Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Debt Investor Presentation (June 2017)
46 slides from Hudbay Minerals's debt investor presentation, June 2017
Slide 1: Investor Presentation June 2017
INVESTOR PRESENTATION June 2017
Slide 2: Cautionary Information
Cautionary Information This presentation contains forward-looking information within the meaning of applicable Canadian and United States securities legislation. All information contained in this presentation, other than statements of current and historical fact, is forward-looking information. Ofte
Slide 3: Cautionary Information
Cautionary Information 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, such as eco
Slide 4: Hudbay Investment Highlights
Hudbay Investment Highlights CLEAR AND DISCIPLINED GROWTH STRATEGY TSX, NYSE, BVL Symbol HBM • Investment-grade countries in the Americas Market Capitalization1 C$1.9 billion • VMS and porphyry geological focus Shares Outstanding 237 million • Accretive to NAV per share Available Liquidity2 $0.4 bil
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 19 years Lalor Mine Snow Lake Zn, Au 10 years Manitoba 777 Mine Flin Flon Cu, Zn 4 years Reed Mine Near Flin Flon Cu 2 years Arizona Rosemont Project Pima County Cu 19
Slide 6: Consolidated Financial Results
Consolidated Financial Results GROWING FREE CASH FLOW CONSOLIDATED FINANCIAL & OPERATING RESULTS • Generated positive free cash flow in cyclical Q1 2017 LTM low copper prices and relatively high sustaining capex period Copper contained in conc. (kt) 34.7 170.3 • LTM average copper cash cost of $0.87
Slide 7: South America Business Unit
South America Business Unit Cusco CUSCO Las Bambas CONSTANCIA Yauri Tintaya Antapaccay CONSTANCIA PIT AREQUIPA Imata PERU Arequipa MINE TOWN Lima Cerro Verde RAILROAD MOQUEGUA ROAD CONSTANCIA Matarani LAS BAMBAS HAUL ROAD 0 TACNA 100km 7
Slide 8: Constancia Mine
Constancia Mine LTM1 AVG. LOM2 OPERATING AT FULL PRODUCTION Ownership 100% • Low-cost, long-life copper mine began Daily ore throughput 74k tpd 85k tpd production at end of 2014 Annual Cu production3 132kt 81kt Unit operating cost4 $8.43/t $7.39/t • Annual Cu production of 110k tonnes at cash Cash c
Slide 9: Pampacancha Update
Pampacancha Update UPDATED CONSTANCIA MINE PLAN HIGHLIGHTS • New mine plan incorporates mining of Pampacancha in 2018-2021 • Higher production and lower costs over 5-year period (2017-2021) than previous 2012 technical report 5-YEAR PRODUCTION1 AND COST3 (2017E-2021E) MINE PLAN SUMMARY (5-YEAR AVERA
Slide 10: Manitoba Business Unit
Manitoba Business Unit New Britannia Mill Snow Lake Stall Mill LALOR MINE LALOR MINE Stall Mill AERIAL VIEW OF LALOR MINE SITE 0 5km SASKATCHEWAN MANITOBA Snow Lake LALOR MINE 777 LALOR 777 MINE REED MINE Flin Flon MILL Flin Flon Mill TOWN RAILROAD Winnipeg REED MINE ROAD 0 50km 10
Slide 11: Lalor Mine
Lalor Mine LTM1 AVG. LOM2 PRODUCING LOW COST MINE WITH Ownership 100% ZINC & GOLD UPSIDE POTENTIAL Daily ore throughput 3,000 tpd 3,800 tpd • Production shaft with capacity of 6,000tpd Annual Zn production3 76kt 66kt Annual Au-Eq. production3 46koz 78koz • Stall mill currently processing ~3,000tpd o
Slide 12: Lalor Cross-Section
Lalor Cross-Section LALOR CROSS-SECTION, LOOKING WEST 0m Legend Base metal zone Production Shaft (6,000 tpd of ore + waste) 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 12
Slide 13: 777 and Reed Mines
777 and Reed Mines 777 & REED COMBINED LTM1 AVG. LOM2 STEADY, LOW-COST PRODUCTION Ownership 100% / 70%3 Daily ore throughput 4,700 tpd 4,200 tpd • Optimizing operations to end of mine life Annual Cu production4 33kt 27kt • Plan to keep processing assets on care and Annual Zn production4 42kt 49kt ma
Slide 14: 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 TOWN Patagonia RAILROAD ROSEMONT ROAD 0 25km 14
Slide 15: Rosemont Project
Rosemont Project 80%-OWNED1 COPPER PROJECT Y 1-10 AVG.2 AVG. LOM2 Ownership 80%1 • High-quality development project with well- Daily ore throughput 85k tpd established infrastructure Strip ratio 2.5 2.0 • March 2017 feasibility study demonstrates Annual Cu production3 140kt 112kt robust project econ
Slide 16: Rosemont Initial Capex & Funding
Rosemont Initial Capex & Funding INITIAL CAPITAL COST ESTIMATE OF $1.9 BILLION ROSEMONT INITIAL CAPITAL COST BREAKDOWN • 3-year construction period: $144 million in $ million year 1, $861 million in year 2, $768 million in Site wide $42 year 3, remaining capital in ramp-up period Mining $474 Process
