TSX, NYSE – HBM 2020 No. 10 Hudbay Announces First Quarter 2020 Results
TSX, NYSE – HBM
2020 No. 10
Hudbay Announces First Quarter 2020 Results
Toronto, Ontario, May 14, 2020 – Hudbay Minerals Inc. (“Hudbay” or the “ company”) (TSX, NYSE:HBM) today
released its first quarter 2020 financial results. All amounts are in U.S. dollars, unless otherwise noted.
First Quarter Operating and Financial Results
• Delivered a solid operating quarter in Mani toba, which included record mine production at Lalor and record
throughput at the Stall concentrator.
• Lalor ore mined and Stall concentrator thro ughput increased by 8% and 19%, respectively, in the first
quarter of 2020 compared to the fourth quarter of 2019.
• Constancia achieved target mill throughput and operating unit costs during the quarter prior to its temporary
shutdown.
• Net loss of $76.1 milli on or $0.29 per sh are for the first quarter of 2020 reflects lower realized base metal
prices, lower Constancia grades in line with the mine plan and higher cost of sales in Peru as a result of the
temporary suspension of Constan cia and certain inventory v aluation adjustmen ts versus the previous
quarter.
• Cash generated from operating activities decreased to $9 .1 million in the first quarter of 2020 from $98.7
million in the fourth quarter of 2019, while o perating cash flow before change in non -cash working capital
decreased to $42.0 million in the first quarter from $69.1 million in the previous quarter due to lower realized
base metal prices and lower Constancia grades.
• Cash and cash equiva lents of $306.0 million as at March 31, 2 020 continued to provide the company with
financial flexibility during the temporary production disruption at Constancia and the current low base metal
price environment and have since been bolstered by the gold prepay proceeds described below.
COVID-19 and Annual Guidance
• The COVID-19 global pandemi c has had a significa nt impact on Hudbay and the pri ces of the produc ts it
produces. The company experienced operational and supply chain disruptions, including a temporary
suspension of oper ations at Co nstancia for a period of approximately eight weeks as a result of a
government declared state of emergency in March. Operations con tinued in Manitoba without any impact to
production or the ability to ship concentrate and zinc metal.
• Hudbay is a ffirming 2020 Manitoba production, operating cost and capital ex penditure gu idance. Peru
guidance has been suspended due to the ongoing uncert ainty surrounding COV ID-19 and the recent
temporary Constancia mine shutdown.
• On May 14, Constancia received recognition and approval from Peru’s Ministry of Energy and Mines for its
restart protocols and is planning to ramp up operations over the next week. Hudbay expects to provide an
update to its Peru guidance with second quarter results.
• Hudbay has been p rudently managing the business and the impact of the p andemic. This has resulted in
approximately $150 million in incremental liquidity this year , in cluding $115 million in cash pro ceeds
received from a gold forward sale and prepay transaction, an approximate $25 million deferral in Peru ’s
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2020 sustaining capital and company-wide discretionary and input cost reductions of approxim ately $10
million. In addition, Hudbay’s 2020 forecasted cash flows are expected to benefit from the Canadian dollar
cost structure of the Manitoba operations and the anticipated increase in cash flows from Lalor due to higher
precious metals production expected this year and the prevailing commodity prices and foreign exchange
rates.
Recent Developments
• Received $115 million from a gold forward sale and prepay transaction completed in early May 2020, which
prefunds the entire capital budget for the low-risk, high -return New Britanni a gold mill refurb ishment at
attractive terms and low cost of capital.
• In Fe bruary, prior to the COVID -19 pandemic, Hudbay re-negotiated the covenants of its revolving credit
facilities which resulted in an increase of $443 million in liquidity available as at March 31, 2020 , providing
additional financial flexibility to execute its growth initiatives.
• Executed amendment with Wheaton Precious Metals extending the target date for mining four million tonnes
of ore from Pampacancha by six months to June 30, 2021.
• March 2020 update to reserve s and resources increased La lor's life-of-mine gold production by 41% f rom
the previous mine plan and expected annual gold pr oduction to ove r 150,000 ounces by 2022, while total
Snow Lake gold r eserves in creased by 35% to 2.2 million ounces, which supports an expanded 18 -year
mine life for the Snow Lake operations.
• The New Britannia g old mill refurbishment is on track to be complet ed before the end of 2021 with ord ers
placed for long-lead items and early works construction underway.
