TSX, NYSE – HBM 2022 No. 6 Hudbay Announces First Quarter 2022 Results
TSX, NYSE – HBM
2022 No. 6
Hudbay Announces First Quarter 2022 Results
Toronto, Ontario, May 9, 2022 – Hudbay Minerals Inc. (“Hudbay” or the “ company”) (TSX, NYSE:HBM) today
released its first quarter 2022 financial results. All amounts are in U.S. dollars, unless otherwise noted.
First Quarter Operating and Financial Results
• Consolidated production in the first quarter was 24, 702 tonnes of copper and 53,956 ounces of gold. C ash
cost and sustaining cash cost i per pound of copper produced, net of by -product credits, were $1.11 and
$2.29, respectively.
• Full year 2022 production and cost guidance reaffirmed as first quarter production was in line with quarterly
cadence expectations and Hudbay achieved strong unit operating cost performance despite the inflationary
environment.
• Peru's operations in the first quarter were impacted by COVID -19 related employee absenteeism and high
rainfalls resulting in reduced Pampacancha production relati ve to the fourth quarter of 2021, as well as a
semi-annual scheduled mill maintenance period in January.
• Manitoba achieved first quarter gold production of 43,167 ounces at a cash cost per ounce of gold produced,
net of by -product credits i, of $416 as New Britannia's gold metallurgical recoveries improved significantly
relative to previous months. Manitoba sa les volumes were impacted by the availability of railcars during the
quarter, with excess inventory of approximately 7,000 tonnes of copper concentrate containing high gold
content and 6 million pounds of refined zinc at the end of the quarter, collectively valued at approximately
$45 million.
• First quarter net earnings and earnings per share were $63.8 million and $0.24, respectively. After adjusting
for a non -cash gain of $79.9 million mostly related to a quarterly revaluation of the Flin Flon environmental
provision given higher long term risk -free discount rates, amongst other items, first quarter adjusted net
earningsi per share were $0.02.
• Operating cash flow before change in non-cash working capital was $77.1 million and adjusted EBITDAi was
$110.2 million in the first quarter of 2022, benefiting from strong realized base metals prices but negatively
impacted by the temporary buildup of unsold inventory in Manitoba.
• Cash and cash equivalents decreased during the first quarter to $213.4 million, as at March 31, 2022, mainly
as a result of $55.9 million of sustaining capital investments, $31.9 million of interest payments and an $18.6
million partial repayment of the gold prepay liability, partially offset by cash generated from operations, which
was negatively impacted by limited railcar availability leading to an inventory buildup in Manitoba.
Executing on Growth Initiatives
• The Copper World preliminary economic assessment is nearing completion and is expected to reflect a two-
phase mine plan contemplating the development of the Copper World deposits in conjunction with an
alternative plan for the Rosemont deposit.
• In April 20 22, the New Britannia mill consistently achieved throughput greater than 1,500 tonnes per day
after scheduled rod mill liner maintenance was completed in the first quarter.
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• Announced annual reserve and resource update with mineral reserve growth replacing close to 100% of
2021 mining depletion and extending the mine life at each of Constancia and Snow Lake by one year to
2038.
• Significant exploration activity continues across the business with seven drill rigs now turning at the Copper
World site to conduct infill and extension drilling and to support future economic studies, winter drilling
campaigns recently completed in the S now Lake region and at the Flin Flon tailings facility, and the
advancement of exploration initiatives in Peru.
“We maintained steady operations during the first quarter despite being faced with a number of external challenges,
including COVID -related abs enteeism, extreme weather conditions and inflationary cost pressures,” said Peter
Kukielski, President and Chief Executive Officer. “This led to strong unit cost performance which is a testament to our
effective risk management systems and focus on operating efficiencies. We have seen strong performance from the
New Britannia mill in Manitoba and we are on track to mine the significantly higher grades in Peru later this year . As
such, we have reaffirmed our 2022 p roduction and cost guidance . We look forward to continuing to advance our
world-class project pipeline, including the release of a robust PEA on our Copper World project in the second
quarter.”
Summary of First Quarter Results
Consolidated copper production in the first quarter of 202 2 was 24,702 tonnes, in line with expected quarterly
cadence for the year . Consolidated gold production decreased by 16% compared to the fourth quarter, primarily due
to lower gold production in Peru as COVID -19 related absenteeism and high rainfalls limited production from the
Pampacancha pit during the quarter . Consolidated zinc production in the first quarter was 4% lower than the fourth
quarter primarily due to lower zinc grades at Lalor and 777.
