TSX, NYSE – HBM 2024 No. 2 Hudbay Delivers Record Fourth Quarter and Full Year 2023 Results and Provides Annual Guidance
Toronto, Ontario, February 23, 2024 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE: HBM) today released its fourth quarter and full year 2023 financial results, and announced 2024 annual production and cost guidance. All amounts are in U.S. dollars, unless otherwise noted. All production and cost amounts reflect the Copper Mountain mine on a 100% basis, with Hudbay owning a 75% interest in the mine.
Delivering Record Fourth Quarter and Full Year Operating and Financial Results
- Achieved record quarterly and annual revenue of $602.2 million and $1,690.0 million, respectively, with strong consolidated copper production of 45,450 tonnes and record consolidated gold production of 112,776 ounces in the fourth quarter from continued higher grades at the Pampacancha deposit in Peru and the Lalor mine in Manitoba and the contributions of the newly acquired Copper Mountain mine in British Columbia.
- Delivered a significant increase in operating cash flow before change in non-cash working capital to $246.5 million in the fourth quarter, a 35% increase compared to $182.0 million in the third quarter, which was meaningfully higher than prior quarters.
- Achieved 2023 consolidated production guidance for all metals. Full year 2023 copper production of 131,691 tonnes, gold production of 310,429 ounces and silver production of 3,575,234 ounces increased by 26%, 41% and 13%, respectively, compared to 2022.
- Consolidated 2023 cash costi and sustaining cash costi were better than expected and significantly outperformed the 2023 guidance range. Full year 2023 consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, were $0.80 and $1.72, respectively, increasing by 7% and 17%, respectively, compared to 2022.
- Consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter, were $0.16 and $1.09, respectively, improving by 85% and 42%, respectively, compared to the third quarter of 2023.
- Peru operations benefited from continued higher grades at the Pampacancha satellite pit, resulting in 33,207 tonnes of copper production and 49,418 ounces of gold production in the fourth quarter. Full year copper production was within 2023 guidance ranges while gold production exceeded the top end of guidance. Peru cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter improved to $0.54, and full year cash costs significantly improved over 2022 levels and achieved the low end of the 2023 annual cost guidance range.
- Manitoba operations produced 59,863 ounces of gold in the fourth quarter, a quarterly record as higher gold and copper grade zones were mined at Lalor and the New Britannia mill processed significantly higher amounts of gold ore. Full year gold production was well within the 2023 guidance range and exceeded recent expectations of being positioned at the lower end of the range. Manitoba cash cost per ounce of gold produced, net of by-product creditsi, was $434 during the fourth quarter and full year cash costs were within the 2023 annual guidance range.
- British Columbia operations produced 8,508 tonnes of copper at a cash cost per pound of copper produced, net of by-product creditsi, of $2.67 in the fourth quarter. Full year production and cash costs were within Hudbay's post-acquisition guidance ranges. Operational stabilization plans continue to be implemented at the Copper Mountain mine with a focus on opening additional mining faces, optimizing ore feed to the plant and improving plant reliability.
- Fourth quarter net earnings and earnings per share were $33.5 million and $0.10, respectively. After adjusting for a non-cash loss of $34.0 million related to a quarterly revaluation of a closed site environmental reclamation provision and a non-cash revaluation loss of $9.0 million related to the gold prepayment liability, among other items, fourth quarter adjusted earningsi per share were $0.20.
- Cash and cash equivalents increased by $4.6 million to $249.8 million during the fourth quarter due to strong operating cash flows bolstered by higher copper and gold prices and sales volumes enabling a $94.5 million reduction in net debti during the quarter.
Strong Operating Performance Driving Free Cash Flow Generation with Continued Financial Discipline
- Executed on planned higher production levels and achieved continued operating and capital cost efficiencies to generate significant free cash flow in the fourth quarter.
- Achieved adjusted EBITDAi of $274.4 million in the fourth quarter, the highest quarterly level over the last five years and a 44% increase from the previous recent high in the third quarter of 2023.
- Completed $90 million in debt repayments during the fourth quarter with a $30 million net reduction in the company’s revolving credit facility balance and a $59.7 million redemption of the remaining Copper Mountain bonds, well ahead of the 2026 maturity to increase financial flexibility and lower financing costs. Deleveraging efforts continued into the first quarter of 2024 with an additional $10 million repayment of the company’s revolving credit facility balance in January 2024.
- Increased cash and total liquidity by $34.1 million to $573.7 million compared to the end of the third quarter. Net debti reduced to approximately $1,038 million during the fourth quarter, which together with higher levels of adjusted EBITDA, improved the net debt to adjusted EBITDA ratioi to 1.6x compared to 2.0x at the end of 2022.
