HudBay will spend $42.8 million on exploration next year

The mantra at HudBay Minerals‘s (HBM-T, HBMFF-O) head office these days appears to be that “exploration delivers HudBay’s organic growth.”

Or at least that’s what Peter Jones, HudBay’s president and chief executive, said when he announced the company would spend $42.8 million on exploration next year.

The 2008 budget builds on this year’s $45.2 million exploration program, which successfully delivered the Lalor Lake deposit.

In October, HudBay announced a significant new zinc discovery at its Lalor Lake property near Snow Lake in Manitoba.

The company believes the deposit has a potential resource of 18 to 20 million tonnes grading 7.7% to 8.8% zinc. The deposit is open in two directions and a National Instrument 43-101 compliant resource estimate is planned for early 2008.

The massive sulphide mineralization at Lalor Lake is similar to the coarse grained pyrite and sphalerite at the nearby Chisel North mine as well as the previously mined Chisel Lake mine and the more copper and gold rich Photo Lake mine, the company says on its website.

These types of mineralization have historically provided excellent concentrator recoveries. To date these three mines have produced a total of 9.8 million tonnes of ore.

HudBay’s other exploration properties include about 4,000 sq. km in the Flin FLon Greenstone Belt of Manitoba and Saskatchewan and another 200 sq. km in the Balmat district of New York state.

In addition, the company owns the Tom-Jason-zinc-lead-silver mineral deposit in the Yukon, zinc exploration properties in southwestern Ontario, and copper exploration properties in Chile.

The hefty exploration budget comes after the company released third-quarter results last month that showed that the strong Canadian dollar had hammered its revenues by an estimated $23 million and earnings before tax by about $16.8 million.

HudBay reported revenues of $319.8 million for the third quarter ended September 30, compared with $346.2 million in the same quarter in 2006.

Operating cash flow for the quarter was $113.9 million, down from $166 million in the quarter the previous year.

Despite the disappointing numbers, however, HudBay’s management remained upbeat.

“Our production performance was strong for the quarter and year to date,” Jones said in a prepared statement, announcing the financial results.

“We’re firmly on track and our exploration program has delivered the Lalor Lake discovery which positions HudBay well for the longer term.”

News of HudBay’s sizeable exploration budget for 2008 sent its shares on the Toronto Stock Exchange down $1.21 apiece, or 5.65%, to close at $20.20 on a trading volume of 874,061.