May 7, 2008 / 5:29 PM / 10 years ago

UPDATE 1-HudBay may close copper smelter early, CEO says

(Adds details on smelter, changes dateline from Ottawa)

By Cameron French

TORONTO, May 7 (Reuters) - HudBay Minerals (HBM.TO) may be forced to shut down its copper smelter in Flin Flon, Manitoba, earlier than previously expected, the company’s chief executive said on Wednesday, noting that at current copper treatment prices, the facility does not make money.

“If we were to shut the smelter tomorrow, the financial impact on the company would be positive,” Allen Palmiere, who was named CEO of the base metals miner in January, said on a conference call to discuss first-quarter earnings.

Winnipeg, Manitoba-based HudBay said in November it may have to close the smelter by 2015 due to regulations requiring emission cuts that would render the aging plant uneconomical.

However, he said on Wednesday that low industry copper treatment charges and rising fuel costs may mean that could happen sooner than expected, unless the situation changes.

“Do we want to shut the smelter down early? No we don’t. But economics may very well dictate that we have to seriously consider it,” he said.

HudBay, which mines copper and zinc, does not produce enough copper concentrate to keep the operation running, forcing it to purchase and ship in concentrate from other mines, which pushes costs higher.

The company has decided not to enter into agreements to process third-party concentrate beyond 2008, unless treatment rates improve.

HudBay will continue to buy and process concentrates under contracts settled for 2008, Palmiere said. But it has exercised early termination rights on smelting contracts that were originally scheduled to extend into 2009 and beyond.

The company has said that, when the smelter shuts, it will likely continue to mine the ore, then sell the copper concentrate rather than the finished metal.


HudBay said late on Tuesday that its first-quarter profit fell nearly 66 percent, as it was stung by a stronger Canadian dollar, shipping delays, higher operating costs and a slumping zinc price.

Just after midday, HudBay’s stock was down 53 Canadian cents at C$19.60 on the Toronto Stock Exchange.

The company earned C$21.6 million, or 17 Canadian cents a share, down sharply from C$63.1 million, or 50 Canadian cents a share, in the year-before period.

Revenue declined 22 percent to C$271.6 million, while operating cash flow fell by more than half to C$70.7 million, from C$142.5 million.

HudBay produced 19,272 tonnes of copper, down 11 percent from 21,724 tonnes, while zinc production rose 10.5 percent to 34,710 tonnes.

The company, which had a cash position of C$781 million at March 31, has been alternately rumored as on the hunt for acquisitions or as a target for larger players. ($1=$1.00 Canadian) (Additional reporting by Susan Taylor; editing by Rob Wilson)

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