Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX,
NYSE:HBM) today released its second quarter 2021 financial
results. All amounts are in U.S. dollars, unless otherwise noted.
Second Quarter Operating and Financial
Results
- Generated $404.2 million in
revenue, $132.8 million of operating cash flow before change in
non-cash working capital and $143.2 million of adjusted EBITDA1 in
the second quarter of 2021 from higher realized metal prices and
higher copper and precious metals sales volumes, partially offset
by lower zinc sales volumes.
- Consolidated copper production in
the second quarter was 23,474 tonnes at cash cost and sustaining
cash cost per pound of copper produced, net of by-product creditsi,
of $0.84 and $2.25, respectively. Consolidated gold production
increased to 39,848 ounces in the second quarter, a record for
Hudbay.
- Second quarter Peru production was
boosted by higher metal recoveries and initial production from
Pampacancha in April 2021. Pampacancha production continues to ramp
up in line with the recently published Constancia mine plan, which
contemplates an increase in average annual copper production to
approximately 102,000 tonnes over the next eight years starting in
2022.
- Second quarter Manitoba metal
production was impacted by lower copper and zinc grades, lower
precious metal recoveries and production interruptions.
- On track to meet annual guidance
for copper, zinc and precious metals production, consolidated
sustaining capital expenditures, and Manitoba unit operating costs
in 2021. After adjusting for unbudgeted COVID-related costs in
Peru, full year unit operating costs for Peru are expected to be
within the 2021 guidance range.
- Second quarter net loss and loss
per share were $3.4 million and $0.01, respectively. After
adjusting for the net mark-to-market loss on financial instruments,
amongst other items, second quarter adjusted net earningsi per
share were $0.02.
- Cash and cash equivalents decreased
during the second quarter to $294.3 million, as at June 30, 2021,
mainly as a result of $100.6 million of capital investments
primarily for the construction of the New Britannia refurbishment
project and sustaining capital expenditures, partially offset by
cash generated from operations.
- On June 19, a worker employed by a
service provider at the Lalor mine was fatally injured from a fall
while working at height. The company is undertaking a number of
initiatives to learn from this tragic incident.
Executing on Growth
Initiatives
- New Britannia project continues to
track ahead of the original schedule with approximately 95% of the
project completed at the end of July. New Britannia gold circuit
commissioning completed in July 2021 and first gold pour is
expected in August, ahead of the original schedule. Annual gold
production from Lalor and the Snow Lake operations is expected to
increase to over 180,000 ounces at average cash cost and sustaining
cash cost, net of by-product credits, of $412 and $788 per ounce of
gold, respectively, during the first six full years of operation
starting in 2022.
- Due to additional costs and
COVID-19 related impacts, approximately $20 million in additional
growth capital is expected to be spent this year at New Britannia
and 2021 growth capital guidance has been revised accordingly.
- Following the finalization of the
remaining land user agreement for Pampacancha, first production was
achieved in April, consistent with the recently published mine
plan.
- Completed 85,000 feet of drilling
at the Copper World property in Arizona in the first half of the
year and the company remains on track to complete an initial
inferred resource estimate before the end of the year and a
preliminary economic assessment in the first half of 2022.
- Released the 18th Annual
Sustainability Report in May 2021 discussing Hudbay’s key
accomplishments and initiatives in 2020, how the company manages
the social, environmental and economic risks, impacts and
opportunities associated with its activities, and the importance of
continuous improvement in these areas for the company’s long-term
success.
“We are deeply saddened by the fatality at our
Lalor mine in June and we are committed more than ever to our
objective of zero harm across the organization,” said Peter
Kukielski, President and Chief Executive Officer. “Operationally,
our second quarter results benefited from higher production at our
Peru operations after the successful ramp up of mining activities
at Pampacancha during the quarter. We also expect to achieve our
first gold pour at the New Britannia mill this month, ahead of the
original schedule, which together with the startup of Pampacancha,
is expected to result in increased cash flows from these
high-return investments starting in the second half of 2021.
COVID-19 continues to have an impact our operations, but we remain
focused on managing these impacts while continuing to execute our
growth initiatives and focusing on operating safely and
efficiently.”
