Higher costs, lower output hurt HudBay

A combination of higher unit costs, employee bonuses and lower than expected copper production added up to a drop in fourth-quarter profits for Hudson Bay Mining & Smelting (TSE) and quarterly loss for parent Inspiration Resources (NYSE). HudBay reported fourth-quarter net earnings of $11.8 million on revenues of $109.8 million, compared with earnings of $14.8 million on revenues of $130.4 million during the same period in 1988.

The company’s annual earnings increased last year to $46.4 million on revenues of $454.2 million from $28.5 million on revenues of $410.9 million in fiscal 1988.

The favorable impact of higher copper and zinc prices and a $7.1- million contribution from HudBay’s 60% owned Namew Lake nickel mine in Manitoba was partially offset by the increased unit cost of purchased concentrates, the company said.

Higher employee bonuses related to metals prices, increased maintenance costs and lower than expected copper production also affected HudBay’s bottom line.

The 1989 results include a $4- million benefit from the application of tax loss carryforwards and a $1.2-million insurance loss recovery whereas 1988 earnings were affected by a $3.4-million benefit from tax loss carryforwards and a $2.8-million investment writedown.

Those factors also affected earnings reported by Inspiration Resources. The New York-based company reported a fourth-quarter net loss of US$2.4 million or 4cents per share, compared with net income of US$2.6 million or 4cents per share at the same time last year. Fourth- quarter revenues dropped to US$235.5 million from US$246.4 million.

For the year ended Dec. 31, Inspiration reported net income of US$25.2 million or 38cents per share, compared with US$42 million or 63cents per share in 1988. Annual revenues for both 1988 and 1989 were US$1.4 billion.

HudBay’s Namew Lake mine, which went into production in the second quarter of 1989, contributed about four million pounds of nickel to the company’s 1989 production quota. However, the average grade of Namew nickel reserves has been revised downward to 2.05% from 2.47%. That represents a total reduction of about 10% or six million pounds of contained nickel during the mine’s 4 1/2-year lifespan.

Low base metal prices are expected to mean reduced operating results this year for HudBay, said Chief Executive Officer John Ellis. Hudson Bay Mining & Smelting (TSE) Year ended Dec. 31 1989 1988 Revenue (000s) $454,200 410,900 Net earnings (000s) 46,400 28,500004