TORONTO, ON—(Marketwired – November 02, 2016) – HudBay Minerals Inc. (“Hudbay” or the “company”) (NYSE: HBM) (TSX: HBM) today released its third quarter 2016 financial results. All amounts are in US dollars, unless otherwise noted.
Summary:
Record production, consisting of 45,937 tonnes of copper, 31,606 tonnes of zinc, 29,865 ounces of gold, and 1,043,791 ounces of silver1
Earnings per share of $0.14 compared to loss per share of $0.05 in the third quarter of 2015
Continued low cost performance with consolidated cash cost, net of by–product credits, of $0.91 per pound, and consolidated all–in sustaining cash cost, net of by–product credits, of $1.46 per pound2
Operating cash flow before change in non–cash working capital increased to $124.2 million, or $0.53 per share, from $79.0 million, or $0.34 per share, in the third quarter of 20152
Total liquidity of approximately $277.5 million, including $118.3 million in cash, after semi–annual bond interest payment at the end of the third quarter
In the third quarter of 2016, cash generated from operating activities decreased to $95.9 million from $104.2 million in the same period of 2015. Operating cash flow before change in non–cash working capital increased to $124.2 million in the third quarter of 2016 from $79.0 million in the same quarter of 2015. The increase in operating cash flow is the result of growth in production and copper sales volumes, slightly higher realized sales prices and ongoing cost optimization initiatives at all sites. Offsetting the growth in operating cash flow were movements in non–cash working capital mainly related to receivables and payables that used cash in 2016 and released cash in 2015, leading to the overall reduction in cash generated from operating activities.
“Our strong operating performance together with the cost efficiencies achieved at our operations enabled us to generate increased operating cash flow and earnings during the quarter,” said Alan Hair, president and chief executive officer. “We remain on track to meet the production and operating cost targets established earlier this year, with sustaining capital spending expected to be lower than initial guidance.”
Net profit and earnings per share in the third quarter of 2016 were $33.6 million and $0.14, respectively, compared to net loss and loss per share of $11.8 million and $0.05, respectively, in the third quarter of 2015. In addition to the positive factors described above, profit in the third quarter of 2016 was higher than the same period in 2015 as a result of an asset impairment charge of $21.4 million after–tax in 2015 related to equipment inherited from the acquisition of Augusta Resource Corporation.
Net profit and earnings per share in the third quarter of 2016 were affected by, among other things, the following items:
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Pre–tax gain
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After–tax gain
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Per share
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($ millions)
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($ millions)
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($/share)
Gain on mark–to–market of various
financial instruments
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10.5
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10.5
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0.04
Non–cash deferred tax adjustments
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3.2
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0.01
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Results at Hudbay's operations were strong with record quarterly consolidated copper–equivalent production3 and continued low cash costs in both Peru and Manitoba. In the third quarter of 2016, consolidated cash cost per pound of copper produced, net of by–product credits, was $0.91, which is nearly unchanged compared to the same period last year when it was $0.90 per pound. Incorporating sustaining capital, capitalized exploration, royalties and corporate general and administrative (“G&A”) costs, consolidated all–in sustaining cash cost per pound of copper produced, net of by–product credits, in the third quarter of 2016 declined to $1.46 from $1.86 in the third quarter of 2015. The decline was driven by substantial declines in sustaining capital expenditures.
The cost reduction initiatives announced on February 24, 2016 are on track to meet company targets for 2016. Based on these efforts and operating results to date, Hudbay expects to meet all of its production and operating cost guidance. Sustaining capital spending is expected to be approximately 10% lower than initial guidance of $220 million as a result of cost savings and deferral of some spending to 2017 and subsequent years.
Cash and cash equivalents increased by $64.4 million to $118.3 million as at September 30, 2016 from $53.9 million as at December 31, 2015. This increase was mainly a result of cash generated from operating activities of $334.9 million, drawdowns on our credit facilities of $59.3 million and a net release of restricted cash of $45.9 million. These inflows were partly offset by $149.3 million of capital investments. Primarily at Hudbay's Peru and Manitoba operations, debt principal repayments of $108.4 million and interest payments of $103.5 million. Net debt4 decreased to $1.1 billion as at September 30, 2016 from $1.2 billion as at December 31, 2015.
