Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — 2019 TD Securities Mining Conference
57 slides from Hudbay Minerals's conference presentation, Jan 17, 2019
Slide 1: Investor Presentation
I N V E S T O R P R E S E N TAT I O N January 2019
Slide 2: Cautionary Information
CAUTIONARY INFORMATION This presenta,on contains forward-looking informa,on within the meaning of applicable Canadian and United States securi,es legisla,on. All informa,on contained in this presenta,on, other than statements of current and historical fact, is forward-looking informa,on. O@en, but n
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS Constancia & Exploration Peru Lalor, 777 & Exploration Manitoba, Canada TSX, NYSE, BVL HBM Exploration Symbol British Columbia, Canada Rosemont Market Capitalization1 C$1.7 billion Arizona, USA Ann Mason Shares Outstanding 261 million Nevada, USA Exploration Chile Available Liq
Slide 4: Consistent Strategy Since 2010
CONSISTENT STRATEGY SINCE 2010 VISION STATEMENT " Our vision is to become a top-tier operator of long-life, low cost mines in the Americas VALUE DRIVERS STRATEGIC CRITERIA Safety & Long Life Responsibility Meaningful Low Cost Scale Financial Exploration Strength Mining Per Share Friendly Accretion J
Slide 5: Track Record of Safe, Responsible Mining
TRACK RECORD OF SAFE, RESPONSIBLE MINING OPERATING IN MANITOBA FOR 90+ YEARS " Founded in Flin Flon, Hudbay has discovered and mined 28 mines in Manitoba over the past 90 years SOCIALLY RESPONSIBLE " Track record of constructive community relations in Peru and elsewhere FOCUS ON SAFETY " Zero lost t
Slide 6: Adding Value Through Exploration
ADDING VALUE THROUGH EXPLORATION CONSTANCIA (2009-2017)1 777 (2004-2017)1 LALOR (2010-2017)1 Reserves Reserves Reserves Copper Equivalent (Mt) Copper Equivalent (Mt) Production Production Production Copper Equivalent (Mt) 4.0 1.5 1.0 +31% Growth 3.0 +98% Growth 0.8 +56% Growth 1.0 2.0 0.5 0.5 1.0 0.
Slide 7: Experienced Mine Developer
EXPERIENCED MINE DEVELOPER " Proven track record of successful new mine development and in-depth mining expertise in both open pit and underground mining " Hudbay built 30% of the mines constructed by its peer group in the last ten years and invested 37% of the capital spent by its peer group on min
Slide 8: Growing Free Cash Flow & Reducing Debt
GROWING FREE CASH FLOW & REDUCING DEBT " Continued to grow free cash flow through un-hedged production and stable low-cost operations " Reduced net debt position by more than $700 million since 2016 OPERATING AND FREE CASH FLOW1 NET DEBT2 ($M) ($M) Operating Cash Flow Free Cash Flow Net Debt 582 589
Slide 9: Low Cash Costs
LOW CASH COSTS " Hudbay is positioned in the first quartile of the cost curve 2019E COPPER C1 CASH COSTS1 (US $/lb) $3.00 Capstone $2.00 Ero Copper $1.00 Hudbay First Quantum Turquoise Hill Lundin Oz Minerals $0.00 ($1.00) ($2.00) 0% 25% 50% 75% 100% 2019E COPPER C1 + SUSTAINING CAPEX CASH COST1 (US
Slide 10: Long Mine Lives With Exploration Potential
LONG MINE LIVES WITH EXPLORATION POTENTIAL " Long life assets provide exposure to multiple commodity price cycles RESERVE AND RESOURCE LIFE Reserve Life M&I Resource Life1 Inferred Resource Life2 Rosemont 3 19 11 1 Constancia 18 6 1 Lalor 9 2 3 777 3 11 HISTORICAL COPPER PRICE CYCLES4 12 Years +436%
Slide 11: Reserve Growth & Per Share Accretion
RESERVE GROWTH & PER SHARE ACCRETION " Focused on NAV per share and reserve per share accretion HUDBAY 2007-2017 RESERVE GROWTH HUDBAY 2007-2017 RESERVE GROWTH PER SHARE Manitoba Peru Arizona Other Manitoba Peru Arizona Other 6.0 60.0 rowth +142% G Copper Equiv. Reserves per HBM Share R +9% CAG Copp
