Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX,
NYSE:HBM) today released its second quarter 2020 financial
results. All amounts are in U.S. dollars, unless otherwise noted.
Second Quarter Results Boosted by Strong
Manitoba Operations
- Strong production and cost performance from the Manitoba
operations during the quarter; an increase in production of all
metals over the first quarter and record gold production driven by
increasing Lalor gold grades and record gold recoveries at
Stall.
- Successfully achieved efficient restart of operations at
Constancia in mid-May with increased government-supported COVID-19
health and safety protocols in place.
- Second quarter net loss was $51.9 million or $0.20 per share.
Second quarter adjusted net lossi per share was $0.15 and adjusted
EBITDAi was $49.1 million after adjusting for the impact of the
Peru temporary suspension costs and a partial reversal of the Peru
inventory write-down from last quarter.
- Operating cash flow before change in non-cash working capital
decreased to $29.5 million in the second quarter of 2020 from $42.0
million in the first quarter of 2020 due to lower revenues from the
Peru operations, offset by higher realized gold prices and higher
gold sales in Manitoba.
- Cash and cash equivalents increased during the second quarter
to $391.1 million as at June 30, 2020 as a result of the previously
announced $115.0 million gold prepay transaction and cash generated
from operations, partially offset by capital investments on the New
Britannia refurbishment project.
On Track to Achieve Manitoba Guidance;
Updated Peru Guidance
- Owing to the outstanding performance from the Manitoba
operations in the first half of 2020, and the ability to achieve
safe and continuous operations despite COVID-19 operating
challenges, Hudbay is on track to meet all Manitoba production and
cost guidance for 2020.
- COVID-19 in Peru had a significant impact on Hudbay’s business
in the second quarter and continues to be a risk the company is
actively managing. A government declared state of emergency in
mid-March required the suspension of operations at Constancia for a
period of eight weeks. The Constancia mill resumed full operation
on May 18 processing stockpiled ore, and mining activities returned
to normal levels in early July under a successful phased restart
plan.
- Updated 2020 Peru production guidance of 65,000 to 75,000
tonnes of copper and 25,000 to 35,000 ounces of precious metals
reflects the Constancia suspension period and the expected start of
mining at Pampacancha in early 2021.
Executing on Growth
Initiatives
- Fully-funded New Britannia gold mill refurbishment project
remains on schedule and within budget, with detailed engineering
approximately 90% complete and construction activities
approximately 25% complete.
- Early mining of the gold zone at Lalor is well-underway, which
is expected to result in gold production of 74,000 ounces in 2020
and 102,000 ounces in 2021. This is in preparation for the restart
of the New Britannia gold mill, which is expected to increase
annual gold production from Lalor to over 150,000 ounces by
2022.
- Successfully advanced Pampacancha with individual land-user
agreements in place covering approximately two-thirds of the land,
and land clearing activities are underway.
- Filed initial briefs with the U.S. Court of Appeals for the
Ninth Circuit in June to advance the appeal of the July 2019
Rosemont court decision, which revoked the U.S. Forest Service's
issuance of the Final Record of Decision for Rosemont.
- Restructured revolving credit facilities in the wake of
COVID-19 to right-size the facilities and further enhance financial
flexibility during the development of the New Britannia and
Pampacancha projects.
- Updated National Instrument ("NI") 43-101 resource estimate for
the 1901 deposit near Lalor includes a larger base metal resource
estimate and a new gold-rich inferred resource estimate of 500,000
tonnes grading 6.8 grams per tonne of gold.
“We continue to be extremely proud of our team’s
ability to adapt to the COVID-19 protocols to achieve a safe
working environment while remaining focused on delivering strong
operational performance,” said Peter Kukielski, President and Chief
Executive Officer. “Our Manitoba operations continue to impress
with record gold production this quarter and a significant increase
in revenues over the first quarter. Our Constancia operations in
Peru achieved a quick and efficient ramp up in mid-May after having
been temporarily suspended due to COVID-19. Now that Constancia is
fully operational, we have reissued production and cost guidance
for Peru and are continuing to advance Pampacancha, with land
clearing activities underway. The New Britannia gold mill
refurbishment activities continue on budget and on schedule to
increase Lalor’s annual gold production to over 150,000 ounces by
2022. We are also pleased to announce an update to the resource
estimates for the 1901 deposit which increases the total size of
the deposit and demonstrates the gold potential in the Snow Lake
camp through significantly increasing the gold content of the base
metal zones while adding a new gold-rich zone to the resource
estimate.”
“We were pleased to further enhance our
quarterly financial disclosure through the introduction of adjusted
earnings and adjusted EBITDA metrics this quarter,” said Steve
Douglas, Senior Vice President and Chief Financial Officer. “The
strong performance from the Manitoba business this quarter helped
offset the reduced contribution from the Peru operations resulting
in second quarter adjusted earnings unchanged from first quarter
levels, while adjusted EBITDA was only slightly below first quarter
levels. Our liquidity remains more than sufficient to pursue our
low-risk high-return capital projects, with almost $400 million of
cash at the end of the quarter, renewed credit facilities of $400
million and no meaningful debt maturities for two years, coinciding
with delivery of our fully-funded growth projects in 2021, which
are expected to generate significant free cash flow.”
Summary of Second Quarter
Results
Consolidated copper production in the second
quarter of 2020 was 18,026 tonnes, a 27% decrease from the first
quarter of 2020 primarily as a result of the temporary suspension
of operations at Constancia until mid-May. Consolidated gold
production increased by 7% compared to the first quarter of 2020
due to higher production from Manitoba as a result of higher gold
grades and record quarterly gold recoveries at the Stall mill.
Consolidated zinc production in the second quarter of 2020 was in
line with the first quarter of 2020.
In the second quarter of 2020, consolidated cash
cost per pound of copper produced, net of by-product credits, was
$0.64, a 47% improvement over the first quarter of 2020. Given the
significant reduction in Constancia production in the second
quarter, this measure is more heavily impacted by Manitoba
production which contains meaningful zinc and gold by-product
revenue components, and is not indicative of future consolidated
cash costs. Incorporating sustaining capital, capitalized
exploration, royalties, selling, administrative and regional costs,
consolidated all-in sustaining cash cost per pound of copper
produced, net of by-product creditsi, in the second quarter of 2020
was $2.26, which improved from $2.40 in the first quarter of 2020,
driven mainly by same factors noted above, and reduced sustaining
capital expenditures due to reduced activity from the temporary
suspension of operations at Constancia.
Cash generated from operating activities in the
second quarter of 2020 increased to $31.4 million compared to $9.1
million in the first quarter of 2020. Operating cash flow before
change in non-cash working capital was $29.5 million during the
second quarter of 2020, reflecting a decrease of $12.5 million
compared to the first quarter of 2020. The decrease in operating
cash flow is primarily the result of lower Constancia production
and sales due to the temporary suspension of mine operations. This
decrease was partially offset by higher gold production and sales
in Manitoba as well as higher realized gold prices.
