HudBay Minerals Inc.
(HBM-T) C$9.37
Q3/12 -- Staying on course
Event
HudBay reported Q3/12 adjusted EPS of $0.07 compared with TD forecast
EPS of $0.05 and consensus estimate of $0.09. The company will be holding
a conference call to discuss Q3/12 results on Nov. 2 at 10:00AM (EST).
Impact – NEUTRAL
While results were better than expected, we would view Q3/12 results as
largely neutral with most of the beat related to higher-than-expected sales
volumes and a higher-than-expected realized zinc price. Production was also
better than expected; however, this was related to the processing of stockpiled
ore through the Flin Flon concentrator. The company has maintained its 2012
production and cost guidance.
Timeline targets appear to be on schedule for Lalor, Reed and Constancia.
Capital budgets remain unchanged for all three projects, although the timing
of expenditures has changed slightly with 2013 expenditures reduced slightly
and shifted to 2014. This appears to be related to more clarity on the timing of
equipment and other deliveries. The first phase of the Lalor project (with
production via the main ventilation shaft) is expected to be declared in
commercial production in Q2/13.
While the company reported an operationally sound quarter with production
ahead of our expectations, we would view the near to medium-term outlook
for the company as neutral with flat production over the next few years with
the Trout Lake and Chisel mines now closed. Production until 2014 will be
mainly sourced from 777, with limited production coming Lalor until the
production shaft is complete. Significant production growth will not occur
until 2014/15 when the Lalor and Constancia projects come online. We are
maintaining our HOLD recommendation.