Hudbay Minerals Q4 2024 Earnings Report

Hudbay Minerals EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.20
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.20

Hudbay Minerals Revenue Results

• Actual Revenue: $584.90 million
• Expected Revenue: $588.28 million
• Beat/Miss: Missed by -$3.38 million
• YoY Revenue Growth: -2.90%

Hudbay Minerals Announcement Details

• Quarter: Q4 2024
• Date: 2/19/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 11:00AM ET

Hudbay Minerals (NYSE:HBM), a diversified mining company, focuses on the exploration, development, operation, and optimization of properties in North and South America. It produces copper concentrates containing gold, silver, and molybdenum; gold concentrates containing zinc; zinc concentrates; molybdenum concentrates; and silver/gold doré. The company's flagship project is the 100% owned Constancia mine located in the Province of Chumbivilcas in southern Peru. Hudbay Minerals Inc. was founded in 1927 and is based in Toronto, Canada.

Hudbay Minerals Q4 2024 Earnings Call Transcript

Presentation

[Operator]

I would like to remind everyone that this conference call is being recorded today, 02/19/2025 at 11AM Eastern Time. I will now turn the conference over to Candice Brule, Vice President, Investor Relations. Please go ahead.

[Candace Brule, VP - IR, Financial Analysis and External Communications at Hudbay Minerals]

Thank you, operator. Good morning and welcome to Hudbay's twenty twenty four fourth quarter results conference call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, and we encourage you to refer to it during this call. Our presenter today is Peter Kekilski, Hudbay's President and Chief Executive Officer.

[Candace Brule, VP - IR, Financial Analysis and External Communications at Hudbay Minerals]

Accompanying Peter for the Q and A portion of the call will be Eugene Lee, our Chief Financial Officer and Andre Lauzon, our Chief Operating Officer. Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR Plus and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.

[Candace Brule, VP - IR, Financial Analysis and External Communications at Hudbay Minerals]

S. Dollars unless otherwise noted. And now, I'll pass the call over to Peter Kekilski.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Thank you, Candice. Good morning, everyone, and thank you for joining us for today's call. I'll start by saying we had another incredible year in 2024. It was a year of execution as we delivered record financial performance and fully transformed our balance sheet. We proudly achieved consolidated production guidance for all metals with gold production significantly exceeding the top end of the guidance range.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

And we outperformed our twice improved consolidated cash cost guidance, demonstrating industry leading cost performance. These strong operating results enabled us to achieve a record revenues of more than $2,000,000,000 and record free cash flow generation of more than $350,000,000 in 2024. This was driven by our enhanced and diversified operating platform where we continue to demonstrate operational excellence and disciplined capital allocation. Our Peru operations delivered steady copper production and better than expected gold production in 2024 as mill throughput continued to exceed design capacity and we took advantage of a recent government initiative to allow mining companies to operate above permitted throughput levels. Pampacancha also continued to contribute high grade copper and gold ore.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

In addition, the team is advancing studies on future opportunities to further increase mill throughput in Peru. Our Manitoba operations achieved record annual gold production, increasing by 14% from 2023 and exceeding the top end of our production guidance range. I am very proud of the team's continuous improvement efforts, which resulted in impressive cost performance that significantly exceeded our expectations. This success was in part due to the contribution from the new Britannia mill, which was refurbished in 2021, and we continue to deliver high returns from this brownfield investment project. Our British Columbia operations have enhanced our operating platform with 2024 being the first full year of having a third operating asset.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We continued our stabilization and optimization efforts in 2024, including increasing mining activities and our focus for 2025 will be on mill optimization initiatives to enhance mill throughput. As a result of the free cash flow generation from the enhanced business, plus the proceeds from the successful equity offering we completed in May, we have proudly reduced net debt by more than $500,000,000 in 2024. We have transformed our balance sheet to now be in the lowest leverage position of our peers, a significant change from one of the highest leverage positions more than a year ago. We are in the best financial position we have ever been in to prudently deliver our attractive pipeline of growth opportunities. And this is timely as our Copperworld project in Arizona has received the final key permits and we are now advancing the project through feasibility studies and the minority joint venture partner process.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

I'll go into more detail on our recent achievements throughout today's presentation, along with our outlook for 2025 and our plans for advancing many exciting growth initiatives to continue to unlock value for all stakeholders. Turning to Slide four. The fourth quarter of twenty twenty four had strong production and operating cost performance across the business. Consolidated copper production was 43,000 tonnes in the quarter, an increase of 38% compared to the third quarter and in line with quarterly production cadence expectations. Consolidated gold production was 94,000 ounces, which significantly exceeded our expectations for the quarter and increased 6% from the strong levels achieved in the prior quarter.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

This was primarily due to higher grades in Peru and continued strong gold production in Manitoba. As a result, we achieved our consolidated full year production guidance for all metals and significantly exceeded the top end of our production guidance range for gold. We had another quarter of industry leading cost performance with consolidated cash costs of $0.45 per pound of copper and sustaining cash costs of $1.37 per pound. While a majority of our revenues continued to be from copper, our unique copper and gold diversification adds further cash flow resiliency and strong leverage to higher metal prices. This is seen through the increasing portion of our revenues from gold representing 35% of total revenues in 2024 compared to 29% in 2023.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Fourth quarter adjusted EBITDA was $257,000,000 a 25% increase compared to the prior quarter, resulting in full year 2024 adjusted EBITDA of $823,000,000 a substantial increase from $648,000,000 a year ago. Adjusted net earnings was $0.18 per share in the fourth quarter, a 40% increase compared to the third quarter. Our financial results would have been even higher if excess copper concentrate in Peru was sold in the quarter. As a result of the strong ramp up of production during the quarter, there remained approximately 30,000 tonnes of copper concentrate inventory at the December compared to the typical levels of 15,000 tonnes. The excess copper concentrate is expected to be sold in the first quarter of twenty twenty five.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Slide five highlights our efforts to transform our balance sheet in 2024, which has positioned us as the lowest levered company in our peer group, as I mentioned. We ended the year with $582,000,000 in cash and cash equivalents, an increase of $332,000,000 over the course of 2024 due to a successful equity offering and record free cash flows bolstered by strong copper and gold prices. Hudbay has successfully delivered six consecutive quarters of meaningful free cash flow generation as a result of recent brownfield investments, continuous operational improvement efforts and steady cost control across the business. We use part of the equity offering use of proceeds and the free cash flow generation to make $245,000,000 of debt repayments during the year. This included repurchasing and retiring a total of $83,000,000 of senior unsecured notes, as well as completing the repayment of $100,000,000 on the revolving credit facilities.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We also fully repaid the gold prepay facility with $62,000,000 in gold deliveries during 2024. As a result, we have reduced our net debt by over $500,000,000 in 2024. And as of December 31, we have $526,000,000 of net debt. The net debt reduction together with higher levels of adjusted EBITDA over the last twelve months has significantly improved our net debt to adjusted EBITDA ratio to 0.6 times in comparison to a ratio of 1.6 times at the end of twenty twenty three and over two times at the end of twenty twenty two. In addition to these efforts, in November, we took further action to improve balance sheet resilience and financial flexibility by proactively extending our senior secured revolving credit facilities from October 2025 to November 2028.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

