Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Scotiabank Mining Conference 2016
46 slides from Hudbay Minerals's conference presentation, Dec 1, 2016
Slide 1: Investor Presentation | December 2016
INVESTOR PRESENTATION | DECEMBER 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$2.1 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 19 years Production Lalor Mine Snow Lake Zn, Au 14 years Manitoba 777 Mine Flin Flon Cu, Zn 4 years Reed Mine Near Flin Flon Cu 2 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 85k tpd production at end of 2014 Annual Cu production3 137kt 81kt ! Annual Cu production of 110k tonnes at cash Unit operating cost4 $8.25/t $7.39/t costs
Slide 9: South America Q3 2016 Results
South America Q3 2016 Results ! Constancia plant performance optimization Peru Summary Operating Statistics remains primary focus Q3 2016 YTD 2016 Ore mined (million tonnes) 6.9 20.3 ! Improved copper recovery to 83.6% in Q3 Ore milled (million tonnes) 6.9 19.8 ! On track to achieve full year copper
Slide 10: 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 11: Manitoba Business Unit
Manitoba Business Unit Aerial View of Lalor Mine Site New Britannia Mill Snow Lake LALOR MINE 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 PRESENTATION | 11
Slide 12: Lalor Mine
Lalor Mine PRODUCING LOW COST MINE WITH LTM1 Avg. LOM2 ZINC & GOLD UPSIDE POTENTIAL Ownership 100% ! Production shaft with capacity of 6,000tpd Daily ore throughput 3,000 tpd 3,300 tpd ! Stall mill currently processing 3,000tpd of Annual Zn production3 75kt 67kt base metal Zn-rich ore Annual Au-Eq.
Slide 13: Lalor Cross-Section
Lalor Cross-Section LALOR CROSS-SECTION, LOOKING WEST 0m Legend Base metal zone Production Shaft (6,000tpd 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 INVESTOR PRESENTATION | 13
Slide 14: 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 4,850 tpd 4,500 tpd ! Plan to keep processing assets on care Annual Cu production4 36kt 31kt and maintenance after mine closures to
Slide 15: Manitoba Q3 2016 Results
Manitoba Q3 2016 Results ! Zinc and precious metals grades were Manitoba Summary Operating Statistics higher in Q3 than prior quarters due to Q3 2016 YTD 2016 higher grades at 777 Ore mined (kt) 692 2,153 Ore milled (kt) 723 2,132 ! Recoveries were higher for zinc and Copper grade milled 1.58% 1.61%
Slide 16: 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 | 16
Slide 17: 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 18: Liquidity
Liquidity September 30, 2016 $ Millions Cash and Cash Equivalents $118 Availability under Credit Facilities $159 Total Available Liquidity $277 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 F
Slide 19: Uniquely Positioned
Uniquely Positioned ! Downside protection with low-cost assets in low-risk jurisdictions ! Strong leverage to copper price with growing zinc exposure ! Achieving capital and operating cost efficiencies to maximize free cash flow ! Best-in-class growth potential § Lalor gold § Pampacancha § Rosemont
Slide 20: Appendix
Appendix INVESTOR PRESENTATION | 20
Slide 21: Appendix Contents
Appendix Contents ! Experienced management team ! Copper by-product cost curve ! Declining industry copper grades ! Global refined metal market balance ! Constancia site map ! Constancia mine plan summary ! Peru inventory levels ! Manitoba operations flow chart ! Manitoba history of discoveries ! 20
Slide 22: 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 23: Copper By-Product Cost Curve
Copper By-Product Cost Curve 2016 COST CURVE1 250 200 Constancia Reed 150 C1 Cash Cost (100 x $/lb) 777 100 50 0 0 10 20 30 40 50 60 70 80 90 100 -50 Cumulative Percentile Production (%) -100 -150 -200 Lalor -250 Source: Wood Mackenzie 1. Wood Mackenzie Cu normal mine site C1 cost curve for 2016 (Q3
Slide 24: 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 25: Global Refined Metal Market Balance
