TSX, NYSE – HBM 2019 No. 23 Hudbay Announces Second Quarter 2019 Results
TSX, NYSE – HBM
2019 No. 23
Hudbay Announces Second Quarter 2019 Results
• Delivered a solid operating quarter, which included record mine production at Lalor and record throughput at
the Stall concentrator
• 777 and Lalor ore mined increased by 35% and 21%, respectively, in the second quarter of 2019 compared
to the same period in 2018
• Second quarter 2019 results are on track to meet all production and cost guidance for 2019
• Following the previously announced U.S. court decision suspending construction work at Rosemont, Hudbay
intends to appeal the decision and is evaluating options for advancing the project
• Announced an initial National Instrument ("NI") 43-101 resource estimate for the recently discovered zinc -
rich 1901 deposit near Lalor
• Progressed other key strategic initiatives, including engineering and permitting for the Lalor Gold strategy
and community negotiations near Constancia
• Cash generated from operating activities increased to $107.0 million in the second quarter of 2019 from
$97.0 million in the same quarter of 2018 , while operating cash flow before change in non -cash working
capital decreased to $81.1 million in the quarter from $131.6 million in the same quarter of 2018 as a result
of lower realized prices and sales volumes
• Cash and cash equivalents increased from $485.9 million at March 31, 2019 to $489.5 million at June 30,
2019, as free cash flow fr om operations more than funded the $45.0 million upfront cost to acquire the
Rosemont minority joint venture interest and $50.0 million of capital expenditures
Toronto, Ontario, August 8, 201 9 – Hudbay Minerals Inc. (“Hudbay” or the “ company”) (TSX, NYSE:HBM)
today released its second quarter 2019 financial results. All amounts are in U.S. dollars, unless otherwise noted.
“Hudbay delivered strong operating results in the se cond quarter, including record mine production at Lalor, record
throughput at the Stall concentrator and successful semi-annual maintenance activities at the Constancia mill,” said
Peter Kukielski, Interim President and Chief Executive Officer . “Based on these results, we are on track to achieve
our full year 2019 production and cost guidance.”
“We were surprised and disappointed by the court’s decision on Rosemont, which we intend to appeal,” stated Mr.
Kukielski. “Rosemont aside, we continue t o execute our strategy. In Snow Lake , we are pleased to announce the
initial resource estimate for the 1901 deposit, a mere six months from the initial discovery. In the second half of the
year, w e will continue advancing the WIM, Pen II and New B ritannia zones to upgrade them to a reserve
classification, while advancing feasibility work on the 1901 deposit. In Peru, our focus will continue to be on accessing
the high-grade Pampacancha satellite deposit while advancing discussions with the communities to the northwest to
explore the other satellite properties.”
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Net loss and loss per share in the second quarter of 2019 were $54.1 million and $0.21, respectively, compared to a
net profit and earnings per share of $24.7 million and $0.09, respectively, in the second quarter of 2018.
Net loss and loss per share in the second quarter of 2019 were affected by, among other things, the following items:
Pre-tax gain
(loss) After-tax gain
(loss) Per share
gain (loss)
($ millions) ($ millions) ($/share)
Non-cash deferred tax adjustments - (15.1) (0.06)
Write down of UCM receivable (26.0) (26.0) (0.10)
Costs associated with recent proxy contest (3.0) (2.2) (0.01)
As previously disclosed, as part of the orderly acquisition of the remaining interest in the Rosemont copper project on
April 25, 2019, Hudbay, immediately prior to closing the acquisition, agreed to release United Copper & Moly LLC
("UCM") from its repayment obligations under the Rose mont project loan in ex change for an increase in equity
interest in Rosemont. As a result, the loan receivable balance was written down in the income statement and other
capital reserves, a component of shareholder's equity, was subsequently increased.
Cash generated from operating activities increased to $107.0 million in the second quarter of 2019 from $97.0 million
in the same quarter of 2018. Operating cash flow before change in non-cash working capital was $81.1 million during
the second quarter of 20 19, reflecting a decrea se of $50.5 million compared to the second quarter of 2018. The
decrease in operating cash flow is primarily the result of lower realized copper and zinc prices and lower sales
volumes of copper and zinc, compared to the second quart er of 2018. Copper -equivalent production in the second
quarter of 2019 decreased by 14% compared to the same period in 2018, primarily as a result of lower mine grades
at Constancia, as planned, and the closure of the Reed mine.
