Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — Canaccord Genuity Global Resources Conference 2012
52 slides from Hudbay Minerals's conference presentation, Oct 18, 2012
Slide 1: Creating Sustainable Value Through High Quality, Long-Life Deposits
Creating Sustainable Value Through High Quality Quality, Long Long-Life Life Deposits Canaccord Genuity October 16 – 18, 2012 Gl b l Resources Global R Conference C f HBM
Slide 2: Forward-looking Information
F Forward-looking d l ki IInformation f ti 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 pre
Slide 3: Note to U.S. Investors
N t tto U Note U.S. S IInvestors t 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
Slide 4: Stringent Criteria for Growth
St i Stringent t Criteria C it i for f Growth G th 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 • lleverage our
Slide 5: Key Metals Growth
K M Key Metals t l Growth G th 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 2 3 4 5 Hudbay - Current Ops Lalor Co
Slide 6: Growing Mineral Reserves and Resources Per Share
G Growing i MiMinerall R Reserves and dRResources P Per Sh Share Commodity Exposure1,2 Cu Eq/Share (lb Cu/sh) 1 Hudbay y reserves and resources as of March 31,, 2012. Measured and Indicated Resources are exclusive of Proven and Probable Reserves. 2 Commodity exposure calculated using commodity price
Slide 7: Flagship Mine
Fl Flagship hi 777 Mi Mine Steady production with low cash costs Mining Cost MANITOBA (C$/tonne) 777 Wi i Winnipeg PROFILE Ownership p 100% Life of Mine 9 years Applying 360° Applying Expertise 360° PAGE Expertise > 78
Slide 8: 777 Mine
777 Mi Mine Expansion and underground exploration program underway 530m level 690m level 840m level 1082m level 1262m level 1412m level Applying 360° Expertise > 8
Slide 9: Lalor
L l Lalor First production in August 2012 Snow Lake MANITOBA Ore Concentrator Trout Lake Lalor Project Snow 777 Mine Lake Flin Flon Chisel North Lalor Reed Flin Flon Lake Amisk Lake Ore Concentrator Hwy #39 Zinc Plant Reed Project N Hwyy 25 kkm #10 Winnipeg PROFILE Ownership 100% Projected Life of M
Slide 10: Lalor
L l Lalor Multi year underground exploration program initiated Surface 0m 500m Vent Raise Production Shaft 750m H1/2012 H2/2012 2013 - 2014 2015 Exploration Platform 1000m 1250m Base Metal Resource Gold & Copper-Gold Resource High Grade Intercepts Looking N70oW 0m 250m 1500m Applying 360° 360° Apply
Slide 11: Reed
R d Reed High grade copper deposit near existing infrastructure MANITOBA > 70% Hudbay ownership > High-grade, near-surface copper deposit Reed > Expected to add ~ 17,000 tonnes Cu/yr Winnipeg > Production set to commence in late 2013 PROFILE Ownership 70% j Projected Life of Mine 5y years Constructi
Slide 12: Constancia Project
C Constancia t i PProject j t $1.5 billion construction program now underway PERU > $252 million of long-lead items T jill Trujillo secured under fixed price contracts Lima Cusco > $91 million spent to June 30, 2012 Constancia > Initial production expected late 2014; Arequipa full production expecte
Slide 13: Constancia Project
C Constancia t i Project P j t 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 > Rail-head at Imata 150km away > Road upgrades for concentrate h
Slide 14: Constancia Exploration Potential
C Constancia t i EExploration l ti P Potential t ti l Early exploration success leads to expanded program > Expand Pampacancha resource • 2 drills active at P Pampacancha h • Geophysics indicates anomalies to the west and north > Chilloroya South • Classic signs of porphyry system • 1 drill currentl
Slide 15: Steady Production with Low Cash Costs
St d Production Steady P d ti with ith L Low C Cash hCCosts t On track to meet annual guidance for sixth consecutive year Three Months Ended Six Months Ended Guidance1 Contained metal in concentrate June 30, 2012 June 30, 2012 2012 Copper 1 tonnes 10,762 21,506 35-40,000 Refined Zinc 1 tonnes 20,457
Slide 16: Reliable Cash Flow Generation
R li bl C Reliable Cash h Fl Flow G Generation ti Three Months Ended Six Months Ended Jun 30 Jun 30 ($000s except per share amounts) 2012 2011 2012 2011 Revenue 189,858 246,823 376,896 424,168 Operating cash flow 1 66,138 61,826 108,383 103,689 Operating cash flow per share 1 0.38 0.36 0.63 0.63 1 B
Slide 17: Strong Balance Sheet
