Hudbay down with lower zinc prices

Lower zinc prices took their toll on HudBay Minerals (HBM-T) second quarter earnings.

The company’s results showed a 52% drop in profits from the same period last years, but lower zinc prices weren’t the only thing at play.

The company reported higher costs connected to its copper concentrate production and lower copper production at its smelter due to a production slowdown to comply with environmental regulations aimed at reducing its sulphur dioxide emissions.

A stronger Canadian dollar was also cited as a factor causing revenue depression.

Earnings for the quarter ending on June 30 came in at $33.2 million or 26 a share compared with $69.1 million or 55 per share for the same period last year.

Total revenue was off 21% to $284 million.

Copper production for the quarter came in at 17,384 tonnes a 24% decline but zinc production managed to grow by 9% to 33,672 tonnes.

Despite the fall off in copper production chief executive Allen Palmier said that production is was “tracking well” towards full year targets, and in a press release, he chose to highlight where the company was heading.

“We are seeing excellent results from our exploration program, and we’ve announced the proposed business combination with Skye Resources, which represents a tremendous long term opportunity for HudBay and its shareholders,” he said.

Skye Resources‘ (SKR-T) Fenix Nickel project in Guatemala has roughly 41 million tonnes of reserves and, Hudbay says, is capable of near term production with a projected mine life of 30 years.

Sky shareholders are slated to decide whether or not to accept HudBay’s $460 million offer for the company on August 19th.

On the exploration side the company is planning to spend roughly $43 million for the year two million more than it spent last year.

For the first half of the year exploration focused on territories in the Flin Flon Greenstone Belt in Manitoba, including its Lalor Lake zinc discovery.

Lalor Lake was discovered in 2007 and a conceptual estimate put the deposit at 18 to 20 million tonnes grading 7.7% to 8.8% zinc.

Drilling from this year also found precious metals and higher copper grades. Six rigs are continuing to turn at the property with a compliant resource estimate expected in August.

HudBay operates three mines in Manitoba and has operations in Ontario, Michigan, and New York State

In Toronto on July 31 the Winnipeg-based company’s shares were off 4 to $10.06 on 6.3 million shares traded.

Its share price has moved between $9.12 and $27.74 over the last 52 week period and it has roughly 127 million shares outstanding.