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Financial Condition ($000s)
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Sep. 30, 2016
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Dec. 31, 2015
Cash and cash equivalents
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118,258
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53,852
Total long–term debt
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1,223,427
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1,274,880
Net debt1
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1,105,169
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1,221,028
Working capital
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138,211
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57,613
Total assets
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4,484,805
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4,479,585
Equity
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1,797,470
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1,787,290
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Financial Performance
($000s except per share and cash cost amounts)
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Sep. 30
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Nine months ended
Sep. 30
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2016
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2015
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2016
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2015
Revenue
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311,424
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269,808
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812,024
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549,410
Cost of sales
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242,965
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227,779
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667,351
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489,849
Profit (loss) before tax
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42,001
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(16,132)
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31,670
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(73,431)
Profit (loss)
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33,571
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(11,833)
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12,080
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(75,960)
Basic and diluted earnings (loss) per share
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0.14
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(0.05)
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0.05
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(0.32)
Cash generated from operating activities
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95,878
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104,150
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334,949
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114,897
Operating cash flows before change in non–cash working capital1
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124,236
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79,046
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265,611
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114,413
Operating cash flow per share1
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0.53
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0.34
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1.13
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0.49
1
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Net debt, operating cash flow before change in non–cash working capital and operating cash flow per share are non–IFRS financial performance measures with no standardized definition under IFRS. For further information, please see page 6 of this news release.
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Production and Cost Performance
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Three months ended
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Sep. 30, 2016
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Sep. 30, 2015
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Peru
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Manitoba
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Total
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Peru
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Manitoba
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Total
Contained metal in concentrate produced1Â Â Â Â
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Copper
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tonnes
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35,604
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10,333
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45,937
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37,647
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10,274
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47,921
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Gold
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oz
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6,867
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22,998
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29,865
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6,712
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19,829
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26,541
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Silver
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oz
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749,498
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294,293
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1,043,791
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663,937
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171,493
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835,430
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Zinc
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tonnes
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–
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31,606
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31,606
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–
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24,165
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24,165
Payable metal in concentrate sold    Â
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Copper
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tonnes
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38,859
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9,647
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48,506
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27,391
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11,632
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39,023
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Gold
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oz
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6,479
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19,235
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25,714
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4,758
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29,612
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34,370
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Silver
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oz
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573,097
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207,156
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780,253
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328,948
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264,702
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593,650
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Refined zinc
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tonnes
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–
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26,211
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26,211
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–
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25,420
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25,420
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Cash cost2
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$/lb
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1.13
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0.18
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0.91
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0.96
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0.66
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0.90
Sustaining cash cost2
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$/lb
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1.60
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0.69
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1.82
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1.88
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All–in sustaining cash cost2
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$/lb
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1.46
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1.86
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Sep. 30, 2016
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Sep. 30, 2015
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Peru
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Manitoba
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Total
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Peru
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Manitoba
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Total
Contained metal in concentrate produced1Â Â Â Â Â
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Copper
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tonnes
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99,446
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31,262
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130,708
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68,162
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30,979
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99,141
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Gold
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oz
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21,243
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65,571
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86,814
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12,279
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61,154
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73,433
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Silver
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oz
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2,036,940
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726,278
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2,763,218
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1,353,150
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572,512
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1,925,662
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Zinc
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tonnes
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–
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81,438
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81,438
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–
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70,557
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70,557
Payable metal in concentrate sold     Â
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Copper
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tonnes
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96,694
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30,565
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127,259
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45,796
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30,090
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75,887
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Gold
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oz
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18,016
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52,170
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70,186
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7,981
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53,914
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61,895
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Silver
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oz
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1,721,512
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548,923
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2,270,435
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648,845
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473,216
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1,122,061
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Refined zinc
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tonnes
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–
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75,359
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75,359
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–
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74,856
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74,856
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Cash cost2
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$/lb
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1.08
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0.55
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0.95
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1.05
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1.16
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1.09
Sustaining cash cost2
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$/lb
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1.49
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1.34
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1.91
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2.11
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All–in sustaining cash cost2
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$/lb
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1.54
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2.10
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Metal reported in concentrate is prior to deductions associated with smelter contract terms.
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Cash cost, sustaining cash cost and all–in sustaining cash cost per pound of copper produced, net of by–product credits, are non–IFRS financial performance measures with no standardized definition under IFRS. For further information, please see page 6 of this news release.
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Peru Operations Review
During the third quarter of 2016, the Peru operations produced 35,604 tonnes of copper, 6,867 ounces of gold and 749,498 ounces of silver, which remained relatively consistent compared to the same period in 2015. Year–to–date production of copper, gold and silver was 46%, 73% and 51% higher, respectively, than the same period in 2015. Year–to–date growth reflects the ramp–up of Constancia to full production and the improvements in recoveries made in the last year.
Ore mined during the third quarter of 2016 decreased by 25% compared to the same period in 2015 as ore production rates were aligned to mill throughput rates. Mined and milled copper grades in the third quarter of 2016 were approximately 10% lower than the same period in 2015 as the mine plan continues to advance to lower levels in the pit. Mill throughput during the third quarter of 2016 was marginally affected by repairs to the power supply for one of the grinding circuits and to the process water pond liner. Both repairs arose from installation issues and steps have been taken to prevent future impacts from these issues.
