TSX, NYSE – HBM 2018 No. 12 Hudbay Announces Second Quarter 2018 Results
TSX, NYSE – HBM
2018 No. 12
Hudbay Announces Second Quarter 2018 Results
Toronto, Ontario, July 31, 2018 – Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX, NYSE:HBM) today
released its second quarter 2018 financial results. All amounts are in U.S. dollars, unless otherwise noted.
Summary:
Net profit and earnings per share in the second quarter of 2018 were $2 5 million and $0. 09, respectively,
compared to a net profit and earnings per share of $19 million and $0.08, respectively, in the second quarter
of 2017
Operating cash flow 1 of $132 million in the second quarter of 2018, a 6% increase from the second quarter
of 2017
Reduced net debt 2 position by $49 million during the second quarter of 2018; as at June 30, 2018, Hudbay
had net debt of $536 million and total liquidity, including cash and available credit facilities, of $859 million
Consolidated cash cost2, net of by -product credits, of $0 .96 per pound of copper , a 13% increase from the
second quarter of 2017
Consolidated all-in sustaining cash cost2, net of by -product credits, of $1. 48 per pound of copper in the
second quarter of 2018, down slightly from $1.49 in the second quarter of 2017
Manitoba combined mine/mill unit operating costs are now expected to be between C$125 and C$135 per
tonne in 20183; Peru remains on track to meet production, capital cost and unit cost guidance for 2018
Net profit and earnings per share in the second quarter of 2018 were $24.7 million and $0.09, respectively, compared
to a net profit and earnings per share of $19.1 million and $0.08, respectively, in the second quarter of 2017.
In the second quarter of 201 8, o perating cash flow before change in non -cash working capital increased to
$131.6 million from $124.1 million in the same quarter of 201 7. The increase in operati ng cash flow is the result of
higher realized prices for copper, zinc and precious metals , partially offset by decreases in the sales volumes of
copper, zinc and silver and higher mine operating costs.
“In the first half of the year , we delivered solid production results and growing free cash flow, and applied that cash
flow to substantial net debt reduction and funding the development of our exploration pipeline ,” said Alan Hair,
president and chief executive officer. “ Our focus for the remainder of the year is to deliver on our operating targets,
complete the ramp -up of ore production at Lalor and move Rosemont through the permitting p rocess into
development.”
1 Operating cash flow before change in non-cash working capital.
2 Net debt, cash cost and all-in sustaining cash cost per pound, net of by-product credits are not recognized under IFRS. For a
detailed description of each of these non-IFRS financial performance measures, please see the discussion under “Non-IFRS
Financial Performance Measures” beginning on page 5 of this news release.
3 Initial guidance for Manitoba combined unit operating costs was C$110 – C$123.
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Net profit and earnings per share in the second quarter of 2018 were affected by, among other things, the following
items:
Pre-tax gain
(loss) After-tax gain
(loss) Per share
gain (loss)
($ millions) ($ millions) ($/share)
Foreign exchange gain 5.7 5.3 0.02
Mark-to-market adjustments of various items 4.7 3.3 0.01
Non-cash deferred tax adjustments - (7.3) (0.03)
Compared to the second quarter of 201 7, production of contained copper-equivalent in concentrate in the second
quarter of 2018 decreased by 6.7% as a result of lower production of copper and zinc, partially offset by higher
production of precious metals. This reflected lower grades at the Constancia mine in accordance with the mine plan,
offset in part by higher Constancia mill throughput.
In the second quarter of 2018, consolidated cash cost per pound of copper produced, net of by -product credits, was
$0.96, a n increase compared to $0. 85 in the same period last year. The increase is mainly due to increased
operating costs in Hudbay’s Peru and Manitoba business units and reduced copper production, partially offset by
higher by -product cred its realized. 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 2018 was $1.48, down slightly from $1.49 in the second quarter of 2017,
as higher cash costs were offset by reduced sustaining capital spending.
Cash and cash equivalents increased by $ 46.8 million from March 31, 2018 to $439.6 million as at June 30, 2018.
This increase was a result of operating cash flow before change in non -cash working capital of $131.6 million. These
inflows were partly offset by $34.6 million of working capital movements and $39.2 million of capita l investments,
primarily at Hudbay’s Peru and Manitoba operations.
Net debt declined by $49.2 million from the first quarter to $536.2 million at June 30, 2018, as a result of positive cash
flow from Hudbay’s operations. At June 30, 2018, total liquidity, including cash and available credit facilities , was
$859.2 million, up from $810.0 million at March 31, 2018.
Based on results to date, Hudbay is on track to meet production and capital expenditure guidance expectations, as
well as Peru unit cost guidance. As a result of a number of factors , including cold weather in the first quarter, higher
costs at the 777 mine and the impact of a fan outage at the Lalor mine, Hudbay expects Manitoba combined mine/mill
unit operating costs to be between C$125 and C$135 per tonne in 2018.
