TSX, NYSE – HBM 2024 No. 6 Hudbay Delivers Strong First Quarter 2024 Results
Toronto, Ontario, May 14, 2024 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE: HBM) today released its first quarter 2024 financial results. 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.
"We delivered another consecutive quarter of strong operational and financial performance with steady free cash flow generation and further debt reduction,” said Peter Kukielski, President and Chief Executive Officer. “These results demonstrate the strength of our diversified operating base, with continued contributions from the high-grade Pampacancha deposit in Peru, better-than-planned gold production in Manitoba and benefits starting to be realized from operational stabilization efforts at the Copper Mountain mine in British Columbia. We are well on track to achieve all of our production and cost guidance metrics. Hudbay’s resilient operating platform offers leading exposure to copper and unique complementary exposure to gold, which together with our quality pipeline of growth assets, provide significant upside potential for further value creation at higher copper and gold prices.”
Delivered Strong First Quarter Operating and Financial Results; Production and Cost Guidance Affirmed
- Enhanced operating platform delivered consolidated copper production of 34,749 tonnes and stronger than expected gold production of 90,392 ounces in the first quarter.
- Solid operating performance was driven by continued high copper and gold grades at the Pampacancha deposit in Peru, continued high gold grades at Lalor and strong performance from the New Britannia mill in Manitoba, and the operational stabilization efforts at the Copper Mountain mine in British Columbia.
- Achieved revenue of $525.0 million and operating cash flow before change in non-cash working capital of $147.5 million in the first quarter of 2024.
- Affirmed full year 2024 consolidated copper production and cash cost guidance of 137,000 to 176,000 tonnes of copper at a cash cost of $1.05 to $1.25 per poundi and sustaining cash cost of $2.00 to $2.45 per poundi.
- Consolidated cash costi and sustaining cash costi per pound of copper produced, net of by-product creditsi, in the first quarter of 2024, were $0.16 and $1.03, respectively, consistent with strong levels achieved in the fourth quarter of 2023.
- Peru operations benefited from continued contributions from the high-grade Pampacancha satellite pit, resulting in 24,576 tonnes of copper and 29,144 ounces of gold produced in the first quarter of 2024. Peru cash cost per pound of copper produced, net of by-product creditsi, in the first quarter improved to $0.43, a 20% decrease compared to the fourth quarter of 2023.
- Manitoba operations produced 56,831 ounces of gold in the first quarter of 2024, exceeding management's quarterly cadence expectations as New Britannia continues to operate well above nameplate capacity and budgeted throughput levels. Manitoba cash cost per ounce of gold produced, net of by-product creditsi, was $736 during the first quarter of 2024 and well within guidance expectations.
- British Columbia operations produced 7,024 tonnes of copper at a cash cost per pound of copper produced, net of by-product creditsi, of $3.49 in the first quarter. Operational stabilization plans continue to be advanced at the Copper Mountain mine.
- First quarter net earnings and earnings per share were $18.5 million and $0.05, respectively. After adjusting for a non-cash gain of $5.3 million related to a quarterly revaluation of the closed site environmental reclamation provision, a $12.8 million mark-to-market adjustment loss related to share-based compensation, gold prepayment liability and strategic gold and copper hedges and a $9.0 million write-down of property, plant and equipment (“PP&E”), among other items, first quarter adjusted earningsi per share were $0.16.
- Cash and cash equivalents increased by $34.6 million to $284.4 million during the first quarter due to strong operating cash flows bolstered by higher copper and gold prices and sales volumes enabling a $43.5 million reduction in net debti during the quarter.
Operating Performance and Financial Discipline Driving Free Cash Flow and Deleveraging
- Unique copper and gold diversification provides exposure to higher copper and gold prices and attractive free cash flow generation.
- Executed on planned higher production levels and achieved continued operating and capital cost efficiencies to generate significant free cash flow in the first quarter.
- Realized strong margins by maintaining low consolidated cash cost of $0.16 per pound of copper in the first quarter while benefiting from higher copper prices, positioning the company for continued significant cash flow generation in a period of high commodity prices.
- Achieved adjusted EBITDAi of $214.2 million in the first quarter and a trailing twelve month adjusted EBITDAi of $760.5 million.
- Reduced net debti to $994.2 million during the first quarter, which, together with higher levels of adjusted EBITDAi, further improved the company’s net debt to adjusted EBITDA ratioi to 1.3x compared to 1.6x at the end of 2023.
