Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Corporate Update (September 2013)
70 slides from Hudbay Minerals's corporate update, Sep 30, 2013
Slide 1: Constancia Site Visit Presentation
Constancia Site Visit Presentation October 2013
Slide 2: Forward-looking Information
Forward-looking 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, othe
Slide 3: Note to U.S. Investors
Note to U.S. Investors Information concerning Hudbay’s mineral properties has been prepared in accordance with the requirements of Canadian securities laws, which differ in material respects from the requirements of SEC Industry Guide 7. Under Securities and Exchange Commission (the “SEC”) Industry
Slide 4: Safety
Safety 13 LTI’s Project to date 0.18 LTI Frequency (200,000 man hours) High Risk Areas: •Vehicle travel – road safety •Weather (lightning) Rainy Season •Trips and Slips uneven ground •Hand safety •Working at heights
Slide 5: Constancia Timeline & History
Constancia Timeline & History > Acquired Norsemont Mining Inc., owner of the Constancia project, in July 2011 through a combination of approximately 19.8 million shares and $117 million in cash November 2010 April 2012 June 2012 August 2013 Environmental Social Initial resource Beneficiation Updated
Slide 6: Consistent with Acquisition Strategy
Consistent with Acquisition Strategy M&A Target Constancia Focus on Americas, mining favourable jurisdictions VMS or porphyry deposits with exploration upside Transaction size of ~20% of market capitalization Add value through technical expertise and financial capacity Accretive to in-situ metal val
Slide 7: Overview of Constancia
Overview of Constancia PERU SITE VISIT l 7
Slide 8: Constancia – Inside a Prolific Copper Belt
Constancia – Inside a Prolific Copper Belt Cusco CONSTANCIA PROJECT LOCATION MAP PERU Xstrata – Las Bambas First Quantum – Haquira Trujillo Constancia APURIMAC Project CUSCO DEPT. Pan Pacific – Quechua Lima Cusco PUNO AREQUIPA DEPT. Constancia Xstrata – Antapaccay Arequipa Scale 1:750,000 Matarani M
Slide 9: Constancia Project Summary
Constancia Project Summary > US$690 million incurred and entered PERU into additional US$426 million in commitments to August 31, 2013 Ball mill shells on site Lima > Preliminary results from re-estimation Constancia of project capital costs indicate an increase of ~15%, of which one half would be d
Slide 10: Access to Existing Infrastructure
Access to Existing Infrastructure > 83km access road from Yauri • To be upgraded for concentrate haulage post commissioning > Tintaya power substation 70km away • Planned upgrade to 220 kV to be commissioned by Q4 2013 • Contract executed for construction of power transmission line from Tintaya > Ra
Slide 11: Current Schedule at Constancia
Current Schedule at Constancia 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Permitting Mine Permit Front End Engineering Design Construction Camp Procurement Community Agreements Board Approval Power Line TMF and WRF Plant Pampacancha Feasibility Study Commiss
Slide 12: Milestones
Milestones Process Plant Completion Complete Engineering Q1 2014 Complete Procurement Q1 2014 Mine dewatering Mechanical Completion Q2 2014 Copper Plant Mechanical Completion Q3 2014 Energize Power Q3 2014 Start Ore Commissioning (Completion of C2) H2 2014 Forecast as at Heavy Civil Works August 23,
Slide 13: Project Completion to August 2013
Project Completion to August 2013 Category Weight % Complete Percent of Project EPCM & Other Indirects 14% 51% 7% Procurement 26% 51% 13% Construction 48% 26% 13% Commissioning 1% 0.0% 0.0% Owners 10% 58% 6% Project Percent Complete1 39% 1Percentage completion estimate reflects updated capital cost
Slide 14: Constancia Project – Site Plan and Layout
Constancia Project – Site Plan and Layout PERU SITE VISIT l 14
Slide 15: Constancia Production Profile
Constancia Production Profile High tonnage with low cash costs > 2015 – 2019: annual copper metal in concentrate expected to average 118,000 t > 2020 – 2030: annual copper metal in concentrate expected to average 77,000 t > Cash costs of production expected to average: $0.84/lb 1 of copper for first
