Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Bank of America Merrill Lynch 2018 Global Metals, Mining & Steel Conference
52 slides from Hudbay Minerals's conference presentation, May 7, 2018
Slide 1: Investor Presentation
I N V E S T O R P R E S E N TAT I O N May 2018 1
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: Investment Highlights
INVESTMENT HIGHLIGHTS Constancia & Exploration Peru Lalor, 777, Reed & Exploration Manitoba, Canada TSX, NYSE, BVL Exploration HBM Symbol British Columbia, Canada Exploration Market Capitalization1 C$2.3 billion Chile Rosemont Shares Outstanding 261 million Arizona, USA Available Liquidity2 $0.8 bil
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 Jur
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 time ac
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) 4.0 Production Production Production Copper Equivalent (Mt) 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 mine de
Slide 8: Growing Free Cash Flow & Reducing Debt
GROWING FREE CASH FLOW & REDUCING DEBT Continue to grow free cash flow through un-hedged production and stable low-cost operations Reduced net debt position by ~$650 million since 2016 OPERATING AND FREE CASH FLOW1 NET DEBT2 ($M) ($M) Operating Cash Flow Free Cash Flow Net Debt 1,228 582 1,168 531 1
Slide 9: Low Cash Costs
LOW CASH COSTS Hudbay is positioned in the first quartile of the cost curve 2018E COPPER C1 CASH COSTS1 (US $/lb) $3.00 $2.00 First Quantum Oz Minerals Turquoise Hill $1.00 Capstone Lundin $0.00 Hudbay ($1.00) ($2.00) 0% 25% 50% 75% 100% 2018E COPPER C1 + SUSTAINING CAPEX CASH COST1 (US $/lb) $6.00
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 Copper Equiv. Reserves per HBM Share Copper Equiv. Reserves (Mt) 4.
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% Peru
Slide 13: Copper Growth Projects
COPPER GROWTH PROJECTS NEW COPPER PRODUCTION DEPENDENT ON GREENFIELD MINES IN DIFFICULT JURISDICTIONS Approximately 40% of new production is expected to come from the DRC, Mongolia, Zambia Only 38% of new production is expected to come from mining friendly jurisdictions (Chile, Peru, USA) Approximat
Slide 14: Copper Supply/Demand Outlook
COPPER SUPPLY/DEMAND OUTLOOK INSUFFICIENT COPPER PROJECTS TO FILL GAP Probable projects are required to come on by 2019 in order to balance market; structural deficit exists beyond 2024 Near-term surplus projected by Wood Mackenzie amounts to less than 1% of annual production in any given year and i
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% 234 kt CuEq 8% 5,383 kt CuEq 68% 73% Copper Zinc Gold Silver Copper Gold Silver Molybdenum Zinc Note: The following metals price assumptions were applied to reserves
Slide 16: Consolidated Production Profile
CONSOLIDATED PRODUCTION PROFILE GROWING COPPER EQUIVALENT PRODUCTION Production profile is based on a hypothetical scenario assuming first year of Rosemont construction occurs in 2019; Rosemont project development is conditional upon receipt of final permits and Board approval HUDBAY CONSOLIDATED AN
Slide 17: Project Pipeline
PROJECT PIPELINE Hudbay has a diversified portfolio of operating mines and an extensive development pipeline to perpetuate production growth Production Constancia Lalor 777 Reed Shovel-ready Development Rosemont Pampacancha Constancia Peru Manitoba Chile Lalor B.C. Resource Definition / Feasibility
Slide 18: Exploration Focus
EXPLORATION FOCUS Hudbay more than tripled its owned or optioned mineral properties in the last two years PERU LAND CANADA PROPERTY OWNERSHIP SURFACE (HA) LAND PROPERTY OWNERSHIP SURFACE Pinco Pinco 100% Owned 10,600 (HA) Llaguen Optioned 8,897 BRITISH COLUMBIA Maria Reyna Optioned 5,850 Ike Optione
Slide 19: 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 Minerals
Slide 20: 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 20
Slide 21: 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 New 201
Slide 22: 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 Increasing
Slide 23: Mining Properties Near Constancia
MINING PROPERTIES NEAR CONSTANCIA MINERAL PROPERTIES WITHIN TRUCKING DISTANCE OF CONSTANCIA PROCESSING FACILITY Exploration work to be conducted on newly acquired properties near Constancia with potential to provide higher-grade feed to the Constancia mill post-Pampacancha Maria Reyna Caballito Cons