- Continued deleveraging efforts with a $10 million repayment of the revolving credit facility balance in January 2024 and an additional $10 million repayment after quarter-end in May 2024.
- Increased cash and total liquidity by $45.2 million to $618.9 million as at March 31, 2024 compared to the end of 2023.
Continued Execution of Growth Initiatives to Further Enhance Copper and Gold Exposure
- Post-acquisition plans to stabilize the Copper Mountain operations remain in progress, with a focus on mining fleet ramp-up activities, accelerated stripping and increasing mill reliability. Achieved better than planned copper recoveries of 83% in the first quarter, and stabilization benefits continued to be realized subsequent to quarter end with 83% copper recoveries and approximately 40,000 tonnes per day average mill throughput in the month of April.
- Constancia’s expected mine life extended by three years to 2041 as a result of mineral reserve conversion with the addition of a further mining phase at the Constancia pit.
- The New Britannia mill achieved record throughput levels, averaging 1,870 tonnes per day in the first quarter, exceeding its original design capacity of 1,500 tonnes per day due to the successful implementation of process improvement initiatives and effective preventative maintenance measures. Received permit to increase New Britannia throughput to 2,500 tonnes per day.
- Achieved copper recoveries of approximately 92% and gold recoveries of approximately 68% at the Stall mill in the first quarter of 2024 as the company continues to benefit from the Stall mill recovery improvement project, which was completed in 2023.
- The development of an access drift to the 1901 deposit in Snow Lake remains on track and on budget. 1901 is located within 1,000 metres of the existing underground ramp access to the Lalor mine. The drift is expected to reach mineralization in late-2024, which is intended to enable confirmation of the optimal mining method and conducting drilling to further evaluate the orebody and upgrade inferred gold resources to reserves.
- Progressing the three prerequisites plan (the “3-P plan”) for sanctioning Copper World with deleveraging advancing towards targeted levels and remaining key state permits expected in 2024.
- Drill permitting for highly prospective Maria Reyna and Caballito properties near Constancia continues to advance through the regulatory process with environmental impact assessment applications submitted for both properties in recent months.
- Largest annual exploration program in Snow Lake underway consisting of geophysical surveys and drill campaigns testing the newly acquired Cook Lake claims, former Rockcliff properties and near-mine exploration at Lalor.
- Advancing Flin Flon tailings reprocessing opportunities through metallurgical test work and early economic evaluation to potentially produce critical minerals and precious metals while reducing the environmental footprint.
- Entered into an option agreement with Marubeni Corporation relating to three exploration projects located near Hudbay's existing Flin Flon processing facilities.
Summary of First Quarter Results
Consolidated copper production of 34,749 tonnes in the first quarter of 2024 declined from the strong levels achieved in the fourth quarter of 2023 but was in line with mine plan expectations. Consolidated gold production of 90,392 ounces in the first quarter exceeded expectations. First quarter production benefitted from the continued mining of high copper and gold grades at the Pampacancha deposit in Peru, continued high gold grades mined at Lalor and strong performance from the New Britannia mill in Manitoba, and the operational stabilization efforts at the Copper Mountain mine in British Columbia. Full year 2024 production guidance for all metals has been affirmed.
Industry-leading consolidated cash cost per pound of copper produced, net of by-product creditsi, was $0.16 in the first quarter of 2024, consistent with the favourable levels achieved in the fourth quarter of 2023. This was primarily the result of continued high by-product credits, partially offset by higher mining costs and lower copper production. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.03 in the first quarter of 2024 compared to $1.09 in the fourth quarter of 2023. This improvement was primarily due to lower sustaining capital expenditures. Full year 2024 consolidated cash cost, sustaining cash cost and capitalized expenditures guidance has been affirmed.
Cash generated from operating activities in the first quarter of 2024 of $139.7 million was lower than the fourth quarter of 2023 but better than anticipated, primarily because of strong gold sales volumes and higher realized copper prices, partially offset by a $30.1 million increase in cash taxes paid mainly in Peru. Operating cash flow before change in noncash working capital of $147.5 million also exceeded expectations due to the same reasons.
Similarly, adjusted EBITDAi of $214.2 million in the first quarter of 2024 benefited from the solid operating performance outlined above and remained comparable to the strong levels achieved in recent quarters, including $274.4 million in the fourth quarter and $190.7 million in the third quarter of 2023.
