Hudbay Minerals Inc. said it will sharply reduce spending on its proposed Rosemont copper mine for the remainder of 2016.
“Capital expenditures in Arizona on the Rosemont project are expected to decline substantially over the balance of 2016,” the company stated in its Management Discussion & Analysis report for the 1st Quarter.
The reduced spending comes at the same time as major permitting decisions are looming including the crucial U.S. Army Corps of Engineers decision on whether to issue a Section 404 Clean Water Act permit for the mine.
In an unusual action since acquiring the Rosemont project in July 2014, Hudbay did not mention Rosemont in a press release announcing the company’s release of its quarterly financial results.
The Toronto-based company reports spending $11.5 million in the 1st Quarter on the Rosemont prospect in the Santa Rita Mountains on the Coronado National Forest 30 miles southeast of Tucson.
Hudbay’s financial reports project spending an additional $28.5 million over the remaining nine months of 2016 on Rosemont.
Hudbay continued its five quarter string of losses posting a $15.8 million loss in the first quarter, despite a sharp increase in revenue as interest payments on $1.3 billion in debt left the company in the red.
“Notwithstanding lower metals prices, revenues nearly doubled in the first quarter of 2016 to $253.6 million, $124.9 million higher than the same period in 2015,” the company stated in its MD&A.
“This increase was primarily due to higher sales volumes compared to the first quarter of 2015 as a result of commercial production being achieved at Constancia,” Hudbay stated.
Constancia is an open-pit copper mine in the Peruvian Andes that is Hudbay’s largest operation and is similar in size to the proposed Rosemont project.
But $43.7 million in semi-annual interest payments cut deeply, leaving the company with a loss. Hudbay must repay $920 million in long term bonds in October 2020.
The combination of depressed copper prices and substantial long term debt payments puts Hudbay in a difficult position to finance construction of the Rosemont project, even if it obtains the necessary permits and withstands expected legal challenges.
Low copper prices have cut sharply into the company’s expected revenue from Constancia, which was projected to provide enough free cash flow for Hudbay to internally finance the $1.5 billion Rosemont project.
Hudbay announced earlier this year that it has delayed construction of Rosemont, but is continuing to pursue the necessary permits to build what would be the third largest copper mine in the United States.
Hudbay has lost money in each of the last five quarters including a $255 million loss in the 4th Quarter of 2015, $11.8 million loss in the 3rd Quarter of 2015, a $55.2 million loss in the 2nd Quarter of 2015 and a $237 million loss in the 1st Quarter of 2015.
Hudbay will hold its annual meeting on May 19 in Toronto.
The activities of HUDBAY regarding their ROSEMONT COPPER PROPERTY are not surprising in view of the depressed copper price and the overall depressed metals price and a weak economy .
This is certainly not the time to be trying to develop a new copper mine , particularly in the USA , where the political scene is as unpredictable as the copper market .
It is becoming more and more apparent that HUDBAY will be submitting a revised mine plan to the FOREST SERVICE as a result of the test work that they have carried out since they acquired the property from AUGUSTA . This is in keeping with the fact that they have been selling off the mining/milling/processing equipment that AUGUSTA purchased to go with the original mine plan that had been submitted to the FOREST SERVICE . Will the FOREST SERVICE simply accept a revised mine plan or will HUDBAY be required to submit a new application ? The time frame for this is critical .
Without a fully approved permit in place , HUDBAY does not have a BANKABLE DOCUMENT in hand . This makes it difficult for them to borrow money against the ROSEMONT COPPER PROPERTY or to even attract a joint venture partner . HUDBAY was planning to develop the property with its own INHOUSE FINANCIAL RESOURCES but that no longer is possible considering their debt situation .
In view of the above , HUDBAY is vulnerable , making it advantageous for those opposing the project to exert maximum pressure on the powers that be to deny any permit and to force the FOREST SERVICE to terminate , by whatever means , the processing of the application for the development of the ROSEMONT COPPER PROPERTY .
ACTION IS REQUIRED NOW !!!!!!!!!!
Caterpillar’s proposed facilities seem more than coincidence. What’s the best action to help stop the permit approval?
Under the circumstances , it is paramount to put pressure on the GOVERNMENT AGENCIES , at all levels , who are responsible for the permitting procedures that HUDBAY is going through in order to block/stop/terminate THE FINAL PERMIT .
The move of CATERPILLAR to TUCSON reflects the major role that it plays in providing MINING equipment and services to ARIZONA , a state that is KING OF COPPER in the mining industry .
HUDBAY inherited the MOU that AUGUSTA had negotiated with CATERPILLAR . It would only come into play after the FOREST SERVICE has issued the final permit to HUDBAY . At this point , there is hope that will NEVER HAPPEN .
YOUR HELP IS NEEDED !!!!!!!
Cat’s entry into Tucson seems to be more than mere coincidence vis a vis Rosemont. Cat is also hurting financially. It promises to supply 600+ high-paid jobs into the Tucson area. Could Hudbay be planning a reduced exposure in its Rosemont venture in conjunction with a Cat project that lubricates the permitting process? Afterall, Cat’s entry could eliminate much of the expensive overhead in physical equipment that Hudbay is now liquidating. Put on your thinking caps folks.
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