TSX, NYSE – HBM 2020 No. 15 Hudbay Announces Second Quarter 2020 Results
TSX, NYSE – HBM
2020 No. 15
Hudbay Announces Second Quarter 2020 Results
Toronto, Ontario, August 11, 2020 – Hudbay Minerals Inc. (“Hudbay” or the “ company”) (TSX, NYSE:HBM)
today released its second quarter 2020 financial results. All amounts are in U.S. dollars, unless otherwise noted.
Second Quarter Results Boosted by Strong Manitoba Operations
• Strong production and cost performance from the Manitoba operations during the quarter; an increase in
production of all metals over the first quarter and record gold production driven by increasing Lalor gold
grades and record gold recoveries at Stall.
• Successfully achieved efficient restart of operations at Constancia in mid -May with increased government -
supported COVID-19 health and safety protocols in place.
• Second quarter net loss was $51.9 million or $0.20 per share. Second quarter adjusted net loss i per share
was $0. 15 and adjusted EBITD Ai was $49.1 million after adjusting for the impact of the Peru temporary
suspension costs and a partial reversal of the Peru inventory write-down from last quarter.
• Operating cash flow before change in non -cash working capital decreased to $29.5 million in the second
quarter of 2020 from $ 42.0 million in the first quarter of 20 20 due t o lower revenues from the Peru
operations, offset by higher realized gold prices and higher gold sales in Manitoba.
• Cash and cash equivalents increased during the second quarter to $391.1 million as at June 30, 2020 as a
result of the previously announced $115.0 million gold prepay transaction and cash generated from
operations, partially offset by capital investments on the New Britannia refurbishment project.
On Track to Achieve Manitoba Guidance; Updated Peru Guidance
• Owing to the outstanding performance from the Manitoba operations in the first half of 2020 , and the ability
to achieve safe and continuous operations despite COVID -19 operating challenges , Hudbay is on track to
meet all Manitoba production and cost guidance for 2020.
• COVID-19 in Peru had a significant impact on Hudbay’s business in the second quarter and continues to be
a risk the company is actively managing. A government declared state of emergency in mid-March required
the suspension of operations at Constancia for a period of eight weeks. The Constancia mill resumed full
operation on May 18 processing stockpile d ore, and mining activities returned to normal levels in early July
under a successful phased restart plan.
• Updated 2020 Peru production guidance of 65,000 to 75,000 tonnes of copper and 25,000 to 35,000 ounces
of precious metals reflect s the Constancia suspension period and the expected start of mining at
Pampacancha in early 2021.
Executing on Growth Initiatives
• Fully-funded New Britannia gold mill refurbishment project remains on schedule and within budget, with
detailed engineering approximately 90% complete and construction activities approximately 25% complete.
• Early mining of the gold zone at Lalor is well -underway, which is expected to result in g old production of
74,000 ounces in 2020 and 102,000 ounce s in 2021 . This is in preparation for the restart of the New
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Britannia gold mill, which is expected to increase annual gold production from Lalor to over 150,000 ounces
by 2022.
• Successfully advanced Pampacancha with individual land-user agreements in place covering approximately
two-thirds of the land, and land clearing activities are underway.
• Filed initial brief s with the U.S. Court of Appeals for the Ninth Circuit in June to advance the appeal of the
July 2019 Rosemont court decision, which revoked the U.S. Forest Service's issuance of the Final Record of
Decision for Rosemont.
• Restructured revolving credit facilities in the wake of COVID -19 to right-size the facilities and further
enhance financial flexibility during the development of the New Britannia and Pampacancha projects.
• Updated National Instrument ("NI") 43 -101 resource estimate for the 1901 deposit near Lalor includes a
larger base metal resource estimate and a new gold -rich inferred resour ce estimate of 500 ,000 tonnes
grading 6.8 grams per tonne of gold.
