Production from the Lalor and Reed mines could end years of red ink for Hudbay in 2014.
That much was apparent last week when the company announced a profit of $49.2 million for the third quarter.
Helping yield that figure was a 15 per cent rise, compared to the same period last year, in ore production in northern Manitoba.
Hudbay credited Lalor and Reed with the increase while 777 mine performed below target as a result of reduced production and an unscheduled safety-related shutdown.
While 777 is not on schedule to meet production targets, the company said “good results” from Lalor and Reed are expected to enable full-year production from northern Manitoba to be within previously announced guidance ranges.
In terms of production costs, Hudbay encountered good news and bad news.
Operating costs per tonne of ore rose 26 per cent at 777 compared to the third quarter of 2013, with Hudbay blaming paste fill requirements, rising material costs and lower production.
Not surprisingly, operating costs at Lalor were down 23 per cent due
to higher production
volumes.
By earning $49.2 million in the third quarter, Hudbay is now $22.3 million in the black for the year. Barring a substantial loss in the fourth quarter, the company will turn a yearly profit for the first time since 2010.
Progressing
Hudbay is progressing with both Lalor, located near Snow Lake, and its massive Constancia copper project in Peru.
In the final quarter of 2014, the company expects to pump about $118 million in capital expenditures into the pair of projects.
As of Sept. 30, Constancia was about
94 per cent complete on a proportion-spent basis, with Hudbay having incurred some $1.6 billion in costs.
Conveyance testing at Constancia is underway and ore commissioning at the crusher has been completed. Major mechanical installation is complete in the grinding area, with work focused on finalizing piping and electrical installation.
Constancia remains on track for first concentrate production in the fourth quarter and commercial production in the second quarter of 2015.
At Lalor, Hudbay achieved the second phase of commercial production at the end of September.
In September, the company hoisted more than 60 per cent of the monthly average of planned ore to be generated from Lalor over a one-year period.
Of Lalor’s total mine construction budget of $441 million, Hudbay had invested about $413 million and entered into an additional $26 million or so in commitments as of Sept. 30.
Major items to be completed at Lalor include the installation of the surface exhaust fans and the construction of an office and change house complex. This work is expected to be completed by the end of the year.
Hudbay has also commissioned the refurbished Snow Lake concentrator, which now has the capacity to treat 2,700 tonnes of ore per day.
The underground exploration ramp at Lalor “progressed well” in the third quarter, the company said, adding it is over a quarter complete.
“The exploration drilling that will be enabled by this ramp is intended to assist in the upgrading of inferred resources to a higher resource category,” Hudbay said, “and to establish an underground drilling platform in 2015 to further test the down dip extension of the copper/gold zone.”
At Rosemont, a copper project in Arizona, Hudbay’s ownership is subject to an earn-in agreement with United Copper & Moly.
Under the agreement, United Copper has earned a 7.95 per cent interest and may earn up to a 20 per cent interest.
A joint venture agreement between Hudbay’s subsidiary, Rosemont Copper Company, and United Copper governs the parties’ respective rights and obligations vis-à-vis the project.
A drill program now underway at Rosemont is intended to provide a better understanding of the geological setting and mineralization, and to collect additional metallurgical, geotechnical and hydrological information.
Permitting efforts at Rosemont are ongoing, Hudbay said.