“The COVID -19 pandemic has been an un precedented c hallenge for o ur business, but with the help of extensive
scenario planning, we have pro actively implemented measures to miti gate t he impact to our operations, our
employees and our co mmunities. Our focus on p rudently man aging the business has resulted in a significant
improvement in our liquidity, and we remain well -positioned to fund our future growth initiatives while remaining
vigilant in this ever-changing environment,” said Peter Kukielski, President and Chief Executive Officer. “While we
have s uspended our Per u guidance due to the temporary shu tdown of Constanc ia durin g the pande mic, we are
affirming our Manitoba guidance after a strong operating quarter. Lalor and the Stall mill achieved record production
levels and the New Britannia gold mill refurbishment, which will enable an increase in Lalor ’s annual gold production
to over 150,000 ounces, is on track for completion by the end of 2021.”
“We are very pleased with the work we ’ve done this year to protect our balance sheet and improve our liquidity
position,” said Eugene Lei, Hudbay’s Senior Vice President, Corporate Developm ent & Strategy and Interim Chief
Financial Officer. “We started the year by proactively amending our cov enants under the revo lving credit facilities to
provide us with more flexib ility in this volatile market. The recent gold prepay transaction provides a non-dilutive, low
cost of capital financing, enabling us to fund our Snow Lake g old growth initiatives in a prudent manner by utilizing a
fraction of New Britannia’s first two yea rs of gol d production, while protecting our balance sheet, preserving our
existing cash and improvin g our tota l available liq uidity. Incorporating the expect ed sustaining capital deferrals in
Peru and the company-wide cost savings this year, we have secured an incremental $150 million in liquidity.”
Summary of First Quarter Results
Consolidated c opper production in the first quarter o f 20 20 was 24,635 tonnes , a 24% decrease from t he fourth
quarter of 2019 primarily as a result of planned lower c opper grades at Con stancia, in line with the mine plan, and
lower ore produ ction from Cons tancia due to the temporary suspension of operation s in March 2020 following a
government declared state of emergency i n Peru due to COVID-19. Consolidated zinc production in the first quarter
of 2020 was in line with the fourth quarter of 2019 due to record production from the Lalor m ine and the Stall mil l,
offset by lower production from the Flin Flon mill.
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In the first quarter of 20 20, consolidated cash co st per pound of copper prod uced, net of by -product creditsi, was
$1.21, a slight improvement over the fourth quarter of 2019 as lower copper production was more than offset by lower
Peru costs . Incorporating sustaining capital, capita lized exploration, royalties, selling, a dministrative an d r egional
costs, consolidated all-in sustaining cash c ost per pound of copper produced, net of by-product credits i, in th e first
quarter of 2020 was $2. 40, which decreased from $ 2.55 in the fourth quarter of 2019 , driven mainly b y lower
sustaining capital expenditures and capitalized exploration, and the same f actors noted above affecting consolidated
cash costs.
Cash generated from operating activities in the first quarter of 2020 decreased substantially to $9.1 million compared
to $98.7 million in the fourth quarter of 2019. Operating cash flow before change in non-cash working capital was
$42.0 million during the first quarter o f 2020, reflecting a decrease of $ 27.1 million compared to the fourth quarter of
2019. The decrease i n operating cash fl ow is primarily the result of the signi ficant negative impact o f COVID-19 on
realized base metal prices as well as lower sales volumes compared to the previous quarter.
Net loss and loss per s hare in the first quarter of 2020 we re $76.1 million and $0.29, respectively, compared to a net
loss and los s per share of $ 1.5 million and $0.0 1, respectively, in the fourth quarte r of 2019. The decrease in
earnings was caused by dec lining base metal pric es, lower Constancia grades in li ne with the mine plan , and lower
sales volumes due to th e temporary suspension of Constancia in March. In a ddition, the temporary suspension of
mining operations at Constancia required a portion of overhead costs to be directly charged to cost of sales and lower
metal prices led to the write-down of certain inventories in Peru, as further described below.
