TSX, NYSE – HBM 2020 No. 22 Hudbay Announces Third Quarter 2020 Results
TSX, NYSE – HBM
2020 No. 22
Hudbay Announces Third Quarter 2020 Results
Toronto, Ontario, November 3, 2020 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE:HBM)
today released its third quarter 2020 financial results. All amounts are in U.S. dollars, unless otherwise noted.
Third Quarter Operating and Financial Results
• Delivered a solid operating quarter with steady production and cost performance from the Manitoba and
Peru operations, including an increase in copper production over the first two quarters of 2020 and strong
gold production driven by increased gold grades at Lalor.
• Third quarter net loss was $24.0 million or $0.09 per share. Third quarter adjusted net lossi per share was
$0.10 and adjusted EBITDAi was $96.1 million.
• Operating cash flow before change in non-cash working capital increased to $84.4 million in the third quarter
of 2020, from $29.5 million in the second quarter of 2020, due to higher realized prices and increased sales
volumes at Constancia after the successful ramp up to full production.
• Cash and cash equivalents increased during the third quarter to $449.0 million as at September 30, 2020 as
a result of the net proceeds received from the refinancing of the 2023 notes and cash generated from
operations, partially offset by capital investments in the New Britannia refurbishment project and the
company’s Peru business and interest payments.
On Track to Achieve Annual Guidance
• Owing to the outstanding performance from the Manitoba operations during the first three quarters of 2020,
and the steady operations at Constancia since the eight-week suspension earlier this year, Hudbay
continues to expect to meet all production, consolidated sustaining capital expenditures and unit cost
guidance for 2020, despite ongoing COVID-19 operating challenges.
• Fourth quarter 2020 production and sales volumes in Manitoba will be impacted by the production
interruption at the 777 mine. With the implementation of production mitigation plans, the company continues
to expect to achieve full year guidance for Manitoba.
Executing on Growth Initiatives
• The New Britannia gold mill refurbishment project is ahead of schedule and within budget, with detailed
engineering approximately 99% complete and construction activities approximately 45% complete.
Commissioning of the gold plant is expected in mid-2021, three months earlier than originally planned.
• Early mining of the gold zone at Lalor is well -underway with underground development in the gold rich
lenses advancing ahead of schedule in preparation for the mid-2021 ramp up of New Britannia. The New
Britannia gold mill is expected to increase average annual gold production from Lalor to over 150,000
ounces commencing in 2022.
• Successfully advanced individual land-user agreements at Pampacancha with 79% of the land turned over
to Hudbay as of September 30, 2020 (as compared to approximately 33% as of June 30, 2020).
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• Constancia North follow-up drilling continues to intersect porphyry and skarn mineralization north of the
Constancia pit, including one intersection of 78.6 metres grading 1. 39% copper, 305 grams per tonne
molybdenum, 0.43 grams per tonne gold and 16.0 grams per tonne silver.
• Completed offering of $600.0 million of 6.125% senior notes due 2029 and redeemed all of the outstanding
$400.0 million of 7.250% senior notes due 2023.
“We continue to be pleased with the team’s ability to maintain strong operating and financial performance while
executing on our growth initiatives,” said Peter Kukielski, President and Chief Executive Officer. “Our Peru operations
have been successfully running at full capacity after having been temporarily suspended in the second quarter due to
government-imposed COVID-19 restrictions, and we have maintained positive momentum at Pampacancha. Our
Manitoba operations had the best quarterly cost performance in the last two year s, demonstrating our focus on
continuous improvement initiatives and cost control. The New Britannia project is on budget and ahead of schedule
with first gold production expected three months earlier in 2021 than originally planned. The 777 skip incident was an
unfortunate event but we are grateful all underground personnel were safely evacuated and we are hopeful the
repairs will be completed quickly. We are proud of our team’s achievement of several significant milestones while
adapting to the ever-changing COVID-19 environment and focus on keeping our workforce and communities safe
during this pandemic.”
Summary of Third Quarter Results
Consolidated copper production in the third quarter of 2020 was 25,395 tonnes, a 41% increase from the second
quarter of 2020, primarily as a result of the successful ramp up at Constancia after the eight-week temporary
suspension from mid-March to mid-May. Consolidated gold production decreased by 10% compared to the second
quarter of 2020 due to lower production from Manitoba as a result of the planned maintenance at the Lalor mine in
the third quarter and the record quarterly gold production achieved in the second quarter in Manitoba. Consolidated
zinc production in the third quarter was in line with the second quarter of 2020.