Consolidated cash cost per pound of copper produced, net of by -product credits i, in the first quarter of 2022 was
$1.11, compared to $ 0.51 in fourth quarter o f 2021. This increase was a result of higher milling costs and lower
copper production in Peru and higher general and administrative costs in Manitoba, partially offset by slightly higher
by-product credits per pound . Consolidated sustaining cash cost per pound of copper produced, net of by -product
creditsi, was $2.29 in the first quarter of 2022 compared to $ 1.95 in the fourth quarter. This increase was primarily
due to the same reasons outlined above , partially offset by lower sustaining capital expenditures and capitalized
exploration. Both measures were slightly above the company’s 2022 guidance ranges primarily as a result of the by-
product credit impact from lower sales volumes in the first quarter, as described below, and therefore, consolidated
cash cost and sustaining cash cost are expected to decline in future quarters to within the 2022 guidance ranges with
higher expected copper production and contributions from precious metal by-product credits.
In the first quarter of 2022, Peru and Manitoba maintain ed steady operations with unit operating cost performance of
$12.37 per tonne and C$176 per tonne, respectively, in line with the 2022 guidance ranges. This strong cost
performance was achieved despite continuing to experience broad based inflationary pressures caused by higher
input prices for many services and consumables, such as power, fuel, grinding media, freight and insurance, leading
to higher than budgeted operating costs during the first quarter of 2022. The company also continue s to face
intermittent operational, labour and travel disruptions with periodic waves of COVID-19 cases.
Cash generated from operating activities in th e first quarter of 202 2 decreased to $63.6 million compared to $ 95.8
million in the fourth quarter of 2021. Operating cash flow before change in non-cash working capital was $77.1 million
during the first quarter of 2022, compared to $156.9 million in the fourth quarter 2021. These decreases were due to
lower sales volumes for copper, gold and zinc, primarily as a result of limited railcar availability in Manitoba as
detailed below, partially offset by higher silver sales volumes and higher base metals realized prices.
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As previously announced, f irst quarter Manitoba sales were impacted by limited railcar availability resulting in
approximately 7,000 tonnes of copper concentrate inventory containing high gold content , and 6 million pounds of
refined zinc inventory in excess of normal operating levels. Had the excess copper concentrate and zinc inventory
been sold during the first quarter, Hudbay would have realized approximately $ 45 million of incremental revenue,
assuming end of quarter commodity prices. The above quantities are expected to be recognized as revenue and
converted to cash as inventory levels are drawn down over the next several months with increased railcar access as
weather conditions improve.
Net earnings and earnings per share in the first quarter of 2022 were $63.8 million and $0.24, respectively, compared
to a net loss and loss per share of $10.5 million and $0.0 4, respectively, in the fourth quarter of 2021. First quarter
earnings benefited from a non -cash gain of $79.9 million mostly related to the quarterly revaluation of the Flin Flon
environmental provision, which was impacted by rising long term risk -free discount rates. With Flin Flon operations
closing in June of this year and given the long -term nature of the reclamation cash flows, quarterly revaluation of the
corresponding environmental provision remain s highly sensitive to changes in long -term risk-free discount rates and,
as such, the company expects to continue to experience quarterly environmental provision revaluations. The
quarterly financial results were also negatively impacted by $10.5 million in non-cash mark-to-market losses arising
from the revaluation of the gold prepayment liability, among other items.
Adjusted net earningsi and adjusted net earnings per sharei in the first quarter of 202 2 were $5.2 million and $0.02
per share, respectively, after adjusting for the non-cash gain related to the revaluation of the environmental provision,
among other items. This compares to an adjusted net earnings and adjusted net earnings per share of $32.7 million,
and $0.13 per share in fourth quarter of 2021. First quarter adjusted EBITDAi was $110.2 million, compared to $180.3
million in the fourth quarter of 202 1, primarily as a result of the same factors affecting operating cash flow noted
above.
As at March 31, 2022, the company’s liquidity includes $213.4 million in cash as well as undrawn availability of
$357.5 million under its revolving credit facilities. The company expects that the current liquidity combined with cash
flow from operations will be sufficient to meet its liquidity needs for the foreseeable future. Given the elevated
inventory levels in Manitoba at the end of the first quarter and the positive expected quarterly production cadence, the
company projects its cash balance to grow throughout the remainder of the year based on current commodity prices.
1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please
see the “Non-IFRS Financial Reporting Measures” section of this news release.
