Toronto-based Hudbay Minerals Inc. is taking significant financial steps to free up cash in anticipation of receiving final government approvals to begin construction on its proposed $1.9 billion Rosemont Mine and is confident the company will withstand all legal challenges to its permits, according to financial reports and statements by company officials.
“We’re feeling very well positioned now,” Hudbay Chief Financial Officer David Bryson told stock analysts during a Nov. 2 conference call related to Hudbay’s 3rd quarter earnings.
Bryson said the company’s recent stock offering along with profitable mining operations in Peru and Manitoba has put the company in good position to finance construction of Rosemont. The company raised $242 million in September by selling 24 million shares of common stock.
“Obviously, we have an underlying business,” Bryson said. “It’s capable of generating substantial amount of cash flow over what would be Rosemont’s likely construction period.”
Hudbay officials expressed confidence that the company will withstand all legal challenges to its permits. Organizations that oppose the mine think differently. They are still convinced that the proposed mine will not overcome the required legal hurdles (click here and here for examples.)
Four environmental groups, including Save the Scenic Santa Ritas, a Tucson citizens group opposed to the Rosemont project, in August filed a 60-day notice of intent to sue the U.S. Forest Service alleging the agency violated the Clean Water Act when it issued the Final Record of Decision approving construction of the mine.
The Center for Biological Diversity, a Tucson-based environmental group, in September filed a federal lawsuit against the U.S. Forest Service and the U.S. Fish and Wildlife Service challenging, among other things, the issuance of the “biological opinion” that the mine will not seriously impact endangered species, including the jaguar.
“This lawsuit is one of many challenges against the Rosemont permitting process and Hudbay is confident the permits will be upheld,” the company states in its 3rd Quarter Management Discussion & Analysis report.
Hudbay CEO Alan Hair told analysts a “robust” permitting process has been ongoing for 12 years and that the legal challenges have always been expected.
“As we have said all along, we think that good science should prevail,” Hair said.
Higher copper and zinc prices along with steady production in Manitoba and Peru helped Hudbay strengthen its balance sheet in anticipation of future construction at Rosemont.
“Our strong cash flow generation helped to significantly reduce our debt balances this quarter,” Hair said. “We also applied part of the proceeds from the equity offering in late September to fast track debt reduction and have fully repaid the remaining cash borrowings under our senior secured credit facilities.”
Net profits and earnings per share in the third quarter were $41 million and $0.17 respectively compared to a net profit and profit per share of $26 million and $0.11 respectively in the second quarter of 2017.
Hudbay increased its available cash to $329 million at the end of the 3rd quarter, up from $153 million at the end of the 2nd quarter, according to a company report. Hudbay increased its total liquidity to $750 million as of Sept. 30, up from $497 million at the end of the 2nd quarter on June 30. The company’s long-term debt was $986 million, according to its 3rd quarter financial statement.
The company has one outstanding federal permit application pending before the U.S. Army Corps of Engineers which is determining whether to issue a Clean Water Act permit needed to build the mine. The Corps’ Los Angeles district office recommended denying the permit in July 2016. But a final decision has not been made by the San Francisco regional office.
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