“We continue to be extremely proud of our team’s ability to adapt to the COVID-19 protocols to achieve a safe
working environment while remaining focused on delivering strong operational performance ,” said Peter Kukielski,
President and Chief Executive Officer. “Our Manitoba operations continue to impress with record gold production this
quarter and a significant increase in revenues over the first quarter. Our Constancia opera tions in Peru achieved a
quick and efficient ramp up in mid -May after having been temporarily suspended due to COVID -19. Now that
Constancia is fully operational, we have reissued production and cost guidance for Peru and are continuing to
advance Pampacancha, with land clearing activities underway . The New Britannia gold mill refurbishment activities
continue on budget and on schedule to increase Lalor’s annual gold production to over 150,000 ounces by 2022. We
are also pleased to announce an update to the resource estimates for the 1901 deposit which increases the total size
of the deposit and demonstrates the gold potential in the Snow Lake camp through significantly increasing the gold
content of the base metal zones while adding a new gold-rich zone to the resource estimate.”
“We were pleased to further enhance our quarterly financial disclosure through the introduction of adjusted earnings
and adjusted EBITDA metrics this quarter,” said Steve Douglas, Senior Vice President and Chief Financial Officer.
“The strong performance from the Manitoba business this quarter helped offset the reduced contribution from the
Peru operations resulting in s econd quarter a djusted earnings unchanged from first q uarter levels , while adjusted
EBITDA was only slightly below first quarter levels . Our liquidity remains more th an sufficient to pursue our low -risk
high-return capital projects, with almost $400 million of cash at the end of the quarter, renewed credit facilities of $400
million and no meaningful debt maturities for two years, coinciding with delivery of our fully-funded growth projects in
2021, which are expected to generate significant free cash flow.”
Summary of Second Quarter Results
Consolidated copper production in the second quarter of 2020 was 18,026 tonnes, a 27% decrease from the first
quarter of 20 20 primarily as a result of the temporary suspension of operations at Constancia until mid -May.
Consolidated gold production increased by 7% compared to the first quarter of 2020 due to higher production from
Manitoba as a result of higher gold grades and record quarterly gold recoveries at the Stall mill. Consolidated zinc
production in the second quarter of 2020 was in line with the first quarter of 2020.
In the second quarter of 2020, consolidated cash cost per pound of copper produced, net of by -product credits, was
$0.64, a 47% improvement over the first quarter of 2020. Given the significant reduction in Constancia production in
the second quarter, this measure is more heavily impacted by Manitoba production which contains meaningful zinc
and gold by-product revenue components , and is not indicative of future consolidated cash costs . Incorporating
sustaining capital, capitalized exploration, royalties, selling, administrative and regional costs, c onsolidated all -in
sustaining cash cost per pound of copper produced, net of by -product credits i, in the second quarter of 20 20 was
$2.26, which improved from $ 2.40 in the first quarter of 20 20, driven mainly by same factors noted above, and
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reduced sustaining capital expenditures due to reduced activity from the temporary suspension of operations at
Constancia.
Cash generated from operating activities in the second quarter of 2020 increased to $31.4 million compared to $ 9.1
million in the first quarter of 2020. Operating cash flow before change in non -cash working capital was $ 29.5 million
during the second quarter of 2020, reflecting a decrease of $ 12.5 million compared to the first quarter of 20 20. The
decrease in operating cash flow is primarily the result of lower Constancia production and sales due to the temporary
suspension of mine operations. This decrease was partially offset by higher gold production and sales in Manitoba as
well as higher realized gold prices.
Net loss and loss per share in the second quarter of 2020 were $ 51.9 million and $0.20, respectively, compared to a
net loss and loss per share of $ 76.1 million and $0. 29, respectively, in the first quarter of 20 20. The increase in
earnings quarter -over-quarter was primarily due to higher sales volumes in Manitoba offset by the temporary
suspension of Constancia mine operations. In addition, the temporary suspension at Constancia resulted in fixed
overhead production costs of $25.6 million during the second quarter , and $31.9 million year -to-date, that would
normally be capitalized to inventories and property, plant, and equipment, to be immediately expensed as part of cost
of sales. This was partially offset by a $8.2 million reversal of a Peru inventory write -down due to rising copper prices
in the second quarter.
