EX-99.3 4 a2172578zex-99_3.htm EXHIBIT 99.3
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Exhibit 99.3

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For Immediate Release:


HudBay Announces Exceptional Second Quarter 2006 Results

Q2 2006 Financial Highlights

    •
    Net earnings of $152.8 million, $1.71 per basic share, from revenue of $261.7 million

    •
    Operating cash flow of $98.3 million or $1.10 per basic share

    •
    Cash — less debt of $28.6 million

    •
    Net earnings include net tax recovery of $58.2 million

    •
    Cash cost per pound of zinc sold, net of by-product credits, negative US $0.95

Q2 2006 Corporate Highlights

    •
    Balmat zinc mine achieved first concentrate production

    •
    Planned shutdowns of smelter and zinc plant completed successfully

    •
    Repurchased US$98.2 million of US dollar senior secured notes

    •
    Increased credit facility commitment to $50 million (undrawn)

    •
    $20 million for exploration & development received from issue of flow-through shares

    •
    Incentivized early warrant exercise program, initiated

    •
    CMM agency arrangement completed for Zinc and Zinc Oxide

        Winnipeg, Manitoba — August 11, 2006 — HudBay Minerals Inc. (TSX:HBM) ("HudBay") announces an exceptional 1,659% increase in net earnings to $152.8 million (including a net $58.2 million tax recovery) or $1.71 per basic share on revenue of $261.7 million for the second quarter ended June 30, 2006 (Q2 2006) compared to net earnings of $8.7 million on revenue of $158.2 million for the second quarter 2005 (Q2 2005). In addition, operating cash flow for Q2 2006 increased to $98.3 million, compared to $32.9 million for Q2 2005.

        "Our net earnings growth of 1,659%, or 988% excluding the net tax recovery this quarter, was exceptional, despite lower quarterly sales volumes from planned shutdowns and the completion of the Considar Metals Marketing ("CMM") agency changeover," said Peter Jones, President and Chief Executive Officer of HudBay. "The Q2 2006 results, including the strong operating cash flow, shifts HudBay to positive cash, after deducting debt, and places us in a powerful financial position as we evaluate growth opportunities."

        The following bracketed values denote the comparative figures for Q2 2005.

Q2 2006 Financial Highlights

        Total revenue for Q2 2006 was $261.7 million ($158.2 million) from sales of 19,774 tonnes of zinc (28,465) including sales to Zochem; 10,852 tonnes of zinc oxide (10,577); 17,218 tonnes of copper (20,210); 25,062 ounces of gold (26,520) and 354,024 ounces of silver (322,231). For Q2 2006, compared to Q2 2005, sales of copper and zinc were lower due to a copper smelter and zinc plant planned shutdown and sales of zinc were also lower due to the completion of the contractual change with CMM to an agency arrangement.

        During Q2 2006, gross realized metal prices averaged US$1.55/lb. for zinc (US$0.59/lb.); US$3.50/lb. for copper (US$1.57/lb.); US$593/oz. for gold (US$441/oz.) and US$10.95/oz. for silver (US$7.13/oz.) and the Canadian to US dollar exchange rate averaged C$1.12 per US$1.00 (C$1.24).

        Operating costs for Q2 2006 were $138.9 million ($114.1 million).

        For Q2 2006, HudBay recorded a net tax recovery of $58.2 million, of which $68.0 million was related to the increase in the tax asset offset by other current and future taxes of $9.8 million. The tax asset has been adjusted to reflect the future income tax assets at an amount HudBay considers more likely than not to be realized, and the increase resulted from significantly higher metal price projections. One year of projection is considered appropriate due to the uncertainties of future metals prices and exchange rates.

        For Q2 2006, HudBay's cash cost, net of by-product credits, per pound of zinc sold, was negative US$0.95 (positive US$0.09). (Please see the MD&A for the quarter ended June 30, 2006 for a reconciliation of this non-GAAP measure).

H1 2006 Financial Highlights

        In the first six months of 2006 (H1 2006), net earnings increased by 1,180% to $228.8 million or $2.62 per basic share, compared to $17.9 million for the first half of 2005. In addition, operating cash flow for H1 2006 increased to $176.3 million, compared to $57.7 million for H1 2005.

        Total revenue for the first six months of 2006 was $469.7 million ($309.7 million) from sales of 49,946 tonnes of zinc (55,562) including sales to Zochem; 36,150 tonnes of copper (40,592); 39,908 ounces of gold (51,917) and 586,480 ounces of silver (653,875). As noted in the Q2 financial highlights, for H1 2006, compared to H1 2005, sales of copper and zinc were lower due to the copper smelter and zinc plant planned shutdowns, and sales of zinc were also lower due to the completion of the contractual change with CMM to an agency arrangement.