Net earnings and earnings per share in the first quarter of 2024 were $18.5 million and $0.05, respectively, compared to net earnings and earnings per share of $33.5 million and $0.10, respectively in the fourth quarter of 2023. Adjusted net earningsi and adjusted net earnings per sharei in the first quarter of 2024 were $57.6 million and $0.16 per share, after adjusting for a $5.3 million non-cash gain related to the quarterly revaluation of the environmental reclamation provision at the closed sites, a $12.8 million mark-to-market revaluation loss related to share-based compensation expense, a revaluation of the gold prepayment liability and a revaluation of the company’s strategic gold and copper hedges, and a $9.0 million write-down of PP&E, among other items.
As at March 31, 2024, total liquidity increased to $618.9 million, including $284.4 million in cash and cash equivalents as well as undrawn availability of $334.5 million under the company’s revolving credit facilities. Net debt declined by $43.5 million during the quarter to $994.2 million as at March 31, 2024. Based on expected free cash flow generation beyond the first quarter of 2024, the company continues to make progress on the deleveraging targets as outlined in the 3-P plan for sanctioning Copper World.
| Consolidated Financial Condition ($000s) | Mar. 31, 2024 | Dec. 31, 2023 | Mar. 31, 2023 |
|---|---|---|---|
| Cash and cash equivalents | 284,385 | 249,794 | 255,563 |
| Total long-term debt | 1,278,587 | 1,287,536 | 1,225,023 |
| Net debt1 | 994,202 | 1,037,742 | 969,460 |
| Working capital2 | 200,850 | 135,913 | 100,987 |
| Total assets | 5,231,283 | 5,312,634 | 4,367,982 |
| Equity3 | 2,107,532 | 2,096,811 | 1,574,521 |
| Net debt to adjusted EBITDA1,4 | 1.3 | 1.6 | 2.1 |
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 interim 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
| Mar. 31, 2024 | Dec. 31, 2023 | Mar. 31, 2023 | ||
|---|---|---|---|---|
| Revenue | $000s | 524,989 | 602,189 | 295,219 |
| Cost of sales | $000s | 373,035 | 405,433 | 228,706 |
| Earnings before tax | $000s | 67,750 | 80,982 | 17,430 |
| Net earnings | $000s | 18,535 | 33,528 | 5,457 |
| Basic earnings per share | $/share | 0.05 | 0.10 | 0.02 |
| Adjusted earnings per share1 | $/share | 0.16 | 0.20 | 0.00 |
| Operating cash flow before change in non- | $ millions | 147.5 | 246.5 | 85.6 |
cash working capital Adjusted EBITDA1 $ millions 214.2 274.4 101.9 1 Adjusted 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 Performance Three Months Ended1 Mar. 31, 2024 Dec. 31, 2023 Mar. 31, 2023 Contained metal in concentrate and doré produced2
| Copper | tonnes | 34,749 | 45,450 | 22,562 |
| Gold | ounces | 90,392 | 112,776 | 47,240 |
| Silver | ounces | 947,917 | 1,197,082 | 702,809 |
| Zinc | tonnes | 8,798 | 5,747 | 9,846 |
| Molybdenum | tonnes | 397 | 397 | 289 |
Payable metal sold
| Copper | tonnes | 33,608 | 44,006 | 18,541 |
| Gold3 | ounces | 108,081 | 104,840 | 49,720 |
| Silver3 | ounces | 1,068,848 | 1,048,877 | 541,884 |
| Zinc | tonnes | 6,119 | 7,385 | 5,628 |
| Molybdenum | tonnes | 415 | 468 | 254 |
Consolidated cash cost per pound of copper produced4
| Cash cost | $/lb | 0.16 | 0.16 | 0.85 |
| Sustaining cash cost | $/lb | 1.03 | 1.09 | 1.83 |
| All-in sustaining cash cost | $/lb | 1.32 | 1.31 | 2.07 |
1Includes 100% of Copper Mountain mine production. Hudbay owns 75% of Copper Mountain mine. As Copper Mountain was acquired on June 20, 2023, there were no comparative figures for the three months ended March 31, 2023.
2 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
3 Includes total payable gold and silver in concentrate and in doré 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 Performance Measures” section of this news release.