Slide 12: Growth in Mining Friendly Jurisdictions
GROWTH IN MINING FRIENDLY JURISDICTIONS " Growth in jurisdictions that support responsible mining in the Americas, with strong rule of law and respect for human rights HUDBAY 2017 PRODUCTION1 HUDBAY 2017 RESERVE BASE1 Canada 13% 44% Canada United 43% 234 kt CuEq States 5,383 kt CuEq Peru 56% 44% Per
Slide 13: Copper Growth Projects
COPPER GROWTH PROJECTS NEW COPPER PRODUCTION DEPENDENT ON GREENFIELD MINES IN DIFFICULT JURISDICTIONS " Approximately 40% of production is expected to come from China, Panama, the DRC, Mongolia " Only 43% of production is expected to come from mining friendly jurisdictions (Chile, Peru, Australia, U
Slide 14: Copper Supply/Demand Outlook
COPPER SUPPLY/DEMAND OUTLOOK INSUFFICIENT COPPER PROJECTS TO FILL GAP " Probable projects are required to come on by 2022 in order to balance market; structural deficit exists beyond 2023 " However, there are a limited number of meaningful projects in the pipeline (only 5 of 25 probable projects exp
Slide 15: Growing Exposure to Copper
GROWING EXPOSURE TO COPPER " Un-hedged copper and zinc production 2017 PRODUCTION BREAKDOWN1 2017 RESERVE BREAKDOWN2 4% 5% 9% 7% 7% 19% 8% 234 kt CuEq 5,383 kt CuEq 68% 73% Copper Zinc Gold Silver Copper Gold Silver Molybdenum Zinc Note: The following metals price assumptions were applied to reserve
Slide 16: Consolidated Production Profile
CONSOLIDATED PRODUCTION PROFILE GROWING COPPER EQUIVALENT PRODUCTION " The production profile illustrates the projected outlook assuming a Rosemont construction decision occurs in early 2019; Rosemont project development is conditional upon receipt of final permits and Board approval HUDBAY CONSOLID
Slide 17: Project Pipeline
PROJECT PIPELINE " Hudbay has a diversified portfolio of operating mines and an extensive development pipeline to perpetuate production growth Produc'on Constancia Lalor 777 Shovel-ready Development Rosemont Pampacancha Constancia Peru and Ann Manitoba B.C. Chile Lalor Regional Resource Defini'on / F
Slide 18: Relevant Scale & Meaningful Growth
RELEVANT SCALE & MEANINGFUL GROWTH " Hudbay is one of the top investible1 pure play2 copper producers, offering investors relevant scale and meaningful production growth 2018E GLOBAL COPPER PRODUCTION (Mt) 1.6Mt 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Freeport First Quantum KAZ Minerals Lundin Hudbay Oz Mineral
Slide 19: South America Business Unit
SOUTH AMERICA BUSINESS UNIT Cusco CUSCO Las Bambas CONSTANCIA Yauri Tintaya Antapaccay AREQUIPA Imata PERU Arequipa Lima Cerro Verde MINE MOQUEGUA TOWN RAILROAD CONSTANCIA Matarani ROAD 0 TACNA 100km 19
Slide 20: Constancia Mine
CONSTANCIA MINE Location Chumbivilcas, Peru LOW-COST, LONG-LIFE COPPER MINE IN PERU Ownership 100% " Began production at end of 2014 Porphyry copper- " Developed and maintain meaningful partnerships Type of deposit molybdenum deposit with the local communities Processing On-site processing plant " N
Slide 21: Constancia Optimization
CONSTANCIA OPTIMIZATION " Annual copper production of 105k tonnes at cash costs of $1.09/lb and sustaining cash costs of $1.38/lb over 5 years (2019-2023) " Mining of high-grade Pampacancha satellite deposit intended to enhance Constancia grade starting in 2019; community negotiations ongoing " Incr
Slide 22: Expedited Timeline From First Production to Full Capacity