Net loss and loss per share in the second
quarter of 2020 were $51.9 million and $0.20, respectively,
compared to a net loss and loss per share of $76.1 million and
$0.29, respectively, in the first quarter of 2020. The increase in
earnings quarter-over-quarter was primarily due to higher sales
volumes in Manitoba offset by the temporary suspension of
Constancia mine operations. In addition, the temporary suspension
at Constancia resulted in fixed overhead production costs of $25.6
million during the second quarter, and $31.9 million year-to-date,
that would normally be capitalized to inventories and property,
plant, and equipment, to be immediately expensed as part of cost of
sales. This was partially offset by a $8.2 million reversal of a
Peru inventory write-down due to rising copper prices in the second
quarter.
After adjusting for the temporary suspension
costs in Peru and the reversal of the Peru inventory write-down,
among other items, adjusted net lossi and adjusted EBITDAi in the
second quarter of 2020 were $39.7 million, or $0.15 per share, and
$49.1 million, respectively. This compares to an adjusted net loss
and adjusted EBITDA in the first quarter of 2020 of $39.4 million,
or $0.15 per share, and $55.0 million, respectively. The higher
sales volumes in Manitoba offset the temporary suspension of
Constancia resulting in minimal change in the quarter-over-quarter
adjusted earnings and a slight decrease in adjusted EBITDA.
On a budgeted sales volume basis, if operations
at Constancia were maintained during the eight-weeks in which
production was suspended, this would have resulted in approximately
$108.0 million of incremental revenue and generated approximately
$42.4 million of incremental year-to-date pre-tax earnings,
assuming closing second quarter commodity prices. These amounts
would have improved the company’s current year-to-date reported
revenue of $454.0 million and pre-tax loss of $156.1 million.
Financial Condition ($000s) |
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Cash and cash equivalents |
391,136 |
305,997 |
396,146 |
Total long-term debt |
988,418 |
988,074 |
985,255 |
Net debt1 |
597,282 |
682,077 |
589,109 |
Working capital |
260,672 |
193,045 |
271,284 |
Total assets |
4,498,892 |
4,366,226 |
4,461,057 |
Equity |
1,706,303 |
1,778,277 |
1,848,123 |
1 Net debt is a non-IFRS financial performance measure with no
standardized definition under IFRS. For further information, please
see the “Non-IFRS Financial Reporting Measures” section of this
news release.
Consolidated Financial Performance |
|
Three Months Ended |
|
|
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2019 |
Revenue |
$000s |
208,913 |
245,105 |
329,414 |
Cost of sales |
$000s |
221,567 |
267,096 |
286,271 |
Earnings (loss) before tax |
$000s |
(74,604) |
(81,452) |
(43,931) |
Earnings (loss) |
$000s |
(51,901) |
(76,134) |
(54,145) |
Basic and diluted earnings (loss) per share |
$/share |
(0.20) |
(0.29) |
(0.21) |
Adjusted earnings (loss) per share1 |
$/share |
(0.15) |
(0.15) |
(0.03) |
Operating cash flow before change in non-cash working capital |
$ millions |
29.5 |
42.0 |
81.3 |
Adjusted EBITDA1 |
$ millions |
49.1 |
55.0 |
95.9 |
1 Adjusted loss per
share and adjusted EBITDA are non-IFRS financial performance
measures with no standardized definition under IFRS. For further
information, please see the “Non-IFRS Financial Reporting Measures”
section of this news release. |
Consolidated Operational Performance |
|
Three Months Ended |
|
|
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2019 |
Contained metal in concentrate produced1 |
|
|
|
|
Copper |
tonnes |
18,026 |
24,635 |
30,363 |
Gold |
ounces |
32,614 |
30,355 |
28,099 |
Silver |
ounces |
580,817 |
767,692 |
811,807 |
Zinc |
tonnes |
31,222 |
30,495 |
31,838 |
Molybdenum |
tonnes |
124 |
354 |
334 |
Precious metals2 |
ounces |
39,140 |
38,981 |
39,696 |
Payable metal in concentrate sold |
|
|
|
|
Copper |
tonnes |
15,951 |
24,072 |
33,171 |
Gold |
ounces |
30,590 |
26,574 |
30,538 |
Silver |
ounces |
541,785 |
575,922 |
804,301 |
Zinc3 |
tonnes |
27,604 |
26,792 |
24,224 |
Molybdenum |
tonnes |
120 |
431 |
419 |
Precious metals2 |
ounces |
36,677 |
33,045 |
42,028 |
Cash cost4 |
$/lb |
0.64 |
1.21 |
1.27 |
All-in sustaining cash cost4 |
$/lb |
2.26 |
2.40 |
2.30 |
1 Metal reported in concentrate is prior to deductions
associated with smelter contract terms.2 Precious metals production
includes gold and silver production on a gold-equivalent basis. For
2019, silver is converted to gold at a ratio of 70:1. For 2020,
silver is converted to gold at a ratio of 89:1.3 Includes refined
zinc metal sold.4 Cash cost and all-in sustaining cash cost per
pound of copper produced, net of by-product credits, are non-IFRS
financial performance measures with no standardized definition
under IFRS. For further information, please see the “Non-IFRS
Financial Reporting Measures” section of this news release.
Peru Operations Review
|
Three Months Ended |
|
|
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2019 |
Ore mined1 |
tonnes |
2,775,286 |
6,985,212 |
8,211,166 |
Copper |
% |
0.34 |
0.34 |
0.39 |
Gold |
g/tonne |
0.04 |
0.03 |
0.04 |
Silver |
g/tonne |
2.90 |
3.10 |
3.68 |
Molybdenum |
% |
0.02 |
0.02 |
0.01 |
Ore milled |
tonnes |
4,355,482 |
6,719,466 |
7,679,739 |
Copper |
% |
0.34 |
0.34 |
0.37 |
Gold |
g/tonne |
0.04 |
0.03 |
0.04 |
Silver |
g/tonne |
3.04 |
3.13 |
3.40 |
Molybdenum |
% |
0.01 |
0.02 |
0.02 |
Copper recovery |
% |
76.6 |
84.3 |
84.7 |
Gold recovery |
% |
43.4 |
50.2 |
41.3 |
Silver recovery |
% |
59.6 |
68.2 |
65.7 |
Molybdenum recovery |
% |
19.9 |
35.0 |
28.9 |
Contained metal in concentrate |
|
|
|
Copper |
tonnes |
11,504 |
19,290 |
24,232 |
Gold |
ounces |
2,311 |
3,062 |
3,794 |
Silver |
ounces |
253,687 |
461,302 |
551,807 |
Molybdenum |
tonnes |
124 |
354 |
334 |
Precious metals2 |
ounces |
5,161 |
8,245 |
11,677 |
Payable
metal sold |
|
|
|
Copper |
tonnes |
9,023 |
19,247 |
25,778 |
Gold |
ounces |
1,317 |
2,618 |
4,056 |
Silver |
ounces |
242,519 |
361,591 |
504,259 |
Molybdenum |
tonnes |
120 |
431 |
419 |
Combined unit operating cost3,4 |
$/tonne |
7.77 |
9.31 |
10.39 |
Cash cost4 |
$/lb |
1.56 |
1.63 |
1.63 |
Sustaining cash cost4 |
$/lb |
2.09 |
2.12 |
2.11 |
1 Reported tonnes and grade for ore mined are estimates based on
mine plan assumptions and may not reconcile fully to ore milled.2
Precious metals production includes gold and silver production on a
gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of
89:1.3 Reflects combined mine, mill and general and administrative
(“G&A”) costs per tonne of ore milled. Reflects the deduction
of expected capitalized stripping costs.4 Combined unit cost, cash
cost and sustaining cash cost are non-IFRS financial performance
measures with no standardized definition under IFRS. For further
information, please see the “Non-IFRS Financial Reporting Measures”
section of this news release.