This provides increased financial flexibility to accretively maintain our 4.5% coupon bonds until maturity in 2026 and advance Copperworld towards a sanction decision in accordance with the 3P plan. The newly extended $450,000,000 revolving credit facility includes an improved pricing grid, reflecting the enhanced financial position of Hudbay and features an opportunity to increase the facility by an additional $150,000,000 at our discretion, providing additional financial flexibility. Looking at our Peru operations on Slide six. In the fourth quarter, we produced 34,000 tonnes of copper, 38,000 ounces of gold, 970,000 ounces of silver and 195 tonnes of molybdenum. Copper, gold and silver production was significantly stronger than the third quarter as a result of high grades from Pampacancha as the planned stripping program was successfully completed in the third quarter, as well as a larger portion of all mill feed coming from Pampacancha.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

The strong fourth quarter in Peru resulted in the full year annual guidance ranges being achieved for all metals with the production of 99,000 tonnes of copper and 98,000 ounces of gold in 2024. Peru gold production exceeded the upper end of the guidance range by 6%, primarily a result of additional gold benches that were mined in the Pampacancha Pit ahead of schedule and pulled forward from 2025. The Peru operations continued to benefit from strong and consistent mill throughput, averaging approximately 87,000 tonnes per day in the fourth quarter and full year of 2024. The mill achieved record copper recoveries of 88% in the fourth quarter, higher than the previous record of 87 achieved in the fourth quarter of twenty twenty three. Peru demonstrated strong cost performance and exceeded our expectations in the fourth quarter.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

As a result, full year cash costs were $1.18 per pound in 2024, outperforming the low end of our annual cost guidance range. Strong mill performance and focus on cost efficiencies has proudly positioned Constancia as the lowest cost open pit cost. We continue to evaluate opportunities to further increase mill throughput in the coming years with the government regulatory allowance to exceed permitted levels by 10%. This opportunity has the potential to increase production volumes to partially offset grade declines following the depletion of Pampacancha in late twenty twenty five. At seven highlights the record year we had in Manitoba.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Our Snow Lake operations delivered exceptional operating performance and continued to exceed expectations in both production and efficiency in the fourth quarter. We also proudly achieved a significant milestone in December with the production of a total of 1,000,000 ounces of gold from the Lalor mine, reflecting the success of our strategy to maximize gold production from the Snow Lake operations. Record annual gold production of 214,000 ounces was achieved in 2024 through a combination of higher metallurgical recoveries at the New Britannia and Stall Mills and the strategic allocation of more gold ore feet to the New Britannia mill. This success reflects the positive impact of ongoing continuous improvement initiatives across the entire business unit. Full year gold and copper production both exceeded the upper end of the 2024 guidance ranges.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Zinc production was in line with guidance and silver production was at the top end of the guidance range. The Lalor mine achieved strong results averaging 4,600 tons per day in the fourth quarter, marking the highest quarterly ore production in 2024. This strong performance was driven by positive muck fragmentation, stope availability and improved mobile equipment availability. The New Britannia mill had another quarter of exceptional performance with the mill operating consistently above nameplate capacity, achieving an average throughput of above 2,000 tons per day in the fourth quarter. Plant availability remains strong, supported by ongoing low capital projects aimed at further increasing throughput while maintaining targeted gold recoveries of 90%.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

At the Stahl base metal mill, we produced a similar quantity of ore in the quarter compared to the prior, while annual processing declined by 7% year over year aligned with our strategy to allocate more Lalor ore feed to New Britannia to maximize gold recoveries. Manitoba's gold cash costs were $6.00 $7 per ounce in the fourth quarter and $6.00 $6 per ounce for the full year. These costs remain better than expected as a result of continued operating efficiencies and focus on strong cost control, resulting in full year Manitoba cash costs significantly outperforming the low end of the 2024 guidance range. Similarly, our sustaining cash costs remain stable throughout the year in Manitoba, averaging an impressive $868 per ounce in 2024. Our Snow Lake operations are generating significant cash flows as operating costs remain stable and we benefit from expanding margins in the current high gold price environment.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Slide 8 ranks our operations against other large scale gold mines in Canada. At $868 per ounce in sustaining cash costs, Snow Lake is the lowest cost gold mine in Canada, achieving margins of roughly 70% at current gold prices. Through our continuous improvement efforts, focus on cost control, efforts to maximize gold production and benefits from base metal byproduct diversification, we are proud to say that our Snow Lake business was the highest margin gold operation in Canada in 2024. Moving to our third operating business unit on Slide 9, our British Columbia operations produced 6,000 tonnes of copper, 4,600 ounces of gold and 59,000 ounces of silver in the fourth quarter. Production in the quarter was impacted by lower mill throughput due to planned and unplanned maintenance shutdowns.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Full year COF production was below the guidance range, primarily as a result of lower grades in stockpiled ore and lower throughput during the ramp up of stabilization and optimization efforts throughout the year. Full year gold production was in line with annual guidance. Since acquiring Copper Mountain in June 2023, we have been focused on advancing operational stabilization plans, including opening up the mine by reactivating the full mining fleet, adding additional haul trucks, adding additional mining phases, optimizing the ore feed to the plant and implementing plant improvement initiatives that mirror Hudbay's successful processes at Constancia. These stabilization plans have successfully increased the total tons moved and resulted in stronger mill performance as demonstrated by high mill availability of 92% and copper recoveries of 82% in 2024 compared to 8580% respectively in 2023. The focus in the fourth quarter of twenty twenty four was on mining efficiencies and operator recruitment to effectively utilize the available haul truck fleet.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

