TSX, NYSE – HBM 2022 No. 2 Hudbay Announces Fourth Quarter and Full Year 2021 Results and Provides Annual Guidance
Toronto, Ontario, February 23, 2022 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE:HBM) today released its fourth quarter and full year 2021 financial results and annual production and cost guidance. All amounts are in U.S. dollars, unless otherwise noted.
Fourth Quarter and Full Year Operating and Financial Results
- Consolidated copper production of 99,470 tonnes and consolidated gold production of 193,783 ounces increased by 4% and 55%, respectively, in 2021 as compared to 2020.
- Achieved 2021 consolidated copper, gold and silver production guidance while zinc production fell short of the 2021 guidance range.
- Peru copper production met 2021 guidance with strong operating performance in the fourth quarter, aided by the continued ramp up of Pampacancha. Manitoba zinc production was below 2021 guidance primarily due to higher dilution and mine plan limitations at the 777 mine as it approaches closure.
- Record quarterly consolidated gold production of 64,159 ounces in the fourth quarter, an increase of 18% compared to the third quarter of 2021, due to higher grades at Pampacancha and the commissioning of the New Britannia mill.
- Generated record quarterly revenue of $425.2 million. Operating cash flow before change in non-cash working capital was $156.9 million and adjusted EBITDAi was $180.3 million in the fourth quarter of 2021, due to higher realized base metals prices and higher gold and copper sales volumes, partially offset by lower zinc sales volumes.
- Full year, consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, of $0.74 and $2.07, respectively, achieved 2021 guidance as inflationary cost pressures were offset by strong by-product credits.
- Consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, for the fourth quarter of 2021 were $0.51 and $1.95, respectively, a decrease of 18% and an increase of 1%, respectively, compared to the third quarter of 2021.
- Fourth quarter net loss and loss per share were $10.5 million and $0.04, respectively. After adjusting for an impairment charge related to a revaluation of our Flin Flon environmental obligation due to declining long term discount rates, amongst other items, fourth quarter adjusted net earningsi per share was $0.13.
Executing on Growth Initiatives
- New Britannia achieved commercial production on November 30, 2021. December mill throughput averaged 1,200 tonnes per day with gold and silver recoveries in line with metallurgical models. Throughput and recoveries are expected to achieve design rates in the second quarter of 2022.
- Published an initial mineral resource estimate for Copper World on December 15, 2021, which contained a higher grade, near-surface zone that has the potential to be mined earlier in the mine life and is composed of both sulphide and oxide mineralogy. The company remains on track to complete a preliminary economic assessment of Copper World in the first half of 2022.
- Results from the Constancia Norte underground scoping study are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022.
- Commenced a winter drilling program in Manitoba in January 2022 to test high-priority targets near Lalor and 1901 for potential reserve and resource expansion and support the completion of a preliminary economic assessment of the Flin Flon tailings reprocessing opportunity.
“2021 was a year of execution for Hudbay as we invested approximately $250 million in our brownfield growth projects at Pampacancha and New Britannia,” said Peter Kukielski, President and Chief Executive Officer. “We began to see increased cash flows from these short-payback, high-return investments in the fourth quarter and we are now at an inflection point where we anticipate meaningful copper and gold production growth along with significant EBITDA and cash flow growth. 2022 will be a year in which we start to reap the rewards from our disciplined growth strategy while we advance our high-quality pipeline of copper growth assets, including our newly discovered Copper World project in Arizona, which we believe will generate significant value.”
2022 Annual Guidance and Outlook
- Consolidated copper production is forecast to increase by 17% to 116,000ii tonnes in 2022 and by 34% to 133,500ii tonnes in 2024, compared to 2021, with higher copper grades expected from the Pampacancha deposit in Peru.
- Consolidated gold production is forecast to increase by 28% to 247,500ii ounces in 2022 and by 59% to 307,500ii ounces in 2024, compared to 2021, due to higher production from the New Britannia mill and Pampacancha.
- Introduced 2022 cash cost guidance by business unit with Peru cash cost of $1.10 to $1.40 per pound of copper produced, net of by-product creditsi, and Manitoba cash cost of $300 to $550 per ounce of gold produced, net of by-product creditsi.
- 2022 unit operating costs are expected to increase by approximately 7%ii in Peru and 15%ii in Manitoba, compared to 2021, as a result of expected higher input costs due to industry wide inflation in each region and the transition of operations in Manitoba.