Following the government mandated mid-March
suspension of operations at Constancia, the mine remained closed
for approximately eight weeks and resumed operations in mid-May,
achieving normal mill throughput levels on May 18, within 48 hours
after restart, and continued at these levels for the remainder of
the second quarter. The initial six weeks following restart focused
on milling activities while processing stockpile ore. This was
followed by a ramp-up of mining activities commencing the last week
of June with a full ramp-up to normal levels in early July.
Enhanced health and safety measures were implemented upon the
re-start of operations and remain in place as Hudbay continues to
monitor the local impacts of the COVID-19 pandemic.
Peru’s updated 2020 production guidance has been
revised to reflect the lost production during the eight-week
temporary suspension at Constancia, in addition to revised mine
plans for the remainder of the year and the resulting deferral of
some higher-grade ore into 2021. The updated guidance assumes
Hudbay will be able to continue to safely operate for the remainder
of the year while adhering to the company’s existing health
protocols and those required by the Peruvian government. For
further information, please see the “Annual Guidance Update”
section of this news release.
During the quarter, the Constancia mine produced
11,504 tonnes of copper, 5,161 ounces of precious metals and 124
tonnes of molybdenum. Production results were lower than the first
quarter of 2020 as a result of the temporary suspension of
operations until mid-May and the processing of stockpile ore
following the restart of operations.
Ore milled at the Constancia mine during the
second quarter of 2020 was 35% lower compared to the first quarter
of 2020 primarily due to the temporary suspension of Constancia.
However, over the period when the mill was fully operational during
the quarter, average daily throughput was above 95,000 tonnes per
day. Milled copper grades in the second quarter were flat compared
to the first quarter of 2020, but the characteristics of the
stockpile ore that was processed negatively impacted copper
recoveries.
Combined mine, mill and G&A unit operating
costsi in the second quarter of 2020 were 17% lower than the first
quarter of 2020, primarily due to lower operating costs as a result
of constrained activity during the temporary suspension, and
significantly reduced mining costs during the quarter. The company
also deferred a second quarter planned plant maintenance shutdown
from May to the third quarter, as a result of proactive plant
maintenance completed during the eight-week temporary
suspension.
Peru’s cash cost per pound of copper produced,
net of by-product credits, for the three months ended June 30, 2020
was $1.56, lower than the previous quarter due to lower operating
costs more than offsetting lower copper production. Peru’s
sustaining cash costs per pound of copper produced, net of
by-product credits, for the three months ended June 30, 2020 also
decreased compared to the first quarter primarily as a result of
the lower operating costs.
Manitoba Operations Review
|
Three Months Ended |
|
|
Jun. 30, 2020 |
Mar. 31,
2020 |
Jun. 30, 2019 |
Lalor ore mined |
tonnes |
407,408 |
421,518 |
411,701 |
Copper |
% |
0.77 |
0.70 |
0.73 |
Zinc |
% |
6.05 |
5.43 |
6.34 |
Gold |
g/tonne |
2.64 |
2.27 |
2.12 |
Silver |
g/tonne |
28.40 |
26.18 |
22.32 |
777 ore mined |
tonnes |
281,890 |
279,925 |
288,599 |
Copper |
% |
1.72 |
1.18 |
1.34 |
Zinc |
% |
4.13 |
4.11 |
3.37 |
Gold |
g/tonne |
1.91 |
1.82 |
1.60 |
Silver |
g/tonne |
25.73 |
23.86 |
18.92 |
Stall Concentrator: |
|
|
|
Ore milled |
tonnes |
334,601 |
369,787 |
339,616 |
Copper |
% |
0.76 |
0.70 |
0.71 |
Zinc |
% |
6.16 |
5.38 |
6.36 |
Gold |
g/tonne |
2.70 |
2.28 |
2.08 |
Silver |
g/tonne |
28.72 |
26.28 |
22.03 |
Copper recovery |
% |
86.6 |
86.5 |
85.6 |
Zinc recovery |
% |
92.4 |
91.4 |
91.2 |
Gold recovery |
% |
62.3 |
60.9 |
52.5 |
Silver recovery |
% |
62.1 |
61.1 |
56.5 |
Flin Flon Concentrator: |
|
|
|
Ore milled |
tonnes |
324,906 |
332,589 |
367,017 |
Copper |
% |
1.52 |
1.11 |
1.26 |
Zinc |
% |
4.41 |
4.36 |
3.84 |
Gold |
g/tonne |
1.99 |
1.88 |
1.71 |
Silver |
g/tonne |
25.56 |
24.33 |
19.82 |
Copper recovery |
% |
87.3 |
84.1 |
88.0 |
Zinc recovery |
% |
84.9 |
85.0 |
86.0 |
Gold recovery |
% |
58.6 |
53.5 |
61.3 |
Silver recovery |
% |
50.7 |
44.3 |
53.0 |
Total contained metal in concentrate |
|
Copper |
tonnes |
6,522 |
5,345 |
6,131 |
Zinc |
tonnes |
31,222 |
30,495 |
31,838 |
Gold |
ounces |
30,303 |
27,293 |
24,305 |
Silver |
ounces |
327,130 |
306,390 |
260,000 |
Precious metals1 |
ounces |
33,979 |
30,736 |
28,019 |
Total
payable metal sold |
|
|
|
Copper |
tonnes |
6,928 |
4,852 |
7,393 |
Zinc2 |
tonnes |
27,604 |
26,792 |
24,224 |
Gold |
ounces |
29,273 |
23,956 |
26,482 |
Silver |
ounces |
299,266 |
214,331 |
300,042 |
Combined unit operating cost3,4 |
C$/tonne |
135 |
127 |
135 |
Cash cost4 |
$/lb |
(1.00) |
(0.30) |
(0.15) |
Sustaining cash cost4 |
$/lb |
1.67 |
2.85 |
2.19 |
1 Precious metals production includes gold and silver production
on a gold-equivalent basis. For 2019, silver is converted to gold
at a ratio of 70:1. For 2020, silver is converted to gold at a
ratio of 89:1.2 Includes refined zinc metal sold and payable zinc
in concentrate sold.3 Reflects combined mine, mill and G&A
costs per tonne of ore milled. 4 Combined unit cost, cash cost and
sustaining cash cost are non-IFRS financial performance measures
with no standardized definition under IFRS. For further
information, please see the “Non-IFRS Financial Reporting Measures”
section of this news release.
The Manitoba business unit had solid operating
performance across the mines, mills and zinc plant during the
second quarter. In response to the COVID-19 pandemic, Hudbay has
worked collaboratively with its health and safety committees and
the local health units with a focus on keeping employees and
communities safe by implementing a number of layered workplace
controls. As a result, the second quarter Manitoba operating
results were largely unaffected by the COVID-19 pandemic and are on
track to achieve annual production and cost guidance.