After adjusting for the temporary suspension costs in Peru and the reversal of the Peru inventory write -down, among
other items, adjusted net loss i and adjusted EBITDAi in the second quarter of 2020 were $ 39.7 million, or $0.15 per
share, and $49.1 million, respectively. This compares to an adjusted net loss and adjusted EBITDA in the first quarter
of 2020 of $39.4 million , or $0.15 per share , and $55.0 million, respectively . The higher sales volumes in Manitoba
offset the temporary suspension of Constancia resulting in minimal change in the quarter -over-quarter adjusted
earnings and a slight decrease in adjusted EBITDA.
On a budgeted sales volume basis, if operations at Constancia were maintained during the eight -weeks in which
production was suspended, this would have resulted in approximately $108.0 million of incremental revenue and
generated approximately $42.4 million of incremental year-to-date pre-tax earnings, assuming closing second quarter
commodity prices . These amounts would have improved the company’s current year -to-date reported revenue of
$454.0 million and pre-tax loss of $156.1 million.
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.
Financial Condition ($000s) Jun. 30, 2020 Mar. 31, 2020 Dec. 31, 2019
Cash and cash equivalents 391,136 305,997 396,146
Total long-term debt 988,418 988,074 985,255
Net debt1 597,282 682,077 589,109
Working capital 260,672 193,045 271,284
Total assets 4,498,892 4,366,226 4,461,057
Equity 1,706,303 1,778,277 1,848,123
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Consolidated Financial Performance Three Months Ended
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Revenue $000s 208,913 245,105 329,414
Cost of sales $000s 221,567 267,096 286,271
Earnings (loss) before tax $000s (74,604) (81,452) (43,931)
Earnings (loss) $000s (51,901) (76,134) (54,145)
Basic and diluted earnings (loss) per share $/share (0.20) (0.29) (0.21)
Adjusted earnings (loss) per share1 $/share (0.15) (0.15) (0.03)
Operating cash flow before change in non-
cash working capital
$ millions 29.5 42.0 81.3
Adjusted EBITDA1 $ millions 49.1 55.0 95.9
1 Adjusted loss per share and adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under
IFRS. For further information, please see the “Non-IFRS Financial Reporting Measures” section of this news release.
Consolidated Operational Performance Three Months Ended
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Contained metal in concentrate produced1
Copper tonnes 18,026 24,635 30,363
Gold ounces 32,614 30,355 28,099
Silver ounces 580,817 767,692 811,807
Zinc tonnes 31,222 30,495 31,838
Molybdenum tonnes 124 354 334
Precious metals2 ounces 39,140 38,981 39,696
Payable metal in concentrate sold
Copper tonnes 15,951 24,072 33,171
Gold ounces 30,590 26,574 30,538
Silver ounces 541,785 575,922 804,301
Zinc3 tonnes 27,604 26,792 24,224
Molybdenum tonnes 120 431 419
Precious metals2 ounces 36,677 33,045 42,028
Cash cost4 $/lb 0.64 1.21 1.27
All-in sustaining cash cost4 $/lb 2.26 2.40 2.30
1 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
2 Precious metals production includes gold and silver production on a gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of 89:1.
3 Includes refined zinc metal sold.
4 Cash cost and all-in sustaining cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial
performance measures with no standardized definition under IFRS. For further information, please see the “Non-IFRS Financial
Reporting Measures” section of this news release.
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Peru Operations Review
Three Months Ended
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Ore mined1 tonnes 2,775,286 6,985,212 8,211,166
Copper % 0.34 0.34 0.39
Gold g/tonne 0.04 0.03 0.04
Silver g/tonne 2.90 3.10 3.68
Molybdenum % 0.02 0.02 0.01
Ore milled tonnes 4,355,482 6,719,466 7,679,739
Copper % 0.34 0.34 0.37
Gold g/tonne 0.04 0.03 0.04
Silver g/tonne 3.04 3.13 3.40
Molybdenum % 0.01 0.02 0.02
Copper recovery % 76.6 84.3 84.7
Gold recovery % 43.4 50.2 41.3
Silver recovery % 59.6 68.2 65.7
Molybdenum recovery % 19.9 35.0 28.9
Contained metal in concentrate
Copper tonnes 11,504 19,290 24,232
Gold ounces 2,311 3,062 3,794
Silver ounces 253,687 461,302 551,807
Molybdenum tonnes 124 354 334
Precious metals2 ounces 5,161 8,245 11,677
Payable metal sold
Copper tonnes 9,023 19,247 25,778
Gold ounces 1,317 2,618 4,056
Silver ounces 242,519 361,591 504,259
Molybdenum tonnes 120 431 419
Combined unit operating cost3,4 $/tonne 7.77 9.31 10.39
Cash cost4 $/lb 1.56 1.63 1.63
Sustaining cash cost4 $/lb 2.09 2.12 2.11
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore mille d.
