TSX, NYSE – HBM 2017 No. 11 Hudbay Announces Second Quarter 2017 Results
TSX, NYSE – HBM
2017 No. 11
Hudbay Announces Second Quarter 2017 Results
Toronto, Ontario, August 3, 201 7 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE:HBM)
today released its second quarter 2017 financial results. All amounts are in U.S. dollars, unless otherwise noted.
Summary:
Operating cash flow1 of $124 million, a 54% increase from the first quarter 2017
Consolidated copper production of 40,842 tonnes, an 18% increase from the first quarter 2017
Consolidated zinc production of 34,896 tonnes, a 14% increase from the first quarter 2017
Consolidated cash cost2, net of by -product credits, of $0.8 5 per pound of copper , a 3% decre ase from the
first quarter 2017
Consolidated all-in sustaining cash cost2, net of by -product credits, of $1. 49 per pound of copper , a 2%
increase from the first quarter 2017
Continued progress on reducing debt balances with $6 7 million repaid during the quarter and amended
revolving credit facilities to extend the maturities and reduce the interest rates
Net debt2 of $950 million and total liquidity of $497 million, including $153 million in cash , an improvement
from March 31, 2017 levels of net debt of $1,035 million and total liquidity of $433 million
Rosemont project received the Final Record of Decision from the U.S. Forest Service
Allocated additional funds to exploration budget to focus on high-priority drilling targets
On track to meet production, operating cost and capital cost guidance for 2017
Net profit and earnings per share in the second quarter of 2017 were $25.6 million and $0.11, respectively, compared
to a net loss and loss per share of $5.7 million and $0.02, respectively, in the second quarter of 2016.
In the second quarter of 2017, o perating cash flow before change in non -cash working capital increased to $ 124.1
million from $80.6 million in the first quarter of 2017 and $69.5 million in the second quarter of 2016. The increase in
operating cash flow is the result o f growth in sales volumes of most metals and higher realized copper and zinc
prices.
“We continued to generate positive free cash flow , which enabled us to expand our exploration budget to focus on
building our long -term growth pipeline,” said Alan Hair, president and chief executive officer. “ For the balance of the
1 Operating cash flow before change in non-cash working capital.
2 Cash cost and all-in sustaining cash cost per pound, net of by-product credits, and net debt are not recognized under IFRS. For a
detailed description of each of these non-IFRS financial performance measures used in this news release, please see the
discussion under “Non-IFRS Financial Performance Measures” beginning on page 6 of this news release.
TSX, NYSE – HBM
2017 No. 11
2
year, we remain committed to deliver on our operating targets, further reduce debt and advance the in-house
brownfield opportunities at Lalor and Pampacancha, and we are on-track to achieve these objectives.”
Net profit and earnings per share in the second quarter of 2017 were affected by, among other things, the following
items:
Pre-tax gain
(loss) After-tax gain
(loss) Per share
gain (loss)
($ millions) ($ millions) ($/share)
Foreign exchange loss (5.7) (5.3) (0.02)
Mark-to-market adjustments of various items 6.8 6.1 0.03
Non-cash deferred tax adjustments - 1.7 0.01
Compared to the same quarter of 2016, production of zinc in concentrate increased as a result of higher zinc grades
in Manitoba, while copper production declined due to lower copper grades in Peru.
In the second quarter of 2017, consolidated cash cost per pound of copper produced, net of by -product credits, was
$0.85, a marginal increase compared to $0.83 in the same period of last year. Incorporating sustaining capital,
capitalized exploration, royalties and corporate selling and administrative expenses, consolidated all -in sustaining
cash cost per pound of copper produced, net of by -product credits, in the second quarter of 2017 was $1. 49, up from
$1.42 in the second quarter of 2016. The increase in all -in sustaining cash cost was driven by higher planned
sustaining capital expenditures in Peru and lower copper production compared to the second quarter of 2016.
Cash and cash equivalents increased by $20.1 million in the second quarter to $152.7 million compared to March 31,
2017. This increase was partly a result of cash generated from operating activities of $ 131.9 million, and a net
release of restricted cash of $16.9 million. These inflows were partly offset by $53.5 million of capital investments
primarily at Hudbay’s Peru and Manitoba operations and debt repayments of $67.1 million.