Slide 16: LOM Constancia Copper Concentrate Specifications
LOM Constancia Copper Concentrate Specifications 600 31% Cu Concentrate Combined 500 30% LOM Volume = 5.1M dmt 400 29% Range Ave 300 28% Cu (%) 27 – 29 28.1 200 27% Ag (g/t) 157 – 273 211 Au (g/t) 1.3 – 13.0 3.7 100 26% Zn (%) 1.1 – 4.3 2.4 0 25% Pb (%) 0.7 – 2.2 1.4 2015 2016 2017 2018 2019 2020 20
Slide 17: Constancia Key Metrics
Constancia Key Metrics Project Costs Unit Life of Mine Mining Costs / tonne ore1 US$/t 2.97 Milling Cost / tonne ore US$/t 4.47 G&A Costs / tonne ore US$/t 1.11 1 Includes cost of waste removal PERU SITE VISIT l 17
Slide 18: Heavy Civil Works Engineering / Construction
Heavy Civil Works Engineering / Construction PERU SITE VISIT l 18
Slide 19: Project De-Risking with Experienced Partners
Project De-Risking with Experienced Partners Stracon GyM Relevant Experience > Currently operating in Peru > Toromocho > Experienced in mining and major earth works > El Brocal > Established labour force and operating team > Marcona > Experienced procurement and maintenance > La Arena > Carry over f
Slide 20: Engineering - Knight Piesold
Engineering - Knight Piesold > Detailed Engineering Design (Original Scope) – Overall Percent Complete = 99% > Original Scope Remaining Activities: • Complete TMF Rev 0 Final Design Report • Complete Cunahuiri Reservoir Rev 0 Final Design Report • Complete turn-over packages for Denver work > New Sc
Slide 21: Constancia Project – Stracon Earth Works
Constancia Project – Stracon Earth Works Facilities List • Bog Dam • TMF East • TMF West • WRF and Ponds • Cunahuiri Reservoir • Main Sediment Pond • Topsoil Stockpile • Haul Road • Construction Roads • Access Roads • Diversion Channels • Landfill Area PERU SITE VISIT l 21
Slide 22: Bog Dam
Bog Dam PERU SITE VISIT l 22
Slide 23: TMF East Valley
TMF East Valley PERU SITE VISIT l 23
Slide 24: TMF West Valley
TMF West Valley PERU SITE VISIT l 24
Slide 25: Construction Road
Construction Road 1 PERU SITE VISIT l 25
Slide 26: Construction Road
Construction Road 2 PERU SITE VISIT l 26
Slide 27: Main Sediment Pond
Main Sediment Pond PERU SITE VISIT l 27
Slide 28: Road and TMF Sed Ponds
Road and TMF Sed Ponds PERU SITE VISIT l 28
Slide 29: Crushing and Screening
Crushing and Screening PERU SITE VISIT l 29
Slide 30: Process & Ancillaries Engineering, Procurement and Construction Management
Process & Ancillaries Engineering, Procurement and Construction Management PERU SITE VISIT l 30
Slide 31: Constancia Project – Ausenco Management
Constancia Project – Ausenco Management PERU SITE VISIT l 31
Slide 32: Primary Crusher Mass Concrete
Primary Crusher Mass Concrete PERU SITE VISIT l 32
Slide 33: Crushing Plant – Conveyor Foundation
Crushing Plant – Conveyor Foundation PERU SITE VISIT l 33
Slide 34: Process Plant – Mill Foundations and Reclaim Tunnels
Process Plant – Mill Foundations and Reclaim Tunnels PERU SITE VISIT l 34
Slide 35: Process Plant – Process Water Pond/Tailings Thickener
Process Plant – Process Water Pond/Tailings Thickener PERU SITE VISIT l 35
Slide 36: Process Plant – Concentrate Thickener Foundations
Process Plant – Concentrate Thickener Foundations PERU SITE VISIT l 36
Slide 37: Process Plant – Procurement
Process Plant – Procurement > To date we have committed 72 Major Purchase Orders (PO) with 24 more in process > This represents 75% of purchases by number > 75 minor Purchase Orders have been placed > Ausenco has completed the mobilization of its Material Management Team to site > Laydown and storag
Slide 38: Process Plant – Contracts
Process Plant – Contracts > To date we have committed15 Major Construction/Services Contracts, or 75% of total > Structural, mechanical and piping (SMP) package awarded to Cosapi in September 2013 > Earthworks package is nearing completion with retaining wall for primary crusher allocated to San Mar
Slide 39: Offsite Infrastructure Services
Offsite Infrastructure Services PERU SITE VISIT l 39
Slide 40: Power Purchase Agreement