        During H1 2006, gross realized metal prices averaged US$1.26/lb. for zinc (US$0.60/lb.); US$2.89/lb. for copper (US$1.53/lb.); US$567/oz. for gold (US$434/oz.) and US$10.25/oz. for silver (US$7.18/oz.) and the Canadian to US dollar exchange rate averaged C$1.14 per US$1.00 (C$1.24).

        Operating costs for the six months ended June 30, 2006 were $260.8 million ($231.8 million).

        For H1 2006, HudBay recorded a net tax recovery of $72.6 million, of which $80.3 million was related to the increase in the tax asset offset by other current and future taxes of $7.7 million. The tax asset has been adjusted to reflect the future income tax assets at an amount HudBay considers more likely than not to be realized, and the increase resulted from significantly higher metal price projections. One year of projection is considered appropriate due to the uncertainties of future metals prices and exchange rates.

        For H1 2006, HudBay's cash cost, net of by-product credits, per pound of zinc sold, was negative US$0.34 (positive US$0.15). (Please see the MD&A for the six months ended June 30, 2006 for a reconciliation of this non-GAAP measure).

Q2 2006 Corporate Highlights

        As previously announced, the Balmat zinc mine in New York state achieved production of zinc concentrate, as planned, late in Q2 2006.

        The planned shutdown of the copper smelter, which had a production equivalent impact of approximately 25 days, as well as the annual routine shutdown of the zinc plant, which had a production equivalent impact of 10 days, were completed successfully during the quarter. Mines and concentrators continued to operate normally.

        As previously announced, during Q2 2006, HudBay repurchased, through the open market, a total US$98.2 million of its US dollar senior secured notes, leaving a balance of US$56.8 million as at June 30, 2006.

        During Q2 2006, the CMM agency arrangement was extended to include zinc, zinc oxide and other associated products. Previous to this contractual change, HudBay recognized 50% of its consolidated sales when its metal was shipped from the Flin Flon operations and was sold to CMM. Under the agency contractual arrangement, HudBay will retain title to its metals until sold to third party customers. The associated one-time change in sales at the Flin Flon location to the third-party customer arrangement for zinc was approximately 3 to 4 weeks. The impact for zinc oxide and other products was minimal.

        Early in Q2 2006, as previously announced HudBay sold 1.46 million flow-through common shares at a price of $13.75 per share for aggregate gross proceeds to the Company of approximately $20 million. The proceeds will be used for exploration and development on HudBay's Canadian properties.

        Also in Q2 2006, as previously announced, HudBay initiated an early warrant exercise transaction which was approved by votes of more than 98% in favour at meetings held of its shareholders and warrantholders. As a result, the 30-day period, during which warrantholders would receive an incentive for the early exercise of HudBay's publicly traded warrants, commenced on June 5, 2006 with an expiry date of July 5, 2006.

Events Subsequent to End of Q2 2006

        More than 97.2% of HudBay's publicly traded warrants were exercised for common shares from the proposal made to warrantholders for early exercise of their warrants. HudBay has subsequently received gross proceeds of $104.9 million ($39.6 million received prior to June 30, 2006, and $65.3 million received subsequent to June 30, 2006) from the early warrant exercise.

        Early in July, HudBay completed the sale of 100% of the outstanding shares of ScoZinc Limited, to Acadian Gold Corporation for $7.5 million plus adjustments.

        Also in July, HudBay's wholly owned subsidiary, Hudson Bay Exploration and Development Company Limited ("HBED"), entered into a Letter of Intent ("LOI") with Murgor Resources Inc. ("Murgor") whereby HBED would option to Murgor four mineral properties for purchase. Two large exploration properties are also included in the LOI whereby joint ventures may be formed between the two companies.

        HudBay also announced that it plans to mine additional ore production from pillars at its Trout Lake mine in northern Manitoba. It plans to use contractors to mine 42,000 tons of selected pillar ore from the Trout Lake mine mineral reserves, of approximately 1.4% copper and 5.4% zinc and to increase the mine output from 441,400 tons to 483,750 tons, during the second half of 2006.

        In addition, HudBay also entered into an exclusive option agreement whereby it may acquire 100% of the Jason lead/zinc mineral property in the Yukon from MacPass Resources Limited, for C$1.0 million.

        For further information, please see attached hereto, HudBay's management discussion and analysis for the quarter ended June 30, 2006, and selected financial information for the quarters ended June 30, 2006 and 2005. A copy of HudBay's consolidated financial statements for the three months and six months ended June 30, 2006 and 2005, as well its MD&A for the quarter ended June 30, 2006, are available on SEDAR at www.sedar.com and on the HudBay website at www.hudbayminerals.com.

About HudBay Minerals Inc.