Optimization of plant performance remains the primary focus for Constancia. Total copper recovery continues to improve and was 83.6% in the third quarter of 2016, compared to 76.6% in the same period in 2015, as oxidized copper in the ore feed was lower in the current quarter and the metallurgy associated with the varying ore types is better understood. Gold and silver recoveries also continue to improve.
The molybdenum plant was commissioned and began producing saleable concentrate in July of this year with grades over 50%. Molybdenum production quantities are expected to remain modest but steadily increase as a growing proportion of higher molybdenum grade hypogene ore is processed.
Combined unit operating costs in the third quarter of 2016 were affected by reduced capitalized stripping compared to prior quarters. Combined unit operating costs year–to–date in 2016 remain within guidance expectations.
Cash cost per pound of copper produced, net of by–product credits, for the three and nine months ended September 30, 2016 was $1.13 and $1.08, respectively, an increase from the same periods in 2015 of 18% and 3%, respectively, which reflects routine maintenance activities ramping up as the plant matures.
Sustaining cash cost per pound of copper produced, net of by–product credits, for the three and nine months ended September 30, 2016 was $1.60 and $1.49, a decrease from the same period in 2015 of 12% and 22%, respectively, as a result of lower capital costs from tailings impoundment construction.
Manitoba Operations Review
During the third quarter of 2016, the Manitoba operations produced 10,333 tonnes of copper, 31,606 tonnes of zinc, 22,998 ounces of gold and 294,293 ounces of silver, which was higher by 1%, 31%, 16% and 72%, respectively, compared to the same period in 2015, mostly as a result of higher mill throughput.
Ore mined at Hudbay's Manitoba mines during the third quarter of 2016 increased by 18% compared to the same period in 2015 as a result of increased production at Lalor and 777. Overall copper grades were 18% lower in the third quarter of 2016 compared to the same quarter of 2015 as a result of lower copper grades at the 777 mine, partially offset by higher copper grades at the Lalor and Reed mines as a result of the stopes mined. Gold grades in the third quarter of 2016 were in line with the same period in 2015, while zinc and silver grades were higher than the third quarter of 2015 by 13% and 38%, respectively, as a result of higher silver grades at all mines and higher zinc grades at 777 as a result of planned stope sequencing. Unit operating costs for all Manitoba mines for the third quarter of 2016 declined by 19% compared to the same period in 2015, reflecting ongoing cost reduction efforts and increased production.
Ore processed in the Flin Flon concentrator in the third quarter of 2016 was 18% higher than the same period in 2015 primarily as a result of higher production at our 777 mine. Zinc, gold and silver recoveries were higher in the third quarter of 2016 compared to the same period in 2015 as a result of higher head grades, while copper recovery was slightly lower due to lower copper head grades. Unit operating costs at the Flin Flon concentrator were 45% higher in the third quarter of 2016 compared to the same period in 2015 as a result of higher maintenance expenditures. Ore processed in the Snow Lake concentrator in the third quarter of 2016 was 21% higher than the same period in 2015 as a result of higher production at the Lalor mine. Unit operating costs at the Snow Lake concentrator were 12% lower in the third quarter of 2016 compared to the third quarter of 2015 as a result of increased production.
Combined mine, mill and G&A unit operating costs in the third quarter were 16% lower than in the same period in 2015 as a result of higher overall production and ongoing cost reduction initiatives, and were in line with full year guidance expectations.
Cash cost, net of by–product credits, in the third quarter of 2016 was $0.18 per pound of copper produced, a decrease of 73% compared to the same period in 2015. The decrease is largely the effect of a decrease in general support costs as a result of cost reduction initiatives. Cash cost was also positively impacted by increased revenue from sales of zinc metal.
Sustaining cash cost, net of by–product credits, in the third quarter of 2016 was $0.69 per pound of copper produced, a decrease of 63% compared to the same period in 2015, and was affected by the same factors impacting cash cost in the third quarter as well as reduced capital expenditures.
Non–IFRS Financial Performance Measures
Operating cash flow before change in non–cash working capital and operating cash flow per share are included in this news release because the company believes that they help investors and management to evaluate changes in cash flow generated from the various operations while, in the case of operating cash flow per share, taking into account changes in shares outstanding. Net debt is shown because it is a performance measure used by the company to assess its financial position. Cash cost, sustaining and all–in sustaining cash cost per pound of copper produced are shown because the company believes they help investors and management assess the performance of its operations, including the margin generated by the operations and the company. These measures do not have a meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. For further details on these measures, including reconciliations to the most comparable IFRS measures, please refer to page 28 of Hudbay's management's discussion and analysis for the three and nine months ended September 30, 2016 available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Website Links
Hudbay:
www.hudbayminerals.com
Management's Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2016/Q3/MDA3Q2016.pdf
Financial Statements:
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