Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Bank of America Merrill Lynch 2012 Leveraged Finance Conference
48 slides from Hudbay Minerals's conference presentation, Nov 30, 2012
Slide 1: Creating Sustainable Value Through High Quality, Long-Life Deposits
Creating Sustainable Value Through High Quality, Long-Life Deposits Bank of America Merrill Lynch December 3 – 5, 2012 2012 Leveraged Finance Conference HBM
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 press release, oth
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: Stringent Criteria for Growth
Stringent Criteria for Growth Disciplined focus on per share metrics 1 1. Focus geographically 3 2 • on mining friendly, investment grade countries in the Americas 2. Focus geologically • on VMS and porphyry deposits 3. Acquire small, think big 1 777 - Manitoba 6 • leverage our core competencies as
Slide 5: Key Metals Growth
Key Metals Growth 420% GROWTH 125% GROWTH 1 35% GROWTH Cu Production Precious Metals Production Zn Production (kt) (koz) (kt) 200 220 120 200 175 180 150 160 90 125 140 120 100 60 100 75 80 60 50 30 40 25 20 0 0 0 2012E 2015E 2012E 2015E 2012E 2015E Hudbay - Current Ops 2 Lalor 3 Constancia 4 Reed 5
Slide 6: Diversified Commodity Exposure
Diversified Commodity Exposure Reserves By Metal LTM Revenue By Metal Copper Copper 58% 51% Other 1% Moly Silver 6% Zinc 3% Zinc Silver Gold 27% Gold 17% 7% 12% 18% Cu Eq. Reserves: 3.2 Mt (4) LTM Revenue: $776M Applying 360° Expertise > 6
Slide 7: Consistent, Low-Cost Production
Consistent, Low-Cost Production Production – Actual vs. Guidance 200 Includes production from purchased concentrates Excludes production from purchased concentrates 173 Copper Equivalent Production (kt) 170 Guidance range Actual results 163 152 140 140 118 130 110 119 102 117 99 98 97 91 80 82 77 50
Slide 8: Competitive Cost Position
Competitive Cost Position 2012 Copper and Zinc By-Product Cost Curves1 250 2 Constancia C1 Cash Cost (100 x US$/lb) 200 Reed 150 2 100 777 Mine 50 0 0 10 20 30 40 50 60 70 80 90 100 (50) Cumulative Percentile Production (%) (100) Lalor (150) (200) (250) Cu Cash Cost Zn Cash Cost Source: Brook Hunt (
Slide 9: Flagship 777 Mine
Flagship 777 Mine Steady production with low cash costs Mining Cost MANITOBA (C$/tonne) 777 Winnipeg PROFILE Ownership 100% Life of Mine 9 years Applying 360° Applying Expertise 360° PAGE Expertise > 98
Slide 10: 777 Mine
777 Mine Expansion and underground exploration program underway 530m level 690m level 840m level 1082m level 1262m level 1412m level Applying 360° Expertise > 10
Slide 11: Lalor on Track
Lalor on Track 1st full year of production via production shaft expected in 2015 Snow Lake Ore Concentrator MANITOBA Lalor Project Snow 777 Mine Lake Flin Flon Reed Amisk Flin Flon Lake Lalor Lake Ore Concentrator Hwy #39 Zinc Plant Reed Project N Hwy 25 km #10 Winnipeg PROFILE Ownership 100% Projec
Slide 12: Lalor
Lalor Surface 0m Vent raise Production shaft 325m / current shaft depth 500m 750m H1/2012 H2/2012 2013 - 2014 2015 Exploration platform 1000m 1500m Base Metal Resource Gold & Copper-Gold Resource Looking 0m 250m High Grade Intercepts N70oW Applying 360° Expertise > 12
Slide 13: Reed Progressing Well
Reed Progressing Well Portal trench excavation completed MANITOBA > $16 million spent to Sept. 30, 2012 > Entered into additional $13 million in commitments Reed > Significant project milestones achieved: • Installation of new office and dry complex Winnipeg • Foundations poured for shop and warehou
Slide 14: Constancia Project
Constancia Project US$1.5 billion construction program underway PERU > US$154 million spent to Trujillo September 30, 2012 Lima Cusco > Entered into additional US$322 million in commitments Constancia Arequipa > Significant project milestones achieved prior to board approval: 1-5 Yrs 6-16 Yrs LOM •
Slide 15: Constancia Project
Constancia Project Significant infrastructure advantages > 83km access road from Yauri • To be upgraded for concentrate haulage > Tintaya power substation 70km away • Planned upgrade to 220 kV to be commissioned by Q3 2013 • Contract executed for construction of power transmission line from Tintaya
Slide 16: Steady Production with Low Operating Costs
Steady Production with Low Operating Costs On track to meet annual guidance Three Months Ended Nine Months Ended Guidance1 Contained metal in concentrate September 30, 2012 September 30, 2012 2012 Copper1 tonnes 9,920 31,426 35-40,000 Refined Zinc1 tonnes 20,371 62,495 70-85,000 Precious Metals1,2 t
