Higher earnings despite lower production for Quadra FNX

It was a busy quarter for Quadra FNX Mining (QUX-T), but one that paid large profits to the recently merged company despite lower production totals.

Quadra, which teamed with FNX in May of last year, reported a 75% increase in earnings, as profit climbed to $64 million or 33¢ per share compared to $37 million or 26¢ per share for the same period last year.

The increase was driven by higher copper prices and because FNX’s Sudbury operations were brought into the fold. Those gains more than offset lower operating income from the Robinson Mine in Nevada and the Franke Mine in Chile – both of which saw significant decreases in their production totals.

Total production for the quarter came in at 55 million lbs of copper and 27,000 oz. of total precious metals and with cash costs coming in at US$2.33 per lb of copper, the company was able to secure a healthy margin.

Other key events for the quarter were the completion of a private placement of that raised $500 million. Those new funds helped Quadra FNX finish the quarter with $1.03
billion in cash.

Much of that money will go into the continued development of its flagship project, Sierra Gorda in Chile.

The company recently announced the signing of an agreement with Sumitomo Metal to joint venture on developing the project. The arrangement would leave Quadra FNX with a 55% interest in the JV.

Beyond the financing and the merger, the quarter also saw the company receive the environmental impact assessment permit for Sierra Gorda, which further paves the way for reaching production in 2014.

Sierra Gorda has proven and probable reserves of 1.2 billion tonnes grading 0.39% copper, 0.024% molybdenum and 0.065 grams gold for 11 billion lbs of copper, 678 million lbs of molybdenum and 2.67 million oz. of gold.

The project also has measured and indicated resources of 2.2 billion tonnes grading 0.49% copper equivalent for 8.2 million tonnes of copper.

Another key development during the quarter was the calculation of a resource estimate for the Victoria project in Sudbury. Victoria now has an inferred resource of 12.5 million tonnes grading 2.3% copper, 2.2% nickel, 3.2 gram platinum, 4.3 gram palladium and 1 gram gold per tonne.

Production from both projects will figure significantly in the company’s future plans, as production declines at its current mines.

Despite the higher earnings, copper production for the quarter was significantly lower than for the same period last year. For the second quarter of 2011 the company’s portfolio of six mines produced 54.7 million lbs of copper. The same projects produced 100.8 million lbs of copper the year previous.

Nickel and precious metal production was also significantly lower than last year.

In Toronto on Aug. 10 – the day the results were released – the company’s shares were off 3% or 70¢ to $21.73 on 2.3 million shares traded.