2 Working capital is determined as total current assets less total current liabilities as defined under IFRS and disclosed on the
consolidated financial statements
Consolidated Financial Condition ($000s) Mar. 31, 2022 Dec. 31, 2021 Mar. 31, 2021
Cash 213,359 270,989 310,564
Total long-term debt 1,181,119 1,180,274 1,180,798
Net debt1 967,760 909,285 870,234
Working capital2 161,846 147,512 236,281
Total assets 4,538,214 4,616,231 4,549,196
Equity 1,561,978 1,476,828 1,660,250
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Consolidated Financial Performance Three Months Ended
Mar. 31, 2022 Dec. 31, 2021 Mar. 31, 2021
Revenue $000s 378,619 425,170 313,624
Cost of sales $000s 293,351 343,426 261,112
Earnings (loss) before tax $000s 88,861 (149) (69,592)
Earnings (loss) $000s 63,815 (10,453) (60,102)
Basic and diluted earnings (loss) per share $/share 0.24 (0.04) (0.23)
Adjusted earnings (loss) per share1 $/share 0.02 0.13 (0.06)
Operating cash flow before change in non-
cash working capital
$ millions 77.1 156.9 90.7
Adjusted EBITDA1 $ millions 110.2 180.3 104.2
1 Adjusted earnings (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.
Consolidated Production and Cost Performance Three Months Ended
Mar. 31, 2022 Dec. 31, 2021 Mar. 31, 2021
Contained metal in concentrate and doré produced1
Copper tonnes 24,702 28,198 24,553
Gold ounces 53,956 64,159 35,500
Silver ounces 784,357 899,713 696,673
Zinc tonnes 22,252 23,207 27,940
Molybdenum tonnes 207 275 294
Payable metal sold
Copper tonnes 20,609 24,959 20,929
Gold2 ounces 48,343 56,927 25,383
Silver2 ounces 864,591 638,640 509,760
Zinc3 tonnes 17,306 21,112 28,343
Molybdenum tonnes 213 245 284
Consolidated cash cost per pound of copper produced4
Cash cost $/lb 1.11 0.51 1.04
Peru $/lb 1.54 1.28 1.82
Manitoba $/lb (0.40) (2.77) (1.04)
Sustaining cash cost $/lb 2.29 1.95 2.16
Peru $/lb 2.27 2.46 2.36
Manitoba $/lb 2.33 (0.23) 1.62
All-in sustaining cash cost $/lb 2.54 2.20 2.37
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
2 Includes total payable gold and silver in concentrate and in doré sold.
3 Includes refined zinc metal and payable zinc in concentrate sold.
4 Cash cost, sustaining cash cost and all-in sustaining cash cost per pound of copper produced, net of by -product credits, are non-
IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the “Non-IFRS
Financial Reporting Measures” section of this news release.
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Peru Operations Review
Peru Operations Three Months Ended
Mar. 31, 2022 Dec. 31, 2021 Mar. 31, 2021
Constancia ore mined1 tonnes 6,908,151 7,742,469 7,747,466
Copper % 0.32 0.33 0.30
Gold g/tonne 0.04 0.04 0.04
Silver g/tonne 3.22 2.81 2.90
Molybdenum % 0.01 0.01 0.01
Pampacancha ore mined1 tonnes 847,306 2,107,196 —
Copper % 0.27 0.27 —
Gold g/tonne 0.43 0.34 —
Silver g/tonne 4.06 4.26 —
Molybdenum % 0.01 0.01 —
Ore milled tonnes 7,213,833 8,048,925 6,362,752
Copper % 0.31 0.33 0.33
Gold g/tonne 0.08 0.11 0.04
Silver g/tonne 3.26 3.67 2.84
Molybdenum 0.01 0.01 0.01
Copper recovery % 85.3 86.0 84.1
Gold recovery % 59.8 63.6 52.0
Silver recovery % 66.9 60.8 69.9
Molybdenum recovery % 21.1 26.7 33.4
Contained metal in concentrate
Copper tonnes 19,166 22,856 17,827
Gold ounces 10,789 17,917 4,638
Silver ounces 505,568 578,140 405,714
Molybdenum tonnes 207 275 294
Payable metal sold
Copper tonnes 16,825 20,551 14,836
Gold ounces 14,452 16,304 2,963
Silver ounces 636,133 380,712 337,612
Molybdenum tonnes 213 245 284
Combined unit operating
cost2,3,4
$/tonne 12.37 9.96 11.74
Cash cost4 $/lb 1.54 1.28 1.82
Sustaining cash cost3,4 $/lb 2.27 2.46 2.36
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 Excludes approximately $2.3 million, or $0.32 per tonne, of COVID-19 related costs during the three months ended March 31,
2022, $4.1 million, or $0.51 per tonne, of COVID-related costs during the three months ended December 31, 2021 and $4.6 million,
or $0.72 per tonne, during the three months ended March 31, 2021.