        HudBay Minerals Inc. is an integrated mining company that operates mines, concentrators and a metal production complex in northern Manitoba and Saskatchewan. The company also owns a zinc oxide production facility in Ontario, the White Pine copper refinery in Michigan, and the Balmat zinc mine in New York state.

        HudBay is a member of the S&P/TSX Composite Index.

- 30 -

For further information, please contact:

Don Bain
Director, Investor Relations
Tel: (204) 949-4272
Fax: (204) 942-8177
E-mail: don.bain@hbms.ca

Cautionary Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements", within the meaning of applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to possible joint venture arrangements with Murgor, plans to mine addition ore at the Trout Lake Mine and the possible acquisition of the Jason property. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of HudBay, to be materially different from those expressed or implied by such forward-looking statements, including risks associated with the mining industry such as economics government regulation, environmental and reclamation risks, title disputes or claims, success of exploration activities, risks associated with joint ventures, future commodity prices, costs of production, possible variations in ore reserves, resources, grade or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes, capital expenditures, conclusions of economic evaluations as well as those factors discussed in the section entitled "Risk Factors" in HudBay's Annual Information Form for the year ended December 31, 2005, available on www.sedar.com. Although HudBay has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. HudBay does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.

        To view the Management's Discussion and Analysis, please click the following link:

        http://www.ccnmatthews.com/docs/hbmamda.pdf


HUDBAY MINERALS INC.

CONSOLIDATED STATEMENT OF EARNINGS

(In thousands of Canadian dollars, except share and per share amounts)

 
   Three months ended June 30
   Six months ended June 30
  
 
   2006
   2005
   2006
   2005
  
 
   (Unaudited)

   (Unaudited)

  
Revenue   $ 261,727   $ 158,188   $ 469,690   $ 309,713  
Expenses:                          
  Operating     138,942     114,110     260,829     231,823  
  General and administrative     6,318     5,947     12,246     9,588  
  Depreciation and amortization     15,649     13,228     31,191     25,952  
  Accretion of asset retirement obligation     659     649     1,319     1,301  
  Exploration     3,871     3,216     7,005     3,785  
  Foreign exchange (gain)     (25 )   (424 )   (1,293 )   (674 )
   
 
 
 
 
      165,414     136,726     311,297     271,775  
   
 
 
 
 
Operating earnings     96,313     21,462     158,393     37,938  
Interest expense     (3,279 )   (5,735 )   (8,033 )   (11,388 )
Foreign exchange gain (loss) on long term debt     7,321     (2,765 )   6,497     (4,095 )
Gain (loss) on derivative instruments (note 10)     9,221     (1,819 )   13,552     545  
Premium on long-term debt prepayment     (12,252 )   —     (12,252 )   —  
Interest and other income     1,972     635     3,144     1,105  
Amortization of deferred financing fees     (4,706 )   (366 )   (5,068 )   (707 )
   
 
 
 
 
Earnings before income tax     94,590     11,412     156,233     23,398  
Tax recovery (expense) (note 8)     58,246     (2,721 )   72,589     (5,526 )
   
 
 
 
 
Earnings for the period   $ 152,836   $ 8,691     228,822   $ 17,872  
   
 
 
 
 
Earnings per share:                          
  Basic   $ 1.71   $ 0.11   $ 2.62   $ 0.22  
  Diluted   $ 1.30   $ 0.11   $ 2.03   $ 0.22  
Weighted average number of common shares outstanding                          
  Basic     89,335,965     81,388,858     87,375,369     79,646,755  
  Diluted     117,203,669     81,959,645     112,702,524     80,133,777  

See accompanying notes to consolidated financial statements.


HUDBAY MINERALS INC.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(In thousands of Canadian dollars)

 
   Three months ended June 30
   Six months ended June 30
  
 
   2006
   2005
   2006
   2005
  
 
   (Unaudited)

   (Unaudited)

  
Retained earnings (deficit), beginning of period   $ 154,718   $ 2,695   $ 78,732   $ (6,486 )
Earnings for the period     152,836     8,691     228,822     17,872  
   
 
 
 
 
Retained earnings, end of period   $ 307,554   $ 11,386   $ 307,554   $ 11,386  
   
 
 
 
 

See accompanying notes to consolidated financial statements.


HUDBAY MINERALS INC.