Slide 24: 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 REED MINE Flin Flon MILL Flin Flon Mill TOWN RAILROAD Winnipeg REED MINE ROAD 0 50km 24
Slide 25: Lalor Mine
LALOR MINE PRODUCING LOW-COST MINE WITH ZINC AND Location Snow Lake, Manitoba GOLD UPSIDE POTENTIAL Production shaft with capacity of 6,000tpd Ownership 100% Strong ramp-up of ore production; on track for Type of deposit VMS deposit expanded 4,500tpd mine plan by third quarter 2018 Processing Stall
Slide 26: 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 Possible Cu-Au 189W01 copper & gold zones feeder of Lens 10 296W01 gold zone
Slide 27: 777 Mine
777 MINE STEADY, LOW-COST PRODUCTION Location Flin Flon, Manitoba Maximizing cash flow to end of mine life Ownership 100% Plan to keep processing assets on care and maintenance after mine closure to maintain Type of deposit VMS deposit regional optionality Processing Flin Flon mill Refined zinc, zin
Slide 28: 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 28
Slide 29: 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 17.7% IR
Slide 30: Rosemont Timeline
ROSEMONT TIMELINE KEY MILESTONES 2007 2008 2009 2010 2011 2012 Mine Plan of Operations filed ADWR Groundwater Arizona State Mine Inspector, Mine Safety and Health EPA Hazardous Waste ADEQ Aquifer Protection Permit with U.S. Forest Service Withdrawal Permits issued Arizona Mined Land Administration N
Slide 31: 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) BREA
Slide 32: 2018 Objectives
2018 OBJECTIVES Continue to focus on generating free cash flow and increasing net asset value Advance in-house brownfield growth opportunities Complete Lalor paste plant and ramp up base metal ore throughput from Lalor to 4,500 tonnes per day Pampacancha Lalor gold Advancing permitting and technical
Slide 33: Appendix
APPENDIX 33
Slide 34: Appendix Contents
APPENDIX CONTENTS CONTENTS SLIDE# CONTENTS SLIDE# 2018 Guidance 35-36 Leverage to Commodities 44 Financial Flexibility 37 Precious Metals Stream Overview 45 Global Refined Zinc Market Balance 38 Peru Mineral Reserves 46 Constancia Site Map 39 Peru Mineral Resources 47 Maria Reyna Historical Drill Re
Slide 35: 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 36: 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 37: Financial Flexibility
FINANCIAL FLEXIBILITY MARCH 31, 2018 $ MILLIONS Cash and Cash Equivalents $393 Availability under Credit Facilities $417 Total Available Liquidity $810 DEBT OUTSTANDING AMOUNT INTEREST MAINTENANCE MATURITY MARCH 31, 2018 DRAWN RATE COVENANTS Senior Unsecured Notes $400 7.250% January 2023 None Moody
Slide 38: Global Refined Zinc Market Balance
GLOBAL REFINED ZINC MARKET BALANCE Fundamentals will support higher prices in the near-term, but supply- side responses from high prices expected to push market into surplus ZINC Refined Surplus (Deficit) Zinc Price 1250 200 1000 180 160 750 140 500 LME Zn Price Real c/lb 120 250 kt Zn 100 0 80 -250
Slide 39: Constancia Site Map
CONSTANCIA SITE MAP PAMPACANCHA SATELLITE DEPOSIT LOCATED ~7km (BY TRUCK) FROM PRIMARY CRUSHER Constancia Camp Crushing Area CONSTANCIA PIT Sediment Pond PROCESS NAG Cunahuri PLANT ROM Pad Stockpile Reservoir Main WASTE ROCK Sediment Topsoil Pond Stockpile FACILITY Fortunia PAMPACANCHA Camp WRF Cont
Slide 40: Maria Reyna Historical Drill Results
MARIA REYNA HISTORICAL DRILL RESULTS A summary of the historical drill results from Maria Reyna is contained in the table below, however a qualified person has not independently verified this historical data or the quality assurance and quality control program that was applied during the execution o
Slide 41: 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 42: 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 43: Rosemont: World Class Environmental Mitigation
ROSEMONT: WORLD CLASS ENVIRONMENTAL MITIGATION TECHNOLOGIES EMPLOYED TO REDUCE ENVIRONMENTAL IMPACTS Reduces water use by 50% DRY STACK Reduces land impacts by 80% due to stacking capability TAILINGS Provides better stability, as well as minimizes aquifer impact Permanent buttress in place early to
Slide 44: 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 +/- $56 m
Slide 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: For More Information Contact
F O R M O R E I N F O R M AT I O N C O N TA C T: Carla Nawrocki, Director, Investor Relations 416.362.7362 | carla.nawrocki@hudbay.com 52
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