As a result, total material moved is expected to continue to increase in 2025 as per the mine plan. As I mentioned earlier, mill performance in the fourth quarter was impacted by the ramp up periods following the planned and unplanned maintenance shutdowns. In addition, elevated clay material impacted the secondary crushing circuit. Several initiatives were advanced in the quarter to address these issues. Full year cash costs in British Columbia were $2.74 per pound and were above the high end of the annual cost guidance range due to lower copper production as mentioned.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Progressive operational improvements are expected throughout 2025. Mining activities will continue to execute the three year accelerated stripping program intended to bring higher grade ore into the mine plan. And in January, we completed feasibility engineering to debottleneck and increase the nominal plant capacity to its permitted capacity of 50,000 tons per day earlier than contemplated in the technical report. We released our 2025 annual guidance with our 2024 results and our production guidance is summarized on Slide 10. The 2025 consolidated copper production guidance midpoint of 133,000 tonnes is expected to remain consistent with 2024 levels.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

This is a result of higher expected production in British Columbia as mill throughput optimization plans are implemented, offset by a lower portion of ore feed from Pampacancha in Peru as it depletes this year. The 2025 consolidated gold production guidance midpoint of 278,000 ounces reflects continued strong gold production in Manitoba offset by lower gold grades in Peru as high grade gold benches were mined ahead of schedule in 2024, as well as a lower portion of ore feed from Pampacancha in 2025. Specifically for Peru, the 2025 copper production guidance midpoint is expected to be 88,500 tons and gold production is expected to be 54,500 ounces lower than 2024 levels as less mill or feed will be coming from Pampacancha. As mentioned earlier, additional high grade gold benches were mined in late twenty twenty four and pulled forward from 2025. The Pampacancha depleted in early December twenty twenty five as opposed to October as the mine plan has smooth Pampacancha production throughout the year.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Total mill ore feed from Pampacancha is expected to be approximately 25% in 2025, lower than the typical one third in prior years. In Manitoba, we expect to produce 200,000 ounces of gold based on the midpoint of the 2025 guidance range. The impressive operating performance we saw in 2024 is expected to continue into 2025, resulting in our updated 2025 gold production guidance to be 8% higher than the previously announced guidance of 185,000 ounces. Zinc production for 2025 is expected to be 24,000 tonnes, which is lower than 2024 production due to lower grade base metals in the mining sequence at Lalor as we continue to prioritize the gold zones. In British Columbia, twenty twenty five copper production is expected to be approximately 35,000 tonnes based on the midpoint.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

This is a 31% increase from the 2024 levels as a result of mill throughput ramp up and higher grades in the second half of the year. This is a result of several mill initiatives, including the conversion of the third ball mill to a second sag mill and higher grades from the accelerated stripping schedule. The mill throughput ramp up reflects the first half of twenty twenty five at similar throughput levels seen in 2024 with a significant increase in the second half of twenty twenty five concurrent with the completion of the second SAG mill project ramping up towards 50,000 tonnes per day in 2026. As shown on Slide 11, consolidated copper cash costs in 2025 are expected to be within $0.8 and $1 per pound as we continue to focus on maintaining strong cost control across our operations to drive industry leading margins. Sustaining cash costs are expected to be within $2.25 and $2.65 per pound, reflecting slightly lower copper production, lower byproduct credits and higher sustaining capital expenditures compared to 2024.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

In Peru, Twenty Twenty Five cash costs are expected to be between 1.35 to $1.65 per pound as continued strong cost control offsets lower production and byproduct credits compared to 2024. In Manitoba twenty twenty five, gold cash costs are expected to be between $650 and $850 per ounce, remaining at industry low levels during strong margins at current gold prices. In British Columbia, cash costs are expected to be between $2.45 and $3.45 per pound. This is an increase from 2024 due to higher mining costs related to more material moved as we execute the planned accelerated stripping program and higher milling costs as we implement the mill improvement projects this year, offset by higher copper production. Our capital expenditures guidance is shown on Slide 12.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

In 2024, total capital spending was $10,000,000 lower than guidance of $360,000,000 as lower growth sustaining capital deferrals were partially offset by higher sustaining capital in British Columbia. For 2025, total capital expenditures are expected to be $580,000,000 This increase reflects higher growth capital spending as we reinvest in several high return growth projects as well as higher sustaining capital at the operations, including some that was deferred from 2024. Peru's '20 '20 '5 sustaining capital expenditures are expected to be $170,000,000 with higher capitalized stripping and required mine equipment purchases along with some capital deferrals from 2024. Growth capital of $25,000,000 in Peru is related to the installation of the pebble crusher to increase mill throughput starting in 2026 and other mill optimization initiatives. Manitoba's twenty twenty five sustaining capital expenditures are expected to increase to $60,000,000 primarily the result of additional underground capitalized development costs.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We also plan to spend $15,000,000 of growth capital in 2025 for the exploration and haulage drifts at the 1901 deposit and a portion of the cost has been funded by a premium flow through financing that was completed in the fourth quarter. In British Columbia, twenty twenty five sustaining capital is expected to remain consistent with 2024 at $50,000,000 for mine and mill equipment capital. And we expect to spend $85,000,000 on capitalized stripping costs related to the continued accelerated stripping program. Growth capital at Copper Mountain is expected to be $75,000,000 in 2025, including $55,000,000 for the conversion of the third ball mill to secondary sag mill to increase throughput rates starting in the second half of twenty twenty five and ramping up to 50,000 tons per day in 2026. At Papa World in Arizona, we anticipate spending a total of $90,000,000 in growth capital in 2025.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