- Delivered annual discretionary spending reduction targets for 2023 with lower growth capital and exploration expenditures compared to 2022. As a result of a continued focus on discretionary spending reductions, total capital expenditures for 2023 (excluding Copper Mountain) of approximately $243 million were $57 million lower than original guidance levels, a further decrease from the $30 million in reductions announced in the third quarter.
Executing on Growth Initiatives
- Post-acquisition plans to stabilize the Copper Mountain operations are underway with a focus on mining fleet ramp-up activities, accelerated stripping and increasing mill reliability. Achieved the targeted $10 million in annualized corporate synergies as of January 2024.
- Released a NI 43-101 technical report for the Copper Mountain mine in December 2023, which contemplates average annual copper production of 46,500 tonnes in the first five years, 45,000 tonnes in the first ten years and 37,000 tonnes over the 21-year mine life. Average cash costs and sustaining cash costs over the mine life are expected to be $1.84 and $2.53 per pound of copperi, respectively. Several opportunities to further increase production, improve costs and extend mine life are being evaluated for future mine plans.
- Achieved record copper recoveries of 87.4% at the Constancia mill in the fourth quarter of 2023 as a result of the successful completion of the recovery improvement program in the second quarter, on time and on budget.
- Achieved higher copper recoveries above 90% and gold recoveries above 65% at the Stall mill in the second half of 2023 because of the successful ramp up of the Stall mill recovery improvement project in the second quarter, on time and on budget.
- The New Britannia mill achieved record throughput levels averaging 1,650 tonnes per day in 2023 and 1,800 tonnes per day in the fourth quarter, exceeding its original design capacity of 1,500 tonnes per day due to the successful implementation of process improvement initiatives.
- Commenced largest annual exploration program in Snow Lake consisting of geophysical surveys and drill campaigns testing the newly acquired Cook Lake claims, former Rockcliff properties and near-mine exploration at Lalor.
- Advancing a development and exploration drift at the 1901 deposit in Snow Lake, located within 1,000 metres from the underground ramp access to the Lalor mine, with a focus on confirming the optimal mining method for the base metal and gold lenses and converting the inferred mineral resources in the gold lenses to mineral reserves.
- Continuing to evaluate the Flin Flon tailings reprocessing opportunity through advancing metallurgical test work studies and analyzing metallurgical technologies.
"We had a strong end to the year with increased copper production, record gold production and record financial performance in the fourth quarter, resulting in the successful achievement of our annual guidance metrics,” said Peter Kukielski, President and Chief Executive Officer. “2023 was a year of execution and delivery as we realized the higher grades in Peru, achieved record gold production in Manitoba and enhanced our operating base with the addition of the Copper Mountain mine. We continued to demonstrate financial discipline in 2023 through reduced discretionary spending to drive free cash flow generation and debt reduction. These 2023 achievements are a testament to our outstanding team, which continues to deliver the plan while always operating safely and efficiently. Our commitment to continued financial discipline, together with our resilient operating platform, will allow us to prudently advance and unlock value from our leading organic pipeline of brownfield expansion and greenfield exploration and development opportunities.”
2024 Annual Guidance and Outlook
- Consolidated copper production is forecast to increase by 19% to 156,500 tonnesii in 2024, compared to 2023, with continued higher grades in Peru and a full year of British Columbia production.
- Consolidated gold production is forecast to decrease slightly to 291,000 ouncesii in 2024, compared to 2023, due to higher than planned gold grades being mined in Peru in the fourth quarter of 2023 and a deferral of high grade gold zones in Peru to 2025. Total gold production in Peru over the 2023 to 2025 period is expected to be higher than previous guidance levelsii.
- Consolidated cash cost, net of by-product creditsi, in 2024 is expected to be within a range of $1.05 and $1.25 per pound of copper, higher than 2023 as a result of lower gold by-product credits and a full year of contributions from British Columbia.
- Total capital expenditures are expected to be $335 million in 2024, reflecting lower expenditures in Peru, Manitoba and Arizona, offset by higher expenditures in British Columbia associated with accelerated stripping to access higher grades and a reclassification of costs from operating to capitalized stripping versus the recent technical report.
- Exploration expenditures are expected to increase in 2024 as the company executes its largest-ever exploration program in the Snow Lake region, which is being partially funded by a critical minerals premium flow-through financing that was completed in the fourth quarter.
- Continued focus on reducing discretionary spending in 2024 with total growth capital expenditures 23% lower than 2023.