Slide 17: 2017 Objectives
2017 Objectives Continue to focus on operating efficiencies to generate incremental free cash flow Advance high-return in-house brownfield opportunities • Lalor zinc / base metal throughput • Pampacancha • Lalor gold Advance permitting activities and technical work at Rosemont Use free cash flow to
Slide 18: Appendix
H' DBAY APPENDIX 18
Slide 19: Appendix Contents
Appendix Contents • Experienced Management Team • Copper By-Product Cost Curve • Why Copper? • Global Refined Metal Market Balance • Liquidity • Q1 2017 Results by Business Unit • Constancia Site Map • Constancia Mine Plan Summary • Peru Inventory Levels • Manitoba Operations Flow Chart • Lalor Mine
Slide 20: Experienced Management Team
Experienced Management Team Alan Hair PRESIDENT AND CHIEF EXECUTIVE OFFICER • Appointed President and Chief Execu?ve 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
Slide 21: Copper By-Product Cost Curve
Copper By-Product Cost Curve 2017 COST CURVE1 250 200 Constancia Reed 150 C1 Cash Cost (100 x $/lb) 100 50 0 0 10 20 30 40 50 60 70 80 90 100 -50 Cumulative Percentile Production (%) -100 -150 777 -200 Lalor -250 Source: Wood Mackenzie 1. Wood Mackenzie Cu normal mine site C1 cost curve for 2017 (Q1
Slide 22: Global Refined Metal Market Balance
Global Refined Metal Market Balance • Copper market moves into a supply deficit • Fundamentals will support higher prices in the in 2017, with significant deficit anticipated near-term, but supply-side response from high near the end of the decade prices expected to push market into surplus COPPER Z
Slide 23: Why Copper?
Why Copper? STRONG LONG-TERM FUNDAMENTALS GLOBAL MARKET DEMAND FOR MINE OUTPUT • Long lead times to bring new copper capacity into production • Reserve depletion and falling head grades will see base case production fall after 2019 • Lack of advanced development projects will lead to tight metal mar
Slide 24: Liquidity
Liquidity March 31, 2017 $ Millions Cash and Cash Equivalents $133 Availability under Credit Facilities $300 Total Available Liquidity $433 Amount Interest Maintenance Debt Maturity Drawn Rate Covenants Senior Unsecured $400 7.250% Jan. 2023 None Notes $600 7.625% Jan. 2025 None 3.25x Secured Debt1/
Slide 25: South America Q1 2017 Results
South America Q1 2017 Results • Mill throughput affected by scheduled and PERU SUMMARY OPERATING STATISTICS unscheduled maintenance Q1 2017 Q4 2016 • Copper recoveries decreased as a result Ore mined (million tonnes) 7.2 6.2 of mixed ore types Ore milled (million tonnes) 6.3 7.2 • Combined unit oper
Slide 26: Manitoba Q1 2017 Results
Manitoba Q1 2017 Results MANITOBA SUMMARY OPERATING STATISTICS • Ore milled was lower due to maintenance at Q1 2017 Q4 2016 both mills Ore mined (kt) 688 675 • Increased zinc production as a result of Ore milled (kt) 637 723 higher grades at 777 and Lalor and higher Copper grade milled 1.32% 1.52% r
Slide 27: Constancia Site Map
Constancia Site Map High-grade Pampacancha satellite deposit located ~7km (by truck) from primary crusher 27
Slide 28: Constancia Mine Plan Summary
Constancia Mine Plan Summary MINE PLAN SUMMARY – NOVEMBER 21, 2016 TECHNICAL REPORT 2017E 2018E 2019E 2020E 2021E 5-Yr Avg. Yr 6-19 Avg.1 LOM Avg.1 Ore mined million tonnes 34.6 34.1 27.7 32.2 31.8 32.1 30.1 30.5 Waste mined million tonnes 38.4 39.1 33.8 36.9 37.0 37.0 33.1 34.0 Strip ratio waste:or
Slide 29: Peru Inventory Levels
Peru Inventory Levels • Copper concentrate inventory remains at normal levels • Extended ocean swells at Matarani port at the end of June 2016 caused temporary increase in port inventories, which was drawn-down in early July 2016 PERU COPPER CONCENTRATE Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 201
Slide 30: Manitoba Operations Flow Chart
Manitoba Operations Flow Chart 777 Mine Copper Flin Flon Mill Market Concentrate Reed Mine Zinc Refined Stall 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 Britann
Slide 31: Lalor Mine Plan Summary
Lalor Mine Plan Summary MINE PLAN SUMMARY – MARCH 30, 2017 TECHNICAL REPORT 2017E 2018E 2019E 2020E 2021E LOM Total1 Ore milled tonnes 1,278,282 1,616,285 1,620,000 1,603,652 1,620,000 14,231,636 Zinc grade milled % Zn 7.52% 5.71% 5.62% 4.61% 5.72% 5.12% Copper grade milled % Cu 0.59% 0.52% 0.48% 0.
