Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hudbay Minerals Inc (HBM, Financial) achieved consolidated copper production of 29,000 tonnes and gold production of 59,000 ounces in Q2 2024, aligning with their production cadence expectations.
- The company improved its 2024 consolidated cash cost guidance to a range of $0.9 to $1.10 per pound of copper, down from the previous range of $1.5 to $1.25 per pound.
- Hudbay Minerals Inc (HBM) generated $30 million in free cash flow in Q2 2024, continuing a trend of positive free cash flow over the last 12 months.
- The company successfully completed a $400 million equity offering, which was oversubscribed and upsized, adding $386 million of net proceeds to their cash balance.
- Hudbay Minerals Inc (HBM) reduced its net debt by more than $550 million over the past 12 months, bringing the net debt to adjusted EBITDA ratio to 0.8 times.
Negative Points
- Consolidated copper production is expected to be below the midpoint of the 2024 guidance range due to lower than expected grades and timing impacts from heavy rains in Peru.
- Operating cash flow before changes in non-cash working capital was $122 million, lower than the first quarter due to planned lower production levels.
- Adjusted EBITDA of $145 million in Q2 2024 was lower than the first quarter, impacted by lower copper and zinc sales volumes due to shipment timing.
- The company faced challenges in Manitoba, including forest fires and temporary production interruptions at the Lalor mine, affecting quarterly production.
- Copper production at the Copper Mountain Mine in British Columbia was slightly lower than the first quarter, primarily due to lower head grades from processing stockpiled ore.
Q & A Highlights
Q: Your copper production for the year is tracking below the midpoint of the guidance. What kind of grade are you expecting in Peru in the second half of the year to make that up?
A: The production cadence is lower in the first half due to stripping at Pampacancha. We expect the contribution of Pampacancha to be roughly one-third to two-thirds of Constancia pit production over the year. Grades will increase towards the end of Q3 and into Q4, ranging from 0.4 to 0.57.
Q: Regarding Maria Reiner, does the EIS permit mean you can start drilling immediately, or are there other steps required?
A: There are additional steps required before drilling can commence. The EIA is the first step, but it typically takes about another 12 months after the EIA to start drilling.
Q: Can you talk about the timing and dependencies of the New Britannia expansion to 2,500 tonnes per day in Manitoba?
A: The New Britannia expansion involves high-return throughput enhancements with low capital outlay. We are progressively increasing production through process improvements, with recent peak rates up to 2,400 tonnes per day. These improvements are mostly sub-$10 million expenditures.
Q: What are your targets for throughput and recoveries in British Columbia by year-end, considering the ongoing stripping work?
A: We are ramping up material movement to around 250,000 tonnes per day by August. Mill throughput is averaging 35,000 to 40,000 tonnes per day, with improvements expected to reach around 41,000 tonnes per day by year-end. We are also planning capital projects to increase capacity to 50,000 tonnes per day.
Q: How do you view your current posture on potential acquisitions, and are you actively evaluating opportunities?
A: We continue to evaluate assets that fit our strategic and financial criteria, focusing on Tier 1 mining jurisdictions. We are disciplined and seek opportunities that are accretive and create value for our shareholders.
Q: Were there any significant public comments during the aquifer permit public comment period for Copper World?
A: The comments were generally supportive, with a significant number in favor of the project. We are confident in receiving the permits by the end of the year.
Q: Do you foresee any delays in the Copper World permitting process due to the upcoming election?
A: We do not anticipate delays due to the election. The permitting process is state-driven, and we have a strong commitment from the Arizona Department of Environmental Quality to complete their work by the end of the year.
Q: Are you still planning to wait for the Copper World permits before initiating the JV process?
A: Yes, we plan to initiate the minority JV partner process after receiving the state-level permits. We expect a robust process based on initial indications from potential partners.
Q: Despite improvements, Hudbay still trades at a discount to peers. Why do you think that is, and how does it affect your strategic thinking?
A: The market may be waiting for the outcomes of the Copper World permitting process and progress on Marina and Caballito. We believe our financial and operational improvements will eventually be reflected in our valuation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