Net debt declined by $ 85.7 million from March 31, 2017 to $949.8 million at June 30, 2017, as approximately $63
million in drawings under Hudbay’s revolving credit facilities were repaid. At June 30, 2017, total liquidity, including
cash and available credit facilities, was $496.8 million, up from $432.9 million at March 31, 2017.
1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please
see page 6 of this news release.
Financial Condition ($000s) Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016
Cash and cash equivalents 152,672 132,583 146,864
Total long-term debt 1,102,426 1,168,052 1,232,164
Net debt1 949,754 1,035,469 1,085,300
Working capital 86,112 86,959 121,539
Total assets 4,359,827 4,357,812 4,456,556
Equity 1,794,305 1,762,817 1,763,212
TSX, NYSE – HBM
2017 No. 11
3
Production and Cost Performance Three months ended Three months ended
Jun. 30, 2017 Jun. 30, 2016
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 29,798 11,044 40,842 34,699 11,193 45,892
Gold oz 3,802 22,862 26,664 8,625 21,080 29,705
Silver oz 546,295 264,051 810,346 778,448 218,063 996,511
Zinc tonnes - 34,896 34,896 - 26,456 26,456
Payable metal in concentrate sold
Copper tonnes 28,482 10,767 39,249 26,562 10,272 36,834
Gold oz 3,445 22,006 25,451 4,157 22,598 26,755
Silver oz 558,617 232,090 790,707 482,332 233,541 715,873
Zinc2 tonnes - 29,424 29,424 - 23,728 23,728
Cash cost3 $/lb 1.24 (0.18) 0.85 0.97 0.37 0.83
Sustaining cash cost3 $/lb 1.82 0.38 1.39 1.10
All-in sustaining cash cost3 $/lb 1.49 1.42
Six months ended Six months ended
Jun. 30, 2017 Jun. 30, 2016
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 57,009 18,564 75,573 63,842 20,929 84,771
Gold oz 7,737 39,650 47,387 14,376 42,573 56,949
Silver oz 1,085,830 462,411 1,548,241 1,287,442 431,985 1,719,427
Zinc tonnes - 65,466 65,466 - 49,832 49,832
Payable metal in concentrate sold
Copper tonnes 47,047 18,617 65,664 57,835 20,918 78,753
Gold oz 4,919 46,001 50,920 11,537 32,935 44,472
Silver oz 941,880 525,392 1,467,272 1,148,415 341,767 1,490,182
Zinc2 tonnes - 56,256 56,256 - 49,148 49,148
Cash cost3 $/lb 1.27 (0.37) 0.86 1.05 0.73 0.97
Sustaining cash cost3 $/lb 1.72 0.34 1.44 1.67
All-in sustaining cash cost3 $/lb 1.48 1.59
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
2 Includes refined zinc metal sold and payable zinc in 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
6 of this news release.
Financial Performance Three months ended Six months ended
($000s except per share and cash cost amounts) Jun. 30 Jun. 30
2017 2016 2017 2016
Revenue 324,898 246,975 578,055 500,600
Cost of sales 246,919 198,684 450,926 424,386
Profit (loss) before tax 41,813 6,557 54,507 (10,331)
Profit (loss) 25,586 (5,703) 23,281 (21,491)
Basic and diluted earnings (loss) per share 0.11 (0.02) 0.10 (0.09)
Operating cash flow before change in non-cash
working capital 124,118 69,489 204,718 141,375
TSX, NYSE – HBM
2017 No. 11
4
Peru Operations Review
During the second quarter of 2017, the Peru operations produced 29,798 tonnes of copper, which was 10% higher
than production in the first quarter 2017 as a result of improved mill throughput, but lower than production in the same
quarter of 2016 due to expected grade decline as per the mine plan.
Ore mined at Constancia during the second quarter of 2017 increased by 12% compared to the same period in 2016
as the company continues to increase stockpiles to improve its ability to blend ore at the processing plant. As
expected, milled copper grades in the second quarter were approximately 15% lower than the same period in 2016
as Constancia entered lower grade phases of the mine plan. Despite harder material, mill throug hput improved 3%
due to plant optimization initiatives during the second quarter of 2017.
Recoveries of copper, gold and silver were lower in the second quarter of 2017, compared to the same period in
2016, due to normal ore variability . Improvements in p rocess recoveries continue to be implemented and evaluated
along with consistent positive grade reconciliations.