Net loss and loss per share in the first quarter of 2020 were affected by, among other things, the following items:
Pre-tax loss After-tax loss Per share
loss
($ millions) ($ millions) ($/share)
Mark-to-market adjustments (2.7) (3.0) (0.01)
Peru inventory write-down (10.4) (6.7) (0.03)
Peru cost of sales direct charges from temporary
suspension of operations (6.3) (4.1) (0.02)
Deferred revenue adjustments from increased
reserves and resources (3.8) (2.8) (0.01)
Non-cash deferred tax adjustments — (22.5) (0.09)
Hudbay’s first quarter re sults w ere significantly impacted by the COVID -19 global pandemic, which caused the
temporary suspension of mining and pro cessing activities at Constancia after the Peruvian government declared a
state of emergency on March 15, 2020. T he temporary suspensi on of operations at Co nstancia starting March 19,
2020 resulted in fixed overhead production costs of $6.3 million that would normally be capitalized to inventories and
property, plant and equipment, to be immediately expensed as par t of the cost of sale s. As Constancia operations
remained suspended into the second quarter of 2020, the company expects that there w ill be a similar charge for
fixed overhead costs incurred during the su spension perio d in the second quarter. In addition, an inventory w rite-
down of $10.4 million was recorded in the first q uarter to reflec t lower realizable inventory values in Peru resulting
from low copper prices.
During the fi rst quarter of 2020, Hudbay also recorded a non -cash true up adjust ment on streaming revenues due
mainly to an increase in reserves and resources fo r t he 777 an d Con stancia mines as announced in the annual
reserves and resources news re lease on March 30, 2020. The reduced deferred revenue drawdown rate, which is
recalculated back to the inception of the streams, resulted i n a pre -tax non-cash earnings impact of a pproximately
$3.8 million.
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As at March 31, 2020, the company’s liquidity includes $306.0 million in cash and cash equivalents as well as $445.9
million in undrawn availability under its revolving credit facilities. Although undrawn availability under our revolving
credit facilities is expected t o be negati vely affected by lower metal prices and the suspension of operations at
Constancia, Hudbay continues to take prudent steps to manage its balance sheet and maintain a strong liquidity
position. This includes amendments made to its revolving credit facility covenants during the first quarter of 2020 that
included replacing total debt to EBITDA with net debt to EBITDA, which increased March 31, 2020 available liquidity
by $443.0 million. Subsequently, in the second quar ter of 2020, the company announced a gold forward sale and
prepay transaction that generated $115 million of cash proceeds to further improve its liquidity position and prefund
the growth expenditures in Mani toba. The company expects that its current liquidity together with cash flows f rom
operations will be sufficient to meet its liquidity needs for 2020.
Consolidated Financial Performance Three Months Ended
($000s except per share amounts) Mar. 31, 2019 Dec. 31, 2019 Mar. 31, 2019
Revenue 245,105 324,485 292,258
Cost of sales 267,096 298,852 240,446
Earnings (loss) before tax (81,452) (42,352) (18,108)
Earnings (loss) (76,134) (1,455) (13,412)
Basic and diluted earnings (loss) per share (0.29) (0.01) (0.05)
Operating cash flow before change in non-cash
working capital
41,951 69,141 85,684
Consolidated Operational Performance Three Months Ended
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Contained metal in concentrate produced1
Copper tonnes 24,635 32,422 37,972
Gold ounces 30,495 32,712 25,562
Silver ounces 767,692 930,137 919,195
Zinc tonnes 30,355 30,592 28,037
Molybdenum tonnes 354 372 304
Precious metals2 ounces 39,121 46,000 38,693
Payable metal in concentrate sold
Copper tonnes 24,072 33,715 31,717
Gold ounces 26,792 30,344 22,629
Silver ounces 575,922 909,423 982,906
Zinc3 tonnes 26,574 28,001 22,954
Molybdenum tonnes 431 199 234
Precious metals2 ounces 33,263 43,336 36,671
Cash cost4 $/lb 1.21 1.23 1.11
All-in sustaining cash cost4 $/lb 2.40 2.55 1.88
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 and payable zinc in concentrate 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
Peru Operations Three Months Ended
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
Ore mined1 tonnes 6,985,212 8,049,063 8,634,773
Copper % 0.34 0.41 0.47
Gold g/tonne 0.03 0.04 0.04
Silver g/tonne 3.10 3.87 3.55
Molybdenum % 0.02 0.02 0.01
Ore milled tonnes 6,719,466 7,474,136 7,993,062
Copper % 0.34 0.42 0.46
Gold g/tonne 0.03 0.04 0.04
Silver g/tonne 3.13 3.86 3.53
Molybdenum % 0.02 0.02 0.01
Copper recovery % 84.3 85.6 86.2
Gold recovery % 50.2 50.0 52.2
Silver recovery % 68.2 68.2 69.9
Molybdenum recovery % 35.0 30.8 26.8
Contained metal in concentrate
Copper tonnes 19,290 26,659 31,843
Gold ounces 3,062 5,007 5,357
Silver ounces 461,302 631,774 634,930
Molybdenum tonnes 354 372 304
Precious metals2 ounces 8,254 14,033 14,427
Payable metal sold
Copper tonnes 19,247 28,430 26,662
Gold ounces 2,618 4,824 6,218
Silver ounces 361,591 666,839 752,259
Molybdenum tonnes 431 199 234
Combined unit operating cost3,4 $/tonne 9.31 10.20 8.87
Cash cost4 $/lb 1.63 1.66 1.18
Sustaining cash cost4 $/lb 2.12 2.47 1.41
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.
