Lower zinc prices took their toll on HudBay Minerals’ (HBM-T, HBMFF-O) second-quarter earnings.
The company’s results showed a 52% drop in profits from the same period last year. But lower zinc prices weren’t the only factor at play.
The company reported higher costs connected to copper concentrate production and slowed down copper production at its smelter to comply with environmental regulations aimed at reducing its sulphur dioxide emissions.
A stronger Canadian dollar also cut into revenue.
Earnings for the quarter ending on June 30 came in at $33.2 million or 26 a share, compared with $69.1 million or 55 per share for the same period last year.
Total revenue was off 21% at $284 million.
Copper production for the quarter came in at 17,384 tonnes — a 24% decline — but zinc production managed to grow by 9% to 33,672 tonnes.
Despite the fall off in copper production, chief executive Allen Palmier said that production was “tracking well” towards full-year targets, and in a press release, chose to highlight where the company was heading.
“We are seeing excellent results from our exploration program, and we’ve announced the proposed business combination with Skye Resources, which represents a tremendous long-term opportunity for HudBay and its shareholders,” he said.
Skye Resources’ (SKR-T, SKRZF-O) Fenix nickel project in Guatemala hosts roughly 41 million tonnes of reserves and, HudBay says, is capable of near-term production with a projected mine life of 30 years.
Skye shareholders are slated to decide on HudBay’s $460-million offer for the company on Aug. 19.
On the exploration side, HudBay is planning to spend roughly $43 million for the year — $2 million more than it spent last year.
For the first half of the year, exploration focused on territories in the Flin Flon greenstone belt in Manitoba, including its Lalor Lake zinc discovery.
Lalor Lake was discovered in 2007 and a conceptual estimate put the deposit at 18-20 million tonnes grading 7.7-8.8% zinc.
Drilling this year also found precious metals and higher copper grades. Six rigs are turning at the property and a National Instrument 43-101-compliant resource estimate is expected in August.
HudBay operates three mines in Manitoba and has operations in Ontario, Michigan, and New York State.
In Toronto on the results, the Winnipeg-based company’s shares were off 4 to $10.06 on 6.3 million shares traded.
HudBay shares have traded between $9.12 and $27.74 over the last 52 weeks and the company has roughly 127 million shares outstanding.
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