In the third quarter of 2020, consolidated cash cost per pound of copper produced, net of by-product creditsi, was
$0.65, higher than the second quarter of 2020 when cash costs, net of by-product credits, were more heavily
impacted by the lower cash costs in Manitoba due to the temporary Peru suspension. Incorporating sustaining
capital, capitalized exploration, royalties, selling, administrative and regional costs, consolidated all-in sustaining cash
cost per pound of copper produced, net of by-product creditsi, in the third quarter of 2020 was $2.25, higher than the
prior quarter due to the same factors affecting cash costs, and higher sustaining capital expenditures.
Cash generated from operating activities in the third quarter of 2020 increased to $77.9 million compared to $31.4
million in the second quarter of 2020. Operating cash flow before change in non-cash working capital was $84.4
million during the third quarter of 2020, reflecting an increase of $54.9 million compared to the second quarter of
2020. The increase in operating cash flow is primarily the result of increased sales volumes at Constancia due to the
ramp up to full production after the temporary suspension, lower operating costs in Manitoba and improved
commodity prices.
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Net loss and loss per share in the third quarter of 2020 were $24.0 million and $0.09, respectively, compared to a net
loss and loss per share of $51.9 million and $0.20, respectively, in the second quarter of 2020. During the third
quarter of 2020, Hudbay recorded a non-cash adjustment on streaming revenues due to an amendment to the 777
mine plan leading to fewer inferred resources expected to be mined than previously planned as the mine nears its
expected closure in 2022. The increased deferred revenue drawdown rate, which is recalculated back to the inception
of the stream, resulted in a positive pre-tax non-cash earnings impact of approximately $14.1 million. This was
partially offset by $7.3 million in costs primarily relating to the call premium paid to redeem all of the outstanding
$400.0 million of 7.25% senior unsecured notes due 2023 (the “Redeemed Notes”) and a $3.8 million write-down of
unamortized transaction costs related to the Redeemed Notes and the company’s revolving credit facilities, which
were restructured during the quarter.
Adjusted net lossi and adjusted EBITDAi in the third quarter of 2020 were $25.4 million, or $0.10 per share, and $96.1
million, respectively, after adjusting for the call premium paid on the Redeemed Notes, the write-down of unamortized
transaction costs related to the Redeemed Notes and amended credit facilities, and the non-cash adjustment on
streaming revenues. This compares to an adjusted net loss and adjusted EBITDA of $51.9 million, or $0.15 per
share, and $49.1 million, respectively, in the second quarter of 2020. The increase in adjusted EBITDA in the third
quarter of 2020 was primarily due to increased sales volumes in Peru after the successful mine ramp up, lower
operating costs in Manitoba and higher realized prices, partially offset by lower sales volumes in Manitoba.
1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please
see the “Non-IFRS Financial Reporting Measures” section of this news release.
Consolidated Financial Performance Three Months Ended
Sep. 30, 2020 Jun. 30, 2020 Sep. 30, 2019
Revenue $000s 316,108 208,913 291,282
Cost of sales $000s 276,830 221,567 260,327
Earnings (loss) before tax $000s (23,944) (74,604) (348,367)
Earnings (loss) $000s (23,955) (51,901) (274,796)
Basic and diluted earnings (loss) per share $/share (0.09) (0.20) (1.05)
Adjusted earnings (loss) per share1 $/share (0.10) (0.15) (0.09)
Operating cash flow before change in non-
cash working capital
$ millions 84.4 29.5 71.2
Adjusted EBITDA1 $ millions 96.1 49.1 76.2
1 Adjusted loss per share and adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under
IFRS. For further information, please see the “Non-IFRS Financial Reporting Measures” section of this news release.
Financial Condition ($000s) Sep. 30, 2020 Jun. 30, 2020 Dec. 31, 2019
Cash and cash equivalents 449,014 391,136 396,146
Total long-term debt 1,175,104 988,418 985,255
Net debt1 726,090 597,282 589,109
Working capital 403,441 260,672 271,284
Total assets 4,590,688 4,498,892 4,461,057
Equity 1,684,464 1,706,303 1,848,123
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Consolidated Operational Performance Three Months Ended
Sep. 30, 2020 Jun. 30, 2020 Sep. 30, 2019
Contained metal in concentrate produced1
Copper tonnes 25,395 18,026 36,422
Gold ounces 29,277 32,614 28,319
Silver ounces 671,685 580,817 924,191
Zinc tonnes 30,570 31,222 28,639
Molybdenum tonnes 392 124 262
Precious metals2 ounces 36,824 39,140 41,522
Payable metal in concentrate sold
Copper tonnes 25,903 15,951 29,916
Gold ounces 30,605 30,590 25,488
Silver ounces 705,495 541,785 756,296
Zinc3 tonnes 26,520 27,604 29,140
Molybdenum tonnes 313 120 334
Precious metals2 ounces 38,532 36,677 36,292
Cash cost4 $/lb 0.65 0.29 0.71
All-in sustaining cash cost4 $/lb 2.25 1.91 1.69
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms. 2 Precious metals production includes gold and silver production on a gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of 89:1. 3 Includes refined zinc metal sold. 4 Cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial
performance measures with no standardized definition under IFRS. For further information, please see the “Non-IFRS Financial
Reporting Measures” section of this news release.