EXPEDITED TIMELINE FROM FIRST PRODUCTION TO FULL CAPACITY " Constancia’s timeline from feasibility to first production and the subsequent ramp-up to nameplate capacity production was the fastest among recently built projects TIME FROM FIRST PRODUCTION TO FULL CAPACITY OPERATIONS (MONTHS) 52+ 46+ 44
Slide 23: Continuous Improvement at Constancia
CONTINUOUS IMPROVEMENT AT CONSTANCIA " Constancia throughput and processing plant utilization have improved since first production was achieved at the end of 2014 " Quarterly copper production remains robust even as copper head grades decline in accordance with the mine plan CONSTANCIA’S QUARTERLY C
Slide 24: Industry Leading Cost Performance
INDUSTRY LEADING COST PERFORMANCE " Constancia is the lowest cost copper mine in South America " Continuous operational improvements at Constancia have driven costs down, while increasing efficiencies and productivity LOWEST COST OPEN PIT COPPER MINES IN SOUTH AMERICA (2018E) $20.00 $19.01 $18.00 $1
Slide 25: Peru Community Relations
PERU COMMUNITY RELATIONS " We work with all levels of government and the communities to develop stable operations and to maximize the impact of our social investment in our area of influence and beyond " Since 2012, executed over 90 social agreements with local governments and communities " Pleased
Slide 26: Manitoba Business Unit
MANITOBA BUSINESS UNIT New Britannia Mill Snow Lake Stall Mill LALOR MINE LALOR MINE Stall Mill 0 5km SASKATCHEWAN MANITOBA Snow Lake LALOR MINE 777 LALOR 777 MINE MINE Flin Flon MILL Flin Flon Mill TOWN RAILROAD Winnipeg ROAD 0 50km 26
Slide 27: Manitoba Community Relations
MANITOBA COMMUNITY RELATIONS LONG HISTORY OF MINING IN MANITOBA " Discovered, mined and reclaimed numerous mines in Manitoba over the past 90 years " Reed closure activities proceeding ahead of schedule and under budget, with reclamation continuing in 2019 REED PORTAL POLISHING POND DURING PRODUCTIO
Slide 28: Lalor Mine
LALOR MINE PRODUCING LOW-COST MINE WITH ZINC AND GOLD UPSIDE POTENTIAL " Production shaft with capacity of 6,000tpd " Strong ramp-up of ore production; expanded 4,500tpd mine plan " Trade-off studies have been completed and Hudbay Location Snow Lake, Manitoba believes the refurbishment of the New Br
Slide 29: Lalor Exploration
LALOR EXPLORATION LALOR CROSS-SECTION, LOOKING SOUTHWEST Potential Lens 31-32 for up-dip extension Ramp from Chisel Lens 25 Lens 10 Possible extension of gold rich Lens 25 Lens 40 Legend base metal zones Lens 27 gold zones 189W01 Possible Cu-Au copper & gold zones feeder of Lens 10 296W01 gold zone
Slide 30: Significant Exploration Potential
SIGNIFICANT EXPLORATION POTENTIAL AU AND CU MINERALIZED OCCURRENCES IN THE SNOW LAKE BELT Hudbay has a large prospective land package in the Snow Lake belt with significant gold exploration potential " Data compilation and modeling over the past producing areas of the New Britannia mine lead to the
Slide 31: 777 Mine
777 MINE STEADY, LOW-COST PRODUCTION " Maximizing cash flow to end of mine life " Plan to keep processing assets on care and maintenance after mine closure to maintain regional optionality Location Flin Flon, Manitoba Ownership 100% Type of deposit VMS deposit Processing Flin Flon mill Refined zinc,
Slide 32: Arizona Business Unit
ARIZONA BUSINESS UNIT Tucson Three Points Mission Complex Twin Buttes Mine Sierrita Mine ROSEMONT Green Valley ARIZONA, US PIMA SANTA CRUZ Sonoita MINE Tucson TOWN Patagonia RAILROAD ROSEMONT ROAD 0 25km 32
Slide 33: Rosemont Project
ROSEMONT PROJECT " High-quality development project with well-established Location Tucson, Arizona infrastructure " March 2017 43-101 demonstrates robust project Ownership 80%2 economics " 19 year mine life generating 15.5% after-tax project IRR Copper-molybdenum Type of deposit skarn deposit and 17
