Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — 2016 Credit Suisse Global Steel and Mining Conference
45 slides from Hudbay Minerals's conference presentation, September 2016
Slide 1: Investor Presentation | September 2016
INVESTOR PRESENTATION | SEPTEMBER 2016 HBM
Slide 2: Cautionary Information
Cautionary Information This presentation contains "forward-looking statements" and "forward-looking information" (collectively, "forward-looking information") within the meaning of applicable Canadian and United States securities legislation. All information contained in this presentation, other tha
Slide 3: Cautionary Information (continued)
Cautionary Information (continued) The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward- looking information may include, but are not limited to, risks generally associated with the mining industry
Slide 4: Hudbay Investment Highlights
Hudbay Investment Highlights Delivered 2015 low-cost copper production growth TSX, NYSE, BVL Symbol HBM ! Successful ramp-up of Constancia Market Capitalization1 C$1.3 billion ! Over 300% y/y growth in Cu sales volumes Shares Outstanding 236 million ! Copper cash cost $1.14/lb4 Available Liquidity2
Slide 5: Long-Life, Low-Cost Asset Base
Long-Life, Low-Cost Asset Base Business Unit Asset Location Primary Metal Mine Life1 South America Constancia Mine Southern Peru Cu 21 years Production Lalor Mine Snow Lake Zn, Au 15 years Manitoba 777 Mine Flin Flon Cu, Zn 5 years Reed Mine Near Flin Flon Cu 3 years Growth Arizona Rosemont Project
Slide 6: Track Record of Delivering Growth
Track Record of Delivering Growth1 330% 90% 35% INCREASE IN CU PRODUCTION INCREASE IN AU-EQ. PRODUCTION 2 INCREASE IN ZN PRODUCTION (kt) (koz) (kt) 3 3 3 Manitoba Business Unit South America Business Unit 1. Represents production growth from 2014 actual production to mid-point of 2016 guidance. 2. A
Slide 7: South America Business Unit
South America Business Unit Cusco CUSCO APURIMAC Las Bambas CONSTANCIA PUNO Yauri Tintaya Antapaccay Constancia Pit AYACUCHO AREQUIPA Imata PERU Arequipa Lima Cerro Verde MINE MOQUEGUA TOWN RAILROAD CONSTANCIA Matarani ROAD 0 TACNA 100km LAS BAMBAS HAUL ROAD INVESTOR PRESENTATION | 7
Slide 8: Constancia Mine
Constancia Mine OPERATING AT FULL PRODUCTION LTM1 Avg. LOM2 Ownership 100% ! Low-cost, long-life copper mine began Daily ore throughput 75k tpd 80k tpd production at end of 2014 Annual Cu production3 139kt 82kt ! Focus on further optimization of costs and plant Unit operating cost4 $8.01/t $8.61/t p
Slide 9: South America Q2 2016 Results
South America Q2 2016 Results ! Milled tonnage slightly higher than Q1 2016 Peru Summary Operating Statistics Q2 2016 Q1 2016 Ore mined (million tonnes) 6.5 6.8 ! Constancia plant performance optimization remains primary focus Ore milled (million tonnes) 6.7 6.2 Copper grade milled 0.62% 0.57% ! Imp
Slide 10: Manitoba Business Unit
Manitoba Business Unit Aerial View of Lalor Mine Site New Britannia Mill Snow Lake LALOR MINE Snow Lake (Stall) Mill 0 5km SASKATCHEWAN MANITOBA MANITOBA CANADA Snow Lake 777 LALOR 777 MINE LALOR MINE REED Flin Flon Flin Flon Mill MINE MILL Winnipeg TOWN REED MINE RAILROAD 0 50km ROAD INVESTOR PRESE
Slide 11: Lalor Mine
Lalor Mine GOLD UPSIDE POTENTIAL LTM1 Avg. LOM2 ! Production shaft with 4,500 tonne per day Ownership 100% capacity operating at steady state Daily ore throughput 2,850 tpd 3,300 tpd ! Snow Lake concentrator with production Annual Zn production3 73kt 67kt capacity of 3,000 tonnes per day processing