Summary of Second Quarter
Results
Cash generated from operating activities in the
second quarter of 2021 increased to $96.4 million compared to $51.8
million in the first quarter of 2021. Operating cash flow before
change in non-cash working capital was $132.8 million during the
second quarter of 2021, reflecting an increase of $42.1 million
compared to the first quarter of 2021. The increase in operating
cash flow is primarily the result of higher realized metal prices
and higher copper and precious metals sales volumes, partially
offset by lower zinc sales volumes.
Consolidated copper production in the second
quarter of 2021 was 23,474 tonnes, a 4% decrease from the first
quarter of 2021, primarily as a result of lower copper grades in
Manitoba, partially offset by higher throughput in Peru.
Consolidated gold production in the second quarter of 2021 was
39,848 ounces, an increase of 12% versus the first quarter of 2021,
due to record gold production in Peru as mining from the high-grade
Pampacancha deposit commenced in the quarter. Consolidated zinc
production in the quarter decreased by 23% while silver production
decreased by 2% versus the first quarter, primarily as a result of
lower grades and recoveries.
In the second quarter of 2021, consolidated cash
cost per pound of copper produced, net of by-product creditsi, was
$0.84, compared to $1.04 in the first quarter of 2021. This
decrease was mainly a result of higher by-product credits.
Sustaining cash cost per pound of copper produced, net of
by-product creditsi, increased to $2.25 in the second quarter of
2021, from $2.16 in the same period in 2020 primarily due to higher
sustaining capital expenditures, partially offset by higher
by-product credits. Hudbay continues to expect consolidated cash
cost and sustaining cash cost per pound of copper produced, net of
by-product credits, to be within the guidance ranges for 2021.
Net loss and loss per share in the second
quarter of 2021 were $3.4 million and $0.01, respectively, compared
to a net loss and loss per share of $60.1 million and $0.23,
respectively, in the first quarter of 2021. Second quarter earnings
benefited from higher realized prices of copper, zinc and gold,
combined with higher copper and precious metals sales volumes,
which were partially offset by lower zinc sales volumes and higher
tax expenses.
Adjusted net earningsi and adjusted net earnings
per sharei in the second quarter of 2021 were $5.4 million and
$0.02 per share after adjusting for the net mark-to-market loss on
financial instruments among other items. This compares to an
adjusted net loss and adjusted net loss per share of $16.1 million
and $0.06 per share in the first quarter of 2021. Second quarter
adjusted EBITDAi was $143.2 million, compared to $104.2 million in
the first quarter of 2021. As previously disclosed, sales volumes
in the first quarter of 2021 were impacted by shipping delays in
Peru and Manitoba, resulting in the delayed parcels being
recognized as revenue in the second quarter of 2021.
As at June 30, 2021, Hudbay’s liquidity includes
$294.3 million in cash and cash equivalents as well as undrawn
availability of $295.2 million under its credit facilities. The
company expects that the current liquidity together with cash flows
from operations will be sufficient to meet its liquidity needs for
the foreseeable future.
Financial Condition ($000s) |
Jun. 30, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
Cash and cash equivalents |
294,287 |
310,564 |
439,135 |
Total long-term debt |
1,181,195 |
1,180,798 |
1,135,675 |
Net debt1 |
886,908 |
870,234 |
696,540 |
Working capital |
219,799 |
236,281 |
306,888 |
Total assets |
4,587,827 |
4,549,196 |
4,666,645 |
Equity |
1,658,924 |
1,660,250 |
1,699,806 |
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.
