Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — BMO Capital Markets 2018 Global Metals & Mining Conference
49 slides from Hudbay Minerals's conference presentation, Feb 26, 2018
Slide 1: Investor Presentation February 2018
INVESTOR PRESENTATION February 2018
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: Cautionary Information
Cautionary Information 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, such as eco
Slide 4: Hudbay Investment Highlights
Hudbay Investment Highlights CLEAR AND DISCIPLINED GROWTH STRATEGY TSX, NYSE, BVL Symbol HBM • Investment-grade countries in the Americas Market Capitalization1 C$2.7 billion • VMS and porphyry geological focus Shares Outstanding 261 million • Accretive to NAV per share Available Liquidity2 $0.8 bil
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 18 years Lalor Mine Snow Lake Zn, Au 9 years Manitoba Flin Flon/Near Flin 777/Reed Mines Cu, Zn/Cu 3 years/<1 year Flon Arizona Rosemont Project Pima County Cu 19 years
Slide 6: 2017 Consolidated Results
2017 Consolidated Results • Achieved or exceeded production guidance on CONSOLIDATED FINANCIAL & OPERATING RESULTS a consolidated basis Full Year • Continued to generate positive free cash flow Q4 2017 2017 in 2017 Copper contained in conc. (kt) 43.2 159.2 • Copper cash cost of $0.84/lb and all-in s
Slide 7: 2018 Guidance
2018 Guidance PRODUCTION AND UNIT COST CONTAINED METAL IN CONCENTRATE1 2018 GUIDANCE 2017 ACTUAL 2017 GUIDANCE MANITOBA2 Copper tonnes 27,500 – 32,500 37,411 32,500 – 42,500 Zinc tonnes 105,000 – 130,000 135,156 125,000 – 150,000 Precious Metals3 ounces 120,000 – 145,000 106,918 90,000 – 110,000 C$/
Slide 8: South America Business Unit
South America Business Unit Cusco CUSCO Las Bambas CONSTANCIA Yauri Tintaya Antapaccay CONSTANCIA PIT AREQUIPA Imata PERU Arequipa MINE TOWN Lima Cerro Verde RAILROAD MOQUEGUA ROAD CONSTANCIA Matarani 0 TACNA 100km 8
Slide 9: Constancia Mine
Constancia Mine 20171 AVG. LOM2 OPERATING AT FULL PRODUCTION Ownership 100% • Low-cost, long-life copper mine began Daily ore milled 79k tpd 85k tpd production at end of 2014 Annual Cu production3 122kt 81kt Unit operating cost4 $8.83/t $7.36/t • Annual Cu production of 103k tonnes at cash Cash cost
Slide 10: Constancia Optimization
Constancia Optimization PAMPACANCHA INTENDED TO ENHANCE CONSTANCIA GRADE STARTING 2018 • Mine plan incorporates mining of Pampacancha in 2018-2021; community negotiations ongoing • Exploration work to be conducted on newly acquired properties near Constancia with potential to provide higher-grade fe
Slide 11: Manitoba Business Unit
Manitoba Business Unit New Britannia Mill Snow Lake Stall Mill LALOR MINE LALOR MINE Stall Mill AERIAL VIEW OF LALOR MINE SITE 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 11
Slide 12: Lalor Mine
Lalor Mine AVG. 20171 PRODUCING LOW COST MINE WITH LOM2 ZINC & GOLD UPSIDE POTENTIAL Ownership 100% Daily ore milled 3,000 tpd 3,900 tpd • Production shaft with capacity of 6,000tpd Annual Zn production3 79kt 63kt • Strong ramp-up of ore production, on track Annual Au-Eq. production3 45koz 81koz for
Slide 13: Lalor Cross-Section
Lalor Cross-Section LALOR CROSS-SECTION, LOOKING WEST 0m Legend Base metal zone Production Shaft (6,000 tpd of ore + waste) Gold zone Copper-gold zone 500m 865mL Exploration Drill Drift 2016 1000m 1025 to 1075mL Exploration Decline 2015 1500m 500 m 13
Slide 14: 777 and Reed Mines
777 and Reed Mines 777 & REED COMBINED 20171 AVG. LOM2 STEADY, LOW-COST PRODUCTION Ownership 100% / 70%3 • Optimizing operations to end of mine life Daily ore milled 4,390 tpd 3,600 tpd Annual Cu production4 31kt 19kt • Plan to keep processing assets on care and Annual Zn production4 56kt 46kt maint
Slide 15: 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 TOWN Patagonia RAILROAD ROSEMONT ROAD 0 25km 15
Slide 16: Rosemont Project
Rosemont Project 80%-OWNED1 COPPER PROJECT Y 1-10 AVG.2 AVG. LOM2 80%1 • High-quality development project with well- Ownership Daily ore milled 85k tpd established infrastructure Strip ratio 2.5 2.0 • March 2017 43-101 demonstrates robust Annual Cu production3 140kt 112kt project economics Unit oper