Slide 12: Lalor Cross-Section
Lalor Cross-Section LALOR CROSS-SECTION, LOOKING WEST 0m Legend Base metal zone Production Shaft Gold zone Copper-gold zone 500m Ramp from Chise l 865mL Exploration Drill Drift 2016 1000m 1025 to 1075mL Exploration Decline 2015 1500m 500 m INVESTOR PRESENTATION | 12
Slide 13: 777 and Reed Mines
777 and Reed Mines STEADY, LOW-COST PRODUCTION 777 & Reed Combined LTM1 Avg. LOM2 Ownership 100% / 70%3 ! Optimizing operations to end of mine life Daily ore throughput 4,700 tpd 4,500 tpd ! Plan to keep processing assets on care Annual Cu production4 36kt 31kt and maintenance after mine closures to
Slide 14: Manitoba Q2 2016 Results
Manitoba Q2 2016 Results ! Ore mined was consistent with Q1 but ore Manitoba Summary Operating Statistics milled grew by 5% primarily due to Q2 2016 Q1 2016 increased production at Lalor in Q2 Ore mined (kt) 730 731 Ore milled (kt) 723 686 ! Copper and zinc milled grades increased, Copper grade mill
Slide 15: Arizona Business Unit
Arizona Business Unit Tucson Three Points Mission Complex Rosemont Project Site Twin Buttes Mine Sierrita Mine ROSEMONT Green Valley ARIZONA, US PIMA SANTA CRUZ Sonoita MINE Tucson Patagonia TOWN RAILROAD ROSEMONT 0 25km ROAD INVESTOR PRESENTATION | 15
Slide 16: Rosemont Project
Rosemont Project 80%-OWNED1 COPPER PROJECT ! High-quality development project with well-established infrastructure ! Permitting and community engagement progressing ! $30 million expected to be spent in 2016 to advance permitting and engineering studies ! Expected to be one of the first new Crusher
Slide 17: Liquidity
Liquidity June 30, 2016 $ Millions Cash and Cash Equivalents $142 Availability under Credit Facilities $152 Total Available Liquidity $294 Amount Interest Maintenance Debt Maturity Drawn Rate Covenants Senior Unsecured $920 9.50% Oct. 2020 None Notes 3.25x Secured Debt2/EBITDA 3M LIBOR Credit Facili
Slide 18: Uniquely Positioned
Uniquely Positioned ! Downside protection with low-cost assets in low-risk jurisdictions ! Strong leverage to copper price with meaningful zinc exposure ! Achieving capital and operating cost efficiencies to maximize free cash flow ! Best-in-class growth potential § Lalor gold § Pampacancha § Rosemo
Slide 19: Appendix
Appendix INVESTOR PRESENTATION | 19
Slide 20: Appendix Contents
Appendix Contents ! Experienced management team ! Copper and zinc by-product cost curves ! Declining industry copper grades ! Global refined metal market balance ! Constancia site map ! Peru inventory levels ! Manitoba operations flow chart ! Manitoba history of discoveries ! 2016 cost reductions, p
Slide 21: Experienced Management Team
Experienced Management Team Alan Hair President and Chief Execu2ve Officer • Appointed President and Chief Execu5ve Officer and Director in January 2016 • An accomplished leader of people and performance, bringing 20 years knowledge of Hudbay and more than three decades of mining and metals industry exp
Slide 22: Copper & Zinc By-Product Cost Curves
Copper & Zinc By-Product Cost Curves 2015 COST CURVES1 Source: Wood Mackenzie 1. Wood Mackenzie Cu and Zn normal mine site C1 cost curves for 2015. Constancia, 777, Lalor and Reed costs for 2015 are sourced from Wood Mackenzie with Constancia and 777 costs adjusted for precious metals stream transac
Slide 23: Declining Industry Copper Grades