CONSOLIDATED BALANCE SHEET

(in thousands of Canadian dollars)

 
   June 30,
2006
   December 31,
2005
  
 
   (Unaudited)

    
  
Assets:              
Current assets:              
  Cash and cash equivalents   $ 113,440   $ 141,660  
  Accounts receivable     95,646     44,698  
  Inventories     155,503     116,596  
  Prepaid expenses     5,541     3,625  
  Current portion of fair value of derivatives     13,222     4,483  
  Future income tax asset (note 8)     106,500     26,200  
   
 
 
      489,852     337,262  

Property, plant and equipment
 
 
431,480
 
 
378,207
 
Other assets (note 4)     7,991     13,284  
   
 
 
    $ 929,323   $ 728,753  
   
 
 

Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
Current liabilities:              
  Accounts payable and accrued liabilities   $ 122,353   $ 91,930  
  Interest payable on long-term debt     2,797     8,004  
  Current portion of other liabilities (note 5)     27,842     28,211  
   
 
 
      152,992     128,145  
   
 
 
Long-term debt (note 6)     69,912     191,493  
Pension obligations     46,129     46,743  
Other employee future benefits     63,142     61,250  
Asset retirement obligations     30,739     29,219  
Obligations under capital leases     7,019     9,011  
Future income tax liabilities     3,982     1,666  
   
 
 
    $ 373,915   $ 467,527  
   
 
 
Shareholders' equity:              
  Share capital:              
    Common shares (note 9 (a))     217,995     143,611  
    Warrants (note 9 (a)&(b))     17,271     28,931  
  Contributed surplus     12,697     10,015  
  Cumulative translation adjustment     (109 )   (63 )
  Retained earnings     307,554     78,732  
   
 
 
      555,408     261,226  
   
 
 
    $ 929,323   $ 728,753  
   
 
 

See accompanying notes to consolidated financial statements.


HUDBAY MINERALS INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands of Canadian dollars)

 
   Three months ended June 30
   Six months ended June 30
  
 
   2006
   2005
   2006
   2005
  
 
   (Unaudited)

   (Unaudited)

  
Cash provided by (used in):                          
Operating activities:                          
  Earnings for the period   $ 152,836   $ 8,691   $ 228,822   $ 17,872  
  Items not affecting cash:                          
      Depreciation and amortization     15,649     13,228     31,191     25,952  
      Tax expense (recovery)     (66,705 )   3,468     (81,643 )   5,470  
      Unrealized foreign exchange (gain) loss     (5,861 )   2,045     (5,343 )   3,131  
      Amortization of deferred financing costs     4,706     366     5,068     707  
      Accretion expense on asset retirement obligation     659     649     1,319     1,301  
      Stock-based compensation     1,823     1,354     4,074     1,354  
      Unrealized portion of change in fair value of derivative     (3,837 )   2,869     (6,996 )   1,631  
      Other     (942 )   181     (190 )   241  
  Change in non-cash working capital (note 11)     (13,974 )   5,157     (65,822 )   8,235  
   
 
 
 
 
      84,354     38,008     110,480     65,894  
   
 
 
 
 
Financing activities:                          
  Repayment of debt obligations     (114,350 )   (2,000 )   (115,518 )   (2,000 )
  Issuance of common shares, net of costs     16,958     9,232     16,958     17,901  
  Proceeds on exercise of stock options     2,568     —     3,748     —  
  Proceeds on exercise of warrants     40,019     —     44,288     —  
  Repayments of obligations under capital leases     (950 )   (916 )   (1,886 )   (384 )
  Deferred financing cost     —     (217 )   —     (350 )
   
 
 
 
 
      (55,755 )   6,099     (52,410 )   15,167  
   
 
 
 
 
Investing activities:                          
  Additions to property, plant and equipment     (41,155 )   (18,292 )   (68,158 )   (35,590 )
  Acquisition of White Pine Copper Refinery, Inc., net of cash acquired (note 3)     —     —     (17,041 )   —  
   
 
 
 
 
  Decrease in restricted cash     —     —     —     13,000  
  Additions to environmental deposits     48     (21 )   63     (21 )
   
 
 
 
 
      (41,107 )   (18,313 )   (85,136 )   (22,611 )
   
 
 
 
 
Foreign exchange (loss) gain on cash held in
foreign currency		     (1,416 )   720     (1,154 )   964  
   
 
 
 
 
Change in cash and cash equivalents     (13,924 )   26,514     (28,220 )   59,414  
Cash and cash equivalents, beginning of period     127,364     97,453     141,660     64,553  
   
 
 
 
 
Cash and cash equivalents, end of period   $ 113,440   $ 123,967   $ 113,440   $ 123,967  
   
 
 
 
 

See accompanying notes to consolidated financial statements



QuickLinks

HudBay Announces Exceptional Second Quarter 2006 Results
HUDBAY MINERALS INC. CONSOLIDATED STATEMENT OF EARNINGS (In thousands of Canadian dollars, except share and per share amounts)
HUDBAY MINERALS INC. CONSOLIDATED STATEMENT OF RETAINED EARNINGS (In thousands of Canadian dollars)
HUDBAY MINERALS INC. CONSOLIDATED BALANCE SHEET (in thousands of Canadian dollars)
HUDBAY MINERALS INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands of Canadian dollars)