- Consolidated cash cost guidance of $0.60 to $1.05 and consolidated sustaining cash cost guidance of $1.60 to $2.25, in each case, per pound of copper produced, net of by-product credits, is expected in 2022.
- Total capital expenditures are expected to decline by 17% year-over-year as major growth investment programs in Peru and Manitoba were completed in 2021 and lower sustaining capital spending is expected in Peru, offset by higher growth spending on technical and economic studies for Copper World.
- Exploration spending of approximately $65.0 million in 2022 reflects plans to continue drilling activities at Copper World and test promising targets in Peru, Manitoba, Nevada and Chile.
Summary of Fourth Quarter Results
Consolidated copper production in the fourth quarter of 2021 was 28,198 tonnes, a 21% increase compared to the third quarter of 2021, primarily due to higher throughput and copper grades in Peru. Consolidated gold production was 64,159 ounces in the fourth quarter of 2021, another quarterly record for Hudbay and an increase of 18% versus the third quarter, primarily due to higher gold production in Snow Lake with the commissioning of the New Britannia mill in the fourth quarter. Consolidated zinc production in the quarter increased by 11% versus the third quarter of 2021, primarily due to higher zinc grades at 777 and Lalor. Consolidated silver production in the fourth quarter increased by 18% compared to the third quarter as higher grades and recoveries in Manitoba offset lower grades in Peru.
In the fourth quarter of 2021, consolidated cash cost per pound of copper produced, net of by-product creditsi, was $0.51, compared to $0.62 in the third quarter of 2021. This 18% decrease was mainly a result of higher copper production and higher gold by-product revenue. Sustaining cash cost per pound of copper produced, net of byproduct creditsi, slightly decreased to $1.95 in the fourth quarter of 2021, from $1.97 in the third quarter, primarily due to the same factors affecting cash cost offset by higher sustaining capital expenditures and royalties.
Operating cash flow before change in non-cash working capital was $156.9 million during the fourth quarter of 2021, reflecting an increase of $53.4 million compared to the third quarter of 2021, primarily the result of higher realized base metal prices and higher gold and copper sales volumes.
Net loss and net loss per share in the fourth quarter of 2021 were $10.5 million and $0.04, respectively, compared to a net loss and net loss per share of $170.4 million and $0.65, respectively, in the third quarter of 2021. Fourth quarter results were negatively impacted by a revaluation of the environmental obligation due to lower long term discount rates since the middle of the year and a corresponding increase to Flin Flon’s property plant and equipment ("PP&E"). As the closure of the 777 mine and Flin Flon operations is expected to commence within several months, an impairment charge was made to PP&E resulting in a loss of $46.2 million. The quarterly financial results were also negatively impacted by $13.3 million in mark-to-market net losses arising from the revaluation of the gold prepayment liability, revaluation of certain other financial instruments, share-based compensation, and a $3.4 million Flin Flon restructuring charge.
Adjusted net earningsi and adjusted net earnings per sharei in the fourth quarter of 2021 were $32.7 million and $0.13 per share, respectively, after adjusting for the impairment charge related to the revaluation of the environmental obligation in Flin Flon, among other items. This compares to adjusted net earnings and adjusted net earnings per share of $0.9 million and $0.00 per share in the third quarter of 2021, which were recalculated as a result of the company’s year-end 2021 tax provision calculation review (see “Non-IFRS Financial Performance Measures”). Fourth quarter adjusted EBITDAi increased to $180.3 million, compared to $119.3 million in the third quarter of 2021, primarily due to higher copper and gold sales volumes and higher realized prices, partially offset by higher exploration and selling and administrative expenses.
As at December 31, 2021, Hudbay’s liquidity includes $271.0 million in cash and cash equivalents as well as undrawn availability of $346.9 million under its revolving credit facilities. The company’s liquidity position was further enhanced in October 2021 through the renegotiation of its credit facilities to increase available borrowings to $450.0 million and extend the maturity to 2025.
Summary of Full Year Results
On a consolidated basis, Hudbay’s copper, gold and silver production met 2021 guidance; however, production of zinc and molybdenum fell short of the 2021 guidance ranges. Production of gold in Peru exceeded the top end of the guidance range due to strong gold grades from Pampacancha. Production of gold and silver in Manitoba fell below the 2021 guidance range primarily due to higher than expected grade dilution at the 777 mine during the fourth quarter and prioritizing base metal rich zones in the fourth quarter at Lalor while deferring some gold-rich ore for future processing at New Britannia to achieve higher gold recoveries. Zinc production was impacted by higher dilution and mine plan limitations as the 777 mine approaches the end of life.