St Strong Balance B l Sheet Sh t Pro forma as at June 30, 30 2012 Sources Uses > Cash on hand - $710 million > Lalor - $427 million > Streaming agreement proceeds - $750 million > Reed - $66 million > Proceeds from High Yield Offering - $500 million > Constancia - $1.455 billion > Existing Credit fa
Slide 18: Applying 360° Expertise in Each Stage of Mining Cycle
A l i 360° Expertise Applying E ti iin E Each h St Stage off Mi Mining i C Cycle l Exploration Development Production Reclamation > Discovered > Currently > 777 Mine is a > Successfully 26 mines in 3 mines in consistently reclaimed 85 years development low-cost 19 mines producer Applying 360° Expert
Slide 19: Growth of Mineral Deposits
G Growth th off Mineral Mi l Deposits D it Discoveries in the Greenstone Belt Flin Flon Lalor ⁄⁄ 62.5 62 5 Trout Lake 777 Stall Lake Chisel U/G Callinan Chisel Osborne Anderson Konuto Spruce Schist Lake Centennial Westarm Chisel Pit Initial resource Coronation White Lake Added resource Dickstone The
Slide 20: APPENDIX
APPENDIX Applying 360° Expertise > 20
Slide 21: Appendix Contents
A Appendix di CContents t t > Cost curves > 2012 operating guidance, capital expenditures and exploration spending breakdown > Lalor guidance, mineralization and plan views > Constancia project > South S th America A i property t > Reserves & resources Applying 360° Expertise > 21
Slide 22: Gold Cost Curve
G ld C Gold Costt C Curve 1,600 1,400 1,200 Au) h Cost (US$/oz A 1,000 800 600 777 Mine 1, 2 C1 Cash 400 200 Lalor 1 0 0 10 20 30 40 50 60 70 80 90 100 Cumulative Percentile Production (%) Source: Brook Hunt (2011 cost curve) and Hudbay estimates (777 Mine and Lalor) 1 Co-product cash costs calculat
Slide 23: Copper Cost Curve
C Copper C Costt C Curve 300 C1 Cash Cost (100 x US$/lb Cu) 250 200 150 777 Mine 1,5 Reed 4 100 Lalor 2 50 Constancia (LOM) 3,5 0 0 10 20 30 40 50 60 70 80 90 100 Cumulative Percentile Production (%) Source: Brook Hunt (777 Mine and 2011 cost curve) and Hudbay estimates (Lalor) 1 Brook Hunt co-produ
Slide 24: Zinc Cost Curve
Zi C Zinc Costt C Curve 120 C1 Cash Cost (100 x US$/lb Zn) 100 80 60 777 Mine 1,3 40 Lalor 2 20 0 0 10 20 30 40 50 60 70 80 90 100 Cumulative Percentile Production (%) Source: Brook Hunt (777 Mine and 2011 cost curve) and Hudbay estimates (Lalor, Reed) 1 Brook Hunt co-product cash costs. 2Co-product
Slide 25: 2012 Operating Guidance
2012 O Operating ti G Guidance id Copper: 35,000 – 40,000 tonnes Zinc: 70,000 – 85,000 tonnes Precious Metals2 : 85,000 85 000 – 105,000 105 000 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
Slide 26: 2012 Operating Guidance – Zinc Plant
2012 O Operating ti G Guidance id – Zinc Zi plant l t 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 calcul
Slide 27: 2012 Capital Expenditures
2012 C Capital it l expenditures dit Committed to $576 million in capital expenditures to grow production profile (figures in C$ millions) Actual 2011 Guidance 2012 Growth Lalor 157 147 Constancia 44 4821 Back Forty 4 2 Reed - 34 777 North 8 6 Fenix2 7 - Total growth capital 219 671 Sustaining 60 95
Slide 28: 2012 Exploration Expenditures
2012 E Exploration l ti E Expenditures dit ($ millions) Total Manitoba 31 S th A South America i 13 Other North America 10 Total exploration expenditures 54 M it b capitalized Manitoba it li d spending di (5) Total exploration expenses $49 Applying 360° Expertise > 28
Slide 29: Lalor Project Guidance
L l project Lalor j t guidance id > CAPEX for new concentrator (including Q3 – Q4 2012 $76 million paste backfill plant) estimated at $263 million 2013 $200 million • $120 million illi estimate ti t iin A Augustt 2010 ffor Snow Lake concentrator refurbishment 2014 $151 million > Incremental investme
Slide 30: Lalor – Plan View Drill Results
L l – Plan Lalor Pl View Vi Drill D ill R Results lt February 27, 2012 N DUB285 Assays pending but weak mineralization DUB287 Cu / Au Zone underway DUB283 6.12m @ 5.91 g/t Au, 8.26% Cu L l D Lalor Deposit it DUB283W01 DUB283W02 Assays pending but 5.55m @ weak mineralization 2.49 g/t Au, 7.79% Cu App
Slide 31: Benefits of Lalor Project Optimization
B Benefits fit off Lalor L l Project O ti i ti 1 P j t Optimization Optimized Lalor Lalor – Aug. 4, 2010 C Construction t ti CAPEX C$ 704M C$ 560M Annual Sustaining CAPEX C$ 22M C $15M Production Rate 4,500 tpd 3,500 tpd Mi i Costs Mining C t $36 per ttonne $56 per ttonne Milling Costs $16 per tonne
Slide 32: Reed Copper Project
R dC Reed Copper P j t1 Project Minerall R Mi Reserves as att M March h 30 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 Re