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Peru Operations Review
Three Months Ended
Sep. 30, 2020 Jun. 30, 2020 Sep. 30, 2019
Ore mined1 tonnes 8,455,668 2,775,286 8,413,367
Copper % 0.31 0.34 0.44
Gold g/tonne 0.03 0.04 0.05
Silver g/tonne 2.55 2.90 3.93
Molybdenum % 0.02 0.02 0.02
Ore milled tonnes 7,480,655 4,355,482 8,240,344
Copper % 0.33 0.34 0.44
Gold g/tonne 0.03 0.04 0.04
Silver g/tonne 2.68 3.04 3.76
Molybdenum % 0.02 0.01 0.02
Copper recovery % 83.3 76.6 86.0
Gold recovery % 51.6 43.4 48.3
Silver recovery % 66.7 59.6 68.9
Molybdenum recovery % 30.4 19.9 20.2
Contained metal in concentrate
Copper tonnes 20,803 11,504 31,091
Gold ounces 3,333 2,311 5,565
Silver ounces 430,208 253,687 686,258
Molybdenum tonnes 392 124 262
Precious metals2 ounces 8,167 5,161 15,369
Payable metal sold
Copper tonnes 21,654 9,023 25,314
Gold ounces 3,753 1,317 3,858
Silver ounces 433,595 242,519 529,139
Molybdenum tonnes 313 120 334
Combined unit operating cost3,4 $/tonne 9.85 7.77 8.63
Cash cost4 $/lb 1.54 1.31 1.06
Sustaining cash cost4 $/lb 2.29 1.84 1.53
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled. 2 Precious metals production includes gold and silver production on a gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of 89:1. 3 Reflects combined mine, mill and general and administrative (“G&A”) costs per tonne of ore milled. Reflects the deduction of
expected capitalized stripping costs. 4 Combined unit cost, cash cost and sustaining cash cost are non-IFRS financial performance measures with no standardized
definition under IFRS. For further information, please see the “Non-IFRS Financial Reporting Measures” section of this news
release.
The Constancia team has demonstrated strong operating performance in an environment of strict COVID -19
measures and controls. Hudbay works collaboratively with the health authorities to ensure its workforce and partners
adhere to the company’s COVID-19 protocols while continuing to operate safely and efficiently.
During the quarter, the Constancia mine produced 20,803 tonnes of copper, 8,167 ounces of precious metals and
392 tonnes of molybdenum. Production results were significantly higher than the second quarter of 2020 as a result
of the ramp-up to full production after the temporary suspension of operations until mid-May.
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The ramp-up also resulted in a significant increase in ore milled during the third quarter at Constancia compared to
the second quarter of 2020. Compared to the same period in 2019, ore milled was 9% lower due to a deferred plant
maintenance shutdown in August, which typically occurs in the second and fourth quarters, as previously disclosed,
as well as lower throughput caused by increased ore hardness. Milled copper grades in the third quarter were slightly
lower than the second quarter of 2020, in line with the mine plan. Copper recoveries in the third quarter were higher
than the second quarter of 2020 due to the processing of stockpile ore after the mill ramp-up in the second quarter.
Combined mine, mill and G&A unit operating costsi in the third quarter of 2020 were higher than the second quarter of
2020, primarily due to abnormally low operating costs during the second quarter as a result of the processing of
stockpile ore after the mill ramp up. Unit operating costs in the quarter were within the guidance range for 2020.
Peru’s cash cost per pound of copper produced, net of by-product credits, for the three months ended September 30,
2020 was $1.54, higher than the previous quarter primarily due to higher operating costs, as described above, and
lower grades. Peru’s sustaining cash cost per pound of copper produced, net of by-product credits, for the three
months ended September 30, 2020 also increased compared to the prior quarter primarily due to the same factors
affecting cash cost as well as accelerated sustaining capital spending following a full ramp up of operations to normal
levels in early July 2020 at Constancia.
Production of all metals and unit operating costs at Constancia are expected to be in line with the revised full year
guidance for 2020 that was released with second quarter results.