Consolidated Financial Performance |
|
Three Months Ended |
|
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Revenue |
$000s |
404,242 |
313,624 |
208,913 |
Cost of sales |
$000s |
322,060 |
261,112 |
221,567 |
Earnings (loss) before tax |
$000s |
14,819 |
(69,592) |
(74,604) |
Earnings (loss) |
$000s |
(3,395) |
(60,102) |
(51,901) |
Basic and diluted earnings (loss) per share |
$/share |
(0.01) |
(0.23) |
(0.20) |
Adjusted earnings (loss) per share1 |
$/share |
0.02 |
(0.06) |
(0.15) |
Operating cash flow before change in non-cash working capital |
$
millions |
132.8 |
90.7 |
29.5 |
Adjusted EBITDA1 |
$ millions |
143.2 |
104.2 |
49.1 |
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 Production and Cost Performance |
Three Months Ended |
|
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Contained metal in concentrate
produced1 |
|
|
|
|
Copper |
tonnes |
23,474 |
24,553 |
18,026 |
Gold |
ounces |
39,848 |
35,500 |
32,614 |
Silver |
ounces |
685,916 |
696,673 |
580,817 |
Zinc |
tonnes |
21,538 |
27,940 |
31,222 |
Molybdenum |
tonnes |
295 |
294 |
124 |
Payable metal in concentrate sold |
|
|
|
|
Copper |
tonnes |
25,176 |
20,929 |
15,951 |
Gold |
ounces |
38,205 |
25,383 |
30,590 |
Silver |
ounces |
577,507 |
509,760 |
541,785 |
Zinc2 |
tonnes |
25,361 |
28,343 |
27,604 |
Molybdenum |
tonnes |
265 |
284 |
120 |
Consolidated cash cost per pound of copper
produced3 |
|
|
|
|
Cash cost |
$/lb |
0.84 |
1.04 |
0.29 |
Peru |
$/lb |
1.85 |
1.82 |
1.31 |
Manitoba |
$/lb |
(3.51) |
(1.04) |
(1.51) |
Sustaining cash cost |
$/lb |
2.25 |
2.16 |
1.59 |
Peru |
$/lb |
2.69 |
2.36 |
1.84 |
Manitoba |
$/lb |
0.36 |
1.62 |
1.16 |
All-in sustaining cash cost |
$/lb |
2.48 |
2.37 |
1.91 |
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 the “Non-IFRS
Financial Reporting Measures” section of this news release.
Peru Operations Review
Peru Operations |
Three Months Ended |
|
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Constancia ore mined1 |
tonnes |
8,016,373 |
7,747,466 |
2,775,286 |
Copper |
% |
0.30 |
0.30 |
0.34 |
Gold |
g/tonne |
0.04 |
0.04 |
0.04 |
Silver |
g/tonne |
3.02 |
2.90 |
2.90 |
Molybdenum |
|
0.01 |
0.01 |
0.02 |
Pampacancha ore mined |
tonnes |
982,992 |
- |
- |
Copper |
% |
0.26 |
- |
- |
Gold |
g/tonne |
0.27 |
- |
- |
Silver |
g/tonne |
4.43 |
- |
- |
Molybdenum |
|
0.01 |
- |
- |
Ore milled |
tonnes |
7,413,043 |
6,362,752 |
4,355,482 |
Copper |
% |
0.31 |
0.33 |
0.34 |
Gold |
g/tonne |
0.07 |
0.04 |
0.04 |
Silver |
g/tonne |
2.88 |
2.84 |
3.04 |
Molybdenum |
|
0.01 |
0.01 |
0.01 |
Copper recovery |
% |
83.3 |
84.1 |
76.6 |
Gold recovery |
% |
62.2 |
52.0 |
43.4 |
Silver recovery |
% |
68.2 |
69.9 |
59.6 |
Molybdenum recovery |
|
33.3 |
33.4 |
19.9 |
Contained metal in concentrate |
|
|
|
Copper |
tonnes |
19,058 |
17,827 |
11,504 |
Gold |
ounces |
10,220 |
4,638 |
2,311 |
Silver |
ounces |
468,057 |
405,714 |
253,687 |
Molybdenum |
tonnes |
295 |
294 |
124 |
Payable metal sold |
|
|
|
Copper |
tonnes |
19,946 |
14,836 |
9,023 |
Gold |
ounces |
5,638 |
2,963 |
1,317 |
Silver |
ounces |
315,064 |
337,612 |
242,519 |
Molybdenum |
tonnes |
265 |
284 |
120 |
Combined unit operating cost2,3,4 |
$/tonne |
11.25 |
12.46 |
7.77 |
Cash cost4 |
$/lb |
1.85 |
1.82 |
1.31 |
Sustaining cash cost4 |
$/lb |
2.69 |
2.36 |
1.84 |
1 Reported tonnes and grade for ore mined are
estimates based on mine plan assumptions and may not reconcile
fully to ore milled. 2 Reflects combined mine, mill and general and
administrative (“G&A”) costs per tonne of ore milled. Reflects
the deduction of expected capitalized stripping costs. 3 Includes
COVID-related costs of approximately $6.3 million, or $0.85 per
tonne, during the three months ended June 30, 2021 and $4.6
million, or $0.72 per tonne, during the first quarter of 2021. 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.