Summary of Fourth Quarter Results
Consolidated copper production in the fourth quarter of 2023 was 45,450 tonnes, an 8% increase from the third quarter of 2023, while consolidated gold production was 112,776 ounces, an 11% increase, and consolidated silver production was 1,197,082 ounces, a 13% increase. The increases in production were primarily due to continued high recoveries in Peru and Manitoba, mining of the high copper and gold grade zones at the Pampacancha deposit and higher gold and copper grade zones at Lalor, record throughput at the New Britannia gold mill, and incremental production from the Copper Mountain mine. Consolidated zinc production in the fourth quarter of 2023 decreased compared to the prior quarter primarily due to lower base metals throughput and lower zinc grades at Lalor, as planned.
Cash generated from operating activities in the fourth quarter of 2023 increased by 50% to $228.5 million compared to $151.9 million in the third quarter of 2023. Operating cash flow before change in non-cash working capital was a record $246.5 million, reflecting an increase of $64.5 million compared to the third quarter. The increase in operating cash flow before change in non-cash working capital was primarily the result of higher copper and gold sales volumes from mining the high copper and gold grade zones of the Pampacancha deposit and higher gold and copper grade zones at Lalor and higher copper and gold metal prices.
Net earnings and earnings per share in the fourth quarter of 2023 were $33.5 million and $0.10, respectively, compared to net earnings and earnings per share of $45.5 million and $0.13, respectively in the third quarter. The results were positively impacted by higher copper, gold and silver sales volumes as well as higher copper, gold and silver realized prices. This was partially offset by a non-cash loss of $34.0 million related to the quarterly revaluation of the environmental reclamation provision at closed sites and a non-cash revaluation loss of $9.0 million related to the gold prepayment liability.
Adjusted net earningsi and adjusted net earnings per sharei in the fourth quarter of 2023 were $71.3 million and $0.20 per share, respectively, after adjusting for the non-cash loss related to the revaluation of the company’s environmental provision and the revaluation loss on the gold prepayment liability, among other items. This compares to adjusted net earnings and adjusted net earnings per share of $24.4 million, and $0.07 in the prior quarter. Fourth quarter adjusted EBITDAi was $274.4 million, an increase of 44% compared to $190.7 million in the third quarter of 2023.
In the fourth quarter of 2023, consolidated cash cost per pound of copper produced, net of by-product creditsi, was $0.16, compared to $1.10 in the third quarter. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.09 in the fourth quarter of 2023 compared to $1.89 in the third quarter. The significant decrease in both was the result of higher copper production and higher by-product credits, partially offset by higher mining, milling and G&A costs from incorporating Copper Mountain.
Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.31 in the fourth quarter of 2023, lower than $2.04 in the third quarter, due to the same reasons outlined above as well as lower corporate selling and administrative expenses.
As at December 31, 2023, total liquidity increased to $573.7 million, including $249.8 million in cash and cash equivalents as well as undrawn availability of $323.9 million under the company’s revolving credit facilities. Net debt declined by $94.5 million to $1,037.7 million as at December 31, 2023. During the quarter, Hudbay redeemed, in full, the remaining $59.7 million of outstanding Copper Mountain bonds and reduced the net balance drawn under the revolving credit facilities by $30 million. Based on continued free cash flow generation in the fourth quarter of 2023, the company continues to make progress on the deleveraging targets set out in the “3-P” plan for sanctioning Copper World. Current liquidity combined with cash flow from operations is expected to be sufficient to meet liquidity needs for the foreseeable future.
Summary of Full Year Results
Hudbay achieved its 2023 consolidated production guidance for all metals. On a business unit stand-alone basis, Peru exceeded the top end of the gold production guidance range, Manitoba exceeded the top end of the copper production guidance range and Copper Mountain exceeded the top end of the silver production guidance range for the portion of 2023 since acquisition. Consolidated copper, gold and silver production for the full year 2023 increased by 26%, 41% and 13%, respectively, compared to 2022 with the acquisition of Copper Mountain as well as higher throughput and recoveries in Peru and Manitoba and higher overall copper, gold and silver grades.
Consolidated cash cost per pound of copper produced, net of by-product creditsi, in 2023 was $0.80, compared to $0.86 in 2022, and achieved the low end of the 2023 annual cost guidance range. This decrease was mainly the result of higher copper production and higher by-product credits, partially offset by higher mining and milling costs from incorporating Copper Mountain. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.72 in 2023, compared to $2.07 in 2022, outperforming 2023 guidance expectations. This decrease was driven by the above reasons as well as the lower cash sustaining capital expenditures. Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.92 in 2023, lower than $2.26 in 2022, due to the same reasons outlined above partially offset by higher corporate selling and administrative expenses.
Cash generated from operating activities decreased to $476.9 million in 2023 from $487.8 million in 2022 primarily due to a $189.2 million decrease in non-cash working capital caused by timing and changes in provisionally priced receivables and an increase in inventory. Operating cash flow before change in non-cash working capital increased to $570.0 million from $391.7 million in 2022. The increase in operating cash flow before change in non-cash working capital was primarily the result of higher copper and gold sales volumes and higher gold prices, partially offset by lower zinc sales volumes, lower copper and zinc metal prices and higher treatment and refining charges. Zinc sales volumes were lower than the prior year due to the planned closure of the 777 mine in June 2022.