Consolidated cash costs per pound of copper produced, net of by-product creditsi, for 2021 was $0.74, and consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, for 2021 was $2.07, in line with the company’s 2021 guidance range.
Operating cash flow before change in non‑cash working capital increased to $483.9 million from $241.9 million in 2020. The increase is the result of higher realized base metal and molybdenum prices and higher sales volumes of gold and copper, partially offset by lower zinc sales volumes.
Net loss and loss per share for 2021 were $244.4 million and $0.93, respectively, compared to a net loss and loss per share of $144.6 million and $0.55, respectively, in 2020. Contributing to the 2021 net loss was an impairment charge of $193.5 million related to an updated closure plan reflecting higher estimates for closure activities in Flin Flon. Full year results were also negatively impacted by charges related to the refinancing of the 2025 senior notes, including a write off of the non-cash embedded derivative of $49.8 million connected with the exercise of the redemption option and a call premium payment of $22.9 million, as well as a $12.4 million Flin Flon restructuring charge.
Financial Condition ($000s) Dec. 31, 2021 Sep. 30, 2021 Dec. 31, 2020
270,989 297,451 439,135 Cash and cash equivalents Total long-term debt 1,182,612 1,135,675
1,180,274
Net debt1 885,161 696,540
909,285
| Working capital2 | 147,512 | 159,917 | 306,888 |
| Total assets | 4,616,231 | 4,504,661 | 4,666,645 |
| Equity | 1,476,828 | 1,490,180 | 1,699,806 |
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.
2 Working capital is determined as total current assets less total current liabilities as defined under IFRS and disclosed on the consolidated financial statements.
Financial Performance Three Months Ended
| Dec. 31, 2021 | Sep. 30, 2021 | Dec. 31, 2020 | ||
|---|---|---|---|---|
| Revenue | $000s | 425,170 | 358,961 | 322,290 |
| Cost of sales | $000s | 343,426 | 444,379 | 287,923 |
| (Loss) earnings before tax | $000s | (149) | (147,830) | 911 |
| (Loss) earnings | $000s | (10,453) | (170,411) | 7,406 |
| Basic and diluted earnings (loss) per share | $/share | (0.04) | (0.65) | 0.03 |
| Adjusted earnings (loss) per share1 | $/share | 0.13 | 0.002 | (0.06) |
| Operating cash flow before change in non- | $ millions | 156.9 | 103.5 | 86.1 |
cash working capital Adjusted EBITDA1 $ millions 180.3 119.3 106.9
Year Ended Dec. 31, 2021 Dec. 31, 2020
| Revenue | $000s | 1,501,998 | 1,092,418 |
| Cost of sales | $000s | 1,370,979 | 1,053,418 |
| Loss before tax | $000s | (202,751) | (179,089) |
| Loss | $000s | (244,358) | (144,584) |
| Basic and diluted loss per share | $/share | (0.93) | (0.55) |
| Adjusted earnings (loss) per share1 | $/share | 0.09 | (0.46) |
| Operating cash flow before change in non- | $ millions | 483.9 | 241.9 |
cash working capital3 Adjusted EBITDA1 $ millions 547.1 306.7 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.
2 The adjusted net earnings (loss) and adjusted net earnings (loss) per share in the third quarter of 2021 have been adjusted by $37.3 million from what was previously reported due to a change in the computed tax effect on certain adjustments. The adjusted net earnings changed from $38.2 million to an adjusted net earnings of $0.9 million and the adjusted net earnings per share changed from $0.15/share to an adjusted net earnings per share of $0.00/share.