Power Purchase Agreement > Terms agreed, awaiting final board approvals > 90 MW capacity > In line with expectations > 10 year contract, with 5 year extension right PERU SITE VISIT l 40
Slide 41: Power Transmission Line
Power Transmission Line > Detail engineering, procurement and construction awarded to Abengoa • Abengoa has 15 years experience in PTL construction and operating concessions in Peru > ATN1 (Subsidiary of Abengoa) will be Concessionaire > Status: • Cadastral survey, workshops complete (by Abengoa) •
Slide 42: Power Transmission Line
Power Transmission Line > Engineering Status • Constancia 135kV PTL: 100% complete > Procurement • Procurement for all equipment complete > PTL & Substations by Others • Tintaya Substation o Engineering 100% complete o Long lead equipment and materials procured o Socobaya Tintaya 220Kv Line (Tesur)
Slide 43: Access Road and PTL
Access Road and PTL Hudbay access road Xstrata access road PERU SITE VISIT l 43
Slide 44: Access Road
Access Road Access Road Section 2 > Engineering • 100% complete • Roadway alignment has been finalized • Regional Government approved design and construction o Tender documentation complete for construction work (under review) > Construction • Schedule 6 Months • Required start / finish dates: Start
Slide 45: Concentrate Transport
Concentrate Transport Unimodal – Short term Bimodal – Long term Truck: Constancia/Imata Truck: Constancia/Tisur Train: Imata/TISUR PERU SITE VISIT l 45
Slide 46: Concentrate Transport
Concentrate Transport Status > Tender process underway • Short-term concentrate transport • Long-term base case o Long-term bimodal option o Discussions with Peru Rail in progress (Bimodal) > Tender issued for proposals for transport • Large contractor 60% • Community contractor 40% PERU SITE VISIT
Slide 47: Matarani Port Overview
Matarani Port Overview > Constancia is ~475km from Matarani Port by road, already more than half paved > Matarani Port located 120km from Arequipa by paved highway > The port is a deep sea port managed by a private group > Used by other mining companies > Currently formalizing expansion plans > TISU
Slide 48: Matarani Port Facilities
Matarani Port Facilities PERU SITE VISIT l 48
Slide 49: Matarani Port Services
Matarani Port Services Short-Term Solutions >TISUR Grain Warehouse A5 • Enclose for concentrate service • Requires EIA Amendment • Commence service 3Q 2014 • Term 6 – 12 months Long-Term Solutions > TISUR Public Warehouse (Commence Q1 2016) • Base Case: Xstrata Antapacay Warehouse (unimodal) • Alter
Slide 50: Mine Planning
Mine Planning PERU SITE VISIT l 50
Slide 51: Mine Planning – Mine Operation Flowsheet
Mine Planning – Mine Operation Flowsheet WRF PAG/NAG PERU SITE VISIT l 51
Slide 52: Pampacancha Feasibility Study
Pampacancha Feasibility Study > Planning • Pampacancha Feasibility study is based (base case) on Nov. 2012 mine plan > Engineering • Schedule - to complete Engineering Feasibility Study by Q4 2013 • Status – site investigation o Geophysics and structural mapping are done o Geotechnical and Hydrogeol
Slide 53: Pampacancha Feasibility Study – Main components
Pampacancha Feasibility Study – Main components Constancia Pit WRF Expansion Process Plant Cunahuire Reservoir ROM Pad & Truck Shop Pampacancha Haul Road NAG Stockpile Pampacancha Pit Sediment Pond Containment Waste Rock Facility Pond PERU SITE VISIT l 53
Slide 54: Exploration Potential
Exploration Potential PERU SITE VISIT l 54
Slide 55: Andahuaylas-Yauri Belt
H' DBAY Andahuaylas-Yauri Belt = a Au 5 Morosayhuas X\ all ow . Andahuaylas-Yauri Belt - ‘\ —_ -— a —. oa” — a gy Cotabambas \ P: hm Apurimac Ferrum (Panoro) Y ~N (Strike Resources) ~ @— La Yegua Las Bambas Alicia ( \ (Bear Creek) (Glencore) (Strait Minerals-Teck) \ Los Chancas (Grupo Mexico) Ml —Ty
Slide 56: Regional Exploration Potential
Regional Exploration Potential > Helicopter Magnetic/Radiometrics Survey • Survey outline with geology, claims(Hudbay in green), and significant deposits • Commodity Focus: Cu, Au, & Mo • Brown and tan areas represent overburden (i.e. underexplored areas) • Survey cost ~$600K, (85km x 40km) • Comple