Despite recent notable improvements in
COVID-19-related statistics in Peru, the Constancia team continues
to adhere to strict COVID-19 measures and controls to ensure the
safety of Hudbay’s workforce, partners and the communities in which
it operates. This has allowed Constancia to maintain strong
operations, although it has resulted in increased unit operating
costs.
During the second quarter 2021, the Constancia
operations produced 19,058 tonnes of copper, 10,220 ounces of gold,
468,057 ounces of silver and 295 tonnes of molybdenum. Production
was higher than the first quarter of 2021 primarily as a result of
increased throughput and improved gold grades and recoveries
compared to the first quarter. Other than molybdenum, which is
expected to fall slightly below the 2021 guidance range but in line
with the recently published mine plan, Hudbay expects the
production of all remaining metals in Peru to be in line with the
2021 full year guidance.
Ore mined during the second quarter of 2021
increased 16% from the first quarter of 2021 as a result of strong
operational efficiencies and a smooth ramp up at Pampacancha.
Following the finalization of the remaining land user agreement,
Pampacancha achieved first production in April, consistent with the
company’s recently published mine plan. Due to its short ramp-up
period, Pampacancha also achieved commercial production in April
2021. Ore milled during the second quarter of 2021 was 17% higher
than the first quarter of 2021 as the prior period was impacted by
a scheduled mill maintenance shutdown, offset slightly by increased
ore hardness in the most recent quarter. Milled grades for copper
were lower than the prior quarter, in line with the mine plan, and
milled gold grades increased by 75% due to higher gold head grades
from Pampacancha. During the second quarter of 2021, Constancia
achieved record gold recoveries primarily due to significantly
higher head grades from Pampacancha.
Combined mine, mill and G&A unit operating
costs in the second quarter of 2021 were $11.25 per tonne, and
lower than the first quarter of 2021, primarily due to a higher
volume of ore milled, partially offset by higher costs associated
with COVID-19 protocols. COVID-related costs in Peru of $6.3
million in the second quarter were higher than budgeted and are
expected to continue at a similar run rate for the remainder of the
year. Unit operating costs in the second quarter were $10.40 per
tonne excluding these COVID-related costs. Hudbay expects Peru unit
operating costs to be in line with the 2021 guidance range after
adjusting for unbudgeted COVID-related costs.
Peru’s cash cost per pound of copper produced,
net of by-product credits, in the second quarter of 2021 was $1.85,
relatively unchanged from the previous quarter. Higher mining costs
and higher general and administrative costs from enhanced COVID-19
protocols were generally offset by lower milling costs and higher
gold by-product credits. Peru’s sustaining cash cost per pound of
copper produced, net of by-product credits, in the first quarter of
2021 increased to $2.69, compared to $2.36 in the first quarter of
2021, due to same factors noted above affecting cash costs, offset
by higher sustaining capital expenditures.
