Peter Kukielski
Canadian miner Hudbay has reported a third-quarter net loss of $274.8-million, reflecting an after-tax impairment loss of $242.1-million on the carrying value of its stalled Rosemont copper project, in the US.
The US District Court has blocked the company from constructing the copper mine in south-eastern Arizona, with the validity of mining claims that would allow for the disposal of waste on public lands adjacent to the operations at the heart of the matter.
Although Hudbay intends to appeal the court ruling, the company explained in its third-quarter results announcement on Monday that the recoverable amount of the Arizona cash generating unit was lower than its carrying value, resulting in an after-tax impairment loss.
In August, Hudbay suspended most of its early works activities at Rosemont and, at the time, said that it would reduce the project’s capital spend to $30-million for the year. This has now been further lowered to $20-million, together with a $20-million for nonproject spending.
“We intend to appeal the recent court decision as we evaluate next steps for the project,” said interim president and CEO Peter Kukielski.
Meanwhile, Hudbay said it delivered a solid operating quarter from its operations in Peru and Manitoba, Canada. The company reported record quarterly ore throughput at the Constancia mill, as well a 9% and 23% respective increase in ore mined at 777 and Lalor.
However, consolidated copper production fell from 40 482 t in the September 2018 quarter, to 36 422 t in the quarter under review, with lower output reported in Peru as a result of lower copper grades and the closure of the Reed mine, in Manitoba.
Gold production remained unchanged at 28 319 oz and silver production fell to 924 191 oz, from 1.01-million ounces a year earlier.
Cash generated from operating activities decreased to $43.5-million in the third quarter of 2019, from $113.8-million in the same quarter of 2018. Operating cash flow before change in non-cash working capital was $69.9-million during the third quarter of 2019, reflecting a decrease of $52.2-million compared with the third quarter of 2018.
Hudbay explained that the decrease in operating cash flow was primarily the result of lower realised prices and sales volumes compared with the third quarter of 2018.
Sales volumes in the third quarter of 2019 reflected the temporary buildup of copper concentrate inventory in Peru as a result of previously disclosed community protests against another company's mining project that restricted access to the port of Matarani in July and August. However, Constancia continued to operate at full capacity during this period and the team actively managed concentrate logistics to overcome these challenges, resulting in only slightly elevated concentrate inventory levels as of September 30, 2019.
Copper-equivalent production in the third quarter of 2019 decreased by 2% compared to the same period in 2018, primarily as a result of lower grades at Constancia, as planned, and the closure of the Reed mine.
Its net loss and loss a share in the third quarter of 2019 were $274.8-million and $1.05, respectively, compared with a net profit and earnings a share of $22.8-million and $0.09, respectively, in the third quarter of 2018.
CEO SEARCH
The Toronto-based company said that its search for a permanent CEO remained ongoing. Alan Hair resigned as CEO in July and was replaced by Kukielski – a former CEO of Nevsun Resources – as interim CEO.
Hudbay in May reached an agreement with shareholder Waterton that three of its nominees, including Kukielski, David Smith and Daniel Muñiz Quintanilla, would join the board and that Alan Hibben would resign once a replacement has been found.
Former Centerra Gold CEO Stephen Lang was appointed chairperson last month.