The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
Jonathon Naylor Editor As Hudbay comes off its second straight year of red ink, the company is bracing for a major cost overrun at its next flagship mine. New financial data shows Hudbay lost $21.1 million last year, making 2012 its second-worst financial year since it scooped up its Flin Flon and Snow Lake operations. The company downplayed the loss, blaming it on costs it 'does not view as part of its core operations' and noting that its yearly production goals were met. Yet the loss is nowhere near the approximately $90 million Hudbay must now add to its budget for the Lalor mine near Snow Lake. The company said the extra funds are needed for the Lalor concentrator, taking its estimated budget from $263 million to about $353 million. Hudbay said better cost estimates are a factor, but so too are changes to the concentrator itself, including a 20 per cent increase in the grinding capacity to 5,400 tonnes per day. The company said this will better match the mine's potential production shaft capacity. It also means the concentrator is expected to start up toward the end of 2015, later than first anticipated. See 'Northern...' pg. 7 Continued from pg. 1 Lalor's overall budget now stands at $794 million. Hudbay projects ore production at Lalor to hit 4,500 tonnes a day at its peak, but the main production shaft is designed for 6,000 tonnes a day. Lalor, as well as the Reed mine near Snow Lake and the Constancia mine in Peru, factor heavily into Hudbay's plans this year. 'Our focus in 2013 is to continue to advance our robust portfolio of development assets,' president and CEO David Garofalo said, 'which we expect to provide significant copper, gold and zinc production growth over the next two years as they are brought into production.' Garofalo made the comment in a company news release issued last week to reveal Hudbay's financial figures from the final quarter of 2012. In the quarter, Hudbay turned a profit of $7.4 million. That was nearly five times less than the company brought in in the final quarter of 2011, but a marked improvement over the $6.1-million loss recorded in the third quarter of 2012. In 2012, Hudbay turned an $8-million profit in quarter one before losing a combined $36.5 million in the next two quarters. Ore production last quarter was 20 per cent lower than 2011's fourth quarter, a fact Hudbay blamed on the closure of its Trout Lake and Chisel North mines. The lessened production was partly offset, however, by early production at Lalor. At Lalor, the company had invested about $326 million of the $794-million capital construction budget as of Jan. 31, and had entered into another $93 million in commitments for the project. The mine portion of Lalor remains on time and on budget. Basic engineering of the new Lalor concentrator is complete. First ore production from the main production shaft is still projected to be on schedule in late 2014. At that time, the ore will be processed at the Snow Lake and Flin Flon mills, with a portion stockpiled for the new concentrator upon its commissioning. In the fourth quarter of 2012, Hudbay hoisted 58,000 tonnes of ore from the ventilation shaft at Lalor. Underground project development has continued to advance and Hudbay's focus is to reach the 910-metre shaft station and continue to ramp to the 955-metre level. The main production shaft is now sunk to about 525 metres and is a little over half complete. Hudbay expects shaft sinking to wrap up in late 2013. Upon completion of sinking, the installation of the steel sets and guides as well as the head frame changeover will begin. Engineering Hudbay is in the process of completing the final engineering work for the load-out facilities located at the 955 metre level, as well as completing the main pumping installations. The company is preparing for construction of the main intake fan systems and the main substation during 2013. Hudbay expects to submit the Environmental Act Licence application for the new concentrator to the provincial government before July. The new design will incorporate a larger grinding circuit being fed from the surface stockpile. Hudbay will hoist uncrushed ore up the Lalor shaft to be crushed on surface and then conveyed to the surface stockpile. The stockpile will feed a SAG mill and ball mill combination that has design capacity of 5,400 tonnes per day. Meanwhile, at the Reed mine also near Snow Lake, Hudbay's focus last quarter was on the development of the underground ramp and completion of surface infrastructure. Of Reed's $72-million capital construction budget, Hudbay had invested some $26 million as of Jan. 31. It had also entered into $20.5 million in other commitments for the project. Capital expenditures at Reed are expected to total about $44 million in 2013. After completing the first portal development round in October, the underground ramp had advanced about 174 metres as of Jan. 31. In December, Hudbay submitted to the Manitoba government the Environmental Act Licence application for Reed which, upon receipt, will allow for the commencement of full production. Hudbay expects initial production at Reed by the fourth quarter of 2013 and full production of about 1,300 tonnes of ore a day by the first quarter of 2014. As of the last day of 2012, Hudbay had $1.34 billion in cash and cash equivalents.