Peru Operations Review
Peru Operations Three Months Ended
| Mar. 31, 2024 | Dec. 31, 2023 | Mar. 31, 2023 | ||
|---|---|---|---|---|
| Constancia ore mined1 | tonnes | 2,559,547 | 973,176 | 3,403,181 |
| Copper | % | 0.31 | 0.30 | 0.34 |
| Gold | g/tonne | 0.04 | 0.04 | 0.04 |
| Silver | g/tonne | 2.79 | 2.26 | 2.52 |
| Molybdenum | % | 0.01 | 0.01 | 0.01 |
| Pampacancha ore mined | tonnes | 2,214,354 | 5,556,613 | 897,295 |
| Copper | % | 0.56 | 0.56 | 0.49 |
| Gold | g/tonne | 0.32 | 0.32 | 0.52 |
| Silver | g/tonne | 4.64 | 4.84 | 5.12 |
| Molybdenum | % | 0.02 | 0.01 | 0.01 |
| Total ore mined | tonnes | 4,773,901 | 6,529,789 | 4,300,476 |
| Strip ratio4 | 1.95 | 1.26 | 1.84 | |
| Ore milled | tonnes | 8,077,962 | 7,939,044 | 7,663,728 |
| Copper | % | 0.36 | 0.48 | 0.33 |
| Gold | g/tonne | 0.15 | 0.25 | 0.08 |
| Silver | g/tonne | 3.48 | 4.20 | 3.69 |
| Molybdenum | % | 0.01 | 0.01 | 0.01 |
| Copper recovery | % | 84.9 | 87.4 | 81.7 |
| Gold recovery | % | 73.4 | 77.6 | 56.8 |
| Silver recovery | % | 70.7 | 78.0 | 60.7 |
| Molybdenum recovery | % | 43.2 | 33.6 | 34.8 |
Contained metal in concentrate
| Copper | tonnes | 24,576 | 33,207 | 20,517 |
| Gold | ounces | 29,144 | 49,418 | 11,206 |
| Silver | ounces | 639,718 | 836,208 | 552,167 |
| Molybdenum | tonnes | 397 | 397 | 289 |
Payable metal sold
| Copper | tonnes | 23,754 | 31,200 | 16,316 |
| Gold | ounces | 42,677 | 38,114 | 11,781 |
| Silver | ounces | 753,707 | 703,679 | 392,207 |
| Molybdenum | tonnes | 415 | 468 | 254 |
| Combined unit operating cost2,3 | $/tonne | 10.92 | 12.24 | 11.47 |
| Cash cost3 | $/lb | 0.43 | 0.54 | 1.36 |
| Sustaining cash cost3 | $/lb | 1.06 | 1.21 | 2.12 |
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 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.
4 Strip ratio is calculated as waste mined divided by ore mined.
During the first quarter of 2024, the Peru operations produced 24,576 tonnes of copper, 29,144 ounces of gold, 639,718 ounces of silver and 397 tonnes of molybdenum. While high grade copper and gold ore continued to be mined from Pampacancha in the first quarter of 2024, the mill processed less Pampacancha ore than in the fourth quarter of 2023, which resulted in lower copper, gold and silver production, in line with mine plan expectations. The company is on track to achieve its 2024 production guidance for all metals in Peru.
The Constancia operations benefited from strong mill throughput, averaging 89,000 tonnes per day in the first quarter. Mill ore feed has reverted to the typical blend of approximately one-third from Pampacancha and two-thirds from Constancia, which is expected to continue throughout 2024. The operations benefited from strong cost performance, achieving lower unit operating costs, cash cost and sustaining cash cost compared to the fourth quarter of 2023. Cash cost also benefited from higher gold sales volumes in the first quarter of 2024.
Total ore mined in the first quarter of 2024 decreased by 27% compared to the fourth quarter of 2023, and was in line with the mine plan, which included supplemental ore feed from stockpiles during the quarter as the company advances pit stripping activities. Ore mined from Pampacancha during the first quarter was 2.2 million tonnes at average grades of 0.56% copper and 0.32 grams per tonne gold.
Ore milled during the first quarter of 2024 was 2% higher than the fourth quarter of 2023 mainly due to the treatment of softer ore from stockpiles. Milled copper and gold grades decreased in the first quarter of 2024 compared to the fourth quarter of 2023 as a result of a normalized blending of ore feed from Pampacancha, as described above. Recoveries of copper, gold and silver during the first quarter of 2024 were 84.9%, 73.4% and 70.7%, respectively, and were in line with metallurgical models.