Slide 32: 2017 Guidance
2017 Guidance PRODUCTION AND UNIT COST CONTAINED METAL IN CONCENTRATE1 2017 GUIDANCE 2016 PRODUCTION 2016 GUIDANCE MANITOBA2 Copper tonnes 32,500 – 42,500 41,059 40,000 – 50,000 Zinc tonnes 125,000 – 150,000 110,582 100,000 – 125,000 Precious Metals3 ounces 90,000 – 110,000 102,242 95,000 – 115,000
Slide 33: 2017 Guidance
2017 Guidance CAPITAL EXPENDITURE1 • Peru’s 2017 sustaining capital expenditures include approximately $52 million related to tailings management facility costs • Total sustaining capital expenditures expected to decline substantially after 2017 as Peru tailings management facility costs decline $ M
Slide 34: 2017 Guidance
2017 Guidance FLIN FLON ZINC PLANT Zinc Metal Produced 95,000 – 115,000 tonnes Unit Operating Costs1 C$0.40 - 0.50/lb 1. Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudbay’s quarterly and annual management’s discussion and analysis. EXPLORATION
Slide 35: Current Exploration Focus
Current Exploration Focus EXTENSIVE TARGET GENERATION IDENTIFIED SEVERAL PRIORITY TARGETS PROPERTY DESCRIPTION TIMEFRAME Lalor Mine, Manitoba Currently reviewing geophysical information relating to near-mine 2017-2018 targets with a combination of surface and underground drilling Other Manitoba Gold
Slide 36: Leverage to Commodities
Leverage to Commodities • Highly leveraged to copper, with additional sensitivity to zinc prices • Moderate exposure to changes in C$/US$ exchange rates SENSITIVITY ANALYSIS1 Change of 10% Impact on 2017 Base Represented by: Operating Cash Flow2 METAL PRICES: Copper Price $2.50/lb +/- $0.25/lb +/- $
Slide 37: Precious Metals Stream Overview
Precious Metals Stream Overview PAYMENTS FROM WHEATON PRECIOUS METALS TO HUDBAY Production payments1 Upfront payment $5.90/oz Silver $885 million $400/oz Gold DELIVERY FROM HUDBAY TO WHEATON PRECIOUS METALS Remaining Life of Mine 777 Silver 100% Gold 50%2 Remaining Life of Mine Constancia Silver 100
Slide 38: Peru Mineral Reserves
Peru Mineral Reserves AS AT JANUARY 1, 2017 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Proven 431,300,000 0.30 95 2.88 0.037 Probable 109,900,000 0.23 62 2.55 0.034 Total Proven and Probable 541,200,000 0.28 88 2.81 0.037 PAMPACANCHA Proven 22,800,000 0.53 149 4.44 0.299 Probable 2
Slide 39: Peru Mineral Resources
Peru Mineral Resources AS AT JANUARY 1, 2017 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Measured 161,800,000 0.19 55 2.26 0.031 Indicated 287,800,000 0.17 50 1.89 0.026 Measured and Indicated 449,600,000 0.18 52 2.02 0.028 Inferred 138,100,000 0.17 40 1.70 0.018 PAMPACANCHA Measure
Slide 40: Manitoba Mineral Reserves
Manitoba Mineral Reserves AS AT JANUARY 1, 2017 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Proven 3,080,000 1.98 4.93 2.01 31.53 7771 Probable 1,386,000 1.16 5.09 2.04 30.96 Proven 362,000 3.35 0.68 0.39 5.35 Reed2 Probable 337,000 3.95 0.31 0.52 5.26 Total Flin Flon 2P Reserves 5,165,
Slide 41: Manitoba Mineral Resources
Manitoba Mineral Resources AS AT SEPTEMBER 30, 2016 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Indicated 736,000 0.99 3.53 1.82 26.24 7771 Inferred 673,000 1.01 4.26 1.72 30.95 Reed2 Inferred 88,000 3.13 0.42 0.79 6.00 Indicated 736,000 0.99 3.53 1.82 26.24 Total Flin Flon Inferred 761
Slide 42: Arizona Reserves & Resources
Arizona Reserves & Resources AS AT MARCH 30, 2017 MINERAL RESERVES1 Category Tonnes Cu (%) Mo (%) Ag (g/t) Proven 426,100,000 0.48 0.012 4.96 Probable 111,000,000 0.31 0.010 3.09 Total 2P Reserves 537,100,000 0.45 0.012 4.58 MINERAL RESOURCES1 Category Tonnes Cu (%) Mo (%) Ag (g/t) Measured 161,300,
Slide 43: 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 Resourc
Slide 44: Additional Information
Additional Information PERU • The mineral reserve estimates for Constancia are based on a long range mine plan with economic value calculation per block (NSR in $/ t), mining, processing and detailed engineering parameters. • The Constancia reserve pits (Constancia and Pampacancha) consist of operat
Slide 45: Additional Cautionary Information
Additional Cautionary Information The technical and scientific information in this presentation related to the Constancia mine and the Rosemont project has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer. The technical and scientific information re
Slide 46: Investor Relations Contact
FOR MORE INFORMATION CONTACT: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com
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