This includes $25,000,000 of typical annual holding costs and roughly $65,000,000 related to de risking activities and definitive feasibility studies to advance the project towards a sanctioning decision in 2026. '20 '20 '5 exploration expenditures are expected to total $40,000,000 in line with 2024 exploration spending as we continue to execute a multi year extensive geophysics and drilling program in Snow Lake to extend mine life and explore for new discoveries. A portion of the Snow Lake exploration program has been funded by a premium critical minerals flow through financing. Moving to Slide 13, Hudbay has a proven track record of prudently allocating capital to generate the highest risk adjusted returns as we execute our growth strategy and advance our world class asset portfolio. As an example of this success, we completed a post project review of our capital investment in the New Britannia Mill refurbishment project.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We acquired the New Britannia Mill in 2015 for $12,000,000 to potentially process high grade Lalor gold ores and allow us to achieve higher gold recoveries of approximately 90%. The refurbishment project construction had an initial capital cost of $115,000,000 and an estimated IRR of 19% at the time of project sanctioned in early twenty twenty. The initial investment was funded by a $115,000,000 low cost gold prepay facility. The project construction was completed on time with mill ramp up and commissioning achieved in late twenty twenty one. The mill was refurbished with a nameplate design capacity of 1,500 tonnes per day and has been consistently exceeding performance expectations, reaching record throughput levels of over 2,000 tonnes per day in 2024.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Project payback was achieved after two point five years and in August we completed the final payment under the gold prepay facility increasing our exposure to the current high gold price environment. After three years in operations, it is estimated that the IRR for the New Britannia refurbishment project has increased to a remarkable 36% after adjusting for higher production rates, stronger gold prices and higher capital and operating costs. In 2024, we received a permit to increase the production rate at New Britannia to 2,500 tonnes per day. With over 2,000,000 ounces of contained gold in current reserves and another 1,400,000 ounces of gold in the inferred sources, the New Britannia investment has the potential to generate even higher returns that could be further enhanced by regional exploration upside and the current strong gold price environment. We expect to replicate this success through our disciplined capital allocation approach when reinvesting in brownfield growth projects such as our mill throughput improvement projects in British Columbia and Peru.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

And we expect to generate attractive returns and unlock significant value through our Copperworld project, which is shown on Slide 14. Copperworld is the most advanced greenfield project in our portfolio and offers significant copper exposure and highly attractive project economics. Copperworld is a standalone operation requiring state and local permits and is expected to produce 85,000 tons of copper per year over the initial twenty year mine life in the first phase. The project generates an NPV of $1,100,000,000 and an after tax IRR of 19% at a copper price of $3.75 per pound. Copperworld is one of the highest grade open pit copper projects in The Americas with mineral reserves of three eighty five million tons at 0.54% copper as shown on Slide 15.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Copperworld is expected to be the fourth largest copper producer in The United States and its cost base compares favorably to current operating mines. Once in production, Copperworld is expected to be a meaningful copper producer in The U. S. Domestic supply chain. The made in America copper cathode anticipated to be produced is expected to be sold entirely to domestic U.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

S. Customers. Turning to Slide 16, we have recently obtained all key permits needed for the development and operation of Copperworld. This includes the Aquifer the we are well positioned to prudently advance Copperworld in accordance with our 3P plan. Once in production, Copperworld is expected to increase our consolidated copper production by more than 50% from current levels.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Our focus in 2025 will be on advancing feasibility studies with completion expected in the first half of twenty twenty six. Now that the permits have been received, we have commenced a minority joint venture partner process. We have also expanded our team in The United States to build bench strength and to establish key leadership roles. This includes the recent hiring of a highly qualified project director and a seasoned mining law expert, both of whom are significant assets as we advance Copperwell towards a sanctioning decision in 2026. We have several exploration opportunities as part of our long term growth pipeline, including many high priority exploration targets in Snow Lake as noted on Slide 17.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

In 2024, we began the largest exploration program in the company's history in Snow Lake with the goal of extending known mineralization near the Lalor deposit to further extend mine life as well as to find a new anchor deposit within tracking distance of the Snow Lake processing infrastructure. To follow on this, in 2025, we will be completing the largest geophysics program in Hudbay's history with plans to complete 800 kilometers of ground electromagnetic surveys and an extensive airborne geophysics survey. At Laurel Northwest, follow-up drilling in the second half of twenty twenty four confirmed the potential for a new gold copper discovery located approximately 400 meters from the existing Lalor underground infrastructure. Several new intersections have helped establish the geometry of this new discovery and we plan to continue to drill Lalor Northwest in 2025. At At the Regional Rail property, which was acquired through the Rockcliffe acquisition in 2023, the 2024 program yielded new intersections of high grade copper gold mineralization.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

These results will be combined with historical drilling results to update the geological model and assess its economic potential. Recent step out drilling at the 1901 deposit from the underground exploration drift targeted down plunge extensions of the ore body. All five holes that were drilled beyond the known extent of the mineralization have intersected visible copper gold mineralization extensions. Additional drilling at 1901 is expected in 2025 to confirm and convert inferred mineral resources in the gold lenses to mineral reserves. One of the recent geophysical targets is a very strong deep anomaly located at Cook Lake North, approximately six kilometers from Lalor.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Drilling at the Cook Lake North property is continuing throughout the winter season. We are pleased to have signed our first ever exploration agreement with the Kitchewapa Cree Nation, reflecting our commitment to meaningful collaboration as we explore for new mineral resources in the Snow Lake and FlinFlon regions. Additionally, in FlinFlon, we continue to advance tailings reprocessing studies to recover critical minerals and precious metals while creating environmental and social benefits for the region. An early economic study on the zinc plant tailings reprocessing opportunity has confirmed the potential for a technically viable reprocessing alternative, so we have further engineering work underway. In Peru, our exploration activities surrounding the Maria Reyna and Caballito properties near Constancia continue to focus on permitting and drill preparation.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