Manitoba Operations Review
Manitoba Operations |
Three Months Ended |
|
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Lalor ore mined |
tonnes |
356,951 |
421,602 |
407,408 |
Copper |
% |
0.64 |
0.57 |
0.77 |
Zinc |
% |
3.81 |
5.20 |
6.05 |
Gold |
g/tonne |
3.19 |
2.67 |
2.64 |
Silver |
g/tonne |
22.98 |
22.75 |
28.40 |
777 ore mined |
tonnes |
255,170 |
275,260 |
281,890 |
Copper |
% |
0.82 |
2.06 |
1.72 |
Zinc |
% |
3.57 |
4.00 |
4.13 |
Gold |
g/tonne |
1.97 |
2.39 |
1.91 |
Silver |
g/tonne |
23.35 |
29.32 |
25.73 |
Stall Concentrator: |
|
|
|
Ore milled |
tonnes |
317,484 |
361,344 |
334,601 |
Copper |
% |
0.68 |
0.60 |
0.76 |
Zinc |
% |
4.06 |
5.53 |
6.16 |
Gold |
g/tonne |
3.19 |
2.57 |
2.70 |
Silver |
g/tonne |
22.02 |
23.40 |
28.72 |
Copper recovery |
% |
88.8 |
85.7 |
86.6 |
Zinc recovery |
% |
88.1 |
91.1 |
92.4 |
Gold recovery |
% |
55.5 |
57.5 |
62.3 |
Silver recovery |
% |
55.1 |
56.2 |
62.1 |
Flin Flon Concentrator: |
|
|
|
Ore milled |
tonnes |
329,503 |
283,386 |
324,906 |
Copper |
% |
0.89 |
1.88 |
1.52 |
Zinc |
% |
3.65 |
4.20 |
4.41 |
Gold |
g/tonne |
2.06 |
2.34 |
1.99 |
Silver |
g/tonne |
23.65 |
28.01 |
25.56 |
Copper recovery |
% |
84.8 |
91.3 |
87.3 |
Zinc recovery |
% |
84.8 |
81.8 |
84.9 |
Gold recovery |
% |
52.9 |
64.0 |
58.6 |
Silver recovery |
% |
37.5 |
54.1 |
50.7 |
Total contained metal in concentrate |
|
|
|
Copper |
tonnes |
4,416 |
6,726 |
6,522 |
Zinc |
tonnes |
21,538 |
27,940 |
30,303 |
Gold |
ounces |
29,628 |
30,862 |
327,130 |
Silver |
ounces |
217,859 |
290,959 |
31,222 |
Total payable metal sold |
|
|
|
Copper |
tonnes |
5,230 |
6,093 |
6,928 |
Zinc1 |
tonnes |
25,361 |
28,343 |
27,604 |
Gold |
ounces |
32,567 |
22,420 |
29,273 |
Silver |
ounces |
262,443 |
172,148 |
299,266 |
Combined unit operating cost2,3 |
C$/tonne |
148 |
151 |
135 |
Cash cost3 |
$/lb |
(3.51) |
(1.04) |
(1.51) |
Sustaining cash cost3 |
$/lb |
0.36 |
1.62 |
1.16 |
1 Includes refined zinc metal sold and payable
zinc in concentrate sold. 2 Reflects combined mine, mill and
G&A costs per tonne of ore milled. 3 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.
Overall production at the Manitoba business unit
in the second quarter was negatively impacted by COVID-19 related
absences and interruptions at Hudbay’s Snow Lake and Flin Flon
operations, a scheduled maintenance shutdown at Lalor and a
temporary suspension of Lalor operations from June 19 to June 24
following a tragic fatal incident. The incident occurred during
underground mining operations on the evening of June 19, 2021, when
a worker employed by a service provider was fatally injured from a
fall while working at height. Operations were suspended to allow
for a thorough investigation by external authorities and a joint
investigation by Hudbay and the service provider. Hudbay is
committed to preventing similar occurrences and applying the
learnings from this incident across its operations.
Production during the quarter included 21,538
tonnes of zinc, 4,416 tonnes of copper, 29,628 ounces of gold and
217,859 ounces of silver. Production results of all metals were
lower than the previous quarter primarily due to the aforementioned
production interruptions, lower grades, lower recoveries and ore
stockpiling for the New Britannia mill.
Ore mined at the Manitoba operations during the
second quarter of 2021 was lower than the first quarter of 2021 due
to the factors outlined above. Gold grades were higher compared to
the previous quarter, consistent with the life of mine production
schedule at Lalor. Copper, zinc and silver grades were lower in
part due to remnant mining at 777, which results in higher
quarter-over-quarter variation as 777 nears the end of its mine
life, and the mining sequence at Lalor. The 777 mine is now within
one year of closure, and the focus continues to be mining out the
remaining reserves by executing the mine production sequence and
completing the necessary ground rehabilitation in order to access
old workings and remnant stopes.