The Manitoba operations achieved higher
quarterly production levels in the second quarter of 2020 compared
to the first quarter. Production during the quarter included 31,222
tonnes of zinc, 6,522 tonnes of copper and 33,979 ounces of
precious metals. The enhanced precious metal production from Lalor,
driven by improved gold and silver grades is a result of
prioritizing resources within the higher value portions of the base
metal lenses. Development in the gold rich lenses 25 and 27
advanced ahead of schedule, and production from these areas is
expected ahead of the New Britannia mill restart as Lalor
transitions to a gold mine. Higher 777 ore grades during the second
quarter of 2020 were expected and consistent with the mine plan
which included the mining of higher-grade copper stopes during the
quarter. As a result, grades of all metals increased over first
quarter levels.
At the Stall concentrator, ore processed during
the second quarter of 2020 was lower than the first quarter as a
result of a planned two-week outage on one of the grinding lines
for capital upgrades. Gold and silver recoveries continued to
increase at Stall during the quarter due to a combination of
improved ore characteristics and ongoing operational improvement
projects implemented at the Stall mill. These sustained
improvements can be seen through the year-over-year increase in
gold recovery at Stall from 52.5% to 62.3%. Ore processed in the
Flin Flon concentrator in the second quarter slightly decreased by
2% compared to the first quarter. Copper and precious metal
recoveries at the Flin Flon concentrator during the second quarter
of 2020 increased compared with the first quarter as a result of
higher grades.
Combined mine, mill and G&A unit operating
costs were slightly higher than the first quarter of 2020 but in
line with expected guidance ranges.
Manitoba’s cash cost per pound of copper
produced, net of by-product credits, for the second quarter of 2020
was negative $1.00. These costs were significantly lower compared
to the first quarter of 2020 primarily as a result of lower zinc
refining and lower G&A costs, and a 22% increase in copper
production quarter-over-quarter. Manitoba’s sustaining cash cost
per pound of copper produced, net of by-product credits, in the
second quarter of 2020 was $1.67, significantly lower than $2.85 in
the previous quarter, due to the same factors affecting cash
costs.
COVID-19 Business Update
Amidst the COVID-19 pandemic, Hudbay’s business
response plan continued to be executed throughout the quarter,
building off the company’s crisis response protocols to establish
business practices to carry it through this ongoing public health
situation. Hudbay remains focused on the health and safety of the
workforce, their families and the communities in which the company
operates. Addressing pandemic issues is a collective effort and the
company continues to actively engage with industry associations to
understand developing practices and with local stakeholders and
public health authorities to ensure effective implementation of its
business response plans. Hudbay closely monitors the evolution of
the pandemic in each of the regions in which it operates and is
continuously reviewing and adapting procedures based on the latest
local situation.
Each of Hudbay’s business units has developed
effective site-specific measures to identify and limit COVID-19
exposure and transmission and maintain a safe environment for
workers and surrounding communities. Site-specific measures include
testing of incoming workers prior to their travel to site,
pre-screening protocols, quarantine periods for incoming workers,
workplace physical distancing protocols, and adjustment of work
rotation schedules. These measures continue to evolve as the status
of the pandemic changes in each of the company’s operating regions
and the company’s measures are adapted to the regional health
authorities’ latest restrictions and guidelines.
Hudbay believes the most important way the
company can support the communities in which it operates is to
manage safe operations that provide income for local employees,
businesses, and communities. In addition to efforts to maintain
safe operations, the company has been supporting public health
efforts and providing COVID-19 relief funding, supplies and
services to its neighbouring communities. Each region has different
emergency needs at this critical time. In Peru, the company has
donated medical equipment and supplies to the regional hospitals
and has delivered food to nearby communities in need. In Manitoba,
Hudbay has donated to charities that provide various forms of
support to families in need.
Annual Guidance Update
On May 14, 2020, Hudbay suspended its previously
issued 2020 annual guidance for its Peru operations due to the
temporary suspension of operations at Constancia and the ongoing
uncertainty surrounding the COVID-19 pandemic. Following a full
resumption of Constancia milling activities in mid-May and mining
activities in early July, the company has reissued updated 2020
annual guidance for its Peru business unit.
The situation in Peru, however, remains fluid.
The state of emergency, first declared by the government in
response to the COVID-19 pandemic on March 15, has since been
extended to August 31, 2020 and there remains a risk of further
disruptions to mining operations. The company is actively
monitoring the situation and any potential future impact on
Constancia’s operations.
The updated annual production and operating cost
guidance, along with the annual capital and exploration expenditure
forecasts are presented below. These forecasts incorporate the
impact of regularly scheduled maintenance at our operations,
including semi-annual mill maintenance at Constancia and planned
maintenance on the Lalor hoist facilities during the third quarter.
The updated Peru guidance assumes the company is able to continue
to safely operate for the remainder of the year while adhering to
the company’s existing health protocols and those required by the
Peruvian government. Hudbay’s Manitoba guidance remains unchanged
from previously disclosed expectations.
Revised 2020 Guidance Summary |
Peru |
Manitoba |
Total |
|
|
|
|
Contained Metal in Concentrate1 |
|
|
|
Copper |
tonnes |
65,000 – 75,000 |
18,000 – 22,000 |
83,000 – 97,000 |
Zinc |
tonnes |
|
105,000 –
125,000 |
105,000 – 125,000 |
Precious metals2 |
oz |
25,000 –
35,000 |
110,000 –
135,000 |
135,000 – 170,000 |
Molybdenum |
tonnes |
1,100 –
1,300 |
|
1,100 – 1,300 |
|
|
|
|
Combined Unit Operating Cost3 |
$/tonne |
$8.30 - $10.00 |
C$130 – 140 |
|
|
|
|
|
|
Capital Expenditures4 |
|
|
|
|
Sustaining capital |
millions |
80.0 |
100.0 |
180.0 |
Growth capital |
millions |
70.05 |
80.0 |
170.06 |
|
|
|
|
|
Exploration Expenditures |
millions |
15.0 |
10.0 |
25.07 |
|
|
|
|
|
1 Metal reported in concentrate is prior to
refining losses or deductions associated with smelter terms. 2
Precious metals production includes gold and silver production on a
gold-equivalent basis, and silver is converted to gold at a ratio
of 89:1.3 Reflects combined mine, mill and G&A costs per tonne
of milled ore. Peru costs reflect the deduction of expected
capitalized stripping costs. Combined unit costs are non-IFRS
financial performance measures with no standardized definition
under IFRS. For further information, please see the discussion
under the "Non-IFRS Financial Reporting Measures" section of this
news release.4 Excludes capital costs not considered to be
sustaining or growth capital expenditures.5 Peru growth capital
expenditures include costs associated with project development and
acquiring the surface rights. Additional costs remain outstanding
in recognition of current uses of land and the company is currently
entering into agreements to address these matters.6 Includes $20.0
million of capitalized Arizona spending associated with the
Rosemont and Mason projects.7 Includes $15.0 million of capitalized
exploration resulting in total exploration expense of $10.0
million. |
The revised production guidance for Peru
reflects a reduction of approximately 15,000 to 20,000 tonnes of
copper and 20,000 ounces of precious metals compared to the
original guidance issued earlier this year, with molybdenum
production only modestly affected. This reduction reflects the lost
production during the eight-week temporary suspension at
Constancia, in addition to revised mine plans for the remainder of
the year and the resulting deferral of some higher-grade ore into
2021. The precious metals production guidance also reflects the
revised expected Pampacancha production start date of early 2021,
compared to the second half of 2020 previously, due to the Peruvian
government declared state of emergency and the resulting impact on
the Consulta Previa consultation process.