Slide 17: Reliable Cash Flow Generation
Reliable Cash Flow Generation Driven by steady production and cost control Three Months Ended Nine Months Ended Sept. 30 Sept. 30 ($000s except per share amounts) 2012 2011 2012 2011 Revenue 144,659 212,335 521,555 636,503 Profit before tax 4,960 37,473 28,814 139,212 Operating cash flow1 21,487 64,
Slide 18: Strong Balance Sheet
Strong Balance Sheet As at September 30, 2012 Sources Uses > Cash and cash equivalents - $1,499 million > Lalor - $399 million > Remaining stream agreement payments > Reed - $56 million - $250 million > Constancia - $1.39 billion > Existing Credit facility - $235 million Total Sources: $1.98 billion
Slide 19: Applying 360° Expertise in Each Stage of Mining Cycle
Applying 360° Expertise in Each Stage of Mining Cycle Exploration Development Production Reclamation > Discovered > Currently > 777 Mine is a > Successfully 26 mines in 3 mines in consistently reclaimed 85 years development low-cost 19 mines producer Applying 360° Expertise > 19
Slide 20: APPENDIX
APPENDIX Applying 360° Expertise > 20
Slide 21: Appendix Contents
Appendix Contents > Growth of Mineral Reserves > 2012 operating guidance, capital expenditures and exploration spending breakdown > Lalor guidance, mineralization and plan views > Constancia project > South America property > Reserves & resources Applying 360° Expertise > 21
Slide 22: Growth of Mineral Deposits
Growth of Mineral Deposits Discoveries in the Greenstone Belt Flin Flon Lalor ⁄⁄ 62.5 Trout Lake 777 Stall Lake Chisel U/G Callinan Chisel Osborne Anderson Konuto Spruce Schist Lake Centennial Westarm Chisel Pit Initial resource Coronation White Lake Added resource Dickstone The mineral reserve for
Slide 23: 2012 Operating Guidance
2012 Operating Guidance Copper: 35,000 – 40,000 tonnes Zinc: 70,000 – 85,000 tonnes Precious Metals2 : 85,000 – 105,000 ounces 777 Trout Lake Chisel North Lalor1 Ore Mined tonnes 1,553,000 230,000 165,000 86,000 Copper % 2.3 1.8 0.72 0.4 Zinc % 4.3 2.3 5.0 10.1 Gold g/tonne 1.9 1.5 1.1 - Silver g/to
Slide 24: 2012 Operating Guidance – Zinc plant
2012 Operating Guidance – Zinc plant Flin Flon Guidance 2012 Zinc concentrate treated Domestic tonnes 164,000 Purchased tonnes 56,000 Total tonnes 220,000 Recovery % 97 Zinc produced tonnes 113,000 Unit operating costs1 C$/lb $0.32 - 0.37 1 Forecast unit operating costs are calculated on the same ba
Slide 25: 2012 Capital Expenditures
2012 Capital Expenditures1 Committed to $640 million in capital expenditures to grow production profile (figures in C$ millions) Actual 2011 Guidance 2012 Growth Lalor2 157 122 Constancia2 44 384 Back Forty 4 2 Reed2 - 31 777 North 8 6 Fenix3 7 - Total growth capital 219 545 Sustaining 60 95 Less: c
Slide 26: 2012 Exploration Expenditures
2012 Exploration Expenditures ($ millions)1 Sept. 30, 2012 Actual Annual 2012 Guidance Manitoba 13 31 South America 13 13 Other North America 8 10 Total exploration expenditures 34 54 Manitoba capitalized spending (1) (5) Total exploration expenses $33 $49 1 Amounts are net of investment tax credits
Slide 27: Lalor Project Guidance
Lalor Project Guidance > CAPEX for new concentrator (including Q4 2012 $23 million paste backfill plant) estimated at $263 million 2013 $162 million • $120 million estimate in August 2010 for Snow Lake concentrator refurbishment 2014 $214 million $399 million > Incremental investment of $144 million
Slide 28: Benefits of Lalor Project Optimization
Benefits of Lalor Project Optimization1 Optimized Lalor Lalor – Aug. 4, 2010 Construction CAPEX C$ 704M C$ 560M Annual Sustaining CAPEX C$ 22M C $15M Production Rate 4,500 tpd 3,500 tpd Mining Costs $36 per tonne $56 per tonne Milling Costs $16 per tonne $24 per tonne Metallurgy 95% Zn 95% Zn 86% Cu
Slide 29: Reed Copper Project
Reed Copper Project1 Mineral Reserves as at March 30, 2012 Mineral Resources as at March 15, 2011 Category Tonnes Cu (%) Zn (%) Au (g/t) Ag (g/t) Probable 2,157,000 3.83 0.59 0.48 6.02 Inferred 170,000 4.26 0.52 0.38 4.55 1 Hudbay holds a 70% joint venture interest in the Reed property Applying 360°
Slide 30: Constancia Project
Constancia Project > Unlevered IRR of 14.5% based on capital cost estimate > Net present value of $571 million, assuming a discount rate of 8.0% and $2.75/lb copper Base Case1 Copper Prices +10%2 Copper Prices -10%2 Long-Term Copper Price US$2.75/lb US$3.03/lb US$2.48/lb IRR – Unlevered 14.5% 17.3%