Declining Industry Copper Grades ! Average copper reserve grades have been declining since late-1980s, while head grades have been increasing ! Potential supply-side impact from current “bear market” high-grading Copper Ore Reserve Grade Evolution Global Cu Reserve Grade Ratio of Head Grade / Reserv
Slide 24: Global Refined Metal Market Balance
Global Refined Metal Market Balance ! Copper market in balance and zinc market in deficit over the next few years ! Copper market into growing supply deficits in 2020 and beyond Copper Zinc Refined Surplus (Deficit) Copper Price Refined Surplus (Deficit) Zinc Price 800 450 1200 200 400 1000 180 600
Slide 25: Constancia Site Map
Constancia Site Map INVESTOR PRESENTATION | 25
Slide 26: Peru Inventory Levels
Peru Inventory Levels ! Copper concentrate inventory remains at normal levels ! Extended ocean swells at Matarani port at the end of June caused temporary increase in port inventories, which was drawn-down in early July Peru Copper Concentrate Sep. 30, 2015 Dec. 31, 2015 Mar. 31, 2016 Jun. 30, 2016
Slide 27: Manitoba Operations Flow Chart
Manitoba Operations Flow Chart 777 Mine Copper Flin Flon Mill Market Concentrate Reed Mine Zinc Refined Snow Lake Mill Zinc Plant Concentrate Zinc Lalor Mine Market New Britannia Gold Dore Market Mill1 Legend: Processing Mine Product Facility 1. Studies underway on potential refurbishment of New Bri
Slide 28: Manitoba History of Discoveries
Manitoba History of Discoveries 85+ YEAR OPERATING HISTORY IN THE FLIN FLON GREENSTONE BELT 62.5 // 62.5 Flin Flon // ⁄⁄ 62.5 Lalor Trout Lake 777 Stall Lake Chisel U/G Callinan Chisel Osborne Anderson Konuto Spruce Schist Lake Centennial Westarm Chisel Pit Coronation White Lake Dickstone Rod Photo
Slide 29: 2016 Cost Reductions
2016 Cost Reductions ! 2016 planned capital spending and operating expenses reduced by over $100 million; no impact on production guidance ! $55 million in sustainable operating cost savings ORIGINAL REVISED ($ Millions) ($ Millions) Sustaining Capital Expenditures1 Sustaining Capital Manitoba 90 80
Slide 30: 2016 Production and Unit Cost Guidance
2016 Production and Unit Cost Guidance Contained Metal in Concentrate1 2016 Guidance 2015 Production 2015 Guidance2 Manitoba3 Copper Tonnes 40,000 – 50,000 41,383 40,000 – 50,000 Zinc Tonnes 100,000 – 125,000 102,919 95,000 – 120,000 Precious Metals4 Ounces 95,000 – 115,000 92,793 83,000 – 103,000 C
Slide 31: 2016 Production and Unit Cost Guidance
2016 Production and Unit Cost Guidance Flin Flon Zinc Plant Zinc Concentrate Treated 195,000 – 240,000 tonnes Zinc Metal Produced 100,000 – 120,000 tonnes Unit Operating Costs1 C$0.38 - 0.46/lb 1. Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudb
Slide 32: 2016 Capital Expenditure Guidance
2016 Capital Expenditure Guidance1 2015 Actual 2015 Guidance 2016 Guidance2 ($ Millions) ($ Millions) ($ Millions) Manitoba sustaining capital 73 127 80 Peru sustaining capital3 184 164 140 Total sustaining capital 256 291 220 Arizona other capitalized costs 49 55 30 Peru other capitalized costs 99
Slide 33: 2016 Exploration Guidance
2016 Exploration Guidance $ Millions Manitoba 5 Peru 1 Arizona - Generative and Other 5 Total Exploration Expenditures 11 Capitalized Spending1 (3) Total Exploration Expense 8 1. Assumes $3 million of Manitoba expenditures will be capitalized. INVESTOR PRESENTATION | 33
Slide 34: Leverage to Commodities
Leverage to Commodities ! Highly leveraged to copper, with additional sensitivity to zinc prices ! Moderate exposure to changes in C$/US$ exchange rates, with minimal exposure to Peruvian currency changes Sensitivity Analysis1 Change of 10% Impact on 2016 Base Represented by: Operating Cash Flow2 Me
