Quadra FNX pumps profits despite lower production

It was a busy second quarter for copper miner 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. copper and 27,000 oz. total precious metals. Cash costs were at US$2.33 per lb. copper, so the company was able to secure a healthy profit margin.

Another key event for the company in the quarter was the completion of a private placement that raised $500 million. These 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 signed an agreement with Sumitomo Metals to joint venture on developing the project. The arrangement would leave Quadra FNX with a 55% interest.

Beyond the financing and the merger, the quarter also saw the company receive an 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 gram gold per tonne for 11 billion lbs. copper, 678 million lbs. molybdenum and 2.67 million oz. gold.

The project also hosts measured and indicated resources of 2.2 billion tonnes grading 0.49% copper equivalent.

Another highlight of the quarter was a new 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 grams platinum, 4.3 grams 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 lower than for last year’s period. For the second quarter of 2011 the company’s portfolio of six mines produced 54.7 million lbs. copper, down from 100.8 million lbs. copper last year.

Nickel and precious metal production was also 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.