Peru sustaining capital of $80.0 million
reflects the deferral of approximately $20.0 million into 2021 due
to the resequencing of capital activities, such as tailings and
capitalized stripping, as a result of the temporary mine
suspension. The revised unit cost guidance in Peru reflects lower
mining costs during the gradual ramp-up of mining activities in the
second quarter of 2020. There was no change to exploration
expenditure guidance.
Peru growth capital of $70.0 million is
unchanged from previous guidance and includes initial expenditures
for developing the Pampacancha deposit and acquiring surface rights
from the local community, but excludes the costs associated with
recognizing the current uses of the land by certain community
members. Hudbay has made significant progress with completing
individual land-user agreements, with agreements covering
approximately two-thirds of the property completed to-date and the
remaining agreements expected to be completed during the third
quarter of 2020. As of June 30, 2020, approximately one-third of
the land has been vacated and turned over to Hudbay. The company
intends to update its Peru growth capital guidance for these
remaining costs once all of the individual land-user agreements are
completed.
Credit Facility Amendment
In the second quarter of 2020, in the wake of
the COVID-19 pandemic, the company entered into discussions with
the syndicate of banks in its revolving credit facilities (the
“Credit Facilities”) to restructure the facilities in order to
provide enhanced flexibility during the development of the New
Britannia and Pampacancha projects. Each of the banks in the
syndicate has received credit approval to amend the Credit
Facilities on the proposed terms and the transaction is expected to
close by the end of August.
As a result of the amendment, total available
borrowings under the Credit Facilities will be $400.0 million to
reflect Hudbay’s anticipated business requirements until June 2022
when the Credit Facilities mature. The revised covenants include
maintaining a net debt to EBITDA ratio of less than 5.25:1 and an
interest coverage ratio of greater than 2.50:1 until the end of
2021.
Snow Lake Development and Exploration
Update
New Britannia Refurbishment Activities
Underway
The New Britannia refurbishment project remains
on schedule and on budget. In May, Hudbay broke ground at the New
Britannia site with the start of construction of the foundation for
the new copper flotation building. Construction of the pipeline
between the New Britannia and Stall mills continues as planned.
Detailed engineering is approximately 90% complete and construction
activities are approximately 25% complete to-date. Refurbishment
activities are on track for completion in August 2021, with plant
commissioning and ramp-up expected during the second half of 2021.
Through the company’s expertise in project development and the
advancement of the detailed engineering work, Hudbay has identified
the potential to produce gold from the New Britannia mill earlier
than expected in 2021. The company is exploring this early gold
opportunity and expects to provide an update in the third quarter
of 2020.
The company continues with its plan to mine
approximately 90,000 tonnes from the gold zone in 2020 as part of
stope sequencing in preparation for the restart of the New
Britannia gold mill. Gold production from Lalor is expected to be
74,000 ounces in 2020 and 102,000 ounces in 2021, as per the March
30, 2020 mine plan. Upon completion of the New Britannia mill
refurbishment, average annual gold production from Lalor is
expected to increase to over 150,000 ounces at cash costs and
sustaining cash costs, net of by-product credits, of approximately
$480 and $655 per ounce, respectively, during the first eight
years.
1901 Deposit Updated Resource
Estimate
Since its discovery in February 2019, drilling
has continued to define the extent and geometry of the 1901
deposit. After announcing an initial inferred resource estimate for
the two zinc-rich lenses in August 2019, the focus of the infill
drill program conducted during the winter of 2020 was two-fold: to
upgrade the classification of a significant portion of the inferred
resources reported in August 2019, and to define an initial
inferred resource estimate for the gold mineralization that had
been intersected around the two zinc-rich lenses.
The 1901 deposit is located half-way between the
former Chisel North mine and the Lalor mine, less than 1,000 metres
from an active underground ramp at a depth ranging from 550 to 650
metres and within 15 kilometres trucking distance of both the Stall
base metal concentrator and the New Britannia gold mill (please see
Figure 1 at the end of this news release, which outlines the
underground location of the 1901 deposit). The property is 100%
owned by Hudbay, free of any royalties or streams. The
mineralization is similar to Lalor with zinc-rich volcanogenic
massive sulphide lenses containing high-grade gold zones and
indication of a copper-gold rich feeder zone. The mineralization
occurs along the hanging wall contact of the stratigraphic horizon
hosting the Chisel North deposit.
The updated resource estimates for the 1901
deposit, as of July 20, 2020, are provided in the table below:
1901 Deposit Mineral Resource
Estimates1,2,3,4,5 |
|
Tonnes (millions) |
Zn Grade (%) |
Au Grade (g/t) |
Ag Grade (g/t) |
Cu Grade (%) |
Base Metal Zone |
|
|
Measured |
|
1.0 |
6.79 |
2.2 |
29.9 |
0.43 |
Indicated |
|
1.1 |
10.07 |
1.5 |
32.9 |
0.30 |
Total Measured and Indicated |
|
2.1 |
8.52 |
1.8 |
31.5 |
0.36 |
Inferred |
|
0.4 |
7.11 |
1.8 |
24.4 |
0.79 |
Gold Zone |
|
|
Inferred |
|
0.5 |
0.53 |
6.8 |
36.0 |
0.78 |
1 CIM definitions were followed for the
estimation of mineral resources. Mineral resources that are not
mineral reserves do not have demonstrated economic viability.2
Mineral resources are reported within an economic envelope defined
by a mineral stope optimization algorithm assuming a selective
mining method.3 Long-term metal prices of $1,500/oz gold, $18.00/oz
silver, $3.00/lb copper and $1.09/lb zinc were used for the
estimation of the mineral resources.4 Metal recovery estimates are
based on the assumption that the base metal mineralization would be
processed at Hudbay’s Stall concentrator and would present a
similar performance to those experienced historically for the
Chisel and Lalor zinc-rich lenses. The gold mineralization is
assumed to be processed at the New Britannia concentrator, which is
currently being refurbished.5 Specific gravity measurements using
industry standard techniques were completed on all assayed
intervals.
High resource conversion - The upgraded base
metal measured and indicated resource estimates at the 1901 deposit
are equivalent to 100% of the initial tonnage of the 2019 base
metal inferred resources reported in Hudbay’s most recent Annual
Information Form, with a 12% lower zinc grade and more than double
the gold grade. While the 2020 infill drilling only covered
approximately two-thirds of the footprint of the 2019 mineral
resource estimates as shown in Figure 2, it has evidenced a larger
zinc-rich resource with significant gold, silver and copper
content. There remains an additional 400 thousand tonnes of base
metal inferred resource estimates with attractive zinc, copper and
gold content which has the potential to be upgraded to higher
categories with further drilling.
Significant gold content - The 2020 drilling
program was also successful in defining a new gold-rich inferred
resource estimate of 500 thousand tonnes at a gold grade of 6.8
grams per tonne. Total gold resources have significantly increased
with 122 thousand ounces in measured and indicated and 137 thousand
ounces in inferred, compared to a total of 58 thousand inferred
ounces previously, which continues to demonstrate the gold
potential of the Snow Lake camp.
