Hudbay Minerals Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Second quarter adjusted EBITDA was $245M, with record annual trailing 12-month adjusted EBITDA of $996M as of June 30. Net earnings were $0.30 per share and adjusted net earnings were $0.19 per share. Cash generated from operating activities was $260M, with 8th consecutive quarter of significant free cash flow generation.
• Operations Resilience: Manitoba operations showed resilience against wildfires, Peru operations had steady performance, and British Columbia made progress on the SAG mill conversion project.
• Copper World JV: Announced a minority joint venture agreement with Mitsubishi Corporation at the Copper World project, with Mitsubishi acquiring a 30% equity interest and initial contribution of $600M, derisking the project and boosting IRR to ~90%.
• Cost Performance: Consolidated cash cost was negative $0.02 per pound and sustaining cash cost was $1.65 per pound. Cost guidance was improved to a range of $0.65 to $0.85, down from the original range of $0.80 to $1.

Segment Performance

• Copper: Second quarter consolidated copper production was 30,000 tonnes. With the Copper World project, copper production is expected to grow.
• Gold: Second quarter consolidated gold production was 56,000 ounces. Manitoba operations produced 43,000 ounces, Peru 7,000 ounces, British Columbia 5,700 ounces.
• Silver: Second quarter consolidated silver production was 815,000 ounces.
• Zinc: Second quarter consolidated zinc production was 5,000 tonnes.
• Manitoba Operations: Produced 43,000 ounces of gold, 1,600 tonnes of copper, 5,100 tonnes of zinc, 198,000 ounces of silver in Q2, impacted by wildfires.
• Peru Operations: Produced 22,000 tonnes of copper, 7,000 ounces of gold, 552,000 ounces of silver, 375 tonnes of molybdenum in Q2, with mine sequencing affected by protests.
• British Columbia Operations: Produced 6,600 tonnes of copper, 5,700 ounces of gold, 65,000 ounces of silver in Q2, progress on SAG mill conversion project.
• Copper World Project: Mitsubishi as 30% partner, initial contribution $600M, boosting project IRR to ~90%, amended Wheaton stream.

Guidance

• Production: Reaffirmed full year consolidated production guidance for all metals.
• Cost: Favorably tracking below full year consolidated cost guidance, resulting in an improved cost guidance range of $0.65 to $0.85.
• Copper World: Derisked the project, moving towards a sanctioned decision in 2026, with 2025 Arizona growth spending guidance increased to $110M from $90M.

Risks

• Wildfires: Impacted Manitoba operations, though no infrastructure damage occurred.
• Permitting and Regulatory: Uncertainties in permitting for projects such as the New Ingerbelle growth project and Copper World Phase 2.
• Market Volatility: Fluctuations in metal prices could impact revenues.
• Project Execution: Potential delays in feasibility studies, construction, or operational issues with projects.

Question and Answer

Q: Ralph Profiti with Stifel asked about commercial arrangements and balance sheet.

A: Peter Kukielski stated Mitsubishi will have 30% offtake rights, and Eugene Lei discussed the balance sheet leverage with project financing and JV capital.

Q: Orest Wowkodaw with Scotiabank inquired about Copper World Phase 2, Albion Process, and CapEx inflation.

A: Peter Kukielski focused on Phase 1 of Copper World, mentioned Albion Process will be studied in the feasibility, and noted mild CapEx escalation due to inflation.

Q: Dalton Baretto with Canaccord asked about approvals, smelting capacity, and Albion front end.

A: Peter Kukielski and Eugene Lei discussed CFIUS filing, feasibility study on Albion, and Tariff considerations.

Q: Fahad Tariq with Jefferies asked about Manitoba Q3 grades and Copper World Phase 2.

A: Andre Lauzon stated Manitoba grades were consistent, and focus remained on Copper World Phase 1.

Q: Matthew Murphy with BMO Capital Markets questioned Copper World financing and exploration.

A: Eugene Lei and Peter Kukielski discussed financing waterfall and exploration paused due to wildfires.

Q: Shane Nagle with National Bank Financial inquired about Copper World matching contribution and Constancia/Pampacancha.

A: Eugene Lei explained matching contribution mechanics, and Andre Lauzon discussed Constancia/Pampacancha processing.