Development and underground construction
activities continue in the lower part of the Lalor mine to support
the start-up and ongoing operation of the New Britannia mill. At
the end of the second quarter, approximately 47,000 tonnes of gold
ore had been stockpiled as initial feed for the New Britannia mill,
an increase of 21,000 tonnes from the end of the first quarter of
2021. The incremental mining activity associated with growing the
gold ore stockpile has contributed to elevated combined mine, mill
and G&A unit operating costs during the first and second
quarters of 2021.
The Stall concentrator processed all available
ore during the second quarter of 2021, which was 12% lower than the
first quarter of 2021. Stall recoveries during the second quarter
of 2021 were higher for copper and lower for zinc and precious
metals versus the previous quarter but were consistent with the
metallurgical model. Ore processed at the Flin Flon concentrator in
the second quarter of 2021 increased by 16% compared to the first
quarter as a result of processing available ore stockpiles.
Recoveries of copper, gold and silver at the Flin Flon concentrator
during the second quarter of 2021 were lower than the previous
quarter mostly due to lower head grades from the 777 mine, but were
consistent with the metallurgical model.
Combined mine, mill and G&A unit operating
costs in the second quarter of 2021 slightly decreased compared to
the first quarter of 2021 and remained within the annual guidance
range.
Manitoba’s cash cost per pound of copper
produced, net of by-product credits, for the second quarter of 2021
was negative $3.51, lower than the prior quarter primarily due to
higher by-product revenues and lower copper production. Manitoba’s
sustaining cash cost per pound of copper produced, net of
by-product credits, in the second quarter of 2021 was $0.36
compared to $1.62 in the first quarter, primarily due to the
reasons listed above.
Full year production of all metals and unit
operating costs in Manitoba are on track to achieve the guidance
ranges for 2021.
COVID-19 Business Update
The COVID-19 pandemic continues to have a
persistent and protracted financial impact on Hudbay’s operations
as the company continues to maintain strict COVID-19 measures to
ensure the safety of its workforce and the communities in which it
operates.
Although there has been a notable reduction in
the number of new cases of COVID-19 in Canada and Peru along with
increased vaccine availability throughout the company’s operating
regions, Hudbay continues to incur COVID-19 related expenditures
beyond levels originally budgeted, including rapid diagnostic test
kits, personal protective equipment, temporary accommodation for
employees awaiting test results, transportation costs as well as
additional cleaning and sanitation expenses related to unscheduled
COVID-19 related interruptions at the company’s operations. These
COVID-related challenges have also had a negative financial impact
on the refurbishment of the New Britannia mill and Peru unit costs.
The company continues to manage the impact and monitor the risks of
the pandemic at each of its locations, and its focus remains on
continuing to operate safely and efficiently.
New Britannia Mill Progress and Manitoba
Growth Capital Update
Refurbishment activities at the New Britannia
gold mill were completed in June 2021 and commissioning and startup
activities occurred in July. The mill is expected to achieve first
gold production in August, in line with the timelines assumed in
the company’s production guidance. These timelines are ahead
of the original schedule to produce first gold before the end of
2021. Annual gold production from Lalor and the Snow Lake
operations is expected to increase to over 180,000 ounces at an
average cash cost and sustaining cash cost, net of by-product
credits, of $412 and $788 per ounce of gold, respectively, during
the first six full years of New Britannia's operation.
The construction of a new copper flotation
facility is on track for commissioning and ramp up in the fourth
quarter of 2021. The overall project is approximately 95% complete
as of the end of July. As noted last quarter, Hudbay has observed
COVID-related cost pressures on the project capital estimate at New
Britannia and there have been areas of cost escalation with
industry cost inflationary pressures as the project nears
completion. As a result, the company expects approximately $20
million in additional growth capital to be spent this year at New
Britannia. The company also expects an additional $10 million to be
spent in 2021 on the advancement of the Stall mill recovery
improvement program, early works for the Lalor mine expansion to
5,300 tonnes per day and the impacts of foreign exchange movements.
