Hudbay Minerals Inc · TSX:HBM
Hudbay Minerals — BMO 2017 Canadian High Yield Dinner & Conference
47 slides from Hudbay Minerals's conference presentation, Oct 3, 2017
Slide 1: Investor Presentation October 2017
INVESTOR PRESENTATION October 2017
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$2.4 billion • VMS and porphyry geological focus Shares Outstanding2 261 million • Accretive to NAV per share Available Liquidity3 $0.7 bi
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 19 years Lalor Mine Snow Lake Zn, Au 10 years Manitoba 777 Mine Flin Flon Cu, Zn 4 years Reed Mine Near Flin Flon Cu 2 years Arizona Rosemont Project Pima County Cu 19
Slide 6: Consolidated Financial Results
Consolidated Financial Results GROWING FREE CASH FLOW CONSOLIDATED FINANCIAL & OPERATING RESULTS • Generated positive free cash flow in cyclical Q2 2017 LTM low copper prices and relatively high sustaining capex period in 2016 Copper contained in conc. (kt) 40.8 165.3 • LTM average copper cash cost
Slide 7: 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 LAS BAMBAS HAUL ROAD 0 TACNA 100km 7
Slide 8: Constancia Mine
Constancia Mine LTM1 AVG. LOM2 OPERATING AT FULL PRODUCTION Ownership 100% • Low-cost, long-life copper mine began Daily ore milled 75k tpd 85k tpd production at end of 2014 Annual Cu production3 127kt 81kt Unit operating cost4 $8.71/t $7.39/t • Annual Cu production of 110k tonnes at cash Cash cost
Slide 9: Pampacancha Update
Pampacancha Update UPDATED CONSTANCIA MINE PLAN HIGHLIGHTS • New mine plan incorporates mining of Pampacancha in 2018-2021 • Higher production and lower costs over 5-year period (2017-2021) than previous 2012 technical report 5-YEAR PRODUCTION1 AND COST3 (2017E-2021E) MINE PLAN SUMMARY (5-YEAR AVERA
Slide 10: 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 10
Slide 11: Lalor Mine
Lalor Mine LTM1 AVG. LOM2 PRODUCING LOW COST MINE WITH Ownership 100% ZINC & GOLD UPSIDE POTENTIAL Daily ore milled 3,000 tpd 3,800 tpd • Production shaft with capacity of 6,000tpd Annual Zn production3 77kt 66kt Annual Au-Eq. production3 45koz 78koz • Stall mill currently processing ~3,000tpd of ba
Slide 12: 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 Ramp from Chise l 865mL Exploration Drill Drift 2016 1000m 1025 to 1075mL Exploration Decline 2015 1500m 500 m 12
Slide 13: 777 and Reed Mines
777 and Reed Mines 777 & REED COMBINED LTM1 AVG. LOM2 STEADY, LOW-COST PRODUCTION Ownership 100% / 70%3 Daily ore milled 4,680 tpd 4,200 tpd • Optimizing operations to end of mine life Annual Cu production4 33kt 27kt • Plan to keep processing assets on care and Annual Zn production4 49kt 49kt mainte
Slide 14: 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 14
Slide 15: Rosemont Project
Rosemont Project 80%-OWNED1 COPPER PROJECT Y 1-10 AVG.2 AVG. LOM2 Ownership 80%1 • High-quality development project with well- Daily ore milled 85k tpd established infrastructure Strip ratio 2.5 2.0 • March 2017 feasibility study demonstrates Annual Cu production3 140kt 112kt robust project economic
Slide 16: 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 17: Liquidity
Liquidity FOCUSED ON DEBT REDUCTION Proforma June 30, 2017* $ Millions • Repaid over $185 million of credit facility Cash and Cash Equivalents $153 cash drawdowns over last twelve months Availability under Credit Facilities $344 from free cash flow generation Net Proceeds from Equity Offering* $186
Slide 18: 2017 Objectives
2017 Objectives Continue to focus on operating efficiencies to generate incremental free cash flow Advance in-house brownfield growth opportunities • Lalor zinc / base metal output expansion • Pampacancha • Lalor gold Advance permitting activities and technical work at Rosemont Use free cash flow to
Slide 19: Appendix
H' DBAY APPENDIX 19
Slide 20: Appendix Contents
Appendix Contents • Experienced Management Team • Copper By-Product Cost Curve • Why Copper? • Global Refined Metal Market Balance • Q2 2017 Results by Business Unit • Constancia Site Map • Constancia Mine Plan Summary • Peru Inventory Levels • Manitoba Operations Flow Chart • Lalor Mine Plan Summar
Slide 21: 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 22: 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 (Q2 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 23: 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 24: 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 25: South America Q2 2017 Results
