Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Q4 2018 Earnings Presentation
49 slides from Hudbay Minerals's earnings presentation, Feb 20, 2019
Slide 1: Q4 2018 Results Presentation
Q 4 2 0 1 8 R E S U LT S P R E S E N TAT I O N February 20, 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: Agenda
AGENDA ! Corporate Review ! 2018 achievements ! Consolidated results and free cash flow generation ! Peru Business Unit ! 2018 performance ! Project development review ! Regional potential ! Manitoba Business Unit ! 2018 performance ! New Lalor reserve and resource estimate and updated mine plan ! R
Slide 4: 2018 Achievements
2018 ACHIEVEMENTS OPERATIONAL AND GROWTH INITIATIVES ✔ Utilized technology and process improvements to drive additional OPERATIONAL efficiencies in our operations ✔ Consolidated copper production exceeded 2018 guidance by 14%1, zinc and precious metals were within 2018 guidance ranges ✔ Generated $2
Slide 5: 2018 Consolidated Results
2018 CONSOLIDATED RESULTS KEY RESULTS SUMMARY ! Consolidated production of copper- FY 2018 Q4 2018 Q3 2018 equivalent contained metal in concentrate of 57kt in Q4 and 247kt Production1 in 2018 Copper kt 154.6 37.2 40.5 ! Consolidated cash costs of $0.94/lb Zinc kt 115.6 27.4 26.2 Cu and sustaining c
Slide 6: Growing Free Cash Flow & Reducing Debt
GROWING FREE CASH FLOW & REDUCING DEBT ! Achieved 2016 cost reduction target of over $100 million; continued to generate positive free cash flow through un-hedged production and stable low-cost operations ! Reduced net debt position by more than $750 million since 2016 OPERATING AND FREE CASH FLOW1
Slide 7: Peru Operations Review
PERU OPERATIONS REVIEW PERU SUMMARY OPERATING STATISTICS FY 2018 Q4 2018 Q3 2018 ! Mill operating at ~90,000 tpd5 and Ore mined (million tonnes)1 34.4 7.3 8.8 achieving ~85% copper recoveries in the fourth quarter Ore milled (million tonnes) 31.3 7.7 8.0 Copper grade milled 0.47% 0.48% 0.48% Gold gr
Slide 8: 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 (2018) $20.00 $18.24 $18.00 $16
Slide 9: Best In Class Mine Development
BEST IN CLASS MINE DEVELOPMENT ! Constancia’s capital cost performance was best in class when compared to other greenfield open pit copper mines in the Americas CAPITAL COST INCREASE AT GREENFIELD OPEN PIT COPPER MINES IN THE AMERICAS 110% 105% CAPITAL COST INCREASE RELATIVE TO FEASIBILITY STUDY Pee
Slide 10: Best In Class Mine Ramp-Up
BEST IN CLASS MINE RAMP-UP ! 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 CONSTANCIA RAMP-UP USED AS BHP’S CAPACITY OPERATIONS (MONTHS) BENCHMARK
Slide 11: Constancia Optimization
CONSTANCIA OPTIMIZATION ! Increasing throughput to 90,000 tpd while achieving targeted recoveries ! 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 enhanc
Slide 12: Constancia Regional Potential
CONSTANCIA REGIONAL POTENTIAL ! We work with all levels of government and local 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 ! P
Slide 13: Manitoba Operations Review
MANITOBA OPERATIONS REVIEW Manitoba Summary Operating Statistics ! Ore mined decreased 5% versus Q3 2018 FY 2018 Q4 2018 Q3 2018 as a result of the Reed mine closure, offset Ore mined (kt) 2,553 562 593 by higher Lalor mine output Ore milled (kt) 2,625 574 626 Copper grade milled ! The Reed mine clo
Slide 14: Lalor Updated Mine Plan Highlights
LALOR UPDATED MINE PLAN HIGHLIGHTS NEW BRITANNIA MILL THE OPTIMAL PROCESSING SOLUTION FOR LALOR GOLD ! Gold recoveries increased to 93% at New Britannia from 53% at Stall INCREASED LALOR RESERVES ACROSS ALL METALS ! Gold reserve grade increased by over 1.0 g/t (+44%) with higher tonnage1 ! In-situ c
Slide 15: Lalor In-House Discovery & Development
LALOR IN-HOUSE DISCOVERY & DEVELOPMENT 2007 2009 2012-2014 2015 DISCOVERY DEVELOPMENT INITIAL PRODUCTION NEW BRITANNIA MILL ! Initial discovery hole ! Construction commenced ! Phase 1 completed in 2012; ! Acquired the nearby New drilled on Phase 1 ramp access Phase 2 completed in 2014 Britannia mill
Slide 16: Lalor Au And Cu-Au Rich Lenses
LALOR AU AND CU-AU RICH LENSES LALOR CROSS-SECTION, LOOKING SOUTHWEST ! Over the past 12 months, we focused on infill drilling and test mining the Au rich Lens 25 and remodeling the Cu-Au rich Lens 27 Potential Lens 31-32 for up-dip extension Ramp from Chisel Lens 25 Lens 10 Possible extension of go