Combined mine, mill and G&A unit operating costsi in the first quarter were $10.92 per tonne, 11% lower than the fourth quarter of 2023 primarily due to lower milling costs and higher ore throughput.
Cash cost per pound of copper produced, net of by-product creditsi, in the first quarter of 2024 was $0.43, a 20% improvement over the favourable levels achieved in the fourth quarter of 2023 primarily due to higher by-product credits, lower milling costs, lower treatment and refining costs and lower freight costs, partially offset by higher copper production. Cash cost for the quarter was below the low end of the 2024 guidance range primarily due to high gold byproduct credits, and it is expected to increase during the remainder of 2024 with full year cash cost expected to be within the 2024 guidance range.
Sustaining cash cost per pound of copper produced, net of by-product creditsi, for the first quarter of 2024 was $1.06, a 12% improvement over the fourth quarter of 2023 primarily due to the same factors affecting cash cost.
The collective bargaining agreement with the labour union representing a portion of the Constancia workforce expired in November 2023, and Hudbay continues to negotiate the terms of a new agreement with the union.
In March 2024, the Peruvian Ministry of Energy and Mines indicated an intention to make regulatory changes to allow mining companies to increase their permitted mill throughput levels by up to 10%. The company is monitoring the status of this proposed regulation and evaluating the potential to increase future production at Constancia.
Manitoba Operations Review
Manitoba Operations Three Months Ended Mar. 31, 2024 Dec. 31, 2023 Mar. 31, 2023 Lalor
| Ore mined | tonnes | 407,708 | 372,384 | 373,599 |
| Gold | g/tonne | 4.84 | 5.92 | 3.96 |
| Copper | % | 0.84 | 1.04 | 0.57 |
| Zinc | % | 2.92 | 2.20 | 3.32 |
| Silver | g/tonne | 23.44 | 28.92 | 18.24 |
New Britannia
| Ore milled | tonnes | 170,409 | 165,038 | 143,042 |
| Gold | g/tonne | 7.03 | 8.03 | 6.05 |
| Copper | % | 1.13 | 1.46 | 0.61 |
| Zinc | % | 0.82 | 0.85 | 0.76 |
| Silver | g/tonne | 21.6 | 27.97 | 22.39 |
| Gold recovery1 | % | 88.6 | 89.0 | 87.9 |
| Copper recovery | % | 96.2 | 91.6 | 91.7 |
| Silver recovery1 | % | 82.0 | 83.2 | 79.1 |
Stall Concentrator
| Ore milled | tonnes | 219,358 | 228,799 | 242,619 |
| Gold | g/tonne | 3.07 | 4.22 | 2.78 |
| Copper | % | 0.64 | 0.73 | 0.59 |
| Zinc | % | 4.54 | 3.20 | 4.81 |
| Silver | g/tonne | 24.46 | 28.63 | 17.14 |
| Gold recovery | % | 68.0 | 67.5 | 61.9 |
| Copper recovery | % | 91.7 | 92.0 | 87.0 |
| Zinc recovery | % | 88.4 | 78.5 | 84.4 |
| Silver recovery | % | 59.8 | 61.8 | 56.3 |
Total contained metal in concentrate and doré2
| Gold | ounces | 56,831 | 59,863 | 36,034 |
| Copper | tonnes | 3,149 | 3,735 | 2,045 |
| Zinc | tonnes | 8,798 | 5,747 | 9,846 |
| Silver | ounces | 219,823 | 255,579 | 150,642 |
Total payable metal sold
| Gold3 | ounces | 62,003 | 63,635 | 37,939 |
| Copper | tonnes | 2,921 | 3,687 | 2,225 |
| Zinc | tonnes | 6,119 | 7,385 | 5,628 |
| Silver3 | ounces | 231,841 | 246,757 | 149,677 |
| Combined unit operating cost4,5 | C$/tonne | 235 | 216 | 216 |
| Gold cash cost5 | $/oz | 736 | 434 | 938 |
| Gold sustaining cash cost5 | $/oz | 950 | 788 | 1,336 |
1 Gold and silver recovery includes total recovery from concentrate and doré.
2 Doré includes sludge, slag and carbon fines in three ended March 31, 2024, December 31, 2023 and March 31, 2023.
3 Includes total payable precious metals in concentrate and in doré sold.
4 Reflects combined mine, mill and G&A costs per tonne of ore milled.
5 Combined unit cost, gold 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 56,831 ounces of gold, 3,149 tonnes of copper, 8,798 tonnes of zinc and 219,823 ounces of silver during the first quarter of 2024. Production of gold in the first quarter was better than expected as a result of many operational improvement initiatives and record performance from the New Britannia mill, as described below. The company is on track to achieve its 2024 production guidance for all metals in Manitoba.