Combined mine, mill and G&A unit operating costs in the second quarter of 2017 were 14% higher than the same
period in 2016 as a result of increased unplanned plant maintenance, costs of operating the molybdenum plant at
higher than planned rates, higher community spending , road maintenance costs and other administrative costs.
Combined unit operating costs are expected to decline in the second half of 2017 with full year results expected to fall
within the guidance range.
Cash cost per pound of copper produced, net of by -product credits, for the three months ended June 30, 2017 was
$1.24, an increase of 28% from the same period in 2016 mainly as a result of decreased copper grades, together with
increased plant maintenance and other costs as described above.
Sustaining cash cost per pound of copper produced, net of by -product credits, for the three months ended June 30,
2017 was $1.82, an incr ease of 31% from the same period in 2016 as a result of the factors noted above, as well as
expected higher sustaining capital in heavy civil works during the dry season and mobile equipment overhauls.
Hudbay expects to meet production and cost guidance in Peru for the year.
Manitoba Operations Review
During the second quarter of 2017, the Manitoba operations produced 34,896 tonnes of zinc, 11,044 tonnes of
copper and 26,634 ounces of gold-equivalent precious metals. Production of zinc and precious metals was higher
than the same quarter in 2016 by 32% and 10%, respectively, as a result of higher grades at 777 and Lalor as well as
higher production at Lalor. Production of copper during the quarter was consistent with the same period in 2016. Due
to increased Lalor mine throughput and higher zinc grades at 777, zinc concentrate production is exceeding the
processing capacity of the Flin Flon zinc plant. As a result, sales of excess zinc concentrate inven tory began in the
second quarter of 2017 and will continue as long as concentrate production exceeds zinc plant processing capacity.
Ore mined at Hudbay’s Manitoba operations during the second quarter of 2017 increased by 2% compared to the
same period in 2016, primarily as a result of increased production at the company’s Lalor and Reed mines , partially
offset by decreased production at the 777 mine. Overall zinc, gold and silver grades were 38%, 10%, and 20%
higher, respectively, while copper grades were 5% lower in the second quarter of 2017 compared to the same period
of 2016. Grade variances were due to planned stope sequencing, including the resequencing of the 777 mine plan to
prioritize higher grade zinc stopes in 2017.
TSX, NYSE – HBM
2017 No. 11
5
Ore processed in Flin F lon in the second quarter of 2017 was consistent with ore processed during the same period
in 2016. Copper, gold and silver recoveries in the second quarter of 2017 were consistent with the same period in
2016, while zinc recovery was 10% higher due to hig her zinc head grades. Unit operating costs at the Flin Flon
concentrator were 6% higher in the second quarter of 2017 compared to the same period in 2016 as a result of higher
maintenance expenditures. Ore processed and recoveries at the Stall concentrator in the second quarter of 2017
were consistent with the same period in 2016. Unit operating costs at the Stall concentrator were 26% higher in the
second quarter of 2017 compared to the same period in 2016 as a result of higher maintenance expenditures and
additional costs related to the use of higher -cost temporary crushing facilities in April. The mill resumed use of its
permanent crushing circuit by the end of April 2017.
The strong ramp up of ore production from the Lalor mine in the first half of 2017 has resulted in the accumulation of
an ore stockpile as Lalor’s production has exceeded the Stall concentrator’s current milling capacity. Hudbay has
started to truck some of the stockpiled ore to the Flin Flon mill for processing in the second half of 2017.
Manitoba combined mine, mill and G&A unit operating costs in the second quarter were 25% higher than in the same
period in 2016 . This was partly due to higher mining unit costs at Lalor , consistent with the revised mine plan,
reflecting increased cement rock filling costs as well as substantial operating and capital development work that was
undertaken to support the company’s plan to grow Lalor’s production rates to 4,500 tonnes per day. Milling unit costs
were higher for the reasons outlined above. In addition, the stockpiling of Lalor ore described above increase d
combined mine/mill unit costs as that metric is expressed as total costs during the period (irrespective of inventory
changes), divided by the tonnes of ore milled. This factor should reverse as stockpiles reduce, although costs in the
second half will be affected by higher Reed mine unit costs as the capitalization of development costs will cease, and
additional costs will be incurred to truck Lalor o re to the Flin Flon mill. Processing the additional Lalor production in
Flin Flon is expected to drive economies of scale and additional revenues through a faster ramp up. Combined unit
costs are expected to be within the guidance range for 2017.