Slide 17: Lalor Production And Cash Costs
LALOR PRODUCTION AND CASH COSTS ! Improved production profile at low cash costs GOLD PRODUCTION AND CASH COSTS ZINC PRODUCTION AND CASH COSTS Gold Production Cash Costs (Net of By-Products) Zinc Production Cash Costs (Net of By-Products) 200 $3,000 100 $4.00 Cash Costs (US$/oz net) Cash Costs (US$/l
Slide 18: Lalor Gold Positioning
LALOR GOLD POSITIONING ! Lalor becomes a meaningful gold producer as one of the lowest cost gold mines in Canada 633 2017A 571 GOLD PRODUCTION1 (K OZ) 376 353 349 305 272 236 209 200 196 194 167 157 141 111 99 91 86 84 67 59 55 51 49 48 28 16 Snow Lake Canadian Malartic Detour Lake Brucejack Meadowb
Slide 19: Snow Lake Regional Potential
SNOW LAKE REGIONAL POTENTIAL HUDBAY HAS A LARGE PROSPECTIVE LAND PACKAGE IN THE SNOW LAKE BELT WITH SIGNIFICANT GOLD EXPLORATION POTENTIAL Proven + Probable Reserves Grade Contained Tonnage Copper Gold Silver Zinc Gold Eq(1) Gold Gold Eq(1) (Mt) (%) (g/t) (g/t) (%) (g/t) (koz) (koz) Lalor - Base Met
Slide 20: Snow Lake Regional Potential
SNOW LAKE REGIONAL POTENTIAL ! There are considerable resources beyond reserves in Snow Lake that could provide long-term feed for New Britannia and Stall RESERVES AND RESOURCES IN THE SNOW LAKE CAMP (M TONNES AND M OZS) 2P Reserves at Lalor Satellite Deposits (Indicated) Lalor and New Britannia (In
Slide 21: In-Mine Exploration – Gold
IN-MINE EXPLORATION – GOLD ! Lens 17 (not yet in resources) is a Cu-Au rich analog to Lens 27 identified based on 7 surface holes. Drilling planned in 2019: ! Phase 1 to confirm upper portion in Q2 2019 ! Phase 2: Potential connection to Lens 10 (Zn rich) in 2H 2019 IN-MINE GOLD EXPLORATION TARGETS
Slide 22: Manitoba Exploration Success
MANITOBA EXPLORATION SUCCESS ! Hudbay has a long history of delivering additional tonnage beyond the initial reserves in the Flin Flon and Snow Lake VMS camps RESERVES IN THE FLIN FLON AND SNOW LAKE CAMP (MILLION TONNES) Flin Flon 62.5 Mt 777 Trout Lake Lalor Stall Lake Chisel U/G Callinan Chisel Os
Slide 23: Adding Value Through Exploration
ADDING VALUE THROUGH EXPLORATION CONSTANCIA (2009-2017)1 777 (2004-2017)1 LALOR (2010-2018)1 Reserves Reserves Reserves Copper Equivalent (Mt) Copper Equivalent (Mt) Production Copper Equivalent (Mt) Production Production 4.0 1.5 1.0 +31% Growth +91% Growth 3.0 +98% Growth 0.8 1.0 2.0 0.5 0.5 1.0 0.
Slide 24: Rosemont Project Development
ROSEMONT PROJECT DEVELOPMENT ! Consolidated annual production illustrates the projected outlook CONSOLIDATED ANNUAL CUEQ PRODUCTION 1,2 assuming a Rosemont Manitoba Peru Arizona (80%) construction decision occurs in 350,000 CuEq Contained in Concentrate (tonnes) 2019 300,000 ! Rosemont expected to i
Slide 25: Rosemont Permitting Milestones
ROSEMONT PERMITTING MILESTONES ! Granted six permits for Rosemont since Hudbay’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 reso
Slide 26: 2019 Guidance
2019 GUIDANCE ! Copper production expected to 2019 PRODUCTION AND UNIT COST GUIDANCE1 Manitoba Production decrease by ~12% compared to 2018, Copper kt 22,000 – 25,000 primarily due to Reed mine closure in Zinc Precious Metals2 kt koz 100,000 – 115,000 105,000 – 125,000 2018 Peru Production Copper kt
Slide 27: 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 Efficient Operations Long Life Meaningful Low Cost Scale Exploration Financial Strength Project Development Mining Per Share Fri
Slide 28: 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 LIFE1 Reserve Life M&I Resource Life 2 Inferred Resource Life 3 Past Production 4 Rosemont 19 11 1 Constancia -3 18 6 1 Lalor -7 10 2 7 777 -14 3 11 HISTORICAL COPPE
Slide 29: 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 Antofagasta $1.00 Hudbay Imperial First Quantum Turquoise Hill Lundin Oz Minerals $0.00 ($1.00) ($2.00) 0% 25% 50% 75% 100% 2019E COPPER C1 + SUSTAINING CAPEX CASH
Slide 30: Per Share Accretion
PER SHARE ACCRETION ! Focused on NAV per share and reserve and resource per share accretion HUDBAY RESERVE GROWTH PER SHARE1 HUDBAY RESOURCE GROWTH PER SHARE1,2 Manitoba Peru Arizona Other Manitoba Peru Arizona Other Nevada 60.0 160.0 rowth Copper Equiv. Resources per HBM Share +147% G Copper Equiv.