Net earnings and earnings per share for 2023 were $69.5 million and $0.22, respectively, compared to 2022 net earnings and earnings per share of $70.4 million and $0.27, respectively. Full year 2023 net earnings were impacted by $21.4 million in non-cash mark-to-market losses arising from the revaluation of the gold prepayment liability, investments and share-based compensation, partially offset by a non-cash gain of $11.4 million related to the revaluation of the Flin Flon environmental reclamation provision. The prior period results benefited from a non-cash $133.5 million revaluation gain for the Flin Flon environmental reclamation provision, partially offset by a $95.0 million pre-tax impairment loss related to the previous stand-alone development plan for the Rosemont deposit. Full year 2023 adjusted EBITDAi was $647.8 million, an increase of 36% compared to $475.9 million in 2022.
Consolidated Financial Condition ($000s) Dec. 31, 2023 Sep. 30, 2023 Dec. 31, 2022 249,794
Cash and cash equivalents 245,217 225,665
| Total long-term debt | 1,287,536 | 1,377,443 | 1,184,162 |
| Net debt1 | 1,037,742 | 1,132,226 | 958,497 |
| Working capital2 | 128,463 | 76,534 |
135,913
| Total assets | 5,312,634 | 5,250,596 | 4,325,943 |
| Equity3 | 2,096,811 | 2,044,684 | 1,571,809 |
| Net debt to adjusted EBITDA1,4 | 1.6 | 2.3 | 2.0 |
1 Net debt and net debit to adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the "Non-IFRS Financial Performance 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.
3 Equity attributable to owners of the company.
4 Net debt to adjusted EBITDA for the 12 month period.
Consolidated Financial Performance Three Months Ended
| Dec. 31, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
|---|---|---|---|
| Revenue | $000s 602,189 | 480,456 | 321,196 |
| Cost of sales | 374,057 | 251,520 |
$000s 405,433
| Earnings (loss) before tax | $000s | 80,982 | 84,149 | (14,287) |
| Earnings (loss) | $000s | 33,528 | 45,490 | (17,441) |
| Basic and diluted earnings (loss) per share | $/share | 0.10 | 0.13 | (0.07) |
| Adjusted earnings per share1 | $/share | 0.20 | 0.07 | 0.01 |
Operating cash flow before change in non- $ millions 246.5 182.0 109.1 cash working capital Adjusted EBITDA1 $ millions 274.4 190.7 124.7
Year Ended Dec. 31, 2023 Dec. 31, 2022
| Revenue | $000s | 1,690,030 | 1,461,440 |
| Cost of sales | $000s | 1,297,469 | 1,184,552 |
| Earnings before tax | $000s | 151,830 | 95,815 |
| Earnings | $000s | 70,382 |
69,543
Basic and diluted earnings per share $/share 0.22 0.27 Adjusted earnings per share1 $/share 0.23 0.10 Operating cash flow before change in non- $ millions 570.0 391.7 cash working capital
647.8
Adjusted EBITDA1 $ millions 475.9 1 Adjusted (loss) earnings 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 Performance Measures” section.
Consolidated Production and Cost Performance5 Three Months Ended Dec. 31, 2023 Sep. 30, 2023 Dec. 31, 2022 Contained metal in concentrate and doré produced1
| Copper | tonnes | 45,450 | 41,964 | 29,305 |
| Gold | ounces | 112,776 | 101,417 | 53,920 |
| Silver | ounces | 1,197,082 | 1,063,032 | 795,015 |
| Zinc | tonnes | 5,747 | 10,291 | 6,326 |
| Molybdenum | tonnes | 397 | 466 | 344 |
Payable metal sold
| Copper | tonnes | 44,006 | 39,371 | 25,415 |
| Gold2 | ounces | 104,840 | 74,799 | 47,256 |
| Silver2 | ounces | 1,048,877 | 748,955 | 559,306 |
| tonnes | 7,385 | 7,125 | 8,230 |
Zinc3 Molybdenum tonnes 468 426 421
Consolidated cash cost per pound of copper produced4
| Cash cost | $/lb | 0.16 | 1.10 | 1.08 |
| Sustaining cash cost | $/lb | 1.09 | 1.89 | 2.21 |
| All-in sustaining cash cost | $/lb | 1.31 | 2.04 | 2.41 |
Year Ended Dec. 31, 2023 Dec. 31, 2022 Contained metal in concentrate and doré produced1
| Copper | tonnes | 131,691 | 104,173 |
| Gold | ounces | 310,429 | 219,700 |
| Silver | ounces | 3,161,294 |
3,575,234
Zinc tonnes 34,642 55,381 Molybdenum tonnes 1,566 1,377
Payable metal sold
| Copper | tonnes | 124,996 | 94,473 |
| Gold2 | ounces | 276,893 | 213,415 |
| Silver2 | ounces | 3,145,166 | 2,978,485 |
| tonnes | 28,779 | 59,043 |
Zinc3 Molybdenum tonnes 1,462 1,352
Consolidated cash cost per pound of copper produced4
| Cash cost | $/lb | 0.80 | 0.86 |
| Sustaining cash cost | $/lb | 1.72 | 2.07 |
| All-in sustaining cash cost | $/lb | 1.92 | 2.26 |
1 Includes production results from the Copper Mountain mine following the June 20, 2023 acquisition completion date. Production results from the Copper Mountain mine represents the period from June 20, 2023 acquisition completion date through to the end of the fourth quarter of 2023. Includes 100% of Copper Mountain mine production. Hudbay owns 75% of the Copper Mountain mine. As Copper Mountain was acquired on June 20, 2023, there were no comparative 2022 figures.