As part of the drill permitting process, environmental impact assessment applications were approved by the government in June 2024 for Maria Reina and in September 2024 for Caballito. We anticipate the drill permitting process to be completed in 2025, at which point we will initiate an extensive eighteen month drill program. Concluding on Slide 18, Hudbay is set up for another highly successful year in 2025. Core to our 2025 objectives is the continued focus on operating safely and sustainably, aligning with our purpose to ensure that the company's activities have a positive impact on our people, communities and the planet. We believe that copper has highly robust long term supply and demand fundamentals as global copper mine supply will be unable to meet growing copper demands.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Hudbay's leading copper development and exploration pipeline and low cost stable operating platform in Tier one jurisdictions offers investors meaningful copper exposure, complementary gold exposure and continued strong near term free cash flow generation. This together with our resilient balance sheet provides significant upside potential for additional value creation as we prudently advance our many high return copper growth opportunities. And with that, we are pleased to take your questions.

[Operator]

Thank

[Operator]

you.

[Operator]

Today's first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

[Orest Wowkodaw, Analyst at Scotiabank]

Hi, good morning. I'm curious if we can get some more color on your 2025 production guidance in Peru. It's been meaningfully reduced from the 2025 guide you put out in March of last year. Can you give us some color in terms of what's driving that reduction? I assume it's Pampacancha, but what exactly are you seeing there and are there any implications to 2026?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Good morning, Aras. Thank you. Thanks for the question. As we mentioned with our last quarter results, we've been experiencing more mining dilution and ore losses than planned in one of the high grade areas at Pampacancha and we've since investigated quite a bit further. Our guidance for 2025 includes conservative resource to reserve conversion factors tested by very thorough reconciliation work in the 2024 production results.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Now, so this is certainly limited, as you suggested, to Pampers Pancha and specifically in 2025 only. On the gold production side, we accelerated some high grade ventures from 2025 into 2024, which resulted in 2024 gold production exceeding the top end of guidance levels. And then in addition, 2025 copper production is expected to be slightly lower than 2024 since Pampacancha is contributing a lower portion of ore feed, approximately 25% of the ore feed in 'twenty five will be from Pampacancha compared to approximately one third in 2024. So that's really what the primary factors are. I'd also add, even though you've not asked it, that I've kind of watched the market's reaction today to our results and frankly, I'm pretty surprised because 2024

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

was an outstanding year and 2025 will

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

be another strong year of delivery. Delivery with stable production, stable costs, outstanding margins. So perhaps it's just a bad day in the market, but I think it's been driven by what we've described in Peru specifically at Pampacancha. Andre, would you add anything?

[Andre T. Lauzon, COO at Hudbay Minerals]

So what

[Andre T. Lauzon, COO at Hudbay Minerals]

I would say just to build on what you said is, so when we went into Q4 as we started recognizing some of the challenges in the model, we signaled being towards the low end of guidance last year and we delivered that with the updated model. We since revised the models to build and forecast into 2025. And so now we're anticipating being at the midpoint. It's not like last year. So this is a really prudent forecast going forward and there may be a little upside on that as well.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Yes, I'd add or sorry, carry on please.

[Orest Wowkodaw, Analyst at Scotiabank]

No, I was going to

[Orest Wowkodaw, Analyst at Scotiabank]

say just thanks for the color, but I'm curious on what the blended average grade for copper may be now at Constancia in '25 given the revisions?

[Andre T. Lauzon, COO at Hudbay Minerals]

The blended average age over '25 is above 0.3, zero point three one three three in that range.

[Orest Wowkodaw, Analyst at Scotiabank]

Thanks. And Peter, I do share your feelings in terms of the overreaction on the share price today. But clearly, the guidance cut for $25,000,000 is negative.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Thanks for that, Orest. I'd also stress that Constancia is the 90,000 tonne per year copper mine with extremely attractive costs and it carries on at this level at least through the end of the decade. And after that, there's massive upside offered by our exploration satellites within tracking distance of consensus. So, we remain very excited about the asset.

[Andre T. Lauzon, COO at Hudbay Minerals]

Yes. If we were to build like for the future is so the forecast for next year and incorporated in the guidance, we just discussed were some subtleties in the model for Pampacancha. I'd say that the cost structure for Peru is year on year, we've been able to hold it flat almost the same and with no increases and that strong cost performance and production performance will carry forward post Papa Concha into the future.

[Orest Wowkodaw, Analyst at Scotiabank]

Thanks for the color.

[Operator]

Thank you.

[Operator]

And our next question comes from Lawson Winder with Bank of America Securities. Please go ahead.

[Lawson Winder, Analyst at Bank of America]

Yes. Thank you very much, operator. Good morning, Peter and team. I wanted to ask about the couple of minority interest process and get an idea from you what kind of interest you're seeing. So is it corporate, strategic more?

[Lawson Winder, Analyst at Bank of America]

Is it potentially financial investors, sovereign wealth funds? Or is it more of the traditional type of partners that we've seen with off takers? And then in terms of early indications, what do the numbers look like? And then finally, so you started the process, what is the expected timing on completion of the sale process? Thank you.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Good morning, Lawson. No, thank you for that question. So the answer to the very simple answer to your question is all of the above. We have had very, very strong interest from, as you put it, the traditional investors, so trading houses and the like. But we visited with several Middle Eastern potential partners later last year.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We had very, very strong interest from The Middle East. We have also had very, very strong interest from strategics. And on top of that, we've had some interest also from some financial advisers. So, I would say the interest has been extremely strong. We expect it to be a very competitive process.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

And to your question with respect to timeline, we think it will take up the order of four to six months to complete.