3 Operating cash flow before precious metals stream deposit and changes in non-cash working capital.
Consolidated Production and Cost Performance Three Months Ended Dec. 31, 2021 Sep. 30, 2021 Dec. 31, 2020 Contained metal in concentrate and doré produced1
| Copper | tonnes | 28,198 | 23,245 | 27,278 |
| Gold | ounces | 64,159 | 54,276 | 32,376 |
| Silver | ounces | 899,713 | 763,177 | 730,679 |
| Zinc | tonnes | 23,207 | 20,844 | 25,843 |
| Molybdenum | tonnes | 275 | 282 | 333 |
Payable metal sold
| Copper | tonnes | 24,959 | 21,136 | 22,963 |
| Gold2 | ounces | 56,927 | 47,843 | 35,179 |
| Silver2 | ounces | 638,640 | 701,601 | 762,384 |
| Zinc3 | tonnes | 21,112 | 21,619 | 28,431 |
| Molybdenum | tonnes | 245 | 304 | 457 |
Consolidated cash cost per pound of copper produced4
| Cash cost | $/lb | 0.51 | 0.62 | 0.43 |
| Sustaining cash cost | $/lb | 1.95 | 1.97 | 1.97 |
| All-in sustaining cash cost | $/lb | 2.20 | 2.18 | 2.24 |
Year Ended Dec. 31, 2021 Dec. 31, 2020 Contained metal in concentrate and doré produced1
| Copper | tonnes | 99,470 | 95,333 |
| Gold | ounces | 193,783 | 124,622 |
| Silver | ounces | 3,045,481 | 2,750,873 |
| Zinc | tonnes | 93,529 | 118,130 |
| Molybdenum | tonnes | 1,146 | 1,204 |
Payable metal sold
| Copper | tonnes | 92,200 | 88,888 |
| Gold2 | ounces | 168,358 | 122,949 |
| Silver2 | ounces | 2,427,508 | 2,585,586 |
| Zinc3 | tonnes | 96,435 | 109,347 |
| Molybdenum | tonnes | 1,098 | 1,321 |
Consolidated cash cost per pound of copper produced4
| Cash cost | $/lb | 0.74 | 0.60 |
| Sustaining cash cost | $/lb | 2.07 | 1.93 |
| All-in sustaining cash cost | $/lb | 2.30 | 2.16 |
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
2 Includes total payable gold and silver in concentrate and in doré sold.
3 Includes refined zinc metal sold and payable zinc in concentrate sold.
4 Cash cost, sustaining 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
| Peru Operations | Three Months Ended | Year Ended | ||||
|---|---|---|---|---|---|---|
| Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | ||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||
| Constancia ore mined1 | tonnes | 7,742,469 | 6,208,019 | 9,313,784 | 29,714,327 | 27,529,950 |
| Copper | % | 0.33 | 0.30 | 0.31 | 0.31 | 0.32 |
| Gold | g/tonne | 0.04 | 0.04 | 0.03 | 0.04 | 0.03 |
| Silver | g/tonne | 2.81 | 2.76 | 2.61 | 2.88 | 2.75 |
| Molybdenum | 0.01 | 0.01 | 0.01 | 0.01 | 0.02 | |
| Pampacancha ore mined tonnes | 2,107,196 | 2,050,813 | — | 5,141,001 | — | |
| Copper | % | 0.27 | 0.27 | — | 0.27 | — |
| Gold | g/tonne | 0.34 | 0.27 | — | 0.30 | — |
| Silver | g/tonne | 4.26 | 3.58 | — | 4.02 | — |
| Molybdenum | 0.01 | 0.01 | — | 0.01 | — | |
| Ore milled | tonnes | 8,048,925 | 6,985,035 | 7,741,714 | 28,809,755 | 26,297,318 |
| Copper | % | 0.33 | 0.30 | 0.33 | 0.32 | 0.34 |
| Gold | g/tonne | 0.11 | 0.11 | 0.03 | 0.08 | 0.03 |
| Silver | g/tonne | 3.67 | 3.93 | 2.74 | 3.35 | 2.87 |
| Molybdenum | 0.01 | 0.01 | 0.02 | 0.01 | 0.02 | |
| Copper recovery | % | 86.0 | 84.9 | 85.3 | 84.6 | 83.0 |
| Gold recovery | % | 63.6 | 71.9 | 52.7 | 64.6 | 49.8 |
| Silver recovery | % | 60.8 | 59.1 | 70.1 | 63.7 | 66.9 |
| Molybdenum recovery | 26.7 | 33.5 | 28.4 | 31.5 | 29.4 |
Contained metal in concentrate
| Copper | tonnes | 22,856 | 18,072 | 21,554 | 77,813 | 73,150 |
| Gold | ounces | 17,917 | 17,531 | 3,689 | 50,306 | 12,395 |
| Silver | ounces | 578,140 | 521,036 | 477,775 | 1,972,949 | 1,622,972 |
| Molybdenum | tonnes | 275 | 282 | 333 | 1,146 | 1,204 |
Payable metal sold
| Copper | tonnes | 20,551 | 16,065 | 18,583 | 71,398 | 68,506 |
| Gold | ounces | 16,304 | 16,902 | 3,297 | 41,807 | 10,986 |
| Silver | ounces | 380,712 | 457,263 | 480,843 | 1,490,651 | 1,518,548 |
| Molybdenum | tonnes | 245 | 304 | 457 | 1,098 | 1,321 |
| Combined unit operating $/tonne | 10.47 | 11.62 | 10.17 | 11.39 | 9.46 |
cost2,3,4 Cash cost3,4 $/lb 1.28 1.26 1.47 1.28 1.45 Sustaining cash cost3,4 $/lb 2.46 2.31 2.58 2.46 2.20 1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled. 2 Reflects combined mine, mill and general and administrative ("G&A") costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
3 Combined unit cost, cash cost and 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 and a detailed reconciliation, please see the discussion under the "Non-IFRS Financial Reporting Measures" section of this news release.