Global Refined Metal Market Balance ! Copper market in balance in near-term, ! Zinc market in deficit over the next few but moves into growing supply deficits in years, but supply-side response from high 2020+ prices expected to cause surplus in 2018+ Copper Zinc Refined Surplus (Deficit) Copper Pri
Slide 26: Constancia Site Map
Constancia Site Map ! High-grade Pampacancha satellite deposit located ~7km (by truck) from primary crusher INVESTOR PRESENTATION | 26
Slide 27: Constancia Mine Plan Summary
Constancia Mine Plan Summary Mine Plan Summary – November 21, 2016 Technical Report 2017E 2018E 2019E 2020E 2021E 5-Year Avg. LOM Avg.1 Ore mined million tonnes 34.6 34.1 27.7 32.2 31.8 32.1 30.5 Waste mined million tonnes 38.4 39.1 33.8 36.9 37.0 37.0 34.0 Strip ratio waste:ore 1.1 1.1 1.2 1.1 1.2
Slide 28: 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, Dec. 31, Mar. 31, Jun. 30, Sep. 30, 2015 2015 2
Slide 29: 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 30: Manitoba History of Discoveries
Manitoba History of Discoveries 85+ YEAR OPERATING HISTORY IN THE FLIN FLON GREENSTONE BELT 62.5 // 62.5 Flin Flon Lalor // ⁄⁄ 62.5 Trout Lake 777 Stall Lake Chisel U/G Callinan Chisel Osborne Anderson Reed Konuto Spruce Schist Lake Centennial Westarm Chisel Pit Coronation White Lake Dickstone Rod P
Slide 31: 2016 Cost Reductions
2016 Cost Reductions ! 2016 planned capital spending and operating expenses reduced by over $100 million; no impact on production guidance ! $55 million in sustainable operating cost savings ! Sustaining capital spending expected to be ~10% lower than revised guidance ORIGINAL REVISED ($ Millions) (
Slide 32: 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 33: 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$0.38 - 0.46/lb 1. Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudb
Slide 34: 2016 Capital Expenditure Guidance
2016 Capital Expenditure Guidance1 2015 Actual 2015 Guidance 2016 Guidance2 ($ 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 35: 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 $3 million of Manitoba expenditures will be capitalized. INVESTOR PRESENTATION | 35
Slide 36: Leverage to Commodities
Leverage to Commodities ! Highly leveraged to copper, with additional sensitivity to zinc prices ! Moderate exposure to changes in C$/US$ exchange rates, with minimal exposure to Peruvian currency changes Sensitivity Analysis1 Change of 10% Impact on 2016 Base Represented by: Operating Cash Flow2 Me
Slide 37: 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 2017 Remaining Life of Mine 777 Silver 100% Silver 100% Gold 100% Gold 50% Remaining Life of Mine C
Slide 38: Peru Mineral Reserves
Peru Mineral Reserves AS AT JUNE 30, 2016 Category Tonnes Cu (%) Mo (g/t) Ag (g/t) Au (g/t) Constancia Proven 442,300,000 0.30 99 2.99 0.037 Probable 109,400,000 0.23 64 2.66 0.035 Total Proven and Probable 551,700,000 0.29 92 2.93 0.037 Pampacancha Proven 22,800,000 0.53 149 4.44 0.299 Probable 20,
Slide 39: Peru Mineral Resources
Peru Mineral Resources AS AT JUNE 30, 2016 Category Tonnes Cu (%) Ag (g/t) Mo % Au (g/t) Constancia Measured 608,700,000 0.27 2.74 0.009 0.04 Indicated 399,300,000 0.19 2.09 0.005 0.03 Measured and Indicated 1,008,000,000 0.24 2.48 0.007 0.03 Inferred 138,200,000 0.17 1.71 0.004 0.02 Pampacancha Mea
Slide 40: 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 41: 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 42: 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 43: Additional Information
Additional Information Peru ! The mineral reserve estimates for the Constancia operations are based on a long range mine plan (LOM) with economic value calculation per block (NSR in $/t), mining, processing, and detailed engineering parameters. ! The Constancia and Pampacancha reserves pits consist
Slide 44: 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 45: 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 46: For more information contact
For more information contact: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com