Conservative resource estimation method - The
methodology followed to estimate mineral resources at the 1901
deposit is identical to the approach used for the Lalor mine
(please refer to the NI 43-101 Technical Report for Lalor dated
March 28, 2019 for more details) and constrains the resource within
a stope optimization envelope (please refer to Figure 3 for a 3D
view of the mineral resource envelope with economic potential) that
is expected to lead to a high mineral resource to mineral reserve
conversion factor.
1901 Deposit Exploration
Potential
There remains further opportunity to convert
additional inferred material to the measured and indicated
categories and to extend the resource in the northern and eastern
parts of the deposit (please refer to Figure 4). Hudbay expects to
complete a drill program in early 2021 with a focus on expanding
and upgrading the 1901 resource estimate. The company has also
identified additional favourable exploration drill targets located
between the 1901 deposit and the Lalor mine that remain to be
tested.
In addition, recent drilling has identified
several high-grade copper-gold zones that have not been included in
the current resource estimate due to limited drilling density.
Highlights of these copper-gold intersections are summarized in the
table below and outlined in Figure 5:
Hole ID |
From |
To |
Intercept |
True Width1 |
Au |
Ag |
Cu |
Zn |
(m) |
(m) |
(m) |
(m) |
(g/t) |
(g/t) |
(%) |
(%) |
CH1925 |
623.4 |
626.3 |
2.9 |
2.8 |
6.5 |
29.1 |
4.64 |
1.39 |
CH1955 |
655.0 |
658.0 |
3.0 |
2.9 |
2.4 |
10.4 |
2.37 |
0.02 |
CH1956 |
674.0 |
677.0 |
3.0 |
2.9 |
4.0 |
41.5 |
2.17 |
0.76 |
CH1979 |
679.7 |
685.8 |
6.0 |
5.8 |
4.1 |
22.3 |
3.18 |
0.16 |
CH1989 |
696.0 |
699.0 |
3.0 |
2.8 |
7.5 |
24.9 |
3.53 |
1.10 |
CH11012 |
736.0 |
742.2 |
6.2 |
- |
0.9 |
19.9 |
4.80 |
0.18 |
CH12012 |
657.0 |
661.0 |
4.0 |
- |
1.5 |
7.6 |
1.22 |
0.04 |
CH12032 |
693.5 |
695.0 |
1.5 |
- |
6.1 |
21.8 |
5.08 |
0.06 |
Note: all grade values are uncut, and assay
results are density and length weighted.1 True width is estimated
based on drill angle and intercept geometry of mineralization.2
Historical drill holes. True widths cannot be estimated at this
stage given the uncertainties of the mineralization geometry.
Hole ID |
From (m) |
To (m) |
Azimuth at Intercept |
Dip at Intercept |
Easting |
Northing |
Elevation |
Easting |
Northing |
Elevation |
CH1925 |
427,188 |
6,078,908 |
-294 |
427,188 |
6,078,907 |
-297 |
229 |
-75 |
CH1955 |
427,128 |
6,078,932 |
-322 |
427,127 |
6,078,931 |
-325 |
216 |
-74 |
CH1956 |
427,095 |
6,078,798 |
-339 |
427,095 |
6,078,797 |
-342 |
217 |
-73 |
CH1979 |
427,118 |
6,078,926 |
-346 |
427,116 |
6,078,925 |
-352 |
247 |
-73 |
CH1989 |
427,087 |
6,078,875 |
-349 |
427,086 |
6,078,874 |
-351 |
238 |
-69 |
CH1101 |
427,471 |
6,078,922 |
-399 |
427,471 |
6,078,921 |
-402 |
162 |
-72 |
CH1201 |
427,266 |
6,078,917 |
-312 |
427,265 |
6,078,916 |
-316 |
215 |
-72 |
CH1203 |
427,201 |
6,079,084 |
-365 |
427,200 |
6,079,084 |
-367 |
251 |
-73 |
Snow Lake Expansion
Potential
The updated resource estimate for the 1901
deposit was planned as part of phase three of Hudbay’s Snow Lake
gold strategy. There remain opportunities for extension and
additional conversion of mineral resource estimates at the 1901
deposit and the company is engaged in engineering activities to
develop a viable mine plan for the 1901 deposit that could
supplement production from Lalor to take advantage of the future
processing capacity of Hudbay’s mills in the Snow Lake region.
Hudbay is also examining the potential to
optimize both the Stall and New Britannia mills, which could create
further value for the 1901 deposit and the Snow Lake operations. At
the Stall mill, the company is initiating studies to increase gold
and copper recoveries. The company will also be completing studies
as to the potential to expand the New Britannia mill capacity
beyond the currently planned 1,500 tonnes per day. Hudbay expects
to complete these studies in the first half of 2021 as the company
executes the third phase of its Snow Lake gold strategy.
Constancia Regional
Exploration
Hudbay’s consistent approach to community
negotiations has proved successful, demonstrating its strong
relationships with the neighbouring communities near Constancia and
positioning the company well to unlock future value on its other
regional growth targets in Peru. After reaching an exploration
agreement with the Quehuincha community in early 2019 and
subsequently completing the Consulta Previa process, the company is
on track to commence its planned drill program in the fall of 2020
to test a high-grade skarn target on the Quehuincha North
property.
The company is also continuing the follow-up
drilling program on the previously disclosed Constancia North
intersections to test a possible extension of copper porphyry and
high-grade skarn mineralization occurring within 300 metres of the
edge of the current Constancia pit. The company expects to have the
results from this drilling program in the third quarter of
2020.
Appointment of Chief Financial
Officer
On June 11, 2020, Steve Douglas was appointed as
Hudbay's Senior Vice President and Chief Financial Officer
effective June 30, 2020. Mr. Douglas is highly regarded and brings
over 25 years of resource industry and senior finance leadership
experience to Hudbay’s executive team.
Appeal of Unprecedented Rosemont Court
Decision
On June 22, 2020, Hudbay announced the filing of
its initial brief with the U.S. Court of Appeals for the Ninth
Circuit in relation to the U.S. District Court for the District of
Arizona’s (“District Court”) decision in July 2019, which revoked
the U.S. Forest Service’s (“Forest Service”) issuance of the Final
Record of Decision (“FROD”) for the Rosemont project in Arizona.
The filing of the company’s brief follows the U.S. federal
government’s initial brief which was filed on June 15, 2020. The
FROD was issued in June 2017 after a thorough process involving 17
co-operating agencies at various levels of government.
The briefs explain how both Hudbay and the
government believe that the District Court misinterpreted federal
mining laws and Forest Service regulations as they apply to
Rosemont. Both briefs assert that current law broadly authorizes
mining-related activities, such as ore processing and tailings
storage, to be conducted on open Forest Service lands. The District
Court’s determination that the Forest Service’s mining regulations
do not apply to mining activities unless those activities are
conducted entirely on valid mining claims, and hence above ore
bodies, is contrary to plain language reading of the general mining
law, as well as Forest Service regulations, which explicitly allow
for mining-related activity to occur on lands not covered by any
mining claim.