1 Net debt is a non-IFRS financial performance measure with no standardized definition under IFRS. For further information, please
see page 5 of this news release.
Financial Condition ($000s) Jun. 30, 2018 Dec. 31, 2017
(Restated)
Cash and cash equivalents 439,576 356,499
Total long-term debt 975,816 979,575
Net debt1 536,240 623,076
Working capital 400,926 251,388
Total assets 4,691,762 4,728,016
Equity 2,168,184 2,112,345
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Production and Cost Performance Three months ended Three months ended
Jun. 30, 2018 Jun. 30, 2017
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 26,818 10,807 37,625 29,798 11,044 40,842
Gold oz 5,190 27,290 32,480 3,802 28,862 26,664
Silver oz 596,570 355,091 951,661 546,295 264,051 810,346
Zinc tonnes - 33,170 33,170 - 34,896 34,896
Payable metal in concentrate sold
Copper tonnes 25,409 10,062 35,471 28,482 10,767 39,249
Gold oz 3,764 25,932 29,696 3,445 22,006 25,451
Silver oz 438,532 250,952 689,484 558,617 232,090 790,707
Zinc2 tonnes - 28,168 28,168 - 29,424 29,424
Cash cost3 $/lb 1.64 (0.71) 0.96 1.24 (0.18) 0.85
Sustaining cash cost3 $/lb 1.82 0.38 1.82 0.38
All-in sustaining cash cost3 $/lb 1.48 1.49
Six months ended Six months ended
Jun. 30, 2018 Jun. 30, 2017
Peru Manitoba Total Peru Manitoba Total
Contained metal in concentrate produced1
Copper tonnes 58,369 18,462 76,831 57,009 18,564 75,573
Gold oz 10,608 52,965 63,573 7,737 39,650 47,387
Silver oz 1,242,456 686,343 1,928,799 1,085,830 462,411 1,548,241
Zinc tonnes - 61,952 61,952 - 65,466 65,466
Payable metal in concentrate sold
Copper tonnes 54,977 17,000 71,977 47,047 18,617 65,664
Gold oz 8,671 47,082 55,753 4,919 46,001 50,920
Silver oz 1,034,162 541,778 1,575,940 941,880 525,392 1,467,272
Zinc2 tonnes - 53,620 53,620 - 56,256 56,256
Cash cost3 $/lb 1.46 (0.58) 0.97 1.27 (0.37) 0.86
Sustaining cash cost3 $/lb 1.63 0.65 1.72 0.34
All-in sustaining cash cost3 $/lb 1.47 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 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
5 of this news release.
Financial Performance Three months ended Six months ended
($000s except per share and cash cost amounts) Jun. 30 Jun. 30
2018 2017 2018 2017
Revenue 371,288 336,033 757,944 597,799
Cost of sales 278,827 248,047 544,712 453,168
Profit before tax 49,797 34,935 122,900 39,573
Profit 24,673 19,137 66,118 9,108
Basic and diluted earnings per share 0.09 0.08 0.25 0.04
Operating cash flow before change in non-cash
working capital 131,635 124,118 263,428 204,718
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Peru Operations Review
During the second quarter of 2018, the Peru operations produced 26,818 tonnes of copper, which was approximately
10% lower than production in the second quarter of 2017 due to an expected decline in mined grades in accordance
with the mine plan. Production for the first half of 2018 for all commodities increased compared to the same period in
2017 due to improved mill throughput, offset in part by lower copper grades.
Recoveries of copper and silver were slightly lower in the second quarter of 2018, compared to the same period in
2017, while gold recoveries remain unchanged over the same period . Hudbay is implementing several metallurgical
initiatives with the intention of increasing copper recoveries as anticipated in the recently filed 2018 Technical Report
for Constancia. Production results to date are on track to meet 2018 Peru production guidance.
Combined mine, mill and G&A unit operating costs in the second quar ter of 2018 were 15% higher than the same
period in 2017. The higher combined unit operating costs are due to higher costs for diesel, steel and power and a
decrease in capitalized stripping. Combined unit costs for the first half of 2018 include accruals for signing bonuses
for the three -year collective bargaining agreement agreed to earlier in 2018, as well as costs associated with the
scheduled plant maintenance outage in May 2018, which was significantly broader in scope than the maintenance
planned for the fourth quarter of 2018. Accordingly, Hudbay expects combined unit costs in the second half of 2018 to
be lower than the first half, with full year combined unit costs expected to be within the guidance range for 2018.
