Hudbay bottom line better despite weak metal prices

Even though base metal prices continued at depressed levels last year, Hudson Bay Mining and Smelting was able to improve its bottom line, but not enough to boost it into the black.

The company’s net loss for the year ended Dec 31 totalled $20.2 million on revenues of $285.4 million — a significant improvement from the net loss of $59.3 million on revenues of $291.1 million in 1985.

The 1986 loss included unusual charges totalling $11.6 million related to the redemption of two debenture issues, a charge of $7 million in the fourth quarter for the write-down of non-producing investments and a gain of $5.8 million from the sale of undeveloped gold properties to two affiliates.

The company produced more than 184 million lb of zinc, 136 billion lb of copper, 66,000 oz of gold and 1.2 million oz of silver from domestic and purchased concentrates in 1986. These production levels were comparable to those of 1985.

However, over all production costs declined by 6.3% in 1986. Unit costs at the mining and metallurgical operations at Flin Flon and Snow Lake were reduced through an 11.5% reduction in the work force, negotiated concession from major suppliers, more efficient usage of materials and services and reduced fuel and freight costs, says President Lloyd Nilsen.

These improved results were offset partially by a $4.1-million writedown of deferred mine development expenditures related to deteriorating ground conditions in certain areas of older mines, says Mr Nilsen.

Interest and other income declined in 1986 to $5.5 million from $10.3 million in 1985, mainly as a result of a 1986 foreign exchange loss of $0.9 million, compared to an exchange gain of $3 million in 1985.

Exploration expenses last year totalled $13.5 million, compared with $12.8 million in 1985. The major expense in both years was related to the further exploration of the company’s high grade nickel/copper deposit at Namew Lake, 60 km south of Flin Flon.

Here, the exploration shaft, which will be sunk ultimately to a depth of 1,350 ft, reached 1,067 ft at year end. Mr Nilson says the company is seeking to establish a joint venture for continued exploration and future development of the property. Back in September, Hudbay signed a letter of intent with Outokumpu which, if concluded, would establish a joint-venture partnership for the property.

The Namew Lake deposit hosts reserves of 2.85 million tons of 2.44% nickel, 0.9% copper and minor amounts of platinum and palladium.

With encouraging exploration results from the north zone of the Trout Lake zinc/ copper mine near Flin Flon, Man., Hudbay and its joint venture partners expect to begin sinking a shaft at the site early this year, says Mr Nilsen.

Partners with Hudbay in this venture are Granges Exploration and Outokumpu Mines.