Slide 17: Rosemont Initial Capex & Funding
Rosemont Initial Capex & Funding INITIAL CAPITAL COST ESTIMATE OF $1.9 BILLION ROSEMONT INITIAL CAPITAL COST BREAKDOWN • 3-year construction period: $144 million in $ million year 1, $861 million in year 2, $768 million in Site wide $42 year 3, remaining capital in ramp-up period Mining $474 Process
Slide 18: Debt Reduction
Debt Reduction ACHIEVED SIGNIFICANT DEBT REDUCTION • Reduced net debt position by $462 million during full year 2017 • Net debt of $623 million as at December 31, 2017 FREE CASH FLOW1 AND NET DEBT2 Free Cash Flow Net Debt $175 $1,300 $150 $1,200 $1,100 $125 $1,000 US$ millions US$ millions $100 $900
Slide 19: Liquidity
Liquidity December 31, 2017 $ Millions Cash and Cash Equivalents $356 Availability under Credit Facilities $421 Total Available Liquidity $7781 Debt Outstanding Amount Maintenance Interest Rate Maturity December 31, 2017 Drawn Covenants Senior Unsecured Notes $400 7.250% January 2023 None Moody’s B3
Slide 20: 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 Advance permitting and techn
Slide 21: Appendix
H' DBAY APPENDIX 21
Slide 22: Appendix Contents
Appendix Contents • Experienced Management Team • Copper By-Product Cost Curve • Global Refined Metal Market Balance • Why Copper? • Q4 2017 Results by Business Unit • Consolidated Production Profile • Constancia Site Map • Mining Properties Near Constancia • Constancia Mine Plan Summary • Manitoba
Slide 23: Experienced Management Team
Experienced Management Team Alan Hair PRESIDENT AND CHIEF EXECUTIVE OFFICER • Appointed President and Chief Executive 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 indust
Slide 24: Copper By-Product Cost Curve
Copper By-Product Cost Curve 2017 COST CURVE1 Source: Wood Mackenzie 1. Wood Mackenzie Cu normal mine site C1 cost curve for 2017 (Q4 2017 update). Constancia, 777, Lalor and Reed costs are sourced from Wood Mackenzie. Wood Mackenzie’s costing methodology may be different than the methodology report
Slide 25: Global Refined Metal Market Balance
Global Refined Metal Market Balance • Copper market moves into a significant • Fundamentals will support higher prices in the deficit anticipated near the end of the near-term, but supply-side response from high decade after last of new supply absorbed prices expected to push market into surplus COP
Slide 26: Why Copper?
Why Copper? STRONG LONG-TERM FUNDAMENTALS GLOBAL MARKET DEMAND FOR MINE OUTPUT • Long lead times to bring new copper capacity into production • Reserve depletion and falling head grades will see base case production fall after 2020 • Lack of advanced development projects will lead to tight metal mar
Slide 27: South America Q4 2017 Results
South America Q4 2017 Results PERU SUMMARY OPERATING STATISTICS • Copper production increased quarter-over- quarter because of improved copper head Q4 2017 Q3 2017 grade and copper recoveries Ore mined (million tonnes) 7.2 8.2 • Updated mine plan and reserves by April Ore milled (million tonnes) 7.7
Slide 28: Manitoba Q4 2017 Results
Manitoba Q4 2017 Results • Production of precious metals was higher MANITOBA SUMMARY OPERATING STATISTICS than Q3 2017 as a result of increased Q4 2017 Q3 2017 production at Lalor Ore mined (kt) 639 695 670 671 • Production of all metals in Manitoba for full Ore milled (kt) Copper grade milled 1.52%
Slide 29: Consolidated Production Profile
Consolidated Production Profile GROWING COPPER 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 ANNUAL COPP
Slide 30: 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 WASTE ROCK NAG Cunahuri PLANT ROM Pad Stockpile FACILITY Reservoir Main Sediment Topsoil Pond Stockpile Fortunia PAMPACANCHA Camp WRF Cont
Slide 31: Mining Properties Near Constancia
Mining Properties Near Constancia MINERAL PROPERTIES WITHIN TRUCKING DISTANCE OF CONSTANCIA PROCESSING FACILITY 31
Slide 32: Constancia Mine Plan Summary
Constancia Mine Plan Summary MINE PLAN SUMMARY – NOVEMBER 21, 2016 TECHNICAL REPORT 2018E 2019E 2020E 2021E 2022E LOM Avg.1 Ore mined million tonnes 34.1 27.7 32.2 31.8 31.3 30.3 Waste mined million tonnes 39.1 33.8 36.9 37.0 34.5 33.7 Strip ratio waste:ore 1.1 1.2 1.1 1.2 1.1 1.1 Ore milled million