4 Includes approximately $4.1 million, or $0.51 per tonne, of COVID-related costs during the three months ended December 31, 2021, $4.8 million, or $0.69 per tonne during the three months ended September 30, 2021, and $19.8 million, or $0.69 per tonne during the year ended December 31, 2021.
Peru has experienced notable improvements in COVID-19 health statistics throughout 2021. Peru operations did not encounter any major COVID-19 interruptions during the year; however, with the recent emergence of the Omicron variant in Peru, the company has continued to maintain stringent COVID-19 measures and controls to ensure the safety of Hudbay’s workforce and this has contributed to elevated unit operating costs.
During the fourth quarter of 2021, the Constancia operations produced 22,856 tonnes of copper, 17,917 ounces of gold, 578,140 ounces of silver and 275 tonnes of molybdenum. Copper production was 26% higher than the third quarter due to an increase in throughput and recovery at both Constancia and Pampacancha. Gold and silver production increased by 2% and 11%, respectively, due to the increased throughput and higher grades. This was another record quarter for gold production in Peru.
Full year 2021 copper production increased by 6% year-over-year to 77,813 tonnes, within the annual guidance range. Full year 2021 gold production increased by 306% year-over-year to 50,306 ounces and exceeded the 2021 guidance range due to increased throughput, higher grades from Pampacancha and higher gold recoveries. Full year 2021 production guidance was met for all metals except molybdenum, which was in line with the mine plan published in March 2021.
Total ore mined during the fourth quarter of 2021 increased by 19% from the third quarter of 2021 as mining levels were optimized for mill throughput. Ore mined at Pampacancha in 2021 was 5.1 million tonnes, exceeding the four million tonne threshold required to receive an additional $4 million deposit from Wheaton Precious Metals under the amended Constancia streaming agreement. The proceeds of this deposit were received in December 2021 and were accounted for as an increase in the deferred revenue balance.
Ore milled during the fourth quarter of 2021 was 15% higher than the previous quarter due to a scheduled semiannual mill maintenance program affecting third quarter ore milled. Milled grades for copper were higher than the third quarter due to higher grades from the Constancia pit. Milled grades for gold were consistent with the most recent quarter, while milled silver grades were lower but consistent with the mine plan.
Copper recoveries in the fourth quarter increased over the third quarter of 2021 due to lower oxide levels in the Constancia ore. Recoveries of gold in the fourth quarter of 2021 were lower than the third quarter due to variability of the Pampacancha volume being treated and the increased presence of zinc, while silver recoveries slightly increased compared to the third quarter due to variable metallurgical characteristics of the earlier ores from Pampacancha and slightly lower silver head grades.
Combined mine, mill and G&A unit operating costs in the fourth quarter of 2021 were $10.47 per tonne, a 10% improvement versus the third quarter of 2021. COVID-related costs in Peru were $4.1 million in the fourth quarter of 2021. Combined unit operating costs in the fourth quarter were $9.96 per tonne excluding these COVID-related costs. Full year combined unit operating costs were 20% higher than the same period in 2020 due to inflationary pressures on consumables and energy costs and higher COVID-19 expenditures, offset in part by additional tonnes milled.
Peru’s cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was $1.28, relatively in line with the prior quarter. Peru’s sustaining cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 increased to $2.46, compared to $2.31 in the third quarter of 2021, due to higher capitalized expenditures, partially offset by higher copper production.