On June 29, 2020, further briefs were filed by
industry groups in support of Hudbay and the U.S. government’s
appeal. These industry groups include the National Mining
Association, the American Exploration and Mining Association, and
the Southern Arizona Business Coalition.
Dividend Declared
A semi-annual dividend of C$0.01 per share was
declared on August 11, 2020. The dividend will be paid on September
25, 2020 to shareholders of record as of September 4, 2020.
BlackNorth Initiative
Hudbay’s President and Chief Executive Officer,
Peter Kukielski, recently joined other senior executives from
Canadian public companies in a pledge to take action to end
systemic racism and create opportunities for all of those in the
underrepresented BIPOC (Black, Indigenous and People of Colour)
community. The pledge is part of the BlackNorth Initiative and the
recently formed Canadian Council of Business Leaders Against
Anti-Black Systemic Racism. The BlackNorth Initiative aligns with
Hudbay’s values of dignity and respect, caring, openness and
trustworthiness that are inherent in its corporate culture and in
the company’s decision-making and actions. The company’s community
engagement efforts are focused around creating opportunities for
all members of the communities in which it operates. Through the
BlackNorth Initiative, Hudbay intends to expand its efforts to help
end systemic racism.
Non-IFRS Financial Performance
Measures
Hudbay has added adjusted net earnings (loss)
and adjusted EBITDA to its non-IFRS financial performance measures
this quarter. Adjusted net earnings (loss), adjusted net earnings
(loss) per share, adjusted EBITDA, net debt, cash cost, sustaining
and all-in sustaining cash cost per pound of copper produced, and
combined unit cost are non-IFRS performance measures. These
measures do not have a meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other
issuers. These measures should not be considered in isolation or as
a substitute for measures prepared in accordance with IFRS and are
not necessarily indicative of operating profit or cash flow from
operations as determined under IFRS. Other companies may calculate
these measures differently.
Hudbay believes adjusted net earnings (loss) and
adjusted net earnings (loss) per share better reflect the company’s
performance for the current period and are better indications of
its expected performance in future periods. These measures are used
internally by the company to evaluate the performance of its
underlying operations and to assist with its planning and
forecasting of future operating results. As such, the company
believes these measures are useful to investors in assessing the
company’s underlying performance. The company provides adjusted
EBITDA to help users analyze its results and to provide additional
information about the company’s ongoing cash generating potential
in order to assess its capacity to service and repay debt, carry
out investments and cover working capital needs. Net debt is shown
because it is a performance measure used by the company to assess
its financial position. Cash cost, sustaining and all-in sustaining
cash cost per pound of copper produced are shown because the
company believes they help investors and management assess the
performance of its operations, including the margin generated by
the operations and the company. Combined unit cost is shown because
the company believes it helps investors and management assess the
cost structure and margins that are not impacted by variability in
by-product commodity prices.
In the first half of 2020, a government-imposed
shutdown of non-essential businesses led to a temporary suspension
of the Constancia mining operations. As such, fixed overhead
production costs incurred during the suspension were directly
charged to cost of sales. These costs did not contribute to
production of inventory and were therefore excluded from the
calculations of adjusted net earnings (loss), adjusted EBITDA and
cash costs.
For further details on these measures, including
reconciliations to the most comparable IFRS measures, please refer
to page 42 of Hudbay’s management’s discussion and analysis for the
three and six months ended June 30, 2020 available on SEDAR at
www.sedar.com.
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2020/Q2/MDA202.pdf
Financial Statements:
http://www.hudbayminerals.com/files/doc_financials/2020/Q2/FS202.pdf
Conference Call and Webcast
Date: |
Wednesday, August 12, 2020 |
Time: |
8:30 a.m. ET |
Webcast: |
http://services.choruscall.ca/links/hudbay20200730.html |
Dial in: |
1-416-915-3239 or
1-800-319-4610 |
Qualified Person
The technical and scientific information in this
news release related to the Constancia mine and Rosemont project
has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice
President and Chief Operating Officer. The technical and scientific
information related to the company’s other material mineral
projects contained in this news release has been approved by
Olivier Tavchandjian, P. Geo, Hudbay’s Vice-President Exploration
and Geology. Messrs. Meagher and Tavchandjian are qualified persons
pursuant to NI 43-101. For a description of the key assumptions,
parameters and methods used to estimate mineral reserves and
resources at Hudbay’s material properties, as well as data
verification procedures and a general discussion of the extent to
which the estimates of scientific and technical information may be
affected by any known environmental, permitting, legal title,
taxation, sociopolitical, marketing or other relevant factors,
please see the technical reports for the company’s material
properties as filed by Hudbay on SEDAR at www.sedar.com. For
further information regarding the data verification and quality
assurance / quality control procedures used for the estimate of
mineral resources at the 1901 deposit, please refer to the
procedures used for estimating the mineral resources at the Lalor
deposit, as described in the Lalor technical report filed on SEDAR
on March 28, 2019.
Forward-Looking
Information
This news release contains forward-looking information within the
meaning of applicable Canadian and United States securities
legislation. All information contained in this news release, other
than statements of current and historical fact, is forward-looking
information. Often, but not always, forward-looking information can
be identified by the use of words such as “plans”, “expects”,
“budget”, “guidance”, “scheduled”, “estimates”, “forecasts”,
“strategy”, “target”, “intends”, “objective”, “goal”,
“understands”, “anticipates” and “believes” (and variations of
these or similar words) and statements that certain actions, events
or results “may”, “could”, “would”, “should”, “might” “occur” or
“be achieved” or “will be taken” (and variations of these or
similar expressions). All of the forward-looking information in
this news release is qualified by this cautionary note.
Forward-looking information includes, but is not
limited to, production, cost and capital and exploration
expenditure guidance and potential revisions to such guidance,
anticipated production at Hudbay’s mines and processing facilities,
expectations regarding the impact of the COVID-19 pandemic on the
company’s operations, financial condition and prospects,
expectations regarding the closing of the company’s restructured
credit facilities, expectations regarding the timing of mining
activities at the Pampacancha deposit, the anticipated timing, cost
and benefits of developing the Rosemont project and the outcome of
litigation challenging Rosemont's permits, expectations regarding
the Lalor gold strategy, including the refurbishment of the New
Britannia mill and the potential of the 1901 deposit, the
possibility of converting inferred mineral resource estimates to
higher confidence categories, the potential and anticipated plans
for advancing the mining properties surrounding Constancia and the
Mason project, anticipated mine plans, anticipated metals prices
and the anticipated sensitivity of the company’s financial
performance to metals prices, events that may affect its operations
and development projects, anticipated cash flows from operations
and related liquidity requirements, the anticipated effect of
external factors on revenue, such as commodity prices, estimation
of mineral reserves and resources, mine life projections,
reclamation costs, economic outlook, government regulation of
mining operations, and business and acquisition strategies.
Forward-looking information is not, and cannot be, a guarantee of
future results or events. Forward-looking information is based on,
among other things, opinions, assumptions, estimates and analyses
that, while considered reasonable by the company at the date the
forward-looking information is provided, inherently are subject to
significant risks, uncertainties, contingencies and other factors
that may cause actual results and events to be materially different
from those expressed or implied by the forward-looking
information.