Slide 33: Manitoba Operations Flow Chart
Manitoba Operations Flow Chart 777 Mine Copper Flin Flon Mill Market Concentrate Reed Mine Zinc Refined Stall 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 Britann
Slide 34: 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 35: Exploration Focus by Region
Exploration Focus by Region • Hudbay’s exploration regional focus is consistent with our commodity focus on copper Copper in Past Production and in Reserves vs. Grassroot Exploration Budgets Hudbay regional exploration focus SOURCE: S&P Global Market Intelligence 35
Slide 36: Current Exploration Focus
Current Exploration Focus EXTENSIVE TARGET GENERATION IDENTIFIED SEVERAL PRIORITY TARGETS PROPERTY TYPE DESCRIPTION TIMEFRAME Lalor Mine 100% owned Drilling down-plunge and new near-mine targets with a 2018 combination of surface and underground drilling Other Manitoba 100% owned Drill ready gold an
Slide 37: 2018 Guidance
2018 Guidance CAPITAL EXPENDITURE1 • Total sustaining capital expenditures expected to decline by 27% compared to 2017 guidance, as a major raise of the Constancia tailings management facility was successfully completed in 2017 $ MILLIONS 2018 GUIDANCE 2017 GUIDANCE SUSTAINING CAPITAL Manitoba 85 65
Slide 38: 2018 Guidance
2018 Guidance FLIN FLON ZINC PLANT Zinc Metal Produced 100,000 – 115,000 tonnes Unit Operating Costs1 C$0.40 - 0.50/lb 1. Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudbay’s quarterly and annual management’s discussion and analysis. EXPLORATION
Slide 39: Leverage to Commodities
Leverage to Commodities • Highly leveraged to copper, with additional sensitivity to zinc prices • Moderate exposure to changes in C$/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 +/- $
Slide 40: 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 41: Peru Mineral Reserves
Peru Mineral Reserves AS AT JANUARY 1, 2017 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Proven 431,300,000 0.30 95 2.88 0.037 Probable 109,900,000 0.23 62 2.55 0.034 Total Proven and Probable 541,200,000 0.28 88 2.81 0.037 PAMPACANCHA Proven 22,800,000 0.53 149 4.44 0.299 Probable 2
Slide 42: Peru Mineral Resources
Peru Mineral Resources AS AT JANUARY 1, 2017 CATEGORY TONNES Cu (%) Mo (g/t) Ag (g/t) Au (g/t) CONSTANCIA Measured 161,800,000 0.19 55 2.26 0.031 Indicated 287,800,000 0.17 50 1.89 0.026 Measured and Indicated 449,600,000 0.18 52 2.02 0.028 Inferred 138,100,000 0.17 40 1.70 0.018 PAMPACANCHA Measure
Slide 43: Manitoba Mineral Reserves
Manitoba Mineral Reserves AS AT JANUARY 1, 2017 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Proven 3,080,000 1.98 4.93 2.01 31.53 7771 Probable 1,386,000 1.16 5.09 2.04 30.96 Proven 362,000 3.35 0.68 0.39 5.35 Reed2 Probable 337,000 3.95 0.31 0.52 5.26 Total Flin Flon 2P Reserves 5,165,
Slide 44: Manitoba Mineral Resources
Manitoba Mineral Resources AS AT SEPTEMBER 30, 2016 PROPERTY CATEGORY TONNES Cu (%) Zn (%) Au (g/t) Ag (g/t) Indicated 736,000 0.99 3.53 1.82 26.24 7771 Inferred 673,000 1.01 4.26 1.72 30.95 Reed2 Inferred 88,000 3.13 0.42 0.79 6.00 Indicated 736,000 0.99 3.53 1.82 26.24 Total Flin Flon Inferred 761
Slide 45: 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 46: 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 47: Additional Information
Additional Information PERU • The mineral reserve estimates for Constancia are based on a long range mine plan with economic value calculation per block (NSR in $/t), mining, processing and detailed engineering parameters. • The Constancia reserve pits (Constancia and Pampacancha) consist of operati
Slide 48: Additional Cautionary Information
Additional Cautionary Information The technical and scientific information in this presentation related to the Constancia mine and the Rosemont project has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer. The technical and scientific information re
Slide 49: For More Information Contact
FOR MORE INFORMATION CONTACT: Carla Nawrocki, Director, Investor Relations 416.362.7362 | carla.nawrocki@hudbay.com
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