Earlier this month, Toronto-based Hudbay Minerals Inc. injected US$115 million in cash to its balance sheet, shoring up the company’s finances just as a veil of uncertainty settles over the copper market.
The cash came from an agreement by Hudbay to pre-sell 80,000 ounces of gold from its Manitoba operations at an average of US$1,682 per ounce over the course of 2022 and 2023. As chief executive Peter Kukielski told shareholders, “it looks like gold is flying.”
By pre-selling gold, which has risen 15 per cent since January to US$1,737 as of Friday, Hudbay was able to preserve its access to a revolving line of credit, as clouds build over its copper business — which along with other base metals accounted for 80 per cent of its revenue in 2019.
Unlike gold, copper price largely remains a function of supply and demand, both of which have grown more opaque as mines shut down and global economic growth projections are tossed aside amid the coronavirus pandemic.
It marks a plot twist for copper, which was supposed to shine in 2020 amid a widely projected supply deficit.
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