TORONTO (miningweekly.com) – As markets continued to sway on Wednesday, base metals producer HudBay Minerals CEO David Garofalo assured investors that there had been no credit freeze for mining companies with good projects.

His company may raise $400-million to $500-million in debt to build the Constancia copper mine in Peru, with a construction decision set for early next year.

“Our sense is that credit markets for a good mining project remain wide open, particularly for established producers,” Garofalo said on a conference call.

However, HudBay CFO David Bryson said that the company would raise funds prudently, given the choppy state of the markets.

“We can quite comfortably support $400-million to $500-million of long term debt, with ideally some top up of standby facilities,” he said, adding that the magnitude would be determined by the way markets play out.

The company was considering making use of export credit agencies to make up for some of the funding, and HudBay would likely go for a “hybrid” split between project-level debt and corporate debt to fund Constancia, Bryson noted.

Garofalo said in May the company hoped to wrap up the financing arrangements by the end of the year.

HudBay bought the Constancia project earlier this year through its acquisition of junior Norsemont Mining.

The company aims to start producing at the project in May, with Norsemont’s feasibility study predicting an 85 000-t/y copper-producing operation, coming at a capital cost of just under $1-billion.

The mine, along with a new shaft at HudBay’s Lalor operation, is set to lift HudBay’s copper production by 155% by 2016, with gold and silver output set to double over the same period, Garofalo said, announcing the company’s second-quarter earnings.

HudBay posted a C$171-million loss for the quarter ended June 30, after it had to write down the Fenix nickel project in Guatemala, which it announced last week it would sell to Russian-owned Solway group for $170-million.

Stripping out the impairment charge, the company made C$40-million in profits, compared with the C$4.4-million figure for the June quarter last year.

Garofalo said that the problem with rail car shortages that had plagued HudBay’s Manitoba operations last year had been resolved.

“We’ve started to deliver excess copper concentrate from inventory that had been built up over the second half of 2010 and the first part of 2011 due to rail car shortages. We now have a surplus of rail cars and we will deliver increased sales volumes over and above our production volume over the course of the last six months of 2011.”

HudBay runs two mines, a concentrator and a zinc plant in Flin Flon, Manitoba, as well as the Chisel North mine and a concentrator near Snow Lake in the same province.

Responding to questions from analysts, Garofalo ruled out any further big acquisitions and said the company favoured dividends over share buybacks, which he saw as only providing a one-off benefit.

“The days of asking about excess cash balances are gone...With Constancia and Lalor, our capital is well allocated. We can generate superior rates of return for shareholders in investing in those projects rather than doing a share buyback.

He said that the precipitous share price declines of mining companies over the past few days made some of them look attractive as possible buyouts, but that HudBay would hold back.

“As tempting as these stories are, we can’t lose sight of the fact that our currency has also been hit. We’ll stick to our strategy of cultivating junior explorers and hope to generate some fruit from that farm system over the next couple of years,” commented Garofalo.