Hudbay Minerals, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a record year with record revenues over $2 billion and free cash flow over $350 million. Balance sheet transformed to lowest leverage in peer group with $582 million cash and cash equivalents at year-end.
• Peru operations: Steady copper production, took advantage of government initiative to operate above permitted throughput, Pampacancha contributed high-grade ore, studies ongoing for mill throughput increase.
• Manitoba operations: Record annual gold production, New Britannia mill refurbished in 2021 exceeded performance expectations, cash costs below guidance.
• British Columbia operations: First full year with third operating asset, focused on stabilization and optimization, mill performance impacted by maintenance shutdowns and clay material, plans for mill optimization in 2025.
• Copper World project in Arizona received final permits, advancing through feasibility studies and minority joint venture partner process.
• Extensive exploration activities in Snow Lake, Lalor Northwest, 1901 deposit, and Peru properties.

Segment Performance

• Peru Operations: Fourth quarter production: 34,000 tons copper, 38,000 ounces gold, 970,000 ounces silver, 195 tons molybdenum. Full-year 2024: 99,000 tons copper and 98,000 ounces gold produced, exceeding guidance ranges. Cash costs in 2024 were $1.18 per pound. Revenue contribution from Peru's copper and gold, with copper still being the majority but gold's revenue share increasing.
• Manitoba Operations: 2024 achieved record annual gold production of 214,000 ounces, a 14% increase from 2023, exceeding guidance. Fourth quarter gold cash costs were $607 per ounce, full-year $606 per ounce. Zinc production in line with guidance, silver at top end of range.
• British Columbia Operations: Fourth quarter production: 6,000 tons copper, 4,600 ounces gold, 59,000 ounces silver. Full-year copper production below guidance due to lower grades and throughput, gold in line with guidance. Cash costs in 2024 were $2.74 per pound.

Guidance

• Production: 2025 consolidated copper production midpoint 133,000 tons (consistent with 2024 levels, offset by Peru's Pampacancha depletion and British Columbia's mill optimization). Gold production midpoint 278,000 ounces (strong Manitoba production offset by lower Peru grades).
• Costs: Consolidated copper cash costs expected $0.80-$1.00 per pound, all-in sustaining cash costs $2.60-$2.65 per pound. Peru cash costs $1.35-$1.65 per pound, Manitoba gold cash costs $650-$700 per ounce, British Columbia cash costs $2.45-$3.45 per pound.
• Capital Expenditures: 2025 total capital expenditures expected $485 million, including higher growth and sustaining capital in Peru, Manitoba, and British Columbia; $90 million for Copper World growth capital.

Risks

• Mining Dilution: In Peru, more mining dilution than planned in Pampacancha affected 2025 production guidance, though models revised to be prudent.
• Exchange Rate Impact: Manitoba business exposed to Canadian dollar exchange rate, 10% change in CAD/USD rate impacts cash flow/EBITDA by ~$60 million.
• Geopolitical/Regulatory: Uncertainties in permitting and regulatory approvals for exploration and growth projects like Caballito, Maria Reina, and Copper World.

Question and Answer

• Q: Orest Wowkodaw with Scotiabank on 2025 Peru production guidance reduction: A: Reduction due to more mining dilution than planned in Pampacancha, accelerated high-grade gold benches from 2025 to 2024, Pampacancha contributing lower ore feed in 2025. Blended average copper grade in 2025 ~0.31-0.33.
• Q: Lawson Winder with Bank of America Securities on Copper World minority interest process: A: Strong interest from corporates, strategics, financial investors; process expected to take 4-6 months. Sustaining capital run rate ~$250-$300 million annually.
• Q: Dalton Baretto with Canaccord Genuity on Constancia satellites and Canadian dollar impact: A: Caballito and Maria Reina permitting and drilling to start in 2025, 18-month drill program; Manitoba exposed to CAD/USD, 10% change impacts cash flow/EBITDA by ~$60 million.
• Q: Anita Soni with CIBC World Markets on Pampacancha dilution source: A: Geostatistical in nature, models updated with more information, Pampacancha production done by 2026.
• Q: Farooq Hamed with Raymond James on Copper World cathode production and share buyback: A: Committed to producing made-in-America copper cathode; unlikely to do share buyback post equity issue as balance sheet strengthened for Copper World.