HudBay Minerals Inc. dropped the most in nine months after saying the cost estimate of a Canadian zinc, copper and gold mine rose, rainfall disrupted work at its Peruvian project and it may be unable to maintain its dividend.
HudBay fell 7.1 percent to C$9.35 at the close in Toronto, where the company is based. The decline was the biggest since May 14.
HudBay, which expects to more than quadruple copper output by 2015, increased the cost estimate for its Lalor project in Manitoba by 13 percent to C$794 million ($779 million), and said it is “uncertain” its 10-cent semi-annual dividend can be maintained until the company’s new mines achieve commercial production.
“With higher operating and capital costs built in for Lalor, our model suggests the balance sheet could be squeezed in 2014-2015,” Patrick Morton, an analyst at Royal Bank of Canada, said in a note today. “We assume total additional debt of C$450 million, but the company has options to raise funds, including a minority stake sale, or equipment financing for Constancia.”
The Constancia project in Peru experienced a higher-than-normal amount of rainfall, which slowed progress to date, HudBay said yesterday in its fourth-quarter earnings statement released after the close of regular trading. The company said it believes the impact on the project schedule is “recoverable” and hasn’t changed its targets for production start up in late 2014.
Copper futures for May delivery slumped 1.5 percent to settle at $3.5695 a pound at 1:22 p.m. on the Comex in New York after touching $3.5535, the lowest since Dec. 24.