During the quarter, the Constancia mine produced 19,290 tonnes of coppe r, 8,254 ounces of preci ous metals and
354 tonnes of molybden um. Production results were l ower than t he fourth quarter of 2019 as a result of planned
lower copper grades, in line with the m ine plan, and lower ore production due t o the temporary suspension of
operations in March following a government declared state of emergency in Peru.
Ore milled at the Constancia mine during the first quarter of 2020 was 10% lower compared to the fourth quarter of
2019 primarily due to the temporar y suspension of operations on March 19 as a result of the COVID -19 pandemic
and the state of emergency initiated by the Peruvian government. However, the mill achieved targeted throug hput
levels during the quarter prior to the temporary shutdown. Milled copper grades in the first quarter were approximately
19% lower than the fourth quarter of 2019 as lower grade phases continue to be mined, in line with the mine plan.
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Copper recoveries in the first quarter of 2020 decreased by 2% compared to the fourth quarter of 2019, mainly due to
lower grade ore feed as more ore from Phase 4 is being mined. Gold and silv er re coveries this quarter were
consistent with the fourth quarter of 2019 . While recoveries of individual metals vary from quarter to quarter
depending o n the complexity and grade of the ore feed, the com pany has been seeing c onsistent results fr om
ongoing recovery optimization i nitiatives sin ce the beg inning of 2019. Molybdenum recovery in the first quarter of
2020 increased by 14% compared to the fourth quarter of 2019 mainly due to higher head grades.
Combined mi ne, mill an d G&A unit opera ting costs i in the first quarter of 20 20 were 9% lower than the previous
quarter, prim arily due to lower milling and G&A costs, and were in line with targeted levels p rior to the temporary
shutdown.
Peru’s cash cost per pound of copper pro duced, net of by-product cre dits, for the thr ee months ended March 31,
2020 was $1.63. This represents a slight decrease from the fourth quarter of 2019 as lowe r costs and higher by -
product credits were partially offset by lower production. Peru’s sustaining cash costs per pound of copper produced,
net of by-product creditsi, for the three months ended March 31, 2020 was $2.12. This represents a decrease of 14%
from the fourth quarter of 2019 primarily due to lower sustaining capital expenditures and capitalized exploration.
Peru’s 2020 production and cost guidance has been suspended due to the ongoing uncertainty surrounding COVID -
19 and the recent temporary Con stancia mine suspension. Constancia has received recognition and approval from
Peru’s Ministry of Energ y and Mines for its restart proto cols and is planning to ramp up operations over the next
week. Hudbay expects to provide an update to its Peru guidance with second quarter results.