South America Q2 2017 Results PERU SUMMARY OPERATING STATISTICS • Constancia production increased quarter-over- quarter because of improved mill throughput Q2 2017 Q1 2017 • Plant optimization initiatives implemented during Ore mined (million tonnes) 7.3 7.2 the quarter Ore milled (million tonnes) 6
Slide 26: Manitoba Q2 2017 Results
Manitoba Q2 2017 Results MANITOBA SUMMARY OPERATING STATISTICS • Increased production of all metals as a result of higher grades at 777 and higher throughput Q2 2017 Q1 2017 and grades at both concentrators Ore mined (kt) 746 688 • Sales of excess zinc concentrate inventory Ore milled (kt) 726 637 b
Slide 27: 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 28: 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 Camp PAMPACANCHA WRF Cont
Slide 29: Constancia Mine Plan Summary
Constancia Mine Plan Summary MINE PLAN SUMMARY – NOVEMBER 21, 2016 TECHNICAL REPORT 2017E 2018E 2019E 2020E 2021E 5-Yr Avg. Yr 6-19 Avg.1 LOM Avg.1 Ore mined million tonnes 34.6 34.1 27.7 32.2 31.8 32.1 30.1 30.5 Waste mined million tonnes 38.4 39.1 33.8 36.9 37.0 37.0 33.1 34.0 Strip ratio waste:or
Slide 30: Peru Inventory Levels
Peru Inventory Levels • Copper concentrate inventory levels typically range between 0 - 40,000 wmt depending on the timing of shipments from the port PERU COPPER CONCENTRATE Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Concentrate 140 149 115 140 140 133 109 119 Produced (000 dmt) Inventory Level
Slide 31: 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 32: Lalor Mine Plan Summary
Lalor Mine Plan Summary MINE PLAN SUMMARY – MARCH 30, 2017 TECHNICAL REPORT 2017E 2018E 2019E 2020E 2021E LOM Total1 Ore milled tonnes 1,278,282 1,616,285 1,620,000 1,603,652 1,620,000 14,231,636 Milled daily throughput tonnes per day 3,550 4,500 4,500 4,500 4,500 - Zinc grade milled % Zn 7.52% 5.71
Slide 33: 2017 Guidance
2017 Guidance PRODUCTION AND UNIT COST CONTAINED METAL IN CONCENTRATE1 2017 GUIDANCE 2016 PRODUCTION 2016 GUIDANCE MANITOBA2 Copper tonnes 32,500 – 42,500 41,059 40,000 – 50,000 Zinc tonnes 125,000 – 150,000 110,582 100,000 – 125,000 Precious Metals3 ounces 90,000 – 110,000 102,242 95,000 – 115,000
Slide 34: 2017 Guidance
2017 Guidance CAPITAL EXPENDITURE1 • Peru’s 2017 sustaining capital expenditures include approximately $52 million related to tailings management facility costs • Total sustaining capital expenditures expected to decline substantially after 2017 as Peru tailings management facility costs decline $ M
Slide 35: 2017 Guidance
2017 Guidance FLIN FLON ZINC PLANT Zinc Metal Produced 95,000 – 115,000 tonnes Unit Operating Costs1 C$0.40 - 0.50/lb 1. Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudbay’s quarterly and annual management’s discussion and analysis. EXPLORATION1
Slide 36: Current Exploration Focus
Current Exploration Focus EXTENSIVE TARGET GENERATION IDENTIFIED SEVERAL PRIORITY TARGETS PROPERTY TYPE DESCRIPTION TIMEFRAME Lalor Mine 100% owned Late 2017 drilling down-plunge and currently reviewing 2017-2018 geophysical information relating to near-mine targets with a combination of surface and
Slide 37: Leverage to Commodities
Leverage to Commodities • Highly leveraged to copper, with additional sensitivity to zinc prices • Moderate exposure to changes in C$/US$ exchange rates SENSITIVITY ANALYSIS1 Change of 10% Impact on 2017 Base Represented by: Operating Cash Flow2 METAL PRICES: Copper Price $2.50/lb +/- $0.25/lb +/- $
Slide 38: Precious Metals Stream Overview
Precious Metals Stream Overview PAYMENTS FROM WHEATON PRECIOUS METALS TO HUDBAY Production payments1 Upfront payment $5.90/oz Silver $885 million $400/oz Gold DELIVERY FROM HUDBAY TO WHEATON PRECIOUS METALS Remaining Life of Mine 777 Silver 100% Gold 50%2 Remaining Life of Mine Constancia Silver 100
Slide 39: 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 40: 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 41: 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 42: 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 43: 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 44: 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 45: 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 operat
Slide 46: 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 47: For More Information Contact
FOR MORE INFORMATION CONTACT: Candace Brûlé, Director, Investor Relations 416.814.4387 | candace.brule@hudbay.com
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