Cash cost per pound of copper produced, net of by -product credits, for the three months ended June 30, 2018 was
$1.64, an increase of 32% from the same period in 2017, mainly as a result of higher consumable costs and lower
capitalized stripping . Sustaining cash cost per pound of copper produced, net of by -product credits, for the three
months ended June 30 , 201 8 was $1.8 2, consistent with the same period in 2017 , as reduced sustaining capital
expenditures offset higher cash costs.
Manitoba Operations Review
During the second quarter of 201 8, the Manitoba operations produced 33,170 tonnes of zinc, 10,807 tonnes of
copper and 32,363 ounces of gold-equivalent precious metals. Production of copper was comparable to the same
period in 2017, while productio n of gold and silver was 19% and 34% higher, respectively . Zinc production was 5%
lower compared to the same period in 2017 as a result of lower zinc grades at Lalor, in line with the mine plan.
A failure of one of two main exhaust fans at Lalor in June has created operating restrictions underground that are
delaying the ramp -up to 4,500 tonnes per day and limiting ore production to approximately 3,000 tonnes per day.
Repairs to the fan are expected to be completed in August.
Total ore mined at Hudbay’s Manitoba operations during the second quarter of 2018 decreased by 7% compared to
the same period in 2017. Increased production at the Reed mine was offset by decreased production at the 777 mine.
Overall, gold and silver grades were 11% and 21% higher, respectively, while copper and zinc grades were 5% and
14% lower, respectively, in the second quarter of 2018 compared to the same period of 2017 . Grade variances were
due to planned stope sequencing. Unit operating costs for all Manitoba mines for the second quarter of 2018
increased by 2 2% compared to the same period in 2017 for the reasons described below . Lalor unit costs are
expected to be elevated in the third quarter of 2018 due to r educed production and costs arising from the exhaust fan
failure.
Ore processed in Flin Flon in the second quarter of 201 8 was consistent with the same period in 2017. Lower
production at the 777 mine was offset by the transfer of excess Lalor ore to the Flin Flon concentrator and higher -
than-expected ore output from the Reed mine . Copper and zinc recoveries in the second quarter of 2018 were
consistent with the same period in 2017 while gold and silver recoveries were 9% and 12% higher, respectively, due
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to higher head grades. Unit operating costs at the Flin Flon concentrator were 14% higher in the second quarter of
2018 compared to the same period in 2017 as a result of higher maintenance expenditures. Ore processed was 10%
higher and copper recoveries w ere 4% higher at the Stall concentrator in the second quarter of 2018 compare d with
the same period in 2017, due to ongoing operation al and maintenance improvements and better metallurgical
understanding of the Lalor ore. Unit operating costs at the Stall concentrator were 4% lower in the second quarter of
2018 compared to the same period in 2017 as a result of the increased throughput.
Manitoba combined mine, mill and G&A unit operating costs in the second quarter and year -to-date in 2018 were
10% and 13% higher, respectively, than in the same periods in 2017 due mainly to higher 777 and Lalor mining costs,
Flin Flon mill maintenance and ore rehandling costs . Lalor costs will continue to be affected by additional costs to
truck Lalor ore to the Flin Flon mill. Ore production at Reed was substantially complete at the end of July, as planned.
As a result of a number of factors including cold weather in the first quarter, higher costs at the 777 mine and the
impact of a fan outage at the Lalor mine, Hudbay expects Manitoba combined mine/mill unit operating costs to be
between C$125 and C$135 per tonne in 2018, with higher costs during the third quarter of 2018 while Lalor exhaust
fan repairs are completed. Production of all metals is expected to be within full year guidance.
Cash cost per pound of copper produced, net of by-product credits, in the second quarter of 2018 was negative $0.71
per pound of copper produced. This was lower compared to the same period in 2017 , primarily as a result of
significantly increased zinc by -product credits, partially offset by the factors affecting unit operating costs described
above.
Sustaining cash cost per pound of copper produced, net of by -product credits, in the second quarter of 201 8 was
$0.38, which is consistent with the prior year as the lower cash cost was offset by higher planned sustaining capital
expenditures.
Credit Facility Extension & Amendments
On June 15, 2018 we entered into amendments to our senior credit facilities to extend the maturity date by one year
to July 14, 2022 from July 14, 2021 and to incorporate various amendments to the terms and conditions of the
facilities to provide Hudbay wi th greater flexibility . The two facilities have substantially similar terms and conditions
and continue to provide revolving credit to a maximum amount of up to $550 million.
Dividend Declared
A semi annual dividend of C$0.01 per share was declared on Ju ly 31, 2018. The dividend will be paid on September
28, 2018 to shareholders of record as of September 7, 2018.
Non-IFRS Financial Performance Measures
Net debt is shown in this news release because it is a performance measure used by the company 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 t he performance of its operations,
including the margin generated by the 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 measures 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 29 of Hudbay’s management’s
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discussion and analysis for the three and six months ended June 30, 2018 available on SEDAR at www.sedar.com
and EDGAR at www.sec.gov.