In the second quarter of 2019, consolidated cash cost per pound of copper produced, net of by-product credits1, was
$1.27, an increase compared to $0.96 in the same period last year. Cash costs per pound of copper produced, net of
by–product credits, increased as a result of lower copper and zinc product ion and lower realized zinc prices.
Incorporating sustaining capital, capitalized exploration, royalties, selling, administrative and regional costs,
consolidated all-in s ustaining cash cost per pound of copper produced, net of by -product credits 1, in the second
quarter of 2019 was $ 2.26, which increased from $1. 50 in the same period last year , driven mainly by higher cash
costs and increased sustaining capital expenditures.
Net debt1 decreased by $3.8 million from March 31, 2019 to $487.7 million at June 30, 2019, as the upfront payment
to acquire the Rosemont minority joint venture interest and other capital expenditures was offset by free cash flow
from operations. At June 30, 2019, total liquidity, including cash and available cr edit facilities, was $9 10.7 million,
down from $ 940.3 million as at March 31, 2019 due to additional letters of credit posted to support reclamation
obligations.
1 Cash cost, all-in sustaining cash cost per pound of copper produced, net of by -product credits, and net debt are non-IFRS financial
performance measures with no standardized definition un der IFRS. For further information, please see page 9 of this news release.
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1 Net debt is a non-IFRS financial performance measure with no standardized definition u nder IFRS. For further information, please
see page 9 of this news release.
Financial Performance Three months ended Six months ended
($000s except per share and cash cost amounts) Jun. 30 Jun. 30
2019 2018 2019 2018
Revenue 329,414 371,288 621,672 757,944
Cost of sales 286,271 278,827 526,718 544,712
Profit before tax (loss) (43,931) 49,797 (62,044) 122,900
Profit (loss) (54,145) 24,673 (67,562) 66,118
Basic and diluted (loss) earnings per share (0.21) 0.09 (0.26) 0.25
Operating cash flow before change in non-cash
working capital 81,146 131,635 170,740 263,428
Financial Condition ($000s) Jun. 30, 2019 Dec. 31, 2018
Cash and cash equivalents 489,527 515,497
Total long-term debt 977,196 981,030
Net debt1 487,669 465,533
Working capital 428,078 445,228
Total assets 4,737,938 4,685,635
Equity 2,130,719 2,178,856
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Production and Cost Performance Three months ended Three months ended
Jun. 30, 2019 Jun. 30, 2018
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 24,232 6,131 30,363 26,818 10,807 37,625
Gold oz 3,794 24,305 28,099 5,190 27,290 32,480
Silver oz 551,807 260,000 811,807 596,570 355,091 951,661
Zinc tonnes - 31,838 31,838 - 33,170 33,170
Molybdenum Tonnes 334 - 334 141 - 141
Payable metal in concentrate sold
Copper tonnes 25,778 7,393 33,171 25,409 10,062 35,471
Gold oz 4,056 26,482 30,538 3,764 25,932 29,696
Silver oz 504,259 300,042 804,301 438,532 250,952 689,484
Zinc2 tonnes - 24,224 24,224 - 28,168 28,168
Molybdenum tonnes 419 - 419 - - -
Cash cost3 $/lb 1.63 (0.15) 1.27 1.64 (0.71) 0.96
Sustaining cash cost3 $/lb 2.09 2.11 1.82 0.38
All-in sustaining cash cost3 $/lb 2.26 1.50
Six months ended Six months ended
Jun. 30, 2019 Jun. 30, 2018
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 56,075 12,260 68,335 58,369 18,462 76,831
Gold oz 9,151 44,510 53,661 10,608 52,965 63,573
Silver oz 1,186,737 544,265 1,731,002 1,242,456 686,343 1,928,799
Zinc tonnes - 59,875 59,875 - 61,952 61,952
Molybdenum tonnes 638 - 638 205 - 205
Payable metal in concentrate sold
Copper tonnes 52,440 12,448 64,888 54,977 17,000 71,977
Gold oz 10,274 42,893 53,167 8,671 47,082 55,753
Silver oz 1,256,518 530,689 1,787,207 1,034,162 541,778 1,575,940
Zinc2 tonnes - 47,178 47,178 - 53,620 53,620
Molybdenum tonnes 653 - 653 137 - 137
Cash cost3 $/lb 1.38 0.31 1.19 1.46 (0.58) 0.97
Sustaining cash cost3 $/lb 1.69 2.48 1.63 0.65
All-in sustaining cash cost3 $/lb 2.01 1.48
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
2 Includes refined zinc metal sold and payable zinc i n concentrate sold.
3 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 page
9 of this news release.
