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Shares of Hudbay Minerals Pop on Earnings and Updated Guidance

By Tyler Crowe - Updated Feb 19, 2021 at 2:37PM

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The midsize copper and gold miner is riding some considerable commodity price tailwinds into 2021.

What happened

Shares of mining company Hudbay Minerals (HBM -1.92%) rose as much as 11.7% in early morning trading and are up 7.7% as of 12:30 p.m. EST Friday. Today's stock surge comes after the company released fourth-quarter and full-year results as well as provided preliminary guidance for 2021.

So what

Prior to the market open, the copper and gold mining company released its 2020 results. It ended the quarter with earnings per share of 0.03 Canadian dollars and a full-year per-share loss of CA$0.46. While its 2020 numbers were down compared to the prior year, some of that can be forgiven because several of its mining operations were halted because of the coronavirus pandemic.  

What is more promising, though, was the company's 2021 guidance and the respective price rallies for copper and gold over the past year. The S&P GSCI Copper Index has increased more than 80% since the March 2020 coronavirus sell-off and is now at a nine-year high of $633. Similarly, the price of gold has remained rather strong over the past two years and sits at more than $1,800 per ounce as of this writing. 

An open pit copper mine

Image source: Getty Images.

This is a very promising backdrop for Hudbay's 2021 operations. The company expects to significantly increase its gold production as it finishes work on a new mill that will process more of its ore for gold extraction than for copper or zinc. Similarly, it expects total copper sold to increase by 7% thanks to some of its mines developing sections that have higher ore concentration.

Now what

Things are looking better for Hudbay Minerals. The company has some considerable commodity price tailwinds to ride so far, and some of its major capital projects are set to become 100% operational this year. If commodity prices remain high like this, then the company could reap some considerable profits. 

That said, Hudbay's costs are high enough that it hasn't been able to generate consistent profits from its operations. When it comes to copper, gold, and other smaller precious metal miners, cash costs and all-in sustaining costs matter. If these new operations can't lower its production costs and these commodity price rallies don't continue, then Hudbay Minerals' stock may lose its luster.

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Hudbay Minerals Inc. Stock Quote
Hudbay Minerals Inc.
$5.62 (-1.92%) $0.11

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