HudBay Minerals reported that its operating cash flow in the fourth quarter of 2014 was impacted by lower year-over-year revenues from lower copper sales volumes, with approximately 40% of copper produced during the quarter in-transit and unsold, and an 18% decrease in realized copper prices. Cash flow from operations was also negatively affected by an unscheduled two-week shutdown of the 777 shaft, which caused the Manitoba business to miss its 2014 production guidance targets for zinc and precious metals and achieve the lower end of its guidance range for copper production.
“Last year represented a turning point for Hudbay with the completion of the construction of three new mines and the delivery of an initial 26% year-over-year increase in copper production,” said David Garofalo, president and CEO. “In 2015, we remain on track to achieve our target of at least a further 270% year-over-year increase in copper production and to improve our unit operating costs significantly through further economies of scale.”
Hudbay received financial commitments from Canadian bank lenders to increase the size of the company’s corporate revolving credit facility from $100 million to $250 million. The credit facility is intended to provide additional liquidity as the Constancia project ramps up to commercial production.
Fourth quarter 2014 ore production at Hudbay’s Manitoba business unit was 13% higher than the prior year’s fourth quarter as a result of higher production volumes at Lalor and Reed. Combined mine/mill unit operating costs in the Flin Flon area were 42% higher than the prior year’s quarter primarily due to the unscheduled shutdown of the 777 shaft in October. Mine/mill unit costs in the Snow Lake area were 10% lower in the fourth quarter compared to the prior year due to higher throughput from the Lalor mine.
At the Constancia project in Peru, physical construction was essentially completed and copper concentrate production began as expected during the fourth quarter of 2014. Commercial production remains on track for the second quarter of 2015 and the mine is expected to achieve full capacity in the second half of the year. Safety remains a primary focus at the operation with the project achieving approximately 21 million hours worked and only one lost time injury in 2014.
Commissioning is ongoing and copper concentrate produced to date has met specifications. Trucking to the port commenced in early January and the first sale of concentrate is expected later in the first quarter of 2015.