Slide 35: Precious Metals Stream Overview
Precious Metals Stream Overview PAYMENTS FROM SILVER WHEATON TO HUDBAY Production payments1 Upfront payment $5.90/oz Silver $885 million plus $400/oz Gold . DELIVERY FROM HUDBAY TO SILVER WHEATON 2016 Remaining Life of Mine 777 Silver 100% Silver 100% Gold 100% Gold 50% Remaining Life of Mine Consta
Slide 36: Peru Mineral Reserves
Peru Mineral Reserves AS AT JANUARY 1, 2015 Constancia Mineral Reserves Category Tonnes Cu (%) Mo (g/t) Au (g/t) Ag (g/t) Proven 477,000,000 0.30 94 0.038 2.91 Probable 94,000,000 0.22 61 0.036 2.77 Pampacancha Mineral Reserves Category Tonnes Cu (%) Mo (g/t) Au (g/t) Ag (g/t) Proven 23,000,000 0.52
Slide 37: Peru Mineral Resources
Peru Mineral Resources AS AT SEPTEMBER 30, 2015 Constancia Mineral Resources Category Tonnes Cu (%) Mo (g/t) Au (g/t) Ag (g/t) Measured 68,000,000 0.22 59 0.036 2.17 Indicated 293,000,000 0.20 58 0.033 1.96 Inferred 200,000,000 0.19 51 0.031 1.86 Pampacancha Mineral Resources Category Tonnes Cu (%)
Slide 38: Manitoba Mineral Reserves
Manitoba Mineral Reserves AS AT JANUARY 1, 2016 Property Category Tonnes Cu (%) Zn (%) Au (g/t) Ag (g/t) 7771 Proven 3,316,000 1.80 4.85 1.79 26.71 Probable 2,986,000 1.50 4.79 1.97 27.80 Reed2 Proven 677,000 3.80 0.46 0.35 4.87 Probable 517,000 4.46 0.28 0.52 6.11 Total Flin Flon 2P Reserves 7,496,
Slide 39: Manitoba Mineral Resources
Manitoba Mineral Resources AS AT SEPTEMBER 30, 2015 Cu Property Category Tonnes Zn (%) Au (g/t) Ag (g/t) (%) 7771 Indicated 728,000 0.99 3.51 1.83 26.28 Inferred 683,000 1.02 4.71 1.76 32.63 Reed2 Inferred 203,000 4.63 0.39 0.81 7.71 Total Flin Flon Indicated 728,000 0.99 3.51 1.83 26.28 Inferred 88
Slide 40: Copper Equivalent Reserves and Resources
Copper Equivalent Reserves and Resources1 ALL METALS Project Category Cu Equivalent (000 tonnes) 2016 2015 YoY Change Constancia2 Proven & Probable 2,405 2,552 (147) Measured & Indicated 989 1,004 (15) Inferred 477 484 (7) Lalor Proven & Probable 644 597 47 Measured & Indicated 38 - 38 Inferred 307
Slide 41: Additional Information
Additional Information ! The reserve and resource estimates included in this presentation were prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resou
Slide 42: Additional Information
Additional Information Peru ! A complete estimate update of the mineral reserves at Constancia was not conducted in 2015. Constancia proven reserves were depleted due to production in 2015 and gains were included based on mining and drilling in the upper portion of the deposit. ! The Constancia and
Slide 43: Rosemont Historical Reserves & Resources
Rosemont Historical Reserves & Resources1 Historical Mineral Reserves as at July 24, 2012 Category Tonnes Cu (%) Mo (%) Ag (g/t) Proven 279,481,000 0.46 0.015 4.11 Probable 325,798,000 0.42 0.014 4.11 Total Historical Reserves 605,279,000 0.44 0.015 4.11 Historical Mineral Resources as at July 17, 2
Slide 44: Additional Cautionary Information
Additional Cautionary Information The technical and scientific information in this presentation related to the Constancia mine has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer. The technical and scientific information related to all other sites
Slide 45: For more information contact
For more information contact: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com
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