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Peru Operations Review
During the quarter, the Constancia mine produced 24,232 tonnes of copper, 11,677 ounces of precious metals and
334 tonnes of molybdenum. Production results were lower than the same period last year mainly due to lower grades,
as per the mine plan, partially offset by higher copper recoveries from recent metallurgical initiatives. Hudbay expects
production of all metals and costs at Constancia to be in line with the full year guidance for 2019.
Ore mined at Constancia during the second quarter of 2019 was 6% lower compared to the same period in 2018 due
to mining from areas with a higher stripping ratio than the areas mined in the second quarter of 2018, in line with the
mine plan. Milled copper grades in the second quarter were approximately 16% lower than the same period in 2018
as lower grade phases continue to be mined, in line with the mine plan. Mill throughput in the second quarter of 2019
was consistent compared to the same period in 2018.
Copper recoveries i n the second quarter of 2019 improved by 6% compared to the same period in 2018 . The
increased copper recoveries were a result of sustained metallurgical improvements initiated in 2018. While recoveries
vary from quarter to quart er depending on the complexity and grade of the ore feed, the company is seeing results
from ongoing recovery improvement initiatives. These initiatives include those targeting flotation operating efficiencies
(improvement at the washing station in column cells and water distributio n in the processing plant), and the
integration of an automated, advanced process control system in the grinding and bulk flotation circuits.
During the second quarter of 2019, a six -day scheduled maintenance shutdown of the Con stancia mill was
performed. Combined mine, mill and general and administrative (“G&A”) unit operating costs in the second quarter of
2019 were consistent with the same period in 2018 reflecting correspondingly lower ore throughput and higher
maintenance costs due to the plant shutdo wn. In addition, in line with the mine plan and the first q uarter 2019
operations update, mined copper grades during the second quarter of 2019 were below the expected annual
average. The maintenance shutdown and the var iations in copper grade are consiste nt with the full year plan for
Constancia, and Hudbay continues to expect production and cost guidance to be met for the full year 2019.
Cash cost per pound of copper produced, net of by -product credits, for the second quarter of 2019 is in line with the
same period in 2018 due to lower copper production being offset by higher by-product credits. Sustaining cash cost
per pound of copper produced, net of by -product credits, for the three and six months ended June 30, 2019 was
$2.09 and $1.69, respectively.
The southern Peru copper mining corrido r has seen heightened political activity over the past several months,
including large protests related to the granting of a permit to another company’s mining project. These protests have
blocked the entrance to the port of Matarani since mid-July. While the protests are unrelated to Constancia, Hudbay
and other copper miners use the Matarani port to ship copper concentrates and import consumables. Mining and
milling operations have continued at Constancia, but there has been a substantial concentrate inventory buildup at
the Constancia site, costs for consumables such as diesel have increased, and Constancia’s molybdenum production
has been affected due to the unavailability of necessary consumables.
The Peruvian go vernment has taken recent steps to address the road blockages with some intermittent access
currently a vailable to the port of Matarani . The company is continuing to work to manage the impact of these
disruptions.
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Manitoba Operations Review
The Manitoba operations reflect the first full quarter of the Lalor mine achieving 4,500 tonnes per day and the Stall
mill achieving record quarterly throughput . The 777 mine and Lalor mine output increased by 35% and 21%,
respectively, during the second quarter of 20 19 compared to the same quarter in 2018. Total ore mined at the
Manitoba operations during the second quarter of 2019 increased by 1% compared to the same period in 2018 due to
these production increases being offset by the closure of the Reed mine in August 2018. As a result, the combined
Manitoba operations produced 31,838 tonnes of zinc, 6,131 tonnes of copper and 28,019 ounces of gold-equivalent
precious metals. Total copper, gold and silver produced were lower compared to the same period in 2018 due to the
closure of Reed mine, partially offset by increased production at 777 and Lalo r. Precious metals production in the
second quarter of 2019 was also affected by the stope sequencing of Lalor gold zone ores and the tim ing o f
processing as this material i s currently transported to the Flin F lon mill and blended to achieve optimal recove ries.
Full year production of all metals is expected to be within the annual guidance ranges.