Slide 57: Corporate Affairs and Social Responsibility
Corporate Affairs and Social Responsibility PERU SITE VISIT l 57
Slide 58: Formalized LOM Agreement with Local Communities
Formalized LOM Agreement with Local Communities Uchuccarco >Life of mine agreement in place >Land rights acquired Chilloroya >Life of mine agreement in place >Land rights acquired >Relocation process is underway Committed to community investments PERU SITE VISIT l 58
Slide 59: Local Employment and Procurement
Local Employment and Procurement > Labor force • Peaked at 1,200 workers from direct and indirect area of influence working at the project > Light vehicle rentals • A priority since May regarding communities to reduce project cost impact > Equipment from Communities • Chilloroya: Equipment purchased
Slide 60: Social Programs
Social Programs > Four agreements signed with communities from the indirect area of influence. > Ongoing Projects – CMD: • Chilloroya: implementation of computer center, improvement of the quality of education through teacher training, health center improvement, animal health, plant wastewater treat
Slide 61: Resettlement Update
Resettlement Update # of STATUS families Families w/ signed P. deed and 11 moved Families with public deed signed 15 Families with agreement signed 3 Families in negotiation 7 Total 36 # of STATUS houses Delivered to owner 22 Pending delivery 4 Constructed by Nodeco and finish 5
Slide 62: Permitting / Regulated Infrastructure
Permitting / Regulated Infrastructure PERMIT STATUS • All permits required for construction are approved including mine permit and plant construction CONSTRUCTION permit. These will be amended in October 2013. • Permits for discharge from the main sediment pond, the plant & crusher sediment ponds an
Slide 63: Financial Review
Financial Review PERU SITE VISIT l 63
Slide 64: Updated Peru Tax and Royalty Scheme
Updated Peru Tax and Royalty Scheme What has changed? • Old royalty: 1% – 3% sliding scale royalty on sales (NSR) is being eliminated • New royalty:1% – 12% marginal rate sliding scale applied on operating profit (EBIT) • Equivalent to: 0% – 7.1% effective rate, depending on operating profit margin;
Slide 65: Tax Stability Agreement
Tax Stability Agreement > Several stability agreement applications awaiting Presidential approval > Implications of stability agreement • Increase in marginal income tax rate from 30% to 32% • Accelerated depreciation of certain assets • Overall impact is essentially NAV-neutral using an 8% discount
Slide 66: IGV Early Recovery
IGV Early Recovery > Covers IGV on certain components of Construction capital costs • Approximately 80% of project capital costs are eligible for early recovery • Non-eligible costs are recovered after project is in commercial production and generating sales > Received approval from Peruvian governm
Slide 67: Concentrate Offtake Strategy
Concentrate Offtake Strategy > No obligations currently in place for Constancia offtake > Concentrate quality is very good, with no serious impurities • Zinc content is somewhat high, typical of concentrate from Peruvian copper porphyries > Strong interest from potential long term offtakers • Curren
Slide 68: CAT Equipment Financing Facility
CAT Equipment Financing Facility > Received commitment from Caterpillar Financial to provide equipment financing facility for Constancia’s mobile fleet in Q2 2013 > Equipment financing will cover approximately US$130 million of equipment > Loans expected to have a term of six years, secured by Const
Slide 69: Currency Hedging
Currency Hedging > Currency positions in place via cash holdings to mitigate FX risk on CAPEX > No plans for hedging of PEN exposure in OPEX PERU SITE VISIT l 69
Slide 70: Constancia Site Visit Presentation
Constancia Site Visit Presentation October 2013 For more information contact: John Vincic VP of Investor Relations and Corporate Communications Tel: 416.362.0615 Email: john.vincic@hudbayminerals.com