 2016 was affected by, among other things, non-cash deferred tax adjustments of $8.4 million or negative $0.04 per share,” the company stated in a press release.
The string of losses has occurred even as Hudbay greatly increased revenue and total mineral production with the 2015 completion of construction and beginning of operations at its 80,000 ton-per-day Constancia open-pit copper mine in Peru.
“Notwithstanding lower copper and zinc realized prices, revenues nearly doubled and gross profit increased more than ten-fold compared to the same quarter last year as a result of higher sales volumes and cost optimization at our operations,” the MDA report states.
Hudbay CEO Alan Hair signaled that the losses may continue in the third quarter during a July 28 conference call with investment analysts.
“Cash flow in the third quarter will likely be softer and potentially negative due to peak levels of sustaining capital in Peru and a bond interest payment in late September,” Hair said.
Hudbay is continuing construction on the Constancia tailings dam during the Peruvian dry season in the 2nd and 3rd quarters. The company also has semi-annual bond payments due in the 1st and 3rd quarters. Hudbay reported $1.3 billion in long-term debt as of June 30, 2016.
The company increased its short-term revolving lines of credit by $30 million in the 2nd quarter bringing the total credit available to $530 million. Hudbay has drawn down $378.4 million of the available credit, according to the MD&A.
Hudbay’s spending on its proposed Rosemont mine in the Santa Rita Mountains on the Coronado National Forest sharply decreased in the second quarter to $5.2 million compared to $15.8 million for the same period in 2015. Rosemont spending also decreased over the first six months of 2016 to $16.7 million, down from $20.7 million for the same period in 2015.
“Capital expenditures in Arizona on the Rosemont project are expected to decline substantially over the balance of 2016,” according to the MD&A.
Hudbay’s financial statements and press release do not mention that the Los Angeles district office of the U.S. Army Corps of Engineers recommended denial of the company’s application for a Clean Water Act permit needed to construct the Rosemont mine.
The Arizona Daily Star reported on July 28 that the Los Angeles’ district recommendation had been sent earlier in the week to the Corps’ San Francisco regional office.
As the applicant for the permit, it appears Hudbay may have been aware of the district’s recommendation prior to the release of its financial statements on July 27.
Hair told investment analysts during the July 28 conference call that “at Rosemont, we continue to advance permitting activities and engineering studies.”
Not giving the “full picture” to it’s investors is typical of this company. Denial of the Federal 404 Water Permit puts a halt to the project. A “recommendation for denial” isn’t important enough to mention to stockholders??!!
Have you heard the joke about the definition of a mining company? Answer- A hole in the ground circled by 10 liars.