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Manitoba Operations Review
Three Months Ended
Sep. 30, 2020 Jun. 30, 2020 Sep. 30, 2019
Lalor ore mined tonnes 357,213 407,408 346,456
Copper % 0.66 0.77 0.68
Zinc % 5.98 6.05 6.16
Gold g/tonne 2.28 2.64 2.21
Silver g/tonne 21.23 28.40 25.56
777 ore mined tonnes 264,905 281,890 273,319
Copper % 0.98 1.72 1.33
Zinc % 3.95 4.13 3.01
Gold g/tonne 2.01 1.91 1.63
Silver g/tonne 24.25 25.73 15.42
Stall Concentrator:
Ore milled tonnes 335,739 334,601 318,539
Copper % 0.68 0.76 0.64
Zinc % 6.11 6.16 6.22
Gold g/tonne 2.35 2.70 2.12
Silver g/tonne 22.08 28.72 25.16
Copper recovery % 84.0 86.6 84.4
Zinc recovery % 92.7 92.4 91.8
Gold recovery % 57.4 62.3 54.3
Silver recovery % 57.5 62.1 57.4
Flin Flon Concentrator:
Ore milled tonnes 322,156 324,906 331,216
Copper % 0.99 1.52 1.22
Zinc % 4.07 4.41 3.64
Gold g/tonne 1.99 1.99 1.74
Silver g/tonne 24.01 25.56 17.36
Copper recovery % 83.9 87.3 89.1
Zinc recovery % 87.9 84.9 86.7
Gold recovery % 55.3 58.6 59.1
Silver recovery % 42.0 50.7 48.7
Total contained metal in concentrate
Copper tonnes 4,592 6,522 5,331
Zinc tonnes 30,570 31,222 28,639
Gold ounces 25,994 30,303 22,754
Silver ounces 241,477 327,130 237,933
Precious metals1 ounces 28,657 33,979 26,153
Total payable metal sold
Copper tonnes 4,249 6,928 4,602
Zinc2 tonnes 26,520 27,604 29,140
Gold ounces 26,852 29,273 21,630
Silver ounces 271,900 299,266 227,157
Combined unit
operating cost3,4
C$/tonne 126 135 130
Cash cost4 $/lb (3.41) (1.52) (1.31)
Sustaining cash cost4 $/lb 0.83 1.15 2.15
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1 Precious metals production includes gold and silver production on a gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of 89:1. 2 Includes refined zinc metal sold and payable zinc in concentrate sold.
3 Reflects combined mine, mill and G&A costs per tonne of ore milled. 4 Combined unit cost, cash cost and sustaining cash cost are non-IFRS financial performance measures with no standardized
definition under IFRS. For further information, please see the “Non-IFRS Financial Reporting Measures” section of this news
release.
The Manitoba business unit had solid operating performance across the mines, mills and zinc plant during the third
quarter. In the face of the ongoing COVID-19 pandemic, the controls that were developed in the early part of the year
have been maintained and the company’s health and safety committees have continued to work collaboratively with
local health units with a focus on keeping employees and communities safe.
Production during the quarter included 30,570 tonnes of zinc, 4,592 tonnes of copper and 28,657 ounces of precious
metals. Production results were slightly lower compared to the previous quarter primarily due to lower head grades
and planned maintenance at the Lalor mine during the third quarter.
Operational performance during the third quarter at both Lalor and 777 was strong, with ore production generally in
line with the same period in 2019 and grades at both mines remaining in line with the mine plan. At Lalor, a two-week
planned maintenance program was completed on schedule, and the company achieved a third quarter production
rate averaging 4,600 tonnes per day outside of the maintenance period. The 777 mine maintained consistent and
stable performance during the third quarter as it approaches its planned closure in 2022.
Operational readiness activities in support of the early start-up of New Britannia are on track, including ensuring that
a sufficient and consistent volume of gold ore will be available. Underground development at Lalor in gold-rich lenses
25 and 27 is advancing ahead of schedule in preparation for the mid-2021 start-up of New Britannia, which is three
months earlier than originally planned. Mining of the first stope in lens 27 was completed in September and the trend
of increased precious metal production from Lalor is expected to continue.
At the Stall concentrator, ore processed during the third quarter of 2020 was in line with the second quarter, as both
periods had planned outages for capital upgrades. Although lower than the first half of 2020, the trend of improved
gold recoveries has continued compared to the same periods in 2019 due to improved ore characteristics and
numerous operational improvement projects implemented at the Stall mill. At the Flin Flon concentrator, o re
processed during the third quarter slightly decreased by 1% compared to the second quarter.
Combined mine, mill and G&A unit operating costs in the third quarter decreased by 7% compared to the second
quarter of 2020 primarily due to lower operating costs. Manitoba’s combined unit costs are expected to be within the
guidance range for the full year 2020.
Manitoba’s cash cost per pound of copper produced, net of by-product credits, for the third quarter of 2020 was
negative $3.41. These costs were significantly lower compared to the second quarter of 2020, primarily as a result of
higher by-product credits and lower mining costs, partially offset by lower copper production. Manitoba’s sustaining
cash cost per pound of copper produced, net of by-product credits, in the third quarter of 2020 was $0.83, lower than
the previous quarter due to the reasons listed above, slightly offset by increased sustaining capital expenditures.