Cash cost, net of by-product credits, in the second quarter of 2017 was negative $0.18 per pound of copper produced
compared to $0.37 in the second quarter of 2016. The decrease is primarily a result of significantly increased zinc by -
product credits, partially offset by higher expected costs at the 777 and Reed mines during this part of their mine life.
Sustaining cash cost, net of by -product credits, in the second quarter of 2017 decreased to $0. 38 per pound of
copper produced compared to $1.10 in the second q uarter of 2016 as a result of the same factors described above
and lower capitalized underground mine development.
Hudbay expects to meet production and cost guidance in Manitoba for the year.
Final Record of Decision for Rosemont
On June 7, 2017, the U.S. Forest Service ("USFS") issued the Final Record of Decision ("FROD") related to the
Rosemont Project. Receiving the FROD concludes a thorough process involving 17 co -operating agencies at various
levels of government, 16 hearings, over 1,000 studies, and 245 days of public comment resulting in more than 36,000
comments. Since receiving the FROD, the company has commenced the administrative process working with the
USFS to complete the Mine Plan of Operations ("MPO") , and the draft MPO was submitted to the USFS in late June.
The other key federal permit outstanding is the Section 404 Water Permit from the U.S. Army Corps of Engineers.
Credit Facility Extension & Amendments
On July 14, 2017, Hudbay entered into amendments to its senior credit facilities to secure both facilities with
substantially all of the company’s assets other than assets related to the Rosemont project, amend the financial
TSX, NYSE – HBM
2017 No. 11
6
covenants, extend the maturity dates to July 14, 2021 from March 31, 2019 and reduce t he interest rate to LIBOR
plus 3.00% from LIBOR plus 4.50%, based on financial results for the twelve months ended June 30, 2017. The
revised covenants include maintaining gross total debt to EBITDA of less than 4.00 times in 2017, senior secured
debt to E BITDA of less than 2.00 times, and interest coverage of more than 3.00 times. The two facilities have
substantially similar terms and conditions and continue to provide revolving credit to a maximum amount of up to
$550 million.
Exploration Update
Given the strong free cash flow generation of the business year -to-date, additional funds have been allocated to
exploration in 2017 with a focus on high -priority drilling targets. The company has been active in identifying and
acquiring grassroots exploration p roperties in Peru, Chile and British Columbia during the recent downturn in metal s
prices. The increase in exploration expenditures is expected to fund drilling on the grassroots exploration properties ,
as well as testing targets in Manitoba and drilling down plunge at Lalor.
The revised exploration guidance for 2017 is shown below:
2017 Exploration Guidance
(in $ millions) Revised Original
Manitoba 6 4
Peru 5 2
Generative and Other 12 4
Total Exploration Expenditures 23 10
Capitalized Spending1 (2) (2)
Total1 21 8
1 Assumes $2 million of Manitoba expenditures will be capitalized.
Dividend Declared
A semi -annual dividend of C$0.01 per share was declared on August 3 , 201 7. The dividend will be paid
on September 29, 2017 to shareholders of record as of September 8, 2017.
Non-IFRS Financial Performance Measures
Net debt is shown in this news release because it is a p erformance measure used by the c ompany to assess its
financial position. Cash cost, sustaining and all -in sustaining cash cost per pound of copper produced are shown
because the company believes they help investors and management assess the performance of its operations,
including the margin generated by th e operations and the company. These measures do not have a meaning
prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.
These measures should not be considered in isolation or as a substitute for me asures prepared in accordance with
IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.
Other companies may calculate these measures differently. For further details on these measures, including
reconciliations to the most comparable IFRS measures, please refer to page 31 of Hudbay’s management’s
discussion and analysis for the three and six months ended June 30, 2017 available on SEDAR at www.sedar.com
and EDGAR at www.sec.gov.