[Lawson Winder, Analyst at Bank of America]

Okay, great. And then

[Lawson Winder, Analyst at Bank of America]

the other thing that would be helpful to get a bit of an idea for would be sort of an ex growth CapEx run rate. So when you think about

[Lawson Winder, Analyst at Bank of America]

the four key assets or operating regions of the business, if we were to just put a CapEx number in our model each year, like an average for the next ten years, and of course at current pricing at twenty twenty five pricing level, And what's kind of a good run rate?

[Eugene Lei, CFO at Hudbay Minerals]

Good morning, Lawson. So our sustaining capital guidance for this year is approximately three sixty five million dollars It's a little higher than last year. That includes a lot of stripping in BC. The sustained capital in Manitoba is in that $50,000,000 to $60,000,000 range per annum. Peru ranges between about $130,000,000 to $170,000,000 per year depending on the tailings dam raise and then BC is in that kind of $50,000,000 range.

[Eugene Lei, CFO at Hudbay Minerals]

So we add all those numbers up that's kind of in the $250,000,000 to $300,000,000 range on an annual basis.

[Lawson Winder, Analyst at Bank of America]

Okay.

[Lawson Winder, Analyst at Bank of America]

That's great. Thank you. Both of those responses are helpful.

[Operator]

Thank you. And our next question today comes from Dalton Barreto with Canaccord Genuity. Please go ahead.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Thanks. Good morning, Peter and team. Peter, I want to start by asking a couple of longer term questions, if you will. You mentioned that Constantia is pretty robust until the end of the decade. Based on the mine side, I think the copper grades do drop off fairly significantly after that.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

If you start drilling the satellites this year, do you think Caballito maybe would be ready for production by then?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Good morning, Lawson.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

So, what I would say is, first of all, we as I

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

said during the I have said in the past, we combine the permitting processes for Caballito and Maria Reina. So, we will obtain permitting for both of them at the same time and then we'll decide exactly what the process or the sequence of our drilling will be. It's going to be an eighteen month drilling program. So, once we have completed that drilling program, we'll have a better idea of exactly what the high grade satellites or whatever we talk about will be targeted. I imagine that we'll have a roughly similar timeline associated with permitting for those operations.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

So, it's unlikely that we would be in production before early 2030s. But I would say that with the type of production and the levels of production that we have moving forward now as well as potential expansion of mill infrastructure to offset declining grades, we'll have a very clear line of sight to what those satellites will bring if there is a gap of a year or two between what we're talking about. So it's very difficult for me to say today with any sense of certainty whether we would bring a Caballita or a Maria Reina satellite into production by 02/1930. But I would say around about then in the next couple of years or something like that, but there will always be a very clear line of sight to it, which I think would address any market concerns. But not only that, by then we'll have copper weld in production as well.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

So we'll already have added another 50% to our production portfolio.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Thanks for that, Peter. And then just maybe switching to

[Andre T. Lauzon, COO at Hudbay Minerals]

Sorry, so I just wanted to

[Andre T. Lauzon, COO at Hudbay Minerals]

add something else in there. So with Flannery, so one of the things that we're going through this year is we're up we're renewing some of our permits in Peru and looking for some expansion in anticipation of the Cabito and Maria Reina deposits. And although like Peter said, the timeline is going to be tight around 02/1930 with successful exploration there, we'll be likely permitted in 2028 or so to be able to increase throughput to a much higher level that we can accelerate Constantia and bridge that gap. So we've been working on plans to mitigate those lower grade future years. And if we get Murray Arena and Caballito sooner, even better, like so we'll be permitted to go at a high level of production with that super high grade.

[Andre T. Lauzon, COO at Hudbay Minerals]

And then but if it does slide a little bit, we have the opportunity to accelerate Constancia and produce more metal.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Got it. Thanks for that Andre. And then maybe switching gears to Manitoba. The Canadian dollar has been hammered. Just wondering how much exposure the Manitoba business has to the Canadian dollar and what you are doing to sort of lock in these rates?

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Thanks.

[Eugene Lei, CFO at Hudbay Minerals]

Good morning, Dalton. We budgeted conservatively for $1.35 copper. Obviously, that was today's spot price slightly higher than that. So a 10% change in the Canadian U. S.

[Eugene Lei, CFO at Hudbay Minerals]

Exchange rate is about a $60,000,000 impact on cash flow and EBITDA. And so it's a pretty significant increase in cash flows and that affects both the DC business and the management business.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Got it. Thanks, Eugene. And maybe if I can just squeeze one last one in. Your balance sheet is in very good shape right now. You're still more than a year away from sanctioning Copper World.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Just given the movement in the shares today and your valuation, any thought on maybe buying back some shares?

[Eugene Lei, CFO at Hudbay Minerals]

Dalton, Sujeune again. We're in enviable position with our balance sheet having lowered our leverage full turn over the course of 2024. We have some bonds that are more than a year away from being due. We're always looking at opportunities to allocate capital to the highest risk adjusted returns. And you'll see in our capital forecast this year that we have some investments in our business that we think are high return businesses.

[Eugene Lei, CFO at Hudbay Minerals]

The past practices that we've embarked on, including New Brit, were over 35% return projects. And as we look at dividends and share buybacks, we'll always be evaluating against those internal projects. But as Peter mentioned, we are a bit surprised with the overreaction today in the share price. So it's always something we consider actively as we allocate capital.

[Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets]

Thanks very much guys.

[Operator]

Thank you. And our next question comes from Anita Soni with CIBC World Markets. Please go ahead.

[Anita Soni, Managing Director at CIBC Capital Markets]

Good morning, Peter, Eugene and Andre. So a question for Andre on the dilution and ore losses. Could you give some color on what you think the source of the issue there is? I'm just wondering if it was a geostatistical model or is it something that's happening from the mining side of the operation?

