HudBay Minerals Inc announced Q2 2011 financial results. Profit before asset impairments related mainly to the Fenix nickel project in Guatemala, increased to USD 40.0 million or USD 0.23 per share in the Q2 of 2011 compared to USD 4.4 million or USD 0.03 per share during the Q2 of 2010.
During the Q2 of 2011, HudBay recognized pre tax impairment losses of USD 212.7 million on the Fenix project and USD 1.4 million related to available for sale investments. Including the impairment losses, the Q2 loss attributable to shareholders was USD 171.9 million or USD 0.97 per share. Profit before asset impairments grew during the quarter mainly due to higher metal prices and sales volumes. HudBay's board of directors has declared a semi annual dividend in the amount of USD 0.10 per common share, payable on September 30th 2011 to shareholders of record on September 15th 2011.
HudBay generated strong revenue growth as a result of higher metal prices and higher sales volumes. Results for the second quarters of 2011 and 2010 have been presented in accordance with International Financial Reporting Standards. Compared to results for the second quarter of 2010 previously reported under Canadian generally accepted accounting standards, IFRS profit for the Q2 of 2010 includes additional exploration expenses of USD 11.5 million primarily related to the Lalor project. Other differences between CGAAP and IFRS and their impact on the company's financial results are described in HudBay's interim financial statements for the Q2 of 2011.
On August 5th 2011, HudBay announced it had entered into a definitive agreement with the Solway Group to sell 100% of the company's interest in the Fenix ferro nickel project in Guatemala for USD 140 million in cash at closing and USD 30 million upon the satisfaction of certain conditions during the course of Solway's development of the project. Closing of the transaction is expected to occur in the third quarter of 2011. HudBay recognized an impairment loss related to its investment in Fenix of USD 212.7 million during the Q2.
Co product costs per unit sold in the Q2 of 2011 were USD 1.50 per pound of copper, USD 266 per ounce of gold and USD 1.00 per pound of zinc. Co product costs of copper increased compared to the Q1 of 2011 as by-product credits included the one time sale of copper bearing material in the Q1 following the closure of the company's copper smelter and refinery.
The company was pleased with its cost control at its flagship 777 mine as mining costs of USD 33.49 per tonne were essentially unchanged from the 2010 comparable period. As expected, unit mining costs per tonne at Trout Lake and Chisel North increased over the prior year due to the complex nature of these late stage mining operations and reduced cost capitalization given the short remaining mine life. These costs are expected to remain within the range of guidance for 2011 in HudBay's press release dated December 13th 2010.
Operating cash flow before changes in non cash working capital increased to USD 63.5 million or USD 0.37 per share in the Q2 of 2011 from USD 32.5 million, or $0.22 per share, in 2010 mainly as a result of higher metals prices and sales volumes. Capital expenditures increased to USD 55.2 million due to the acceleration of construction at Lalor and commencement of pre-construction activities at Constancia, offset in part by reduced sustaining capital expenditures.
Cash and cash equivalents decreased to USD 747.7 million at June 30th 2011 from USD 901.7 million at December 31st 2010. The decrease in cash and cash equivalents during 2011 was due mainly to our acquisition of Norsemont, capital expenditures strategic investments and payment of dividends.
Together with our unused credit lines, HudBay has available liquidity of approximately USD 1.0 billion and no debt. While the company believes that the Lalor and Constancia projects can be financed from existing resources and future cash flows, it expects to arrange additional debt financing at either the corporate or project level to maintain optimum financial flexibility.
Mr David Garofalo president and CEO of HudBay said that "Our operating mines delivered very strong performance during the Q2 of 2011 and we remain confident in our ability to meet our production and cost guidance for the remainder of the year. We have also been successful in securing the railcars needed to significantly reduce the copper concentrate inventory levels at our northern Manitoba operations. We made good progress on our strategic objectives with the announcement of an optimized project plan and commitment to a new concentrator at Lalor, progress towards a development decision at Reed, continued exploration success with high grade drill intercepts in Peru in addition to front-end engineering for the Constancia project."