Slide 31: 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 2018 PRODUCTION1 HUDBAY 2017 RESERVE BASE1 Canada 13% 41% Canada United 43% 227 kt CuEq States 5,383 kt CuEq Peru 59% 44% Per
Slide 32: 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 33: Environmental And Social Track Record
ENVIRONMENTAL AND SOCIAL TRACK RECORD SOCIALLY RESPONSIBLE REED MINE RECLAMATION ! Track record of constructive community relations in Peru BEFORE AND AFTER and elsewhere ! 1st place award for Community Relations at the 3rd Community Relations International Conference at the Mines Engineers Institut
Slide 34: Returns And Leverage To Copper
RETURNS AND LEVERAGE TO COPPER ! Hudbay has consistently provided investors with leverage to the copper price and has met or outperformed the peer median in 3 of the last 4 years ANNUAL TSR – HUDBAY, COPPER PRICE PEER LEVERAGE TO COPPER PRICE AND PEER GROUP1 (2016-2018, R2 of Monthly Returns) 50% 45
Slide 35: Scarcity Of Copper Assets
SCARCITY OF COPPER ASSETS ! 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 ! Acquiri
Slide 36: 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 Lalor Gold Constancia Peru and Ann Lalor Mine Manitoba B.C. Regional Chile Life
Slide 37: Near-Term Catalysts
NEAR-TERM CATALYSTS ROSEMONT PERMITTING MILESTONES ! Army Corps of Engineers (“ACOE”) completed consultation process and expected to be in the final stages of 404 Water permit review LALOR MINE RAMP-UP AND MINE LIFE EXTENSION ! On track to achieve 4,500 tpd at Lalor in Q1 2019 ! Upgrading Lalor infe
Slide 38: Near-Term Catalysts (Cont'd)
NEAR-TERM CATALYSTS (CONT’D) ANN MASON EXPLORATION ! Testing potential high-grade targets that could enhance project economics GRASSROOTS EXPLORATION ! Continued exploration activities on 885,000 hectares of prospective grassroots exploration properties in Chile, Peru and Canada ROSEMONT PROJECT DEV
Slide 39: Hudbay Investment Rationale
HUDBAY INVESTMENT RATIONALE ! Consistent long-term growth strategy and world-class asset base ! Proven track record of successful project development ! Operational excellence and value creation through successful exploration ! Focused on free cash flow generation and prudent capital allocation ! Rob
Slide 40: Appendix
H'DBAY APPENDIX
Slide 41: Total Shareholder Return (TSR)
TOTAL SHAREHOLDER RETURN (TSR) ! 2019 YTD, Hudbay’s TSR of 30% is the highest of our peers and ranked 1st out of 8 peers ! In 2018, Hudbay ranks in the 37th percentile, in 2017 Hudbay ranks second only to Antofagasta and in 2016 Hudbay ranks in the middle of the group (2) Period 2016 2017 2018 2019
Slide 42: 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 43: 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 44: Snow Lake Reserves & Resources
SNOW LAKE RESERVES & RESOURCES AS AT JANUARY 1, 2019 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Proven 5,137,000 0.76 7.13 2.37 26.31 Base Metal Zone Probable 5,552,000 0.44 4.19 3.52 27.39 Proven 58,000 0.80 2.65 5.46 39.09 Gold Zone Probable 2,928,000 1.09 0.31 6.74 23.08 Total Lalor
Slide 45: Flin Flon Reserves & Resources
FLIN FLON RESERVES & RESOURCES AS AT JANUARY 1, 2018 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Proven 2,625,000 1.78 4.20 1.70 25.97 777 Reserves Probable 1,251,000 1.11 4.33 1.82 25.41 Total 777 Mineral Reserve 3,876,000 1.56 4.24 1.73 25.79 Proven 67,000 2.91 1.16 0.47 7.78 Reed Res
Slide 46: 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 47: 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 48: 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 49: 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: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com