2 Includes total payable gold and silver in concentrate and in doré sold.
3 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
4 For the three months ended December 31, 2023 and September 30, 2023, this metric includes payable zinc in concentrate sold. For the three months ended December 31, 2022, this metric also included refined zinc metal and payable zinc in concentrate sold. For the year ended December 31, 2023, this metric includes payable zinc in concentrate sold. For the year ended December 31, 2022, this metric also included payable refined zinc metal sold.
5 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 Performance 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, | ||
| 2023 | 2023 | 2022 | 2023 | 2022 | ||
| Constancia ore mined1 | tonnes | 973,176 | 1,242,198 | 5,614,918 | 9,265,954 | 25,840,435 |
| Copper | % | 0.30 | 0.30 | 0.40 | 0.32 | 0.35 |
| Gold | g/tonne | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 |
| Silver | g/tonne | 2.26 | 2.91 | 3.48 | 2.53 | 3.40 |
| Molybdenum | % | 0.01 | 0.01 | 0.01 |
0.01 0.01
| Pampacancha ore mined | tonnes | 5,556,613 | 5,894,013 | 3,771,629 | 14,756,416 | 8,319,250 |
| Copper | % | 0.56 | 0.53 | 0.37 | 0.51 | 0.33 |
| Gold | g/tonne | 0.32 | 0.30 | 0.29 | 0.33 | 0.29 |
| Silver | g/tonne | 4.84 | 4.22 | 3.84 | 4.28 | 4.06 |
| Molybdenum | % | 0.02 | 0.01 | 0.01 |
0.01 0.01
| Total ore mined | tonnes | 6,529,789 | 7,136,211 | 9,386,547 | 24,022,370 | 34,159,685 |
| Strip ratio2 | 1.26 | 1.36 | 0.97 | 1.51 | 1.13 | |
| tonnes | 7,895,109 | 7,795,735 | 30,522,294 | |||
| Ore milled | 7,939,044 | 30,720,929 | ||||
| Copper | % | 0.48 | 0.43 | 0.41 | 0.39 | 0.34 |
| Gold | g/tonne | 0.25 | 0.21 | 0.12 | 0.16 | 0.09 |
| Silver | g/tonne | 4.20 | 3.75 | 3.93 | 3.62 | 3.58 |
| Molybdenum | % | 0.01 | 0.02 | 0.01 | 0.01 | 0.01 |
| Copper recovery | % | 87.4 | 85.2 | 85.1 | 84.2 | 85.0 |
| Gold recovery | % | 77.6 | 74.8 | 69.6 | 71.8 | 63.6 |
| Silver recovery | % | 78.0 | 73.2 | 66.5 | 70.0 | 65.7 |
| Molybdenum recovery | % | 33.6 | 37.2 | 37.7 | 35.8 | 34.8 |
Contained metal in concentrate
| Copper | tonnes | 33,207 | 29,081 | 27,047 | 100,487 | 89,395 |
| Gold | ounces | 49,418 | 40,596 | 20,860 | 114,218 | 58,229 |
| Silver | ounces | 836,208 | 697,211 | 655,257 | 2,505,229 | 2,309,352 |
| Molybdenum | tonnes | 466 | 344 | 1,377 |
397 1,566 Payable metal sold
| Copper | tonnes | 31,200 | 27,490 | 23,789 | 96,213 | 79,805 |
| Gold | ounces | 38,114 | 32,757 | 15,116 | 97,176 | 49,968 |
| Silver | ounces | 460,001 | 411,129 | 2,045,678 |
703,679 2,227,419
Molybdenum tonnes 468 426 421 1,462 1,352 Combined unit operating $/tonne 12.24 12.20 13.64 12.47 12.78 cost3,4,5
0.54 1.07
Cash cost5 $/lb 0.83 1.34 1.58 Sustaining cash cost5 $/lb 1.21 1.51 2.09 1.81 2.35
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled. 2 Strip ratio is calculated as waste mined divided by ore mined.
