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Hudbay Minerals Inc Ordinary Sh (HBM)
Q4 2013 Earnings Conference Call
February 20, 2014, 10:00 AM ET
Candace Brûlé - Director, Investor Relations
David Garofalo - President and Chief Executive Officer
David Bryson - Senior Vice President and Chief Financial Officer
Alan Hair - Senior Vice President and Chief Operating Officer
Cashel Meagher - Vice President, South America Business Unit
Brad Lantz - Vice President, Manitoba Business Unit
Brett Levy - Jefferies
David Charles - Dundee Capital Markets
Alex Terentiew - Raymond James
Alec Kodatsky - CIBC
John Tumazos - John Tumazos Very Independent Research
Stefan Ioannou - Haywood Securities
Shane Nagle - National Bank Financial
Gary Lampard - Canaccord Genuity
Matt Murphy - UBS
Sachin Shah - Albert Fried
Previous Statements by HBM
» HudBay Minerals' Management Presents at Bank of America Merrill Lynch 2013 Leveraged Finance Conference (Transcript)
» HudBay Minerals' CEO Discusses Q3 2013 Results - Earnings Call Transcript
» HudBay Minerals' CEO Discusses Q2 2013 Results - Earnings Call Transcript
» HudBay Minerals' CEO Discusses Q1 2013 Results - Earnings Call Transcript
Thank you, Operator. Good morning and welcome to Hudbay's 2013 fourth quarter results conference call. Hudbay's financial results were issued yesterday and are available on our website, at www.hudbayminerals.com. A corresponding PowerPoint presentation is also available and we encourage you to refer to it during this call.
Our presenter today is David Garofalo, Hudbay's President and Chief Executive Officer. Accompanying David for the Q&A portion of the call will be David Bryson, our Senior Vice President and Chief Financial Officer; Alan Hair, our Senior Vice President and Chief Operating Officer; Cashel Meagher, our Vice President of the South American Business Unit; and Brad Lantz, our Vice President of the Manitoba Business Unit.
Please note that comments made on today's call may contain forward-looking information, and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR and EDGAR. These documents are also available on our website.
We will also be referencing the company's offer to acquire Augusta Resource Corporation and we suggest that you read the offer documents that were filed on February 10 and 11, 2014, which include the offer and circular on SEDAR and its scheduled PO and Form F-10 on EDGAR. All of the company's SEDAR and EDGAR filings are also available on our website. For the purposes of this presentation, we have assumed a U.S. to Canadian dollar conversion ratio of 1:1.
And now, I'll pass the call over to David Garofalo. Dave?
Thanks, Candace. Good morning, everyone. 2013 represented the year of significant transition for Hudbay, as we made substantial progress on our Sector-Leading Production Growth program, all while managing our existing operations and the closure of two older mines.
While the transformation of this scope and scale inevitably leads to challenges, we believe we manage those well. While our shaft sinking was completed during the fourth quarter of 2013 on schedule and on budget, and we also commenced initial production at Reed in September 2013 on time and on budget.
At Constancia, we substantially completed all detailed engineering and procurement during 2013 and advanced construction on schedule with over 56% project completion by yearend. We achieved our zinc and precious metals production targets in 2013. We also raised over $500 million in non-dilutive financing through the Constancia gold stream transaction with Silver Wheaton to follow on issuances of our senior unsecured notes and a mobile equipment financing facility.
We also built upon our well-established safety track record. In 2013, we reported our lost time accident frequency of 0.4 per 200,000 hours, a rate that is well below the average for the mining sector. This is even as our man-hours increased company-wide by 74% over 17 million.
However, the progress we made in 2013 did not come without its challenges. As announced last November, results from the completion of revised capital cost estimate at Constancia indicated an increase in construction cost of approximately $160 million. As you may recall, the most significant contributor to this well-documented cost escalation related to heavy civil works.
We have since made excellent progress in this critical area and other key construction milestones, and are on track to achieve project completion on the revised budget and are on schedule to commence production in the fourth quarter of 2014 and achieve commercial production in the second quarter of 2015.
Also as reported in the company's news release at January 8, 2014, copper production was below expectations in the fourth quarter of 2013. Grades mined at 777 were affected by the deferral of higher grade zones from the 2013 mine plant to future years, as a result of temporary limitations and pace back availability and requirements for ground support in the higher grade zones.
While rehabilitation work will continue in 2014, we remain on track to achieve our full year 2014 metals production and cost guidance, as the rehabilitation work was already factored in to our 2014 production and cost estimates. We expect 2014 to be an active year for Hudbay's. We look towards achieving production growth milestones in all three of our new mines.
We continue to advance Constancia towards initial production late this year. We anticipate doubling the production rate from Lalor in the second half of the year, as the main production shaft is commissioned and the refurbishment of the Snow Lake concentrator is completed. And we anticipate declaring commercial production at the Reed project during the second quarter of this year.
We also have a $20 million brownfield exploration program planned for 2014, which includes the development of an exploration direct at the Lalor mine, where we expect to conduct underground exploration for the first time, starting in late 2014. In addition, we will restart exploration drilling at Constancia to test anomalies identified during a recent airborne geophysical program.