Slide 33: Constancia Project
C Constancia t i PProject j t > 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 $2.75/lb Base Case1 Copper Prices +10%2 Copper Prices -10%2 L Long-Term T Copper C Price Pi US$2 75/lb US$2.75/lb US$3 03/lb
Slide 34: Constancia Capital Spending
C Constancia t i Capital C it l S Spending di ($ millions) Q3 – Q4 2012 391 2013 964 2014 100 Total future capital spending 1,455 Total spent p in Q Q1 and Q2 Q 2012 91 Total 1,546 Applying 360° Expertise > 34
Slide 35: Constancia Key Metrics
C Constancia t i KKey M Metrics ti 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 %
Slide 36: Constancia Project - Site Plan and Layout
C Constancia t i PProject j t - Site Sit Pl Plan and d Layout L t
Slide 37: Constancia Regional Infrastructure – Port
C Constancia t i Regional R i l IInfrastructure f t t – Port P t > 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 > Cu
Slide 38: Constancia Production Profile
C Constancia t i Production P d ti Profile P fil 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 p production expected p to average: g $ $0.
Slide 39: Precious Metals Stream Overview
P i Precious M Metals t l St Stream O Overview i > US$750 million illi iin upfront f t deposit d it payments t from f Sil Silver Wh t for Wheaton f 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 r
Slide 40: Constancia Reserves Overview
C Constancia t i Reserves R O Overview i 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 R
Slide 41: Constancia Resources Overview
C Constancia t i Resources R O Overview i 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
Slide 42: Constancia Project Contingency
C Constancia t i Project P j t Contingency C ti Capital costs Area Base Cost Contingency & Growth Contingency & Growth Dollars % of Base $ $ millions $ millions Mining 145 12 8% Mine Equipment 151 2 1% Pl t Plant 340 57 17% Heavy Civil Works (TMF & reservoirs) 178 42 24% Other Infrastructure 117 21
Slide 43: 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 > 43 43
Slide 44: Updated Peru Tax and Royalty Scheme
U d t dP Updated Peru T Tax and dRRoyalty lt SScheme h 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 opera
Slide 45: Project De-Risking with Experienced Partners
P j t De-Risking Project D Ri ki with ith E Experienced i dPPartners t Stracon GyM Relevant Experience > Currently operating in Peru • Toromocho > Experienced in mining and major earth works • El Brocal > Established labour force and operating p g team • Marcona > Experienced procurement and mainten
Slide 46: South America – Property Acquisition
S th America South A i – Property P t Acquisition A i iti Pacific Ocean Antofagasta CHILE EL SALVADOR Cu > Focus on Chile, Peru EL SALVADOR Copiapo and Colombia CHANARAL La Serena SAN ANTONIO MANTOS VERDES Cu > Compilation of geological SANTIAGO data at San Antonio COPIAPO CANDELARIA Cu > Regional e
Slide 47: In-mine Manitoba Mineral Reserves
I In-mine i M Manitoba it b mineral i l 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 - 6.57
Slide 48: Manitoba Mineral Resources
M it b Mineral Manitoba Mi lRResources 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 I di Indicated d 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
Slide 49: Lalor Project Reserves & Resources
L l Project Lalor P j t Reserves & resources 1 Lalor project mineral reserves - 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
Slide 50: Reserves and Resources
R Reserves and dRResources > To estimate mineral reserves, measured and indicated mineral resources were first estimated in a 12-step ppprocess, which includes determination of the integrity g y and validation of the data collected, including confirmation of specific gravity, assay results and metho
Slide 51: Reserves and Resources
R Reserves and dRResources > The technical and scientific information in this news release related to the Constancia project has been approved pp byy Cashel Meagher, g P. Geo, Hudbay’sy Vice-President, South America. The technical and scientific information related to all other sites and projects co
Slide 52: For more information contact
For more information contact: John Vincic, VP of Investor Relations and Corporate Communications Tel: 416.362.0615 Email: john.vincic@hudbayminerals.com @
Hudbay Minerals — Canaccord Genuity Global Resources Conference 2012 on 6ix