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 Excludes approximately $0.7 million, or $0.09 per tonne, of COVID-related costs during the three months ended December 31, 2022 and $5.2 million or $0.17 per tonne, during the twelve months ended December 31, 2022.
5 Combined unit costs, 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 Performance Measures” section of this news release.
During the fourth quarter of 2023, the Peru operations produced 33,207 tonnes of copper, 49,418 ounces of gold, 836,208 ounces of silver and 397 tonnes of molybdenum. Fourth quarter 2023 production of copper, gold and silver increased 14%, 22% and 20%, respectively, over the third quarter with continued higher copper and precious metal grades, higher recoveries and higher throughput. Peru’s full year 2023 production of copper, gold, silver and molybdenum was 12%, 96%, 8% and 14% higher, respectively, than 2022 for the same reasons outlined above. Copper production was in line with the company’s annual guidance range, whereas silver and molybdenum production were near the upper end and gold production exceeded the top end of the annual guidance range by 6%.
Total ore mined in the fourth quarter of 2023 decreased by 9% compared to the third quarter due to continued phase five stripping activities at Constancia and a significant increase in Pampacancha mining activity which entails a higher amount of stripping. The decrease in total mined ore was in line with the mine plan, with ore stockpiles supplementing mill feed during the quarter. Ore mined from Pampacancha during the fourth quarter was 5.6 million tonnes, at average grades of 0.56% copper and 0.32 grams per tonne gold.
Ore milled during the fourth quarter of 2023 was consistent with the prior quarter. Milled copper and gold grades increased by 12% and 19%, respectively, in the fourth quarter compared to the third quarter due to continued contribution of higher grade copper and gold ore from Pampacancha.
Recoveries of copper, gold and silver during the fourth quarter of 2023 were 87.4%, 77.6% and 78.0%, respectively, with recoveries of all metals improving quarter over quarter, in line with metallurgical models. The Constancia mill achieved record copper recoveries as a result of the successful completion of the recovery improvement program in the second quarter of 2023, as planned, ahead of the start of the period of significantly higher grades from the Pampacancha pit. The program scope was to increase copper recoveries by 2% by increasing the rougher mass, and the mill continues to achieve the targeted higher copper recoveries. Copper recoveries in the fourth quarter also benefited from higher overall head grades and lower contaminants.
Ore mined during 2023 was 30% lower than 2022 due to the same factors as the quarterly variance as well as increased stockpile processing early in 2023 to ration fuel during the protests and civil unrest experienced in Peru. Copper recoveries in 2023 were 1% lower than 2022 due to higher levels of contaminants in processed stockpile ore during the first half of 2023. Gold and silver recoveries in 2023 were 13% and 7% higher, respectively, than 2022 due to increased processing of higher grade Pampacancha ore.
Combined mine, mill and G&A unit operating costsi in the fourth quarter were slightly higher than the third quarter primarily due to the costs associated with the scheduled semi-annual plant maintenance shutdown. Combined mine, mill and G&A unit operating costsi for the full year 2023 were 2% lower than 2022 primarily due to lower mining costs as a result of lower ore mined and higher capitalized stripping.
Peru’s cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter of 2023 was $0.54, a decrease of 35% compared to the third quarter due to higher by-product credits mainly from gold, higher capitalized stripping and higher copper production. This was partially offset by higher profit-sharing expenses and higher treatment, refining and freight costs. Cash cost per pound of copper produced, net of by-product creditsi, in 2023 was $1.07, a 32% reduction from 2022, and achieved the lower end of the cost guidance range due to the same factors noted above.
Sustaining cash cost per pound of copper produced, net of by-product creditsi, for the fourth quarter and for the year ended 2023 were 20% and 23% lower, respectively, than the third quarter and the prior year primarily due to the same factors affecting cash cost noted above and lower sustaining capital expenditures. Total annual sustaining capital expenditures in Peru were $27.9 million lower than the original guidance, exceeding the $10 million previously reduced target, primarily a result of lower capitalized stripping costs.