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.
Following the government mandated mid-March suspension of operations at Constancia, the mine remaine d closed
for approximately eight weeks and resumed operations in mid-May, achieving normal mill throughput levels on May
18, within 48 hours after restart, and continued at these levels for the remainder of the second quarter. The initial six
weeks following restart focused on milling activities while processing stockpile ore. This was followed by a ramp-up of
mining activities commencing the last week of June with a full ramp -up to normal levels in early July. Enhanced
health and safety measures were imple mented upon the re -start of operations and remain in place as Hudbay
continues to monitor the local impacts of the COVID-19 pandemic.
Peru’s updated 2020 production guidance has been revised to reflect the lost production during the eight-week
temporary suspension at Constancia, in addition to revised mine plans for the remainder of the year and the resulting
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deferral of some higher -grade ore into 2021. The updated guidance assumes Hudbay will be able to con tinue to
safely operate for the remainder of the year while adhering to the company’s existing health protocols and those
required by the Peruvian government. For further information, please see the “Annual Guidance Update” section of
this news release.
During the quarter, the Constancia mine produced 11,504 tonnes of copper, 5,161 ounces of precious metals and
124 tonnes of molybdenum. Production results were lower than the first quarter of 2020 as a result of the temporary
suspension of operations until mid-May and the processing of stockpile ore following the restart of operations.
Ore milled at the Constancia mine during the second quarter of 2020 was 35% lower compared to the first quarter of
2020 primarily due to the temporary suspension of Constancia. However, over the period when the mill was fully
operational during the quarter, average daily throughput was above 95,000 tonnes per day. Milled copper grades in
the second quarter were flat compared to the first quarter of 2020, but the characteristics of the stockpile ore that was
processed negatively impacted copper recoveries.
Combined mine, mill and G&A unit operating costs i in the second quarter of 2020 were 17% lower than the first
quarter of 2020 , primarily due to lower operating costs as a result of constrained activity during the temporary
suspension, and significantly reduced mining costs during the quarter. The company also deferred a second quarter
planned plant maintenance shutdown from May to the third quarter , as a result of proactive plant maintenance
completed during the eight-week temporary suspension.
Peru’s cash cost per pound of copper produced, net of by-product credits, for the three months ended June 30, 2020
was $1. 56, lower than the previous quarter due to lower operating costs more than offsetting lower copper
production. Peru’s s ustaining cash costs per pound of copper produced, net of by -product credits, for the three
months ended June 30, 2020 also decreased compared to the first quarter primarily as a result of the lower operating
costs.