In Manitoba, overall copper and silver grades were 36% and 14% lower, respectively, in the second quarter of 2019
compared to the same period of 2018 while zinc grades were 7% higher and gold grades were consistent over the
period. Lower copper grades reflect the cessation of high -grade copper production from Reed following its clos ure,
while grade variances for zinc and silver were due to planned stope sequencing at 777 and Lalor.
Ore processed in Flin Flon in the second quarter of 2019 was 16% lower than the same period in 2018 due to t he
Reed mine closure, partially offset by increased production from the 777 mine. Copper, gold and silver recoveries in
the second quarter of 2019 were 6%, 6%, and 16% lower, respectively, compared with the same period in 2018 due
to lower head grades. Zinc recoveries were consistent quarter-over-quarter.
The Stall concentrator achieved record ore throughput which was 7% higher than the same period in 2018 due to
ongoing operational and maintenance improvements. Copper recoveries were 1% higher and zinc r ecoveries were
3% lower in the second quarter of 2019 compared with the same period in 2018.
Manitoba combined mine, mill and G&A unit operating costs in the second quarter of 2019 were 13% higher than in
the same period in 2018 due mainly to the Reed cl osure an d hig her mining costs at Lalor assoc iated with the
production ramp up. In addition, combined unit costs were negatively impacted due to the timing of batching the Lalor
ore in the Flin Flon mill, as not all of the ore that was transported to Flin Flon was milled during the quarter. Manitoba
combined unit costs are expected to be within guidance ranges for the full year 2019.
Cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2019 was negative $0.15
per pound of copper produced. These costs were higher compared to the same period in 2018, primarily as a result
of lower copper production and zinc by-product revenue. Sustaining cash cost per pound of copper produced, net of
by-product credits, in the second quarter of 2019 was $2.11, which is higher than the prior year period due to higher
cash costs and increased capital development expenditures at Lalor. Copper produced in the second quarter of 2019
was 43% lower than the same quarter in 2018 as a result of the closure of Reed mine, offset by increased production
at 777 and Lalor.
Snow Lake Exploration Update
1901 Deposit Initial Resource Estimate
Since its discovery in February 2019, drilling has continued to define the extent and geometry of the 1901 deposit .
This f ocused drill program, along with geological interpretation and resource modeling, has resulted in an initial
resource estimate a mere six months from discovery. The deposit is located between the former producing Chisel
North mine and Lalor mine, less than 1,000 metres from an active underground ramp at a depth ranging from 550 to
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650 metres and within 15 kilometres trucki ng distance of the Stall concentrator (please see Figure 1, which outlines
the underground location of the 1901 deposit ). The property is 100% owned by Hudbay , free of an y royalties or
streams. The mineralization is interpreted as two zinc -rich volcanogenic massive sulphide lenses with locally high -
grade gold and silver content. The mineralization occurs along the hanging wall conta ct of th e stratigraphic horizon
hosting the Chisel North deposit.
Based on these recent drilling results, Hudbay is pleased to announce an initial mineral resource estimate for the
1901 deposit:
1901 Deposit
Mineral Resource Estimate1,2,3,4,5
Tonnes
(millions)
Zn Grade
(%)
Au Grade
(g/t)
Ag Grade
(g/t)
Cu Grade
(%)
Inferred 2.1 9.67 0.87 30.7 0.25
1 CIM definitions were foll owed for the estimation of mineral resources. Mineral resources that are not mineral reserves do not have demonstrated
economic viability.
2 Mineral resources are reported within an economic envelope defined by a mineral stope opt imization algorithm assuming a selective mining method.
3 Long-term metal prices of $1,260/oz gold, $18.00/oz silver, $3.10/lb copper and $1.10/lb zinc wer e used for the estimation of the mineral resources.
4 Metal recovery estimates are based on the assu mption that this mineralization would be processed at Hudbay’s Stall concentrator and would present
a similar performance to those experienced historically for the Chisel and Lalor zinc-rich lenses.
5 Specific gravity measurements using industry standard techniques were completed on all assayed intervals.
The methodology followed to estimate mineral resources at the 1901 deposit was identical to the appro ach used to
recently update the mineral resource estimates for the Lalor mine (please refer to the NI 43-101 Technical Report for
Lalor dated March 28, 2019 for more details) and constrains the resource within a stope optimization envelope that is
expected to lead to a higher mineral resource to mineral reserve conversion factor.