Manitoba Operations Review
| Manitoba Operations Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| Dec. 31, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, |
| 2023 | 2023 | 2022 | 2023 | 2022 |
Lalor
Ore mined tonnes 372,384 367,491 369,453 1,526,729 1,516,203
5.92 4.74
Gold g/tonne 5.08 4.00 4.00
| Copper | % | 1.04 | 1.02 | 0.73 | 0.86 | 0.73 |
| Zinc | % | 2.20 | 3.31 | 2.17 | 3.00 | 3.14 |
| Silver | g/tonne | 28.92 | 27.80 | 19.37 | 24.51 | 21.96 |
New Britannia
| Ore milled | tonnes | 165,038 | 146,927 | 141,142 | 596,912 | 542,269 |
| Gold | g/tonne | 8.03 | 6.93 | 6.11 | 6.76 | 6.28 |
| Copper | % | 1.46 | 1.22 | 0.91 | 1.03 | 0.81 |
| Zinc | % | 0.85 | 0.90 | 0.67 | 0.84 | 0.80 |
| Silver | g/tonne | 27.97 | 23.88 | 22.09 | 25.11 | 20.97 |
| Gold recovery - concentrate | % | 64.7 | 60.3 | |||
| 58.1 | 56.6 | 60.0 | ||||
| Copper recovery - concentrate | % | 91.6 | 97.4 | 89.3 | 93.3 | 90.7 |
| Silver recovery - concentrate | % | 61.0 | 63.2 | 55.4 | 60.7 | 60.6 |
Stall Concentrator
| Ore milled | tonnes | 228,799 | 255,516 | 204,350 | 965,567 | 968,638 |
| Gold | g/tonne | 4.22 | 3.70 | 2.50 | 3.45 | 2.86 |
| Copper | % | 0.73 | 0.77 | 0.61 | 0.74 | 0.71 |
| Zinc | % | 4.88 | 3.43 | 4.70 |
3.20 4.36
| Silver | g/tonne | 28.63 | 28.82 | 19.24 | 24.19 | 22.81 |
| Gold recovery | % | 67.5 | 67.8 | 62.4 | 64.8 | 58.0 |
| Copper recovery | % | 92.0 | 93.9 | 89.0 | 90.4 | 87.2 |
| Zinc recovery | % | 78.5 | 82.6 | 90.1 | 82.2 | 86.6 |
| Silver recovery | % | 61.8 | 64.9 | 56.6 | 61.4 | 56.8 |
Total contained metal in concentrate and doré1
Gold ounces 56,213 33,060 161,471
59,863 187,363
| Copper | tonnes | 3,735 | 3,580 | 2,258 | 12,154 | 14,778 |
| Zinc | tonnes | 5,747 | 10,291 | 6,326 | 34,642 | 55,381 |
| Silver | ounces | 255,579 | 264,752 | 139,758 | 851,723 | 851,942 |
Total payable metal sold
| Gold2 | ounces | 63,635 | 36,713 | 32,140 | 171,297 | 163,447 |
| Copper | tonnes | 3,687 | 2,925 | 1,626 | 10,708 | 14,668 |
| Zinc3 | tonnes | 7,385 | 7,125 | 9,230 | 28,779 | 59,043 |
| Silver2 | ounces | 246,757 | 197,952 | 148,177 | 728,304 | 932,807 |
| Combined unit operating cost4,5 | C$/tonne | 217 | 241 | 195 |
216 217
Gold cash cost5 $/oz 434 670 922 727 297 Gold sustaining cash cost5 $/oz 788 939 1,795 1,077 1,091 1 Doré includes sludge, slag and carbon fines in three months ended December 31, 2023 and September 30, 2023.
2 Includes total payable precious metals in concentrate and doré sold.
3 Includes refined zinc metal and payable zinc in concentrate sold.
4 Reflects combined mine, mill and G&A costs per tonne of ore milled.
5 Combined unit operating cost, cash cost and sustaining cash cost per ounce of gold 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 Performance Measures” section of this news release.
The Manitoba operations produced a record 59,863 ounces of gold during the fourth quarter of 2023, along with 3,735 tonnes of copper, 5,747 tonnes of zinc and 255,579 ounces of silver. Production of gold and copper increased by 6% and 4%, respectively, in the fourth quarter compared to the third quarter, while production of silver and zinc decreased by 3% and 44%, respectively. This was due to mining of higher grade gold zones with a focus on higher quality ore production and higher recoveries at the New Britannia and Stall mills. Despite significantly higher metal production in the fourth quarter, 2023 production of copper and zinc was lower by 18% and 37%, respectively, than in 2022, mainly due to the loss of production from the closure of the 777 mine in June 2022 and lower comparative zinc grades. Production of gold in 2023 was 16% higher than in 2022 while silver production was unchanged year-over-year. The production of all metals achieved 2023 production guidance, while copper exceeded the top end of 2023 annual guidance range.
In Manitoba, the company continues to focus on improvement initiatives aimed at supporting higher production levels, minimizing dilution and enhancing metal recoveries at the Snow Lake operations. A significant focus continues to be placed on improving the quality of ore production at Lalor mine, employing techniques such as stope redesigns, grade control practices prior to blasting, assaying blasthole cuttings and implementing mine design adjustments to mitigate dilution. These proactive measures have successfully reduced the inclusion of waste rock in the mining cycle and increased gold, copper, and silver grades during the fourth quarter.