4 Combined unit cost, cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS
financial performance measures with no standardized definition under IFRS. For further information, please see the “Non-IFRS
Financial Reporting Measures” section of this news release.
The Peru operations were impacted by the COVID -19 Omicron variant during January and February of 202 2,
resulting in high employee absenteeism which had a direct impact on the quarter's production. Despite the high
absenteeism, COVID-19 containment costs have decreased considerably as the severity of the variant appears lower
and COVID -19 protocols have b een modified to align with recommended public health measures. Full year
production of all metals and costs in Peru are expected to be within guidance ranges for 2022.
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During the first quarter of 2022, the Constancia operations produced 19,166 tonnes of copper, 10,789 ounces of gold,
505,568 ounces of silver and 207 tonnes of molybdenum. Production of all metals was lower than the fourth quarter
of 2021 primarily due to a planned semi -annual mill maintenance shutdown in January and lower grades . As
previously disclosed, full year production in Peru is expected to benefit from significantly higher grades in the fourth
quarter of 2022.
Total ore mined declined during the first quarter of 202 2, relative to the fourth quarter of 202 1, due to high rainfalls
and labour shortages, which resulted in delays affecting the water management system and lower production from
Pampacancha. Ore milled during the first quarter of 202 2 was lower compared to the fourth quarter of 2021 due to
the planned mill maintenance shutdown in January. Milled copper grades and recoveries were lower than the
previous quarter’s levels but were consistent with the mine plan . Milled gold grades and recoveries were lower than
the previous quarter due to a lower contribution of Pampacancha ore in the quarter.
Combined mine, mill and G&A unit operating costs in the first quarter of 2022 were $12.37 per tonne, and higher than
the fourth quarter of 202 1, primarily due to continued inflationary pressures on consumables and energy costs and
fewer tonnes of ore milled due to the planned mill maintenance shutdown. Hudbay experienced unbudgeted
inflationary pressure on costs in the first quarter of 2022 as a result of higher fuel prices, higher power prices, higher
steel prices affecting grinding media costs, higher community costs and higher insurance costs. Despite these
inflationary cost pressures, full year unit operating costs in Peru are expected to be within the 2022 guidance range.
Peru’s c ash cost per pound of copper produced, net of by -product credits, in the first quarter of 202 2 was $1.54,
higher than the fourth quarter primarily due to higher milling costs and lower copper production. Cash costs in the first
quarter were above the upper end of the 2022 guidance range in part due to lower production and higher costs
related to the scheduled semi -annual plant maintenance shutdown in the quarter. Cash cost per pound of copper
produced, net of by-product credits, is expected to decline and full year cash costs are expected to remain within the
2022 guidance range with higher expected copper production and contrib utions from precious metal by -product
credits later this year.
Peru’s s ustaining cash cost per pound of copper produced, net of by -product credits, in the first quarter of 2022
improved to $2. 27, compared to $2.46 in the fourth quarter, as lower sustaining capital expenditures and lower
capitalized exploration more than offset the higher milling costs and lower production in the quarter.
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Manitoba Operations Review
Manitoba Operations Three Months Ended
Mar. 31, 2022 Dec. 31, 2021 Mar. 31, 2021
Lalor ore mined tonnes 386,752 422,208 421,602
Copper % 0.80 0.78 0.57
Zinc % 4.06 4.19 5.20
Gold g/tonne 3.76 3.92 2.67
Silver g/tonne 22.94 30.35 22.75
777 ore mined tonnes 258,069 266,744 275,260
Copper % 1.19 1.13 2.06
Zinc % 4.12 4.16 4.00
Gold g/tonne 1.69 1.80 2.39
Silver g/tonne 21.05 25.02 29.32
Stall Concentrator & New Britannia Mill:
Ore milled tonnes 397,301 419,727 361,344
Copper % 0.82 0.75 0.60
Zinc % 4.24 4.12 5.53
Gold g/tonne 3.87 3.90 2.57
Silver g/tonne 23.16 30.07 23.40
Copper recovery % 87.5 88.7 85.7
Zinc recovery % 85.7 87.4 91.1
Gold recovery % 58.4 54.6 57.5
Silver recovery % 60.0 53.9 56.2
Flin Flon Concentrator:
Ore milled tonnes 254,032 262,565 283,386
Copper % 1.20 1.12 1.88
Zinc % 4.13 4.16 4.20
Gold g/tonne 1.70 1.78 2.34
Silver g/tonne 21.23 25.04 28.01
Copper recovery % 87.6 86.7 91.3
Zinc recovery % 83.2 83.1 81.8
Gold recovery % 57.7 59.2 64.0
Silver recovery % 52.5 45.6 54.1
Total contained metal in concentrate
Copper tonnes 5,536 5,342 6,726
Zinc tonnes 22,252 23,207 27,940
Gold ounces 36,887 37,644 30,862
Silver ounces 268,743 315,054 290,959
Total metal in doré
Gold ounces 6,280 8,598 -
Silver ounces 10,046 6,519 -
Total payable metal sold
Copper tonnes 3,784 4,408 6,093
Zinc1 tonnes 17,306 21,112 28,343
Gold2 ounces 33,891 40,623 22,420
Silver2 ounces 228,458 257,928 172,148
Combined unit operating
cost3,4
C$/tonne 176 168 151
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Gold cash cost4,5 $/oz 416 — —