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Manitoba Operations Review
Three Months Ended
Jun. 30, 2020 Mar. 31, 2020 Jun. 30, 2019
Lalor ore mined tonnes 407,408 421,518 411,701
Copper % 0.77 0.70 0.73
Zinc % 6.05 5.43 6.34
Gold g/tonne 2.64 2.27 2.12
Silver g/tonne 28.40 26.18 22.32
777 ore mined tonnes 281,890 279,925 288,599
Copper % 1.72 1.18 1.34
Zinc % 4.13 4.11 3.37
Gold g/tonne 1.91 1.82 1.60
Silver g/tonne 25.73 23.86 18.92
Stall Concentrator:
Ore milled tonnes 334,601 369,787 339,616
Copper % 0.76 0.70 0.71
Zinc % 6.16 5.38 6.36
Gold g/tonne 2.70 2.28 2.08
Silver g/tonne 28.72 26.28 22.03
Copper recovery % 86.6 86.5 85.6
Zinc recovery % 92.4 91.4 91.2
Gold recovery % 62.3 60.9 52.5
Silver recovery % 62.1 61.1 56.5
Flin Flon Concentrator:
Ore milled tonnes 324,906 332,589 367,017
Copper % 1.52 1.11 1.26
Zinc % 4.41 4.36 3.84
Gold g/tonne 1.99 1.88 1.71
Silver g/tonne 25.56 24.33 19.82
Copper recovery % 87.3 84.1 88.0
Zinc recovery % 84.9 85.0 86.0
Gold recovery % 58.6 53.5 61.3
Silver recovery % 50.7 44.3 53.0
Total contained metal in concentrate
Copper tonnes 6,522 5,345 6,131
Zinc tonnes 31,222 30,495 31,838
Gold ounces 30,303 27,293 24,305
Silver ounces 327,130 306,390 260,000
Precious metals1 ounces 33,979 30,736 28,019
Total payable metal sold
Copper tonnes 6,928 4,852 7,393
Zinc2 tonnes 27,604 26,792 24,224
Gold ounces 29,273 23,956 26,482
Silver ounces 299,266 214,331 300,042
Combined unit
operating cost3,4
C$/tonne 135 127 135
Cash cost4 $/lb (1.00) (0.30) (0.15)
Sustaining cash cost4 $/lb 1.67 2.85 2.19
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1 Precious metals production includes gold and silver production on a gold-equivalent basis. For 2019, silver is converted to gold at a
ratio of 70:1. For 2020, silver is converted to gold at a ratio of 89:1.
2 Includes refined zinc metal sold and payable zinc in concentrate sold.
3 Reflects combined mine, mill and G&A costs per tonne of ore milled.
4 Combined unit cost, cash cost and sustaining cash cost are non-IFRS financial performance measures with no standardized
definition under IFRS. For further information, please see the “Non-IFRS Financial Reporting Measures” section of this news
release.
The Manitoba business unit had solid operating performance across the mines, mills and zinc plant during the second
quarter. In response to the COVID -19 pandemic, Hudbay has worked collaboratively with its health and safety
committees and the local health units with a f ocus on keeping employees and communities safe by implementing a
number of layered workplace controls. As a result, the second quarter Manitoba operating results were largely
unaffected by the COVID-19 pandemic and are on track to achieve annual production and cost guidance.
The Manitoba operations achieved higher quarterly production levels in the second quarter of 2020 compared to the
first quarter. Production during the quarter included 31,222 tonnes of zinc, 6,522 tonnes of copper and 33,979 ounces
of precious metals. The enhanced precious metal production from Lalor, driven by improved gold and silver grades is
a result of prioritizing resources within the higher value portions of the base metal lenses. Developmen t in the gold
rich lenses 25 and 27 advanced ahead of schedule, and production from these areas is expected ahead of the New
Britannia mill restart as Lalor transitions to a gold mine. Higher 777 ore grades during the second quarter of 2020
were expected and consistent with the mine plan which included the mining of higher -grade copper stopes during the
quarter. As a result, grades of all metals increased over first quarter levels.
At the Stall concentrator, ore processed during the second quarter of 2020 was lower than the first quarter as a result
of a planned two-week outage on one of the grinding lines for capital upgrades. Gold and silver recoveries continued
to increase at Stall during the quarter due to a combination of improved ore character istics and ongoing operational
improvement projects implemented at the Stall mill. These sustained improvements can be seen through the year-
over-year increase in gold recovery at Stall from 52.5% to 62.3%. Ore processed in the Flin Flon concentrator in th e
second quarter slightly decreased by 2% compared to the first quarter. Copper and precious metal recoveries at the
Flin Flon concentrator during the second quarter of 2020 increased compared with the first quarter as a result of
higher grades.
Combined mine, mill and G&A unit operating costs were slightly higher than the first quarter of 2020 but in line with
expected guidance ranges.
Manitoba’s cash cost per pound of copper produced, net of by -product credits, for the second quarter of 2020 was
negative $1.00. These costs were significantly lower compared to the first quarter of 20 20 primarily as a result of
lower zinc refining and lower G&A costs, and a 22% increase in copper production quarter -over-quarter. Manitoba’s
sustaining cash cost per pound of copper produced, net of by -product credits, in the second quarter of 2020 was
$1.67, significantly lower than $2.85 in the previous quarter, due to the same factors affecting cash costs.