Optimization of development drift size has led to a 15% reduction in waste volume and an 18% decrease in unit development costs in 2023 compared to 2022. Higher shaft availability has led to efficient ore hoisting and has eliminated the need for trucking ore to surface, resulting in a 5% increase in tonnes hoisted in 2023 compared to 2022. Despite encountering some production challenges in deeper mining areas due to longer haul distances, smaller stope dimensions, and lower ore bulk density, the team is actively pursuing initiatives to continue to bolster efficiency and further enhance mucking productivity.
Additionally, the company advanced optimization initiatives at New Britannia mill to achieve higher throughput rates by prioritizing process improvements and seamlessly integrating additional gold ore feed from the Lalor mine. This reallocation of ore has led to reduced feed to Stall mill, prompting a careful evaluation of lower tonnage set points to optimize plant operations. The team has also started exploring opportunities to share maintenance services with New Britannia during shutdown periods which, if successful, would reduce overall contractor requirements.
At Lalor, Hudbay achieved higher development advance rates during the fourth quarter compared to prior quarters of 2023. A comprehensive review of the long-range mine plan for zone 40 has led to significantly reduced future capital development needs by transitioning to a more selective mining method, thereby enhancing the reserve grade for this mining front. Lalor ore mined during the fourth quarter increased by 1% compared to the third quarter. Notably, gold grades were 5.92 grams per tonne in the quarter, a 17% increase from the third quarter.
Total ore mined at the Manitoba operations in 2023 was 24% lower than in 2022 mainly due to the planned closure of the 777 mine in June 2022. However, total ore mined at Lalor in 2023 was 1% higher than in 2022. Gold, copper and silver grades mined at Lalor during 2023 were 19%, 18% and 12% higher than in 2022, reflecting the successful execution of the strategic mine plan. Zinc grades mined at Lalor for the full year 2023 were 4% lower compared to the same period in 2022, consistent with the mine plan.
The Stall mill processed slightly less ore in the fourth quarter of 2023 compared to the third quarter, due to more ore being sent to New Britannia as the mill exceeded design throughput. After the commissioning of the Stall mill recovery improvement project in the second quarter of 2023, the operations continue to focus on optimizing circuits to achieve targeted recoveries by reducing primary grind size, refining the flotation circuit balance and mass pull and reagent selection. These adjustments have proven highly effective, resulting in notably higher recoveries for copper above 90% in the second half of 2023. In addition, the Stall mill achieved its targeted gold recovery levels of 67.5% in the fourth quarter, bringing the 2023 annual recovery to 64.8%, compared to 58.0% in 2022.
Process improvement initiatives at New Britannia have been successfully implemented with minimal capital outlays, enabling the company to reach progressively higher production targets during the fourth quarter. The New Britannia mill averaged approximately 1,800 tonnes per day in the fourth quarter, approximately 12% above average levels in the third quarter of 2023.
Combined mine, mill and G&A unit operating costsi in the fourth quarter of 2023 slightly decreased compared to the third quarter reflecting lower overall costs partially offset by lower total ore milled. Combined mine, mill and G&A unit operating costs for the full year 2023 were C$217 per tonne reflecting the standalone cost structure of the Snow Lake operations in 2023 after the closure of the Flin Flon operations in June 2022.
Manitoba’s cash cost per ounce of gold produced, net of by-product creditsi, has trended lower throughout 2023, averaging $434 in the fourth quarter. Cash costs were significantly lower in the fourth quarter, with higher by-product credits and higher gold production, in accordance with the mine plan. Full year 2023 cash cost per ounce of gold produced, net of by-product creditsi, was $727, which was higher than 2022 costs primarily due to significantly lower by-product credits partially offset by lower overall costs due to the closure of the 777 mine in June 2022 and higher gold production. Full year 2023 cash cost per ounce of gold produced, net of by-product creditsi, was within annual guidance range.
Sustaining cash cost per ounce of gold produced, net of by-product creditsi, for the fourth quarter of 2023 was $788, a decrease of 16% compared to the third quarter due to the same factors affecting cash cost combined with lower sustaining capital expenditures. Total annual sustaining capital expenditures in Manitoba are $19 million lower than the original 2023 guidance levels of $75 million primarily a result of lower capital development costs realized at Lalor as the team focuses on cost efficiencies. Sustaining cash cost per ounce of gold produced, net of by-product creditsi, in 2023 was $1,077, a decrease of 1% from 2022, primarily due to the same factors affecting fourth quarter sustaining cash cost noted above.