HudBay Minerals Q3 Earnings Call Highlights

Key Points

• Hudbay reported record Q3 revenue of $766 million, adjusted EBITDA of $413 million and free cash flow of $202 million. It lowered full-year cash-cost guidance for a second time, citing operating efficiencies and gold byproduct credits.
• Hudbay and Mitsubishi approved construction of Copper World in Arizona, targeting first production in the second half of 2029. The project is expected to produce an average 102,000 tons of copper annually during its first decade, with initial growth capital estimated at $2 billion.
• Hudbay expects consolidated copper production to rise about 25% in 2027, led by British Columbia, where Copper Mountain generated positive free cash flow for the first time since its acquisition.

HudBay Minerals NYSE: HBM reported record quarterly revenue and improved its 2026 cost outlook after stronger production and gold byproduct credits helped offset higher operating expenses. The company also said it had approved construction of its Copper World project in Arizona.

Third-quarter revenue reached $766 million, while adjusted EBITDA was $413 million, Chief Executive Officer Peter Kukielski said on the Nov. 12 earnings call. Adjusted net earnings were $150 million, or $0.34 per share, and free cash flow was $202 million, up approximately $100 million from the second quarter.

The miner produced 30,000 tons of copper and 70,000 ounces of gold during the quarter. It reaffirmed its full-year production guidance for all metals, with President and Chief Financial Officer Eugene Lei saying copper and gold output were tracking toward the midpoints of their respective ranges.

Costs fall as production outlook improves

Hudbay lowered its full-year consolidated cash cost guidance for a second time this year, to negative $0.55 to negative $0.35 per pound of copper. It also improved its sustaining cash cost guidance to $1.40 to $1.80 per pound. Kukielski said operating efficiencies and gold byproduct credits had more than offset external cost pressures.

Full-year sustaining capital spending is expected to be $35 million below guidance, partly because of lower capitalized stripping in Peru and British Columbia, capital deferrals and efficiencies.

Hudbay ended September with $964 million in liquidity, including $789 million in cash, and a net cash position of $0.1 million. After the quarter, the company increased its revolving credit facilities to $700 million from $450 million and extended their maturity to November 2030. Pro forma liquidity was approximately $1.2 billion after the increase.

For 2027, Lei said Hudbay expects consolidated copper production to rise approximately 25%, while gold production is expected to remain around current levels. Kukielski said British Columbia would be the largest contributor to the copper increase, with production potentially weighted toward the second half.

Copper Mountain turnaround reaches cash flow milestone

Hudbay’s Copper Mountain operation in British Columbia generated positive free cash flow for the first time since its acquisition, Kukielski said. The mine produced 6,600 tons of copper and 7,000 ounces of gold in the third quarter.

The company expects the completion of a three-year stripping program and mill improvements to support a doubling of annual copper production in British Columbia. Chief Operating Officer Rob Carter said the mill reached approximately 43,500 tons per day in September and had exceeded 50,000 tons per day on several individual days, though sustaining that rate remained a challenge.

Carter said Hudbay expects to exit 2026 at approximately 50,000 tons per day and maintain that throughput in 2027. Higher-grade ore is expected to become more significant in the second half of next year. Lei said site capital spending could fall to around $100 million in 2027 from well over $150 million, though the company has not released formal estimates.

In Peru, the Constancia mill achieved record throughput of approximately 91,000 tons per day. Kukielski said a third rougher line had improved recoveries, while two pebble crushers were expected to be commissioned in November. Hudbay is targeting 34 million tons of annual throughput in 2027.

Manitoba produced 57,000 ounces of gold in the quarter, supported by higher mill throughput and improved gold grades. Hudbay’s updated Snow Lake mine plan projects average annual gold production of 185,000 ounces over the next five years and extends the reserve mine life to 2043.

Copper World construction approved

Hudbay and partner Mitsubishi made a final investment decision to build Copper World, with first production targeted for the second half of 2029. The project’s base case anticipates a 15-year mine life and average annual copper production of 102,000 tons over the first 10 years.

Initial growth capital is estimated at $2 billion. The funding plan includes Mitsubishi’s $600 million initial investment, a $230 million stream deposit from Wheaton and up to $650 million in planned project-level debt financing. Hudbay expects its first capital contribution in 2028, with its share totaling roughly $500 million.

The company expects Copper World-related joint venture growth spending of $245 million in 2026, an increase of $110 million associated with fourth-quarter construction and development costs. Hudbay projects the mine will help lift its consolidated annual copper production to approximately 250,000 tons.

Asked about permits, Kukielski said Hudbay has the primary permits needed to proceed through commercial production, although some local construction permits remain. He also said the company has committed to recharge 105% of the groundwater it uses at Copper World.

Exploration and capital allocation

At Constancia, Hudbay reported drilling intersections that it described as a potential high-grade feeder system. Carter said follow-up drilling is underway and that further positive results could support an increase in the mineral resource estimate next year. Defining potential reserves and incorporating them into the mine plan would take longer, he said.

Carter also addressed a judicial review application filed by the Lower Similkameen Indian Band concerning a provincial permit amendment. He said the permit remains in effect, construction continues and a hearing is anticipated in the first quarter of 2027. Hudbay expects the court to uphold the decision, he said.

On acquisitions, Kukielski said Hudbay continues to evaluate opportunities but would pursue only copper assets that meet its strategic and financial criteria and create shareholder value. Lei said the company would consider shareholder returns as excess cash flow becomes available while continuing to fund its growth projects.

About HudBay Minerals (NYSE:HBM)

Hudbay Minerals, now known as Hudbay Inc., is a mining company focused on the discovery, development and operation of copper and other metal deposits. Its products include copper, zinc, gold, silver and molybdenum. The company operates the Constancia mine in Peru and mining and processing assets in Manitoba, Canada, including the Lalor mine. In British Columbia, Hudbay operates the Copper Mountain mine. It also advances copper exploration and development projects in the United States, including projects in Arizona.

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