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2018/Q2/MDA182.pdf
Financial Statements:
http://www.hudbayminerals.com/files/doc_financials/2018/Q2/FS182.pdf
Conference Call and Webcast
Date: Wednesday, August 1, 2018
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 General Manager Mining Operations, Manitoba Business Unit. Messrs.
Meagher and Carter are qualified persons pursuant to NI 43 -101. For a description of the key assumptions,
parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures
and a general discussio n of the extent to which the estimates of scientific and technical information may be affected
by any known environmental, 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 informatio n 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”, “fo recasts”, “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 expressions). All of the forward -looking information in this news
release is qualified by this cautionary note.
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Forward-looking information includes, but is not limited to, productio n, cost and capital and exploration expenditure
guidance, anticipated production at Hudbay’s mines and processing facilities, the expected benefits of implementing
the metallurgical recovery initiatives at the Constancia processing plant, the anticipated t iming for completing the
repairs to the Lalor exhaust fan, the anticipated timing, cost and benefits of developing the Rosemont project and
Pampacancha deposit, the anticipated impact of any delays to the start of mining the Pampacancha deposit, the
anticipated results of litigation challenging the Rosemont permitting process, anticipated exploration plans, including
the exploration and development strategy for the Lalor gold zones, the exploration potential at Lalor, including the
possibility of converting inferred mineral resources to higher confidence categories and establishing additional
mineral resources through testing the continuity of the mineralized zones, the anticipated continued success of
utilizing a selective mining method to mine the high gra de gold zones, 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 financ ing of the Rosemont project, the
potential to optimize the scale of production at Lalor and to efficiently process the excess base metals ore and initial
gold zone ore production at the Flin Flon mill, anticipated cash flows from operations and related liq uidity
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 guarantee
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 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 communities
surrounding the Constancia mine and Rosemont project a nd 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;
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the timing and possible outcome of pending litigation and no significant unanticipated litigation;
certain tax mat ters, 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 continuing adverse changes in general economic conditions or conditions in t he financial
markets (including commodity prices and foreign exchange rates).
The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those
expressed or implied by the forward-looking information may include, but are not limited to, risks generally associated
with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy
prices and general cost escalation), uncertainties related to the development and operation of the company’s projects
(including risks associated with the permitting, development and economics of the Rosemont project and related legal
challenges), risks related to the exploration and development program at Lalor, including the ability to convert inferred
mineral resources to higher confidence categories and to identify additional mineral resources, and risks associated
with the selective mining of the high grade gold zones, risks related to the maturing nature of the 777 mine and the
pending closure of the Reed mine and their impact on the related Flin Flon metallurgical complex, dependence on
key personnel and employee and union relations, risks related to the schedule for mining the Pampacancha deposit
(including the timing and cost of acquiring the required surface rights and the impact of any schedule del ays), risks
related to political or social unrest or change, risks in respect of aboriginal and community relations, rights and title
claims, operational risks and hazards, including unanticipated environmental, industrial and geological events and
developments and the inability to insure against all risks, failure of plant, equipment, processes, transportation and
other infrastructure to operate as anticipated, compliance with government and environmental regulations, including
permitting requirements and anti-bribery legislation, depletion of the company’s reserves, volatile financial markets
that may affect the company’s ability to obtain additional financing on acceptable terms, the failure to obtain required
approvals or clearances from government autho rities on a timely basis, uncertainties related to the geology,
continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade and
recovery rates, uncertain costs of reclamation activities, the company’s ability to comply with its pension and other
post-retirement obligations, the company’s ability to abide by the covenants in its debt instruments and other material
contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “R isk Factors” in
Hudbay’s most recent Annual Information Form.
Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumption prove
incorrect, actual results could vary materially from those expressed or im plied in the forward -looking information.
Accordingly, you should not place undue reliance on forward -looking information. Hudbay does not assume any
obligation to update or revise any forward -looking information after the date of this news release or to e xplain any
material difference between subsequent actual events and any forward -looking information, except as required by
applicable law.
Note to United States Investors
This news release has been prepared in accordance with the requirements of the securities laws in effect in Canada,
which may differ materially from the requirements of United States securities laws applicable to U.S. issuers.
About Hudbay
Hudbay (TSX, NYSE: HBM) is an integrated mining company primarily producing copper concentrat e (containing
copper, gold and silver) , zinc concentrate and zinc metal. With assets in North and South America, the company is
focused on the discovery, production and marketing of base and precious metals. Directly and t hrough its
subsidiaries, Hudbay owns four polymetallic mines, four ore concentrators and a zinc production facility in northern
Manitoba and Saskatchewan (Canada) and Cusco (Peru) , and a copper project in Arizona (United States). The
company’s growth strategy is focused on the exploration and development of properties it already controls, as well as