[Andre T. Lauzon, COO at Hudbay Minerals]

Yes. Thanks for the question. So, as we are going through actually with all of our operations, we were continually updating our models. It's something that we do every quarter and in all our cases monthly looking at reconciliation factors. In this case here, it does appear to be more geostatistical because it didn't affect the gold.

[Andre T. Lauzon, COO at Hudbay Minerals]

We had positive reconciliation on the gold and there was just slight more variability on the copper. But those were corrected and like we projected in the fourth quarter and we updated with our models in the fourth quarter. So those are all the best estimates that we have going forward into 2025 And so, we're very confident that in achieving the midpoint or better.

[Anita Soni, Managing Director at CIBC Capital Markets]

And what kind of I mean, what did you use for your geostatistics, ID3 and ordinary kriging or ID2?

[Andre T. Lauzon, COO at Hudbay Minerals]

So, all of our models are ordinary krig.

[Anita Soni, Managing Director at CIBC Capital Markets]

Just ordinary krig? Okay. And then, how much of the so what was the cutting factor that you used for the 2025 and how many tonnes did that impact in 2025?

[Andre T. Lauzon, COO at Hudbay Minerals]

Say again, sorry, can you repeat that in the question?

[Anita Soni, Managing Director at CIBC Capital Markets]

Yes, you reduced the grade in 2025. So I'm just trying to get an understanding of how much in terms of tonnage was impacted by the reduction in grade and what did you like how much did you reduce it by, like what was the factor like 10% or 15% or?

[Andre T. Lauzon, COO at Hudbay Minerals]

So we could probably take it offline, it's pretty detailed, but what it says is it's very focused to Papa Concha. Papa Concha is only about a third of the production and what we have right now is a resource model that has a lot of information with blast holes and the new information that makes it a it's the best model going forward. So it's not a cutting, it's we have a lot more information now.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. And then, so my last question would be how much of the Pampacancha ore would have been in 2026?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Zero. There is no ore.

[Andre T. Lauzon, COO at Hudbay Minerals]

Yes, Pampacancha is done in 2026. Yes, we are done this year.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. Great. That's it for my question. Thank you very much.

[Operator]

Thank you. And our next question comes from Farooq Hamed with Raymond James. Please go ahead.

[Farooq Hamed, Director at Raymond James]

Thank you, operator, and good morning, everyone.

[Farooq Hamed, Director at Raymond James]

So just a couple of

[Farooq Hamed, Director at Raymond James]

questions from the presentation here. The first one just on Copper World. Peter, in your slide there, you talk about a made in America strategy producing copper cathode. I just wanted to revisit that because I know in the past there has been some discussion about whether you actually end up going all the way and making the cathode or whether you just produce a concentrate. And I think that there was a CapEx trade off related to that decision.

[Farooq Hamed, Director at Raymond James]

So have you now committed that you're going to kind of go down the path of producing cathode in country or is that

[Farooq Hamed, Director at Raymond James]

still something that's up for debate?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Good morning, Faruk. So, to the very easy to ask your question, yes, we're committed to it. It is certainly is a key component of the pre feasibility study and it will be a key component of the feasibility study going forward. We think that the opportunity to produce made in The United States copper cathode is very, very attractive, especially given some of the geopolitical disconnects that we are seeing in the environment now and I think is very, very supportive of building our business in The United States. I mean, of course, we will take a hard look at the technologies that we are going to use, but we are still planning to continue to use the Albion process.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

But remember that it's a project that's funded out of cash flow in approximately year four while we are operating.

[Farooq Hamed, Director at Raymond James]

Okay. Thanks for that. And maybe just earlier in the conference call, you made a reference to at Manitoba running above permitted capacity and there was an allowance from the government. Can you provide some more detail on the allowance from the government and how long you expect that to persist?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

So, Faruk, I think that you're mixing up Peru and Manitoba. So, it's Peru where we have an allowance in the government to exceed production permitted capacity by 10%. The answer on the Manitoba side is we received a permit to increase production at New Britannia to 2,500 tonnes per day. And as we mentioned in the materials, we should be producing at over in the last quarter at over 2,000 tons per day.

[Farooq Hamed, Director at Raymond James]

Okay. Thanks for that clarification. Yes, I think I misheard you on that one. And then just the last one there, just a question related to Dalton's question on potential buyback. Part of the reason why your balance sheet has strengthened is related to the equity issuance that you did earlier in 2024.

[Farooq Hamed, Director at Raymond James]

So I'm just wondering at this point, and I imagine that part of strengthening the balance sheet was to get ready for Copper World. So at this point, is it safe to assume that kind of a share buyback would kind of be off the table given part of the raise was to get ready for Copperworld coming potentially in 2026

[Farooq Hamed, Director at Raymond James]

or starting the construction in 2026?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

I will let Eugene give you a broader answer to it. But in essence, it is unlikely that we would do a share buyback in the wake of issuing equity. Eugene, anything you would add to that?

[Eugene Lei, CFO at Hudbay Minerals]

It's part of a broader strategy when we did the equity issue was to pre fund the stabilization optimization work in British Columbia and that's underway. That's going to be spent this year in 2025 and also put the balance sheet in a position to potentially sanction the Copperworld project in the first half of twenty twenty six. And I think we're really well on track on that. We always look at opportunities both internally and externally to generate returns for our shareholders and we will continue to monitor the situation. But as Peter mentioned, it's not we don't take this lightly in a kind of a one quarter decision.

[Eugene Lei, CFO at Hudbay Minerals]

This is we're building a resilient balance sheet to be able to reinvest and generate superior returns over a sustainable time for our shareholders. We're in a really good pathway to do that. I think we have the lowest leverage among our peers. We've reduced debts permanently in our capital structure and we have a lot of financial flexibility going forward in terms of the refi of the bonds and the sanction of COP world in the context of all the capital allocation opportunities that we have in terms.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

With the goal of ultimately being stable, big time dividend payers. Correct.

[Farooq Hamed, Director at Raymond James]

Okay. Thanks guys.