TSX, NYSE – HBM
2017 No. 11
7
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2017/Q2/2MDA17.pdf
Financial Statements:
http://www.hudbayminerals.com/files/doc_financials/2017/Q2/2FS17.pdf
Conference Call and Webcast
Date: Friday, August 4, 2017
Time: 10 a.m. ET
Webcast: www.hudbay.com
Dial in: 416-849-1847 or 1-866-530-1554
Qualified Person
The technical and scientific information in this news release related to the Constancia mine and Rosemont project
has been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer . The
technical and scientific information related to the Manitoba sites and projects contained in this news release has been
approved by Robert Carter, P. Eng, Hudbay’s Lalor Mine Manager . Messrs. Meagher and Carter are qualified
persons pursuant to NI 43 -101. For a description of the key assu mptions, parameters and methods used to estimate
mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to
which the estimates of scientific and technical information may be affected by any known envi ronmental, permitting,
legal title, taxation, sociopolitical, marketing or other relevant factors, please see the Technical Reports for the
company’s material properties as filed by Hudbay on SEDAR at www.sedar.com.
Forward-Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States
securities legislation. All information contained in this news release, other than statements of current and historical
fact, is forward-looking information. Often, but not always, forward -looking information can be identified by the use of
words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”, “estimates”, “forecasts”, “strategy”, “target”,
“intends”, “objective”, “goal”, “understands”, “anticipates” and “believes” (and variations of these or similar words) and
statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or
“will be taken” (and variations of these or similar express ions). All of the forward -looking information in this news
release is qualified by this cautionary note.
TSX, NYSE – HBM
2017 No. 11
8
Forward-looking information includes, but is not limited to, production, cost and capital and exploration expenditure
guidance, anticipated production at Hudbay’s mines and processing facilities, the anticipated timing, cost and benefits
of developing the Rosemont project, Pampacancha deposit and Lalor growth projects, anticipated exploration plans,
anticipated mine plans, anticipated metals prices and the anticipated sensitivity of the company’s financial
performance to metals prices, events that may affect its operations and development projects, the permitting,
development and financing of the Rosemont project, the potential to increase throughput at the Stall mill and to
refurbish the New Britannia mill and utilize it to process ore from the Lalor mine, anticipated cash flows from
operations and related liquidity requirements, the anticipated effect of external factors on revenue, such as
commodity prices, estimation of mineral reserves and resources, mine life projections, reclamation costs, economic
outlook, government regulation of mining operations, and business and acquisition strategies. Forward -looking
information is not, and cannot be, a guaran tee of future results or events. Forward -looking information is based on,
among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by the
company at the date the forward -looking information is provided, inherently are subject to significant risks,
uncertainties, contingencies and other factors that may cause actual results and events to be materially different from
those expressed or implied by the forward-looking information.
The material factors or assumptions that Hudbay identified and were applied by the company in drawing conclusions
or making forecasts or projections set out in the forward-looking information include, but are not limited to:
the success of mining, processing, exploration and development activities;
the scheduled maintenance and availability of the processing facilities;
the sustainability and success of Hudbay’s cost reduction initiatives;
the accuracy of geological, mining and metallurgical estimates;
anticipated metals prices and the costs of production;
the supply and demand for metals the company produces;
the supply and availability of all forms of energy and fuels at reasonable prices;
no significant unanticipated operational or technical difficulties;
the execution of Hudbay’s business and growth strategies, including the success of its strategic investments
and initiatives;
the availability of additional financing, if needed;
the ability to complete project targets on time and on budget and other events that may affect the company’s
ability to develop its projects;
the timing and receipt of various regulatory, governmental and joint venture partner approvals;
the availability of personnel for the exploration, development and operational projects and ongoing employee
relations;
the ability to secure required land rights to develop the Pampacancha deposit;
maintaining good relations with the communities in which the company operates, including the c ommunities
surrounding the Constancia mine and Rosemont project and First Nations communities surrounding the
Lalor and Reed mines;
no significant unanticipated challenges with stakeholders at the company’s various projects;
no significant unanticipated events or changes relating to regulatory, environmental, health and safety
matters;
no contests over title to the company’s properties, including as a result of rights or claimed rights of
aboriginal peoples;
the timing and possible outcome of pending litigation and no significant unanticipated litigation;
certain tax matters, including, but not limited to current tax laws and regulations and the refund of certain
value added taxes from the Canadian and Peruvian governments; and
no significant and continuin g adverse changes in general economic conditions or conditions in the financial
markets (including commodity prices and foreign exchange rates).