Manitoba Operations Review
| Manitoba Operations | Three Months Ended | Year Ended | ||||
|---|---|---|---|---|---|---|
| Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | ||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||
| Lalor ore mined | tonnes | 422,208 | 392,380 | 468,101 | 1,593,141 | 1,654,240 |
| Copper | % | 0.78 | 0.86 | 0.80 | 0.71 | 0.74 |
| Zinc | % | 4.19 | 3.60 | 5.54 | 4.23 | 5.73 |
| Gold | g/tonne | 3.92 | 3.85 | 2.79 | 3.41 | 2.51 |
| Silver | g/tonne | 30.35 | 22.13 | 24.96 | 24.66 | 25.31 |
| 777 ore mined | tonnes | 266,744 | 256,536 | 164,856 | 1,053,710 | 991,576 |
| Copper | % | 1.13 | 1.06 | 1.89 | 1.28 | 1.40 |
| Zinc | % | 4.16 | 3.88 | 2.98 | 3.91 | 3.88 |
| Gold | g/tonne | 1.80 | 1.96 | 1.85 | 2.03 | 1.90 |
| Silver | g/tonne | 25.02 | 22.99 | 21.64 | 25.25 | 24.13 |
Stall Concentrator & New Britannia Mill:
| Ore milled | tonnes | 419,727 | 408,201 | 372,624 | 1,506,756 | 1,412,751 |
| Copper | % | 0.75 | 0.82 | 0.79 | 0.72 | 0.73 |
| Zinc | % | 4.12 | 3.58 | 5.47 | 4.30 | 5.76 |
| Gold | g/tonne | 3.90 | 3.84 | 2.88 | 3.42 | 2.55 |
| Silver | g/tonne | 30.07 | 23.32 | 24.43 | 24.95 | 25.37 |
| Copper recovery | % | 88.7 | 84.3 | 87.1 | 86.8 | 86.2 |
| Zinc recovery | % | 87.4 | 88.2 | 90.9 | 88.9 | 91.9 |
| Gold recovery | % | 54.6 | 53.4 | 59.5 | 54.9 | 60.0 |
| Silver recovery | % | 53.9 | 52.7 | 60.3 | 54.4 | 60.4 |
Flin Flon Concentrator:
| Ore milled | tonnes | 262,565 | 258,062 | 225,663 | 1,133,516 | 1,205,314 |
| Copper | % | 1.12 | 1.06 | 1.59 | 1.23 | 1.28 |
| Zinc | % | 4.16 | 3.86 | 3.87 | 3.95 | 4.21 |
| Gold | g/tonne | 1.78 | 1.96 | 1.99 | 2.04 | 1.96 |
| Silver | g/tonne | 25.04 | 22.93 | 22.65 | 24.90 | 24.26 |
| Copper recovery | % | 86.7 | 85.2 | 88.1 | 87.7 | 86.0 |
| Zinc recovery | % | 83.1 | 82.2 | 83.9 | 83.0 | 85.5 |
| Gold recovery | % | 59.2 | 58.1 | 56.6 | 58.5 | 56.0 |
| Silver recovery | % | 45.6 | 42.4 | 46.5 | 45.1 | 45.9 |
Total contained metal in concentrate and doré
| Copper | tonnes | 5,342 | 5,173 | 5,724 | 21,657 | 22,183 |
| Zinc | tonnes | 23,207 | 20,844 | 25,843 | 93,529 | 118,130 |
| Gold | ounces | 46,242 | 36,745 | 28,687 | 134,477 | 112,227 |
| Silver | ounces | 321,573 | 242,141 | 252,904 | 1,072,532 | 1,127,901 |
Total payable metal sold
| Copper | tonnes | 4,408 | 5,071 | 4,380 | 20,802 | 20,382 |
| Zinc2 | tonnes | 21,112 | 21,619 | 28,431 | 96,435 | 109,347 |
| Gold | ounces | 40,623 | 30,941 | 31,882 | 126,551 | 111,963 |
| Silver | ounces | 257,928 | 244,338 | 281,541 | 936,857 | 1,067,038 |
| Combined unit | C$/tonne | 168 | 147 | 140 | 154 | 132 |
operating cost3,4 Cash cost4 $/lb (2.77) (1.64) (3.48) (2.11) (2.20)
Sustaining cash cost4 $/lb (0.23) 0.75 (0.36) 0.69 1.02 1 Includes refined zinc metal sold and payable zinc in concentrate sold.