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Manitoba Operations Review
Manitoba Operations Three Months Ended
Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019
777 ore mined tonnes 279,925 269,342 278,522
Copper % 1.18 1.17 1.65
Zinc % 4.11 3.33 3.18
Gold g/tonne 1.82 1.52 1.70
Silver g/tonne 23.86 18.52 21.75
Lalor ore mined tonnes 421,518 390,140 388,483
Copper % 0.70 0.80 0.76
Zinc % 5.43 6.20 6.70
Gold g/tonne 2.27 2.63 1.68
Silver g/tonne 26.18 28.38 25.96
Flin Flon Concentrator:
Ore milled tonnes 332,589 374,529 289,244
Copper % 1.11 1.11 1.55
Zinc % 4.36 4.05 3.49
Gold g/tonne 1.88 1.75 1.66
Silver g/tonne 24.33 20.56 21.78
Copper recovery % 84.1 86.9 88.1
Zinc recovery % 85.0 85.8 82.9
Gold recovery % 53.5 56.1 61.8
Silver recovery % 44.3 49.2 52.3
Stall Concentrator:
Ore milled tonnes 369,787 310,622 321,523
Copper % 0.70 0.80 0.78
Zinc % 5.38 6.24 6.75
Gold g/tonne 2.28 2.60 1.75
Silver g/tonne 26.28 28.12 26.89
Copper recovery % 86.5 85.9 87.2
Zinc recovery % 91.4 90.7 90.7
Gold recovery % 60.9 61.1 59.1
Silver recovery % 61.1 62.9 64.2
Total contained metal in concentrate
Copper tonnes 5,345 5,763 6,129
Zinc tonnes 30,495 30,592 28,037
Gold ounces 27,293 27,705 20,205
Silver ounces 306,390 298,363 284,265
Precious metals1 ounces 30,736 31,967 24,266
Total payable metal sold
Copper tonnes 4,852 5,285 5,055
Zinc2 tonnes 26,792 28,001 22,954
Gold ounces 23,956 25,520 16,411
Silver ounces 214,331 242,584 230,647
Combined unit
operating cost3,4
C$/tonne 127 128 146
Cash cost4 $/lb (0.30) (0.76) 0.77
Sustaining cash cost4 $/lb 2.85 2.33 3.16
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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.
Production from the La lor mine and the Stall mill achieved record quarterly levels in the first quarter of 2020. The
Manitoba operations produced 30,495 tonnes of zinc, 5,345 tonnes of copper and 30,736 ounces of precious metals
during the quarter. Production r esults we re slightly lo wer than the fourth quarter of 2019 p rimarily due to lower
grades, offset by higher tonnes milled.
Ore mined at the Manitoba operat ions during the first quarter o f 2020 increased by 6% compared to the previous
quarter with production vo lumes at 777 a nd La lor incr easing by 4% an d 8%, respectively. The higher prod uction
results are mainly due to record production at Lalor from the successful implementation of several 2019 initiatives as
part of the production ramp up to 4, 500 tonnes pe r day. Ore grades mined during the quar ter are in line wit h the
planned stope sequencing based on life of mine production schedules at 777 and Lalor.
Ore processed in Manitoba in the first quarter of 2020 was higher than the fourth quarter of 2019 due to a 1 9%
increase in ore processed at the Stall mill, offset by lower ore p rocessed at the Flin Flon mill. Recoveries at the Flin
Flon mill were lower than in the fourth quarter of 2019, while recoveries at the Stall mill were relatively in line with the
previous quarter.
Manitoba combined mine, mill and G&A unit operating costs continue to decline quarter-over-quarter as a resu lt of
the company’s focus on operating efficiencies and costs normalizing after the successful production ramp up at the
Lalor mine.
Manitoba’s cash cost per pound of copper produced, net of by -product credits, for the first quarter of 20 20 was
negative $0.30. These costs were higher compared to the fourth quarter of 2019 primarily as a result of lower copper
production despite the de crease in min ing and milling costs. Manitoba’s sustaining cash cost per pound o f copper
produced, net of by -product credits, in the firs t quarter of 2020 was $2.85, higher compared to the previous quarter
due to the same factors that affected cash costs.
Full year production of all metals and combined unit operating costs are expected to be withi n the annual g uidance
ranges for Manitoba.
COVID-19 Business Update
Following the onset of the COVID-19 pandemic, the company’s business response planning commenced in January
and company-wide crisis plans were activated in early-March as part of its crisis management protocols. Throughout
the rapidly changing environment, Hudbay has remained focused on the health and safety of its workforce and local
communities and is actively engaging with local stakeholders and p ublic health authorities to ensure effe ctive
implementation of the company’s business response plans. The company continues to closely monitor the evolvin g
situation and is taking steps to protect the safety of its workforce and their families and the communities it operates in,
while implement ing measures t o minimize the overall impact on operati ons. Hudbay’s business r esponse plans
include planning for the possible nee d to reduce or suspend operations and for the re start of suspended operations,
as well as appropriately managing the company’s liquidity. The overall impact on each o f the sites will depend on the
progression of the pandemic, measures in place for preventing transmission and on market conditions.