The strong production results in the first quarter of 2024 were partly attributed to the successful implementation of improvement initiatives at the Lalor mine that were completed in the second half of 2023 and in early 2024. Noteworthy improvements include high shaft availability, efficient ore hoisting, stope fragmentation reduction and mucking productivity enhancements. In 2024, the company’s primary focus entails implementing stope design modifications aimed at improving mucking efficiency throughout a stope's lifecycle. The company also continues to focus on maintaining the quality of ore production with elevated metal grades through diligent efforts to minimize dilution and enhance ore recovery from stopes.
Total ore mined in Manitoba in the first quarter of 2024 was 9% higher than the fourth quarter of 2023. Grades for all metals reflect the successful execution of the company’s strategic mine plan that prioritizes gold and copper production with a focus on enhanced ore recovery. This resulted in the continued mining of higher gold and copper grade zones and robust grade control practices, including assaying and sampling of blastholes, which further improved ore quality. This also resulted in reduced mining from the zinc areas, lowering the overall zinc grade at Lalor in the first quarter of 2024, in line with the mine plan.
Consistent with the company strategy of allocating more Lalor ore feed to New Britannia, the New Britannia mill throughput averaged a record 1,870 tonnes per day in the first quarter of 2024, a 4% improvement over the previous record level achieved in the fourth quarter of 2023. Recoveries of gold, copper and silver in the first quarter of 2024 were 88.6%, 96.2% and 82.0%, respectively.
The Stall mill processed 4% less ore in the first quarter of 2024 than the fourth quarter of 2023, which is aligned with the strategy of allocating more Lalor ore feed to New Britannia, as noted above. With the completion of the Stall mill recovery improvement project in 2023, recoveries of gold, copper and silver in the first quarter of 2024 were consistent with the fourth quarter, achieving targeted gold recovery levels of approximately 68%.
Combined mine, mill and G&A unit operating costsi in the first quarter of 2024 were C$235 per tonne, a small increase of 9% compared to the fourth quarter of 2023 due to higher mining costs as a result of lower capitalized development costs and longer haulage distances and higher milling costs at Stall associated with lower throughput.
Cash cost per ounce of gold produced, net of by-product creditsi, in the first quarter of 2024 was $736, an increase compared to the uncharacteristically low fourth quarter of 2023 which benefitted from record gold production and higher by-product credits. However, the first quarter cash cost was well positioned at the lower end of the 2024 cash cost guidance range, and the company expects full year gold cash cost to remain within the 2024 guidance range.
Sustaining cash cost per ounce of gold produced, net of by-product creditsi, in the first quarter of 2024 was $950, an increase compared to the fourth quarter of 2023 primarily due to the same factors affecting cash cost as well as lower sustaining capital costs during the quarter.
The New Britannia mill achieved record quarterly throughput of 1,870 tonnes per day in the first quarter due to ongoing improvement initiatives and effective preventative maintenance measures. Noteworthy enhancements in the elution circuit, which facilitates efficient carbon transfer and gold stripping, have bolstered gold recovery to doré. During the first quarter, Hudbay received a permit approval from the Manitoba Environment and Climate Change ministry ("MECC") to increase the New Britannia mill production rate above nameplate capacity to 2,500 tonnes per day. This key approval aligns with the company’s long-term objectives to further increase gold production at the Snow Lake operations by directing more gold ore from Lalor to the New Britannia mill to achieve higher gold recoveries.
At the Anderson tailings facility, Hudbay successfully improved the tailings deposition process during the quarter, leveraging new equipment and procedural refinements, enabling optimized storage capacity and deferred dam construction capital to future years. To further optimize the storage capacity of the facility, a permit to conduct a subaerial tailings deposition trial study was submitted to MECC during the quarter.