2 Includes total payable precious metals in concentrate and in doré 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 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.
During the fourth quarter of 2021, Manitoba operations produced 5,342 tonnes of copper, 46,242 ounces of gold, 321,573 ounces of silver and 23,207 tonnes of zinc. Copper production was relatively in line as compared to the third quarter and gold and silver production increased by 11% and 33%, respectively, due to the ramp-up at New Britannia.
Full year copper production achieved 2021 guidance; however, zinc, gold and silver production for the year fell short of the company’s guidance ranges. Zinc production was predominantly impacted by higher than planned dilution at the 777 mine as it nears the end of life. Gold and silver production were below guidance due to higher dilution at the 777 mine in the fourth quarter and the deferral of some higher gold content ore for future processing at New Britannia to achieve higher gold recoveries.
During the fourth quarter of 2021, the New Britannia mill continued to ramp up with the flotation circuit starting in October. New Britannia processed 109,242 tonnes of ore during the fourth quarter and achieved commercial production in November, triggering the start of depreciation for the mill. In December, New Britannia throughput averaged 1,200 tonnes per day with gold and silver recoveries in line with the metallurgical model. A number of optimization initiatives are underway to improve the mechanical availability of grinding, leaching and tailings circuits. It is anticipated that the throughput and recoveries will achieve full design rates in the second quarter of 2022.
Lalor production processes to separate gold and base metal ores are now fully established to optimally provide feed for both the New Britannia and Stall mills. At the end of 2021, Snow Lake ore stockpiles were at normalized levels with approximately 26,000 tonnes of gold ore and approximately 24,000 tonnes of base metal ore on surface. A production ramp-up strategy to achieve 5,300 tonnes per day at Lalor by the end of 2022 is underway that includes advancing development for new mining fronts, additions to the mine equipment fleet, transition of workforce from the 777 mine upon closure, and expansion of change house and office facilities.
The 777 mine is within months of closure and the focus continues to be on mining out the remaining reserves by completing the necessary ground rehabilitation to access remnant and pillar stoping blocks. Challenging ground conditions have caused delays in the production sequence and resulted in higher dilution than planned. These challenges are expected to continue until the end of mine life in June 2022. Pre-closure activities are underway in mined out areas to decommission stationary equipment of value for redeployment at Lalor.
Although there was less feed to the Stall concentrator in the fourth quarter as gold ore was directed to New Britannia, the combined Snow Lake mills processed a significantly higher volume of ore in the fourth quarter of 2021 and Stall recoveries were consistent with the metallurgical model for the head grades delivered. New Britannia recoveries continued ramping up during the fourth quarter. The Flin Flon concentrator consumed the available ore feed from the 777 mine in the fourth quarter of 2021 and recoveries were consistent with the metallurgical model for the head grades delivered.
Combined unit operating costs in the fourth quarter of 2021 increased by 14% compared to the third quarter of 2021, primarily due to higher milling costs in Snow Lake with the ramp-up of the New Britannia mill in the quarter, partially offset by higher tonnes processed. Full year combined mine, mill and G&A unit operating costs were 17% higher than the prior year due to the same factors as the fourth quarter variances. Full year combined unit operating cost was within the 2021 guidance range.
Manitoba’s cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $2.77, lower than the third quarter primarily due to higher by-product credits as gold revenues increased, offsetting operating cost increases as noted above. Manitoba’s sustaining cash cost per pound of copper produced, net of by-product credits, in the fourth quarter of 2021 was negative $0.23, lower than the $0.75 achieved in the third quarter, due to the same factors affecting cash costs.
Starting in the first quarter of 2022, the company intends to disclose cash cost per ounce of gold produced, net of byproduct credits, as gold revenue grows to become the most significant contributor to total Manitoba revenue for the foreseeable future.
COVID-19 Business Update
Hudbay is maintaining COVID-19 measures and controls to ensure the safety of its workforce, partners and communities. This has contributed to increased operating costs beyond levels initially budgeted for 2021. Despite the maintenance of these stringent measures, the company continues to experience intermittent operational supply chain, travel, labour and shipping disruptions with periodic waves of COVID-19 cases.