Slide 31: Constancia Capital Spending
Constancia Capital Spending ($ millions) Q4 2012 230 2013 900 2014 262 Total future capital spending 1,392 Total spent in Q1 – Q3 2012 154 Total 1,546 Applying 360° Expertise > 31
Slide 32: 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$/t 1.11 Average Annual Sustaining CAPEX M US$ 40 Project Economics NPV of C$ FCF (@ 8% discount and LT Cu of $2.75/lbs) M C$ 571 IRR % 14.5 IRR – w
Slide 33: Constancia Project - Site Plan and Layout
Constancia Project - Site Plan and Layout
Slide 34: Constancia Regional Infrastructure – Port
Constancia Regional Infrastructure – Port > 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 exp
Slide 35: 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: $0.66/lb of copper for first 5
Slide 36: Precious Metals Stream Overview
Precious Metals Stream Overview > US$750 million in upfront deposit payments from Silver Wheaton for delivery of: • 100% of payable gold and silver from 777 mine until the end of 2016 • 50% of payable gold and 100% of payable silver thereafter for the remainder of life of mine • 100% of payable silv
Slide 37: Constancia Reserves Overview
Constancia Reserves Overview Growth in Reserves Constancia Mineral Reserves – August 8, 2012 Category Ore (M tonnes) Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CuEq1 (%) Proven 349 0.37 100 3.29 0.043 0.49 Probable 54 0.24 60 2.98 0.035 0.33 Total 403 0.35 96 3.25 0.042 0.47 Pampacancha Mineral Reserves – Au
Slide 38: Constancia Resources Overview
Constancia Resources Overview Exclusive of Reserves Constancia Mineral Resources1 - November 2, 2011 Category M (tonnes) Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CuEq2 (%) Measured 119 0.23 62 2.3 0.038 0.31 Indicated 344 0.20 58 2.0 0.034 0.27 Total 463 0.21 59 2.0 0.035 0.28 Inferred 219 0.19 49 1.8 0.03
Slide 39: Constancia Project Contingency
Constancia Project Contingency Capital costs Area Base Cost Contingency & Growth Dollars Contingency & Growth % of Base $ $ millions $ millions Mining 145 12 8% Mine Equipment 151 2 1% Plant 340 57 17% Heavy Civil Works (TMF & reservoirs) 178 42 24% Other Infrastructure 117 21 18% Site Accommodation
Slide 40: Formalized LOM Agreements with Local Communities
Formalized LOM Agreements 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 Applying 360° Expertise > 40 40
Slide 41: 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 42: 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 43: In-mine Manitoba Mineral Reserves
In-mine Manitoba Mineral Reserves January 1, 2012 Category Tonnes Cu (%) Zn (%) Au (g/t) Ag (g/t) 7771 Proven 4,921,000 2.36 4.16 1.97 26.78 Probable 7,464,000 1.64 4.44 1.82 27.86 TROUT LAKE Proven 229,000 2.07 1.90 2.06 1.33 CHISEL NORTH-ZINC Proven 48,000 - 7.97 - - Probable 60,000 - 6.57 - - CHI
Slide 44: Manitoba Mineral Resources
Manitoba Mineral Resources January 1, 2012 Category Tonnes Cu (%) Zn (%) Au (g/t) Ag (g/t) 7771 Inferred 1,183,000 1.43 5.47 1.96 39.17 Lost2 Indicated 411,000 1.80 6.10 1.00 20.00 Inferred 69,000 1.50 6.20 0.80 16.50 Total Indicated 411,000 1.80 6.10 1.00 20.00 Inferred 1,252,000 1.43 5.51 1.90 37.
Slide 45: Lalor Project
Lalor Project Reserves & resources Lalor project mineral reserves1 - March 29, 2012 Category Tonnes Cu (%) Zn (%) Au (g/t) Ag (g/t) Base metal Probable reserves 12,591,000 0.63 7.92 1.55 23.81 Gold zone Probable reserves 1,841,000 0.38 0.38 3.99 21.77 Total Reserves 14,432,000 0.60 6.96 1.86 23.55 L
Slide 46: Reserves and Resources
Reserves and Resources > To estimate mineral reserves, measured and indicated mineral resources were first estimated in a 12-step process, which includes determination of the integrity and validation of the data collected, including confirmation of specific gravity, assay results and methods of data
Slide 47: Reserves and Resources
Reserves and Resources > The technical and scientific information in this news release related to the Constancia project has been approved by Cashel Meagher, P. Geo, Hudbay’s Vice-President, South America. The technical and scientific information related to all other sites and projects contained in
Slide 48: For more information contact: John Vincic
For more information contact: John Vincic, VP of Investor Relations and Corporate Communications Tel: 416.362.0615 Email: john.vincic@hudbayminerals.com
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