British Columbia Operations Review
British Columbia Operations Three Months Ended5 Mar. 31, 2024 Dec. 31, 2023
| Ore mined1 | tonnes | 3,722,496 | 2,627,398 |
| Waste mined | tonnes | 15,276,598 | 14,032,093 |
| Strip ratio2 | 4.10 | 5.34 | |
| Ore milled | tonnes | 3,180,149 | 3,261,891 |
| Copper | % | 0.27 | 0.33 |
| Gold | g/tonne | 0.07 | 0.06 |
| Silver | g/tonne | 1.19 | 1.36 |
| Copper recovery | % | 83.4 | 78.8 |
| Gold recovery | % | 61.8 | 54.1 |
| Silver recovery | % | 72.4 | 73.8 |
Total contained metal in concentrate2
| Copper | tonnes | 7,024 | 8,508 |
| Gold | ounces | 4,417 | 3,495 |
| Silver | ounces | 88,376 | 105,295 |
Total payable metal sold
| Copper | tonnes | 6,933 | 9,119 |
| Gold | ounces | 3,401 | 3,091 |
| Silver | ounces | 83,300 | 98,441 |
| Combined unit operating cost3,4 | C$/tonne | 23.67 | 20.90 |
| Cash cost4 | $/lb | 3.49 | 2.67 |
| Sustaining cash cost4 | $/lb | 4.85 | 3.93 |
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 G&A costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
4 Combined unit operating 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 Performance Measures” section of this news release.
5 Copper Mountain mine results are stated at 100%. Hudbay owns 75% of Copper Mountain mine.
During the first quarter of 2024, the British Columbia operations produced 7,024 tonnes of copper, 4,417 ounces of gold and 88,376 ounces of silver. Production of copper and silver was lower than the fourth quarter of 2024 primarily as a result of lower head grades, partially offset by higher recoveries. Production of gold was higher than the fourth quarter of 2024 as a result of higher grades and higher recoveries. The company is on track to achieve 2024 production guidance for all metals in British Columbia.
Since completing the acquisition of Copper Mountain on June 20, 2023, Hudbay has been focused on advancing operational stabilization plans, including opening up the mine by adding additional mining faces and re-mobilizing idle haul trucks, optimizing the ore feed to the plant and implementing plant improvement initiatives that mirror Hudbay's successful processes at Constancia. While the benefits of these stabilization plans are not expected to be fully realized until 2025, the company successfully increased the total tonnes moved and has seen stronger mill performance as demonstrated by higher mill availability and above-target copper recoveries of 83.4% in the first quarter of 2024, achieving the highest quarterly copper recoveries in the last decade. Stabilization benefits continued to be realized into April with 83% copper recoveries and approximately 40,000 tonnes per day average mill throughput, an increase of approximately 9% over throughput levels in the first quarter.
Hudbay has exceeded the targeted $10 million in annualized corporate synergies and is on track to realize the threeyear annual operating efficiencies target.
Total ore mined at Copper Mountain in the first quarter of 2024 was 3.7 million tonnes, a 42% increase versus the fourth quarter of 2023. The mine operations team continues to implement a fleet production ramp up plan to remobilize idle capital equipment at the Copper Mountain site as part of the accelerated stripping program to access higher head grades. This plan entails remobilization of the mining truck fleet, deployment of an additional shovel, production drill and associated equipment. During the quarter, the company also advanced the delivery of five haul trucks to selfperform additional stripping activities over the next three years at a lower cost than the contractor mining approach that was contemplated in the technical report. As a result, total material moved is expected to continue to increase quarter over quarter in line with the mine plan.
The mill processed 3.2 million tonnes of ore during the first quarter of 2024, a 3% decrease versus the fourth quarter of 2023. Benefiting from stabilization and reliability initiatives within the comminution circuit, the average mill availability during the first quarter of 2024 increased by approximately 4% to 90.4%, compared to the fourth quarter of 2023, while maintaining a stable throughput rate. Mill throughput in the first quarter 2024 was impacted by reduced reliability of the crushing circuit, caused primarily by elevated levels of magnetite and scrap metal as mining progresses through areas of historical underground workings. During the quarter, a number of initiatives were advanced to address these issues and other identified constraints and improve throughput to targeted levels, with the benefits expected to be realized throughout the rest of 2024. These initiatives include reprogramming of the mill expert system, installation of advanced semi-autogenous grinding (SAG) control instrumentation, redesign of the SAG liner package and updated operational procedures intended to remove magnetite from the pebble stream.