Gold sustaining cash cost4,5 $/oz 1,187 — —
1 Includes refined zinc metal sold and payable zinc in concentrate sold.
2 Includes total payable precious metals in concentrate and in doré sold.
3 Reflects combined mine, mill and G&A costs per tonne of ore milled.
4 Combined unit cost, cash cost and sustaining cash cost per ounce of gold produced, net of by -product credits, are non-IFRS
financial performance measure s with no standardized definition under IFRS. For further information, please see the “Non -IFRS
Financial Reporting Measures” section of this news release.
5 Cash cost and sustaining cash cost per ounce of gold produced were introduced in 2022 and do not have a published comparative.
During the first quarter of 202 2, the Manitoba operations produced 4 3,167 ounces of gold, 22,252 tonnes of zinc ,
5,536 tonnes of copper and 278,789 ounces of silver. Copper production increased by approximately 4%, where as
gold, zinc and silver production decreased by 7%, 4% and 13%, respectively, compared to the fourth quarter due to
expected grade variability quarter -to-quarter and lower ore milled . As previously mentioned, sales volumes in
Manitoba were impacted by limited railcar availability, and the resulting excess copper concentrate and refined zinc
inventory buildup is expected to normalize over the next several m onths with increased access to railcars as weather
conditions improve. Full year production of all metals and costs in Manitoba are expected to be within guidance
ranges for 2022.
Ore mined at the Manitoba operations during the first quarter of 202 2 was lower than the fourth quarter of 202 1 due
to employee absenteeism caused by COVID -19, unplanned maintenance requirements of the ore handling system
that temporarily affected hoisting ability at Lalor and planned lower production at 777 as the mine app roaches closure
in June 2022.
Lalor production processes to separate gold and base metal ores are fully established to optimally provide feed for
both the New Britannia and Stall mills based on the ore metal content. Higher gold content ore is processed at the
New Britannia facility and higher base metal content ore is directed towards Stall. A production ramp -up strategy to
achieve 5,300 tonnes per day at Lalor by the end of 2022 is underway and includes advancing development for new
mining fronts, addit ions to the mine equipment fleet, transition of workforce from the 777 mine upon closure, and
expansion of change house and office facilities. A planned Lalor maintenance period has been advanced to the
second quarter of 2022 in order to allow for increased availability during the third quarter after 777 has closed and the
additional workforce and equipment have transitioned to Lalor. The 777 equipment relocation strategy will co mmence
in the second quarter of 2022, ahead of expected timeframes to advance the production ramp -up to 5,300 tonnes per
day.
The 777 mine is within months of closure and the focus continues to be on safely mining out the remaining reserves
by completing the necessary ground rehabilitation to access remnant and pillar stoping blocks. Challenging ground
conditions continue to cause delays in the production sequence and result in higher dilution than planned. These
challenges are expected to continue until t he end of the mine life in June 2022. Pre -closure activities are well
underway in mined out areas to decommission stationary equipment of value for redeployment at Lalor. As
development requirements wind down, personnel and equipment are being redeployed t o Lalor as part of the Lalor
ramp-up strategy.
The New Britannia mill averaged approximately 1,400 tonnes per day in the first quarter of 2022 , slightly below the
targeted 1,500 tonnes per day as a result of completing scheduled rod mill liner maintenance during the quarter .
Since completing the mill maintenance, New Britannia has consistently achieved greater than 1,500 tonnes per day in
April. With the inclusion of doré, the gold and silver recoveries at the New Britannia mill have also improved
significantly with metallurgical recoveries in March higher in relation to previous months. Additional initiatives are
planned in the second quarter to further improve recoveries to be in line with metallurgical models.