New Britannia Commercial Production Achieved
The construction of a new copper flotation facility at New Britannia was completed in October 2021, followed by a brief commissioning period that was completed ahead of schedule. The New Britannia mill achieved commercial production on November 30, 2021 after reaching the required recoveries and throughput in the copper and gold circuits. The ramp up of throughput, recoveries and metal production at New Britannia achieved best-in-class timelines as represented by widely recognized ramp-up curves.
The New Britannia mill is expected to average 1,500 tonnes per day in 2022 with continued ramp-up activities and rod mill liner maintenance scheduled during the first quarter. Full design throughput rates and recoveries are expected to be achieved in the second quarter of 2022, a mere six months after commissioning.
Average annual gold production from Lalor and the Snow Lake operations is expected to increase to over 180,000 ounces at an average cash cost and sustaining cash cost, net of by-product credits, of $412 and $788 per ounce of gold, respectively, during the first six full years of New Britannia's operation.
Advancing the Copper World Discovery
On December 15, 2021, Hudbay released a National Instrument 43-101 (“NI 43-101”) initial mineral resource estimate for the recently discovered Copper World deposits in Arizona. The 100% owned Copper World project is located in close proximity to the 100% owned Rosemont deposit, with mineralization closer to surface than Rosemont. The Copper World project consists of seven deposits extending over seven kilometres, including Bolsa, Broad Top Butte, Copper World, Peach, Elgin, South Limb and North Limb.
Copper World’s initial mineral resource estimate includes global indicated mineral resources of 272 million tonnes at 0.36% copper and inferred mineral resources of 142 million tonnes at 0.36% copper. The global resource estimate includes near surface, higher grade indicated mineral resources of 96 million tonnes at 0.57% copper and inferred mineral resources of 31 million tonnes at 0.71% copper, with the potential for this higher grade resource to be mined earlier in the mine life. Resources comprise both sulphide and oxide mineralogy and are potentially amenable to flotation and heap leach processing methods, respectively.
The company has increased the number of drill rigs at site to six to conduct infill drilling and to support future economic studies. The technical studies for Copper World are well-advanced and the results will be incorporated into a Preliminary Economic Assessment (“PEA”) contemplating the development of the Copper World deposits in conjunction with the Rosemont deposit. The PEA is also expected to reflect preliminary expectations of potential synergies between Copper World and Rosemont. Hudbay is on track to publish the PEA results in a NI 43-101 Technical Report in the first half of 2022.
An updated three-dimensional visualization of Copper World, including the location of the deposits, drilling completed in 2020 and 2021, historical mine sites and the updated mineral resource estimates can be found at the following link: https://vrify.com/embed/decks/10916-2022-copper-world-exploration-deck
The company continues to await a decision from the U.S. Court of Appeals for the Ninth Circuit relating to the appeal of the unprecedented Rosemont court decision.
Other Exploration Updates
Peru Regional Exploration
Hudbay continues drilling and scoping studies to evaluate the underground potential at Constancia Norte, and the results are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022. The company also continues to progress exploration agreement discussions with nearby communities on prospective properties near Constancia.
Drilling continues at the Llaguen copper porphyry target in northern Peru, near the city of Trujillo and in close proximity to existing infrastructure. The confirmatory phase of the drill program has totaled over 7,000 metres in 16 holes with two drill rigs presently turning at site. Assay results have been received for five holes with all holes intersecting mineralization. Pending positive results from this initial drilling phase, a second phase of the project will aim at defining an initial inferred mineral resource estimate for Llaguen to be completed in the third quarter of 2022.
Snow Lake Regional Exploration
The company is actively conducting surface and underground winter drilling activities in the Snow Lake area, primarily focused on testing down-plunge extensions of the copper-gold rich feeder zone at the 1901 deposit, the drilling gap between 1901 and lens 17 at Lalor, and a high-priority geophysical target located immediately north of Lalor. In addition, Hudbay continues to compile drilling results from the 2021 program at Lalor and 1901, which are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.
Flin Flon Reclamation Obligations and Tailings Reprocessing Opportunity
In early January 2022, Hudbay commenced a confirmatory drill program on the tailings facility in Flin Flon to support the completion of a PEA on the tailings reprocessing opportunity by the first quarter of 2023. The company is also conducting engineering and test work throughout 2022 to support the PEA. This opportunity could utilize the Flin Flon concentrator, with modifications, after the closure of the 777 mine, creating operating and economic benefits to the Flin Flon community. It could also provide the opportunity to redesign the closure plans, increase metal production, defer or reduce certain closure costs and reduce the environmental footprint of the tailings facility.