The material factors or assumptions that Hudbay
identified and were applied by the company in drawing conclusions
or making forecasts or projections set out in the forward-looking
information include, but are not limited to:
- the ability to continue to operate safely and at full capacity
during the COVID-19 pandemic;
- no significant interruptions to the company’s operations or
significant delays to its development projects in Manitoba and Peru
due to the COVID-19 pandemic;
- the timing of development and production activities on the
Pampacancha deposit;
- the timing of the Consulta Previa and permitting process for
mining the Pampacancha deposit;
- the timing for reaching additional agreements with individual
community members and no significant unanticipated delays to the
development of Pampacancha;
- the successful completion of the New Britannia project on
budget and on schedule;
- the successful outcome of the Rosemont litigation;
- the success of mining, processing, exploration and development
activities;
- the scheduled maintenance and availability of the processing
facilities;
- the accuracy of geological, mining and metallurgical
estimates;
- anticipated metals prices and the costs of production;
- the supply and demand for metals the company produces;
- the supply and availability of all forms of energy and fuels at
reasonable prices;
- no significant unanticipated operational or technical
difficulties;
- the execution of the company’s business and growth strategies,
including the success of its strategic investments and
initiatives;
- the availability of the revolving credit facilities and
additional financing, if needed;
- the ability to complete project targets on time and on budget
and other events that may affect the company’s ability to develop
its projects;
- the timing and receipt of various regulatory and governmental
approvals;
- the availability of personnel for the exploration, development
and operational projects and ongoing employee relations;
- maintaining good relations with the labour unions that
represent certain of the company’s employees in Manitoba and
Peru;
- maintaining good relations with the communities in which the
company operates, including the neighbouring Indigenous
communities;
- no significant unanticipated challenges with stakeholders at
Hudbay’s various projects;
- no significant unanticipated events or changes relating to
regulatory, environmental, health and safety matters;
- no contests over title to the company’s properties, including
as a result of rights or claimed rights of Indigenous peoples or
challenges to the validity of the company’s unpatented mining
claims;
- the timing and possible outcome of pending litigation and no
significant unanticipated litigation;
- certain tax matters, including, but not limited to current tax
laws and regulations and the refund of certain value added taxes
from the Canadian and Peruvian governments; and
- no significant and continuing adverse changes in general
economic conditions or conditions in the financial markets
(including commodity prices and foreign exchange rates).
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 associated with the
COVID-19 pandemic and its effect on Hudbay’s operations, financial
condition, projects and prospects, the possibility of a global
recession arising from the COVID-19 pandemic and attempts to
control it, the state of emergency and political situation in Peru
and risks associated with the resumption of operations at
Constancia, risks associated with the company’s access to capital,
including the negative impact of low metal prices on credit
facility availability, risks generally associated with the mining
industry, such as economic factors (including future commodity
prices, currency fluctuations, energy prices and general cost
escalation), uncertainties related to the development and operation
of the company’s projects (including risks associated with the
litigation affecting the Rosemont project), risks related to the
U.S. district court's recent decisions to set aside the U.S. Forest
Service's FROD and the Biological Opinion for Rosemont and related
appeals and other legal challenges, risks related to the new Lalor
mine plan, including the schedule for the refurbishment of the New
Britannia mill and the ability to convert inferred mineral resource
estimates to higher confidence categories, risks related to the
schedule for mining the Pampacancha deposit (including risks
associated with COVID-19, the Consulta Previa process, risks
associated with reaching additional agreements with individual
community members and risks associated with the rainy season in
Peru and the impact of any schedule delays), dependence on key
personnel and employee and union relations, risks related to
political or social unrest or change, risks in respect of
Indigenous and community relations, rights and title claims,
operational risks and hazards, including the cost of maintaining
and upgrading the company's tailings management facilities and any
unanticipated environmental, industrial and geological events and
developments and the inability to insure against all risks, failure
of plant, equipment, processes, transportation and other
infrastructure to operate as anticipated, compliance with
government and environmental regulations, including permitting
requirements and anti-bribery legislation, depletion of reserves,
volatile financial markets that may affect the ability to obtain
additional financing on acceptable terms, the failure to obtain
required approvals or clearances from government authorities on a
timely basis, uncertainties related to the geology, continuity,
grade and estimates of mineral reserves and resources, and the
potential for variations in grade and recovery rates, uncertain
costs of reclamation activities, the company’s ability to comply
with its pension and other post-retirement obligations, the
company’s ability to abide by the covenants in its debt instruments
and other material contracts, tax refunds, hedging transactions, as
well as the risks discussed under the heading “Risk Factors” in the
company’s most recent Annual Information Form.
Should one or more risk, uncertainty,
contingency or other factor materialize or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking information.
Accordingly, you should not place undue reliance on forward-looking
information. Hudbay does not assume any obligation to update or
revise any forward-looking information after the date of this news
release or to explain any material difference between subsequent
actual events and any forward-looking information, except as
required by applicable law.
Note to United States
Investors
This news release has been prepared in
accordance with the requirements of the securities laws in effect
in Canada, which may differ materially from the requirements of
United States securities laws applicable to U.S. issuers.
About Hudbay
Hudbay (TSX, NYSE: HBM) is a diversified mining
company primarily producing copper concentrate (containing copper,
gold and silver) and zinc metal. Directly and through its
subsidiaries, Hudbay owns three polymetallic mines, four ore
concentrators and a zinc production facility in northern Manitoba
and Saskatchewan (Canada) and Cusco (Peru), and copper projects in
Arizona and Nevada (United States). The company’s growth strategy
is focused on the exploration, development, operation and
optimization of properties it already controls, as well as other
mineral assets it may acquire that fit its strategic criteria.
Hudbay’s vision is to be a responsible, top-tier operator of
long-life, low-cost mines in the Americas. Hudbay’s mission is to
create sustainable value through the acquisition, development and
operation of high-quality, long-life deposits with exploration
potential in jurisdictions that support responsible mining, and to
see the regions and communities in which the company operates
benefit from its presence. The company is governed by the Canada
Business Corporations Act and its shares are listed under the
symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange
and Bolsa de Valores de Lima. Further information about Hudbay can
be found on www.hudbay.com.
For further information, please contact:
Candace BrûléDirector, Investor Relations(416)
814-4387candace.brule@hudbay.com
i Adjusted net loss and adjusted net loss per share, adjusted
EBITDA, net debt, unit operating costs, cash cost, sustaining and
all-in sustaining cash cost per pound of copper produced, net of
by-product credits, are non-IFRS financial performance measures
with no standardized definition under IFRS. For further
information, please see the “Non-IFRS Financial Reporting Measures”
section of this news release.
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/4dfca546-2f5e-44b3-9323-64bae09735b5
https://www.globenewswire.com/NewsRoom/AttachmentNg/ad689b67-04e9-47f1-8cc5-a4fc1165c62b
https://www.globenewswire.com/NewsRoom/AttachmentNg/29606117-0c1a-40c0-9413-2ad0e9de9057
https://www.globenewswire.com/NewsRoom/AttachmentNg/04836b59-3d51-4133-b90d-f4552ed9f51f
https://www.globenewswire.com/NewsRoom/AttachmentNg/6471d54c-9638-4447-a615-7bd150373984
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