Slide 34: Rosemont Timeline
ROSEMONT TIMELINE KEY MILESTONES " Granted six permits for Rosemont since Huday’s acquisition of the project, including the Final Record of Decision issued by the U.S. Forest Service " Successfully defended five lawsuits related to Rosemont permits " Issued updated Technical Report with improved res
Slide 35: Rosemont Initial Capex & Funding
ROSEMONT INITIAL CAPEX & FUNDING INITIAL CAPITAL COST ESTIMATE OF $1.9 BILLION " 3-year construction period; $144 million in year 1, $861 million in year 2, $768 million in year 3, remaining capital in ramp-up period " ~5% growth and 15% contingency added per item ROSEMONT INITIAL CAPITAL COST ($M)
Slide 36: Overview of Ann Mason
OVERVIEW OF ANN MASON ANN MASON – NEVADA, USA " Hudbay acquired the Ann Mason property in December 2018 Elko " Ann Mason is located approximately 85km Reno southeast of Reno, Nevada in the prolific Yerington Ann Mason Copper District " Close to the former producing Yerington mine (1.7B lbs Las Vegas
Slide 37: Strategic Rationale of Ann Mason
STRATEGIC RATIONALE OF ANN MASON " The recent acquisition of Ann Mason is an excellent fit with Hudbay’s strategic criteria " Hudbay was a 14% shareholder of Mason since August 2017 and had followed the project closely for the past several years MEANINGFUL Adding one of the largest undeveloped coppe
Slide 38: Scarcity Value of Ann Mason
SCARCITY VALUE OF ANN MASON " Ann Mason is one of the largest undeveloped copper resources in Hudbay’s preferred jurisdictions " The 3rd largest “actionable” resource that was held within a junior company " A high priority exploration project to target near-surface, high-grade mineralization " Acqui
Slide 39: 2019 Objectives
2019 OBJECTIVES " Maintain industry-leading low-cost business to continue to generate positive cash flow " Complete new reserve and resource estimate for Lalor gold-rich zones and advance plans for New Britannia mill refurbishment " Maintain Constancia targeted recoveries and throughput, while ident
Slide 40: Appendix
H'DBAY APPENDIX
Slide 41: Appendix Contents
APPENDIX CONTENTS CONTENTS SLIDE# CONTENTS SLIDE# Corporate Governance Overview 42-43 Precious Metals Stream Overview 50 2018 Guidance 44-45 Peru Mineral Reserves 51 Financial Flexibility 46 Peru Mineral Resources 52 Constancia Mine Plan Summary 47 Manitoba Reserves & Resources 53 Lalor Mine Plan Su
Slide 42: Corporate Governance Overview
CORPORATE GOVERNANCE OVERVIEW BEST IN CLASS CORPORATE GOVERNANCE " Hudbay has been consistently recognized for strong corporate governance practices " Proxy advisor Institutional Shareholders Service (ISS) has recommended for all directors over the last nine years (2009 - 2018 AGM) " Ranked in top 2
Slide 43: Corporate Governance Overview
CORPORATE GOVERNANCE OVERVIEW INDEPENDENT, DIVERSE AND HIGHLY QUALIFIED BOARD " Our Board is independent " 90% of Board directors are independent (100% excluding our CEO Alan Hair) " 100% of our Audit, Compensation, Governance, and Nominating Committee members and Chairs are independent " Separate C
Slide 44: 2018 Guidance
2018 GUIDANCE PRODUCTION AND UNIT COST CONTAINED METAL IN CONCENTRATE1 2018 GUIDANCE 2017 ACTUAL 2017 GUIDANCE MANITOBA2 Copper tonnes 27,500 – 32,500 37,411 32,500 – 42,500 Zinc tonnes 105,000 – 130,000 135,156 125,000 – 150,000 Precious Metals3 ounces 120,000 – 145,000 106,918 90,000 – 110,000 C$/
Slide 45: 2018 Guidance