[Operator]

Thank you. And our next question comes from Pierre Valencourt with Haywood Securities. Please go ahead.

[Pierre Vaillancourt, Senior Analyst at Haywood Securities]

Thanks. I was wondering if you could elaborate on the tax expense this quarter and what implications are for future quarters?

[Eugene Lei, CFO at Hudbay Minerals]

Hi, Pierre. Yes, there was an elevated tax expense in 2024 due to the differences in mining tax versus income tax and particularly given the strong production in Peru and the higher gold price as well as that strong production in Manitoba. So it was elevated in 2024. It will likely remain elevated in 2022, '20 '20 '5 as these prices prevail, but normalizes as Popconch has exhausted in Peru and as we've exhausted our pools in Peru as of a year ago.

[Pierre Vaillancourt, Senior Analyst at Haywood Securities]

Okay, thanks. Also if I may, wondering if you can give us a sense with Pampacancha finishing this year, what the longer term profile for Constancia in general is in the context of the mill expansion? So it's going to I mean it's down relative to what guidance was previously and it will probably go down again in 2026. How does that where do you achieve steady state in the context of a planned mill expansion until of course, Cahuillito or Reyna comes on?

[Andre T. Lauzon, COO at Hudbay Minerals]

Sure. It's Andre. It's a that's a pretty layered question. We're going to give a lot more clarity on the future years guidance coming up in March with our reserve and resource declaration. So we'll be able to give you a lot more color on that coming up.

[Andre T. Lauzon, COO at Hudbay Minerals]

But there are a sequence of production improvements that we're doing. Like right now, we're doing and it's not really baked into the guidance or budget is we're doing pebble rejection successfully right now. We're seeing some improvements in grade and throughput. We're planning to implement towards the end of this year's pebble crushers. We don't know.

[Andre T. Lauzon, COO at Hudbay Minerals]

We might see some production this year, but it's probably going to the benefits will go into 2026. And depending on the combined of those, we may expand that as well because we know we're planning only to install one pebble crusher, but we have the opportunity and the permits will be in place to put up to four. And so there is all of those baked in and then like I mentioned earlier about Mod four permit update that's going to be a significant production increase that could happen after 2028. And so, we'll signal some of that, like you say, all of that in the three year guidance coming up in March.

[Pierre Vaillancourt, Senior Analyst at Haywood Securities]

But is that going to be that double rejection? I mean, is that significant enough to matter, do you think like?

[Andre T. Lauzon, COO at Hudbay Minerals]

It does. So one of the challenges is the hardness. And so just and it's not every day when we have good throughput as we're seeing, but some days and our permit is on an annual basis and so we're seeing days up as high as 100,000 tonnes per day. And the 10% improvement that we're talking about is about a 94,000 tonnes per day over our permitted level. So we're seeing some significant improvements as we're going through this and we're in what we believe to be relatively hard ore.

[Andre T. Lauzon, COO at Hudbay Minerals]

So we're quite pleased with the work that the team is doing. They're continually making improvements in the mill and improving recovery. And so we're going to bake some of those into the guidance. And as we get further improvements, it will get better than what you see over time.

[Pierre Vaillancourt, Senior Analyst at Haywood Securities]

But is it safe to assume the grade at Constancia will be maintained or is there any

[Andre T. Lauzon, COO at Hudbay Minerals]

So the grade does improve with pebble rejection. So generally the pebbles are hard and lower grade and we do see a slight improvement in grade as that goes through as well too, but it's too early to quantify.

[Pierre Vaillancourt, Senior Analyst at Haywood Securities]

Okay. Thanks, Andre. Thanks, Eugene.

[Operator]

Thank you. And our next question comes from Stefan Iguano with Hallmark Securities. Please go ahead.

[Stefan Ioannou, Mining Analyst at Cormark Securities]

Yes. Thanks very much. Just curious if you could just maybe comment on the strategy of the recent Arizona Sonoran investment, how that kind of fits into the plan going forward in the portfolio?

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

Sure. Hi, Stefan. How are you? Thanks very much for the question. I think that we manage a portfolio of junior mining company investments and we've done that for several years and we look for investment opportunities that fit our strategic criteria.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

So, we all know that copper is scarce and we're always looking for ways to prudently increase our copper exposure. Now, Arizona Sonoran has a copper project in Arizona, which is, of course, an important region for us with our Copperworld project located in Southern Arizona. So, the strategic investment in Arizona Sonoran increases our copper exposure in what we consider to be a top mining jurisdiction. It provides them with some funding to de risk their projects and it supports further copper mining in Arizona. And we as shareholders, together with Rio Tinto, we like the team.

[Peter Kukielski, President & Chief Executive Officer at Hudbay Minerals]

We like their asset and so it's just something that we've tucked into the portfolio.

[Stefan Ioannou, Mining Analyst at Cormark Securities]

Okay, great. That's helpful. Thanks very much.

[Operator]

Thank you. I'm showing no further questions at this time. So I'd like to conclude the question and answer session and turn the conference back over to Candice Brule for any closing remarks.

[Candace Brule, VP - IR, Financial Analysis and External Communications at Hudbay Minerals]

Thank you, operator, and thank you everyone for joining us today. If you have any further questions, please feel free to reach out to our Investor Relations team. Thank you and have a great day.

[Operator]

Thank you. This concludes today's conference call. We thank you all for attending. You may now disconnect your lines and have a wonderful day.

Participants

Executives

• Candace Brule, VP - IR, Financial Analysis and External Communications
• Peter Kukielski, President & Chief Executive Officer
• Andre T. Lauzon, COO
• Eugene Lei, CFO

Analysts

• Orest Wowkodaw, Analyst at Scotiabank
• Lawson Winder, Analyst at Bank of America
• Dalton Baretto, Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets
• Anita Soni, Managing Director at CIBC Capital Markets
• Farooq Hamed, Director at Raymond James
• Pierre Vaillancourt, Senior Analyst at Haywood Securities
• Stefan Ioannou, Mining Analyst at Cormark Securities