Maintenance practices to improve mill availability continue to be a key pillar of the stabilization initiatives. The first quarter planned maintenance shutdown focused on achieving 100% compliance to planned execution. Future maintenance practice enhancements are planned for rollout over the second and third quarters of 2024, which entail the implementation of improved maintenance management processes and a change in the maintenance organizational structure. Work has begun to analyze the trade-off among the various alternatives to further enhance mill performance.
Milled copper grades during the first quarter of 2024 averaged 0.27%, lower than the fourth quarter of 2023 but higher than the reserve grade of 0.25%. Copper recoveries of 83.4% were higher than the fourth quarter of 2023 and higher than expectations for the first quarter due to relieving the regrind circuit constraint and implementing the flotation operational strategy improvements, including reagent selection and dose modification.
Work continues on the expert system that controls mill feed with implementation expected during the second quarter. Throughput in April increased to approximately 40,000 tonnes per day as the mill began realizing benefits from the recalibrated expert system, amongst other initiatives. The benefits of the operational stabilization improvements are expected to continue to be realized throughout 2024. The company is also accelerating engineering studies to debottleneck and increase the nominal plant capacity to 50,000 tonnes per day earlier than was contemplated in the technical report.
Combined mine, mill and G&A unit operating costs in the first quarter of 2024 were C$23.67 per tonne milled, 13% higher than the fourth quarter of 2023 primarily due to higher mining costs. Combined unit operating costs are expected to decrease over time as the company continues to implement its stabilization and optimization initiatives at Copper Mountain. As the hiring and training of additional haul truck drivers continues, the company expects to have a fully trained complement of truck drivers by July to support the larger mining fleet, which is expected to increase material moved and reduce unit operating costs.
Cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, in the first quarter of 2024 were $3.49 and $4.85, respectively. Cash cost for the quarter was above the upper end of the 2024 guidance range; however, it is expected to decline during the remainder of 2024 and the full year cash cost is expected to be within the 2024 guidance range.
Generating Free Cash Flow with Increased Production and Continued Financial Discipline
Hudbay delivered a third successive quarter of positive free cash flow during the first quarter of 2024 as the company executed its plan for higher copper and gold production from Pampacancha and higher gold production at Lalor, both driven by higher grades, throughput and recoveries. The company continues to expect to see strong production levels throughout 2024 from sustained higher grades in Peru and Manitoba, along with additional production from Copper Mountain.
During the first quarter, Hudbay completed $10 million in net repayments on its revolving credit facilities. The company also completed three additional months of deliveries under the gold forward sale and prepay agreement, further reducing the outstanding gold prepayment liability, and is scheduled to fully repay the gold prepay facility by August 2024. Despite these debt repayments and gold deliveries, the company increased its cash and cash equivalents to $284.4 million and reduced overall net debt to $994.2 million as at March 31, 2024, compared to $249.8 million and $1,037.7 million, respectively, as at December 31, 2023. The $43.5 million decline in net debt, together with higher levels of adjusted EBITDAi in the first quarter, have improved Hudbay’s net debt to adjusted EBITDA ratioi to 1.3x compared to 1.6x at the end of 2023. Subsequent to quarter-end, the company continued the deleveraging efforts with an additional $10 million repayment on the revolving credit facilities in May 2024.
During the first quarter, the company continued to exercise financial discipline and take steps to support free cash flow generation during the stabilization period at Copper Mountain. To this end, Hudbay entered into new forward sales contracts at Copper Mountain for a total of 3,600 tonnes of copper production over the twelve-month period from May 2024 to April 2025 at an average price of $3.97 per pound, as well as zero-cost collars for 3,000 tonnes of copper production over the twelve-month period from May 2024 to April 2025 at an average floor price of $4.00 per pound and an average cap price of $4.36 per pound. As at March 31, 2024, 15.9 million pounds of copper forwards and 19.8 million pounds of copper collars were outstanding, representing approximately 44% of 2024 production guidance levels for Copper Mountain. The company also entered into zero-cost collars for 36,000 ounces of gold production over the period from April to December 2024 at an average floor price of $2,088 per ounce and an average cap price of $2,458 per ounce.