2018 GUIDANCE CAPITAL EXPENDITURE1 $ MILLIONS 2018 GUIDANCE 2017 GUIDANCE SUSTAINING CAPITAL Manitoba 85 65 Peru2 50 120 TOTAL SUSTAINING CAPITAL 135 185 GROWTH CAPITAL Manitoba 20 40 Peru 454 25 Arizona3 35 20 TOTAL GROWTH CAPITAL 100 85 Capitalized Exploration 10 2 TOTAL CAPITAL EXPENDITURE 245 27
Slide 46: Financial Flexibility
FINANCIAL FLEXIBILITY SEPTEMBER 30, 2018 $ MILLIONS Cash and Cash Equivalents $460 Availability under Credit Facilities $418 Total Available Liquidity $878 DEBT OUTSTANDING AMOUNT INTEREST MAINTENANCE MATURITY SEPTEMBER 30, 2018 DRAWN RATE COVENANTS Senior Unsecured Notes $400 7.250% January 2023 No
Slide 47: Constancia Mine Plan Summary
CONSTANCIA MINE PLAN SUMMARY MINE PLAN SUMMARY – MARCH 29, 2018 TECHNICAL REPORT 2019E 2020E 2021E 2022E 2023E LOM Avg.1 Ore mined million tonnes 37.7 34.0 27.6 28.6 33.6 30.8 Waste mined million tonnes 32.5 32.0 38.1 39.5 35.4 33.7 Strip ratio waste:ore 0.9 0.9 1.4 1.4 1.1 1.1 Ore milled million to
Slide 48: Lalor Mine Plan Summary
LALOR MINE PLAN SUMMARY MINE PLAN SUMMARY – MARCH 30, 2017 TECHNICAL REPORT 2018E 2019E 2020E 2021E 2022E LOM Total1 Ore milled tonnes 1,616,285 1,620,000 1,603,652 1,620,000 1,473,657 12,953,354 Milled daily throughput tonnes per day 4,500 4,500 4,500 4,500 4,100 - Zinc grade milled % Zn 5.71% 5.62
Slide 49: Leverage to Commodities
LEVERAGE TO COMMODITIES " Highly leveraged to copper, with additional sensitivity to zinc prices " Moderate exposure to changes in C$/US$ exchange rates SENSITIVITY ANALYSIS1 CHANGE OF 10% IMPACT ON 2018 BASE REPRESENTED BY: OPERATING CASH FLOW2 METAL PRICES: Copper Price $3.00/lb +/- $0.30/lb +/- $
Slide 50: Precious Metals Stream Overview
PRECIOUS METALS STREAM OVERVIEW PAYMENTS FROM WHEATON PRECIOUS METALS TO HUDBAY UPFRONT PAYMENTS PRODUCTION PAYMENTS2 777 and Constancia Rosemont 777 and Constancia Rosemont $885 million (pending) $5.90/oz Silver $3.90/oz Silver $230 million1 $400/oz Gold $450/oz Gold DELIVERY FROM HUDBAY TO WHEATON
Slide 51: Peru Mineral Reserves
PERU MINERAL RESERVES AS AT JANUARY 1, 2018 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Proven 455,900,000 0.30 96 2.93 0.035 Probable 72,800,000 0.23 72 3.09 0.035 Total Proven and Probable 528,700,000 0.29 93 2.95 0.035 PAMPACANCHA Proven 32,400,000 0.59 178 4.48 0.368 Probable 7,
Slide 52: Peru Mineral Resources
PERU MINERAL RESOURCES AS AT JANUARY 1, 2018 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Measured 175,000,000 0.20 51 2.19 0.028 Indicated 180,900,000 0.20 56 2.09 0.033 Inferred 54,100,000 0.24 43 1.71 0.018 PAMPACANCHA Measured 11,400,000 0.41 101 4.95 0.245 Indicated 6,000,000 0.
Slide 53: Manitoba Reserves & Resources
MANITOBA RESERVES & RESOURCES AS AT JANUARY 1, 2018 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Proven 3,511,000 0.73 6.21 2.37 27.18 Lalor Reserves1 Probable 9,484,000 0.65 4.31 2.72 26.03 Total Lalor Mineral Reserve 12,995,000 0.67 4.83 2.62 26.33 Proven 2,625,000 1.78 4.20 1.70 25.97
Slide 54: 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 55: 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 56: Additional Information
ADDITIONAL INFORMATION Table 1 below provides a summary of the Lalor drill results referenced in this presentation. Table 1: Lalor drill results Hole ID From To Intercept Depth Estimated true Cu Au (m) (m) (m) (m) width(m)1 (%)2 (g/t)2 189W01 1197.0 1205.0 8.0 1154 7.1 0.1 9.3 193W01 1041.2 1046.5 5
Slide 57: For More Information
F O R M O R E I N F O R M AT I O N C O N TA C T: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com
Hudbay Minerals — 2019 TD Securities Mining Conference on 6ix