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To: LoneClone who wrote (28495)	11/5/2008 8:52:21 PM
From: LoneClone	Read Replies (1) \| Respond to of 193209

Current zinc, nickel prices 'not sustainable' – HudBay's Palmiere miningweekly.com By: Liezel Hill Published on 5th November 2008 Updated 4 hours ago TORONTO (miningweekly.com) – Current base metals prices are “not sustainable for any period of time”, Hudbay Minerals CEO Allen Palmiere asserted on Wednesday. “Fifty cents [a pound] is a zinc price that is going to push the vast majority of zinc operations under water,” he said on a conference call with analysts and investors. Base metal prices have plunged as the US dollar strengthens and weighed by concerns over demand in light of a forecast global economic slowdown. “The marginal cost of zinc is in the range of 75c/lb to 80c/lb, and that probably is a more realistic longer term floor,” said Palmiere. He also expects nickel prices will rise over the medium to long term. However, in the short term, faced with depressed metals prices and a rollercoaster financial market, HudBay has entered a period of “cash conservation”. “In this world, cash is absolutely king. We need to be extremely careful about conserving our cash balances. “My view is that we are probably in for a two to three year period of reasonably tough sledding in the mining industry, and we need to ensure that we have got the cash reserves to get us through that comfortably," Palmiere said. The company has frozen all hiring processes, is reexamining spending across the board and announced that it will delay building a nickel project that it bought less than three months ago. HudBay paid about $450-million in shares for Skye Resources, whose main asset was the Fenix project, in Guatamala, and said in June that it hoped to start production at the mine by late 2010. The firm is still committed to the project, but, in the current environment, believes it would be “inappropriate” to press ahead with development. “We are going through our capital budgets and the project control documents line by line to determine what we are going to be deferring, what deliveries we want to take and exactly what expenditures we want to make over the next couple of years.” “We're going to be reviewing everything.” The company will also use the delay to focus on developing a long-term power strategy for the project, Palmiere said. Skye agreed to a friendly acquisition by HudBay earlier this year after it had struggled to raise project funding. HudBay owns mines, concentrators and a metal production complex in northern Manitoba and Saskatchewan, in Canada, as well as a zinc oxide production facility in Ontario, the White Pine copper refinery in Michigan and the Balmat zinc mine in New York, where it suspended operations in August. At the time, HudBay blamed low zinc prices, high operating costs and "general inflationary pressures" for the decision to close the Balmat mine and smelter. Palmiere said that the only operation that was still under threat in the current pricing environment was the Chisel mine in Manitoba, where the company is looking at ways to enhance the head grade in 2009. "At this stage though, we are not contemplating the closure of the Chisel mine," he said. "We are cautiously optimistic."