There remain opportunities for extension of the mineralization discovered at the 1901 deposit (please refer to Figure
2). Exploration targets for new discrete lenses also exist i n the immediate vicinity of 1901 and two drills are actively
exploring in the area. The company is studying alternatives to dev elop the 1901 deposit to optimize the net present
value of the Manitoba business unit.
High-Grade Gold and Copper-Gold Intercepts
In addition to the initial resource estimate on the 1901 deposit, drilling has also identified several high-grade gold and
copper-gold zones but drilling density i s not yet at a level to establish a mineral resource estimate. Highlights of the
drill hole intersections occurring in the footwall of the zinc rich lenses are summarized in the table below and the drill
hole locations are shown in Figure 3 . Drill hole CH1916 assayed 29.8 g/t Au and 401.8 g/t Ag over 7.5 metres from
580.5 to 588.0 metres, and drill hole CH1925 assayed 3.2 g/t Au, 19.9 g/t Ag and 2.83% Cu over 9 metres from 637.5
to 646.5 metres. Several other high -grade copper and gold intersections of less than 3 metres occur throughout the
footwall zone in altered felsic units. As drilling pro gresses to an infill stage to convert the inferred zinc-rich resource
estimates to an indicated category, the company also expects to establish the continuity of the gold and copper-gold
rich mineralization and report a mineral resource estimate for this portion of the mineralization. The gold and copper-
gold rich mineralization is likely to constitute a suitable feed for the New Britannia gold mill after its refurbishment is
completed in 2022 and could further enhance the gold production profile from the Snow Lake camp.
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Hole ID
From To Intercept1 Depth Au Ag Cu Zn
(m) (m) (m) (m) (g/t) (g/t) (%) (%)
CH1916 580.5 588.0 7.5 574 29.8 401.8 0.16 0.04
CH1918 570.0 575.5 5.5 570 14.2 105.3 0.13 0.21
CH1931 617.9 625.0 7.1 565 13.4 28.3 0.04 0.75
CH1934 692.8 696.0 3.2 646 14.3 181.2 0.21 0.04
CH1925 637.5 646.5 9.0 621 3.2 19.9 2.83 0.17
Note: all grade values are uncut.
1 True widths cannot be estimated at this stage as there is insufficient knowledge on the orientation of the gold and copper -gold mineralization
Hole ID
From (m) To (m) Azimuth
at
Intercept
Dip at
Intercept Easting Northing Elevation Easting Northing Elevation
CH1916 427067 6078909 -270 427068 6078909 -278 087 -85
CH1918 427094 6078818 -265 427094 6078818 -271 052 -83
CH1931 427083 6078909 -259 427081 6078908 -266 247 -65
CH1934 427072 6078847 -322 427070 6078846 -326 237 -64
CH1925 427185 6078904 -307 427183 6078903 -315 229 -75
Other Snow Lake Regional Exploration
During the second quarter of 2019, Hudbay has also continued in-mine exploration activities at the L alor mine and
progressed engineering studies for its other 100%-owned deposits in the Snow Lake area, including the WIM, Pen II
and New Britannia mine properties. Drilling and studies will continue thr oughout the ye ar and a re expected to be
incorporated in the annual mineral reserve and resource estimate.
Rosemont Developments
On July 31, 2019, the U.S. District Court for the District of Arizona (“Court”) issued a ruling in the lawsuits challenging
the U.S. Forest Service’s issuance of the Final Record of Decision (“FROD”) for the Rosemont project in Arizona. The
Court ruled to vacate and remand the FROD such that Rosemont cannot proceed with construction at this time.
Hudbay strongly bel ieves that the Court has mis interpreted federal mining laws and Fores t Service regulations as
they apply to Rosemont. As such the company intends to appeal the Court’s decision to the U.S. Ninth Circuit Court
of Appeals and is evaluating other options to advance Rosemont. Hudbay is also reassessing the optimal timeline for
financing Rosemont, including the previously announced process to identify a joint venture partner for Rosemont.
Hudbay had previously initiated an early works program for Rosemont with anticipated 2019 project capital spending
of $122 million. The company has suspended most of the early works activities and now expects Ro semont project
spending of approximately $ 30 million in 2019, including costs to demobilize engineering work and complete
committed procurement. These co sts a re in addition to $20 million of Rosemont non -project costs that are still
expected to be incurred in 2019.
Dividend Declared
A semi -annual dividend of C$0.01 per share was declared on August 8, 2019 . The dividend will be paid on
September 27, 2019 to shareholders of record as of September 6, 2019.