As such, Manitoba’s total growth capital guidance in 2021 has
increased to $105 million from $75 million.
Exploration Update
Copper World Exploration
Hudbay’s 2020 drill program at its Copper World
property in Arizona confirmed the discovery of the Broad Top Butte,
Copper World, Peach and Elgin deposits, with a combined strike
length of over five kilometres and opportunities to discover
additional mineralization between the deposits. The program
intersected significant volumes of high-grade copper sulphide and
oxide mineralization starting, in most cases, near surface or at
shallow depth. Drilling at Broad Top Butte included intersections
of 440 feet of 1.38% copper and 246 feet of 0.70% copper starting
at surface. Drilling at the Peach and Eglin deposits included
intersections of 500 feet of 0.82% copper and 300 feet of 0.64%
copper, both starting from surface. The mineralization at the
Copper World deposits is located closer to surface than at Rosemont
and remains open at depth.
The expanded 2021 exploration program at Copper
World is well-advanced with 85,000 feet of drilling completed in
the first half of the year and four drill rigs currently turning at
site. Hudbay expects to publish an update once the majority of
assays have been received for the holes drilled during the first
half of 2021. The hydrogeological, geotechnical, mineralogical and
metallurgical studies are underway. The company is also evaluating
several targets identified through geophysical surveys on Hudbay’s
extensive regional land package. Hudbay continues to expect to
complete an initial inferred resource estimate before the end of
the year and a preliminary economic assessment in the first half of
2022.
Peru Regional Exploration
Hudbay continues to progress discussions with
the community of Uchucarcco on the Maria Reyna and Caballito
properties, both of which are located within ten kilometres of
Constancia.
At the end of June, the company commenced
drilling at the Llaguen copper porphyry target located in northern
Peru, near the city of Trujillo and in close proximity to existing
infrastructure. The initial confirmatory phase of the drill program
consists of 5,000 metres with two drill rigs presently turning at
site. Pending positive results from this initial drilling phase, a
second phase aimed at defining an initial mineral resource for
Llaguen is expected to follow either later this year or in the
second quarter of 2022 after the rainy season.
A scouting eight-hole drill program was
completed at the Quehuincha North target near Constancia. Copper
sulphides and oxides were intercepted but at tenors too low to be
of economic merit.
Snow Lake Regional Exploration
The company’s regional exploration efforts in
the Snow Lake area continue, following on its success from the 2021
winter drill program in the Chisel Basin where the copper-gold rich
feeder of the 1901 deposit was discovered and high grade zinc and
gold mineralization was confirmed through infill and extension
drilling. Hudbay’s summer program includes surface mapping and
ground geophysics to identify both base metal and gold targets as
well as a follow-up limited drill program on a new target
identified immediately north of the Lalor mine from a borehole
survey completed in February 2021. The results from Hudbay’s 2021
drill program in Snow Lake are expected to be incorporated into the
annual mineral reserve and resource estimates to be published at
the end of March 2022.
18th Annual Sustainability
Report
In May 2021, Hudbay released its integrated
annual and sustainability report (“Annual Sustainability Report”).
The Annual Sustainability Report provides transparency and progress
on key accomplishments and initiatives in 2020. The company
believes that continuously improving how it manages the social,
environmental and economic risks, impacts and opportunities
associated with its activities is critical for its long-term
success.
- Hudbay’s 2020 Annual Sustainability
Report disclosures were mapped to the Global Reporting Initiative
(GRI), the Sustainability Accounting Standards Board (SASB) Metals
& Mining industry standard and the Task Force on
Climate-related Financial Disclosures (TCFD). The company also
provides disclosure through the CDP Climate, Water and Forests
questionnaires.
- To inform Hudbay’s sustainability
programs and improve its performance, the company applies and
voluntarily supports several international best practice standards,
including ISO 14001, ISO 45001, ISO 9001, Towards Sustainable
Mining, the Voluntary Principles on Security and Human Rights and
International Finance Corporation (IFC) Performance Standards.
- As a member of the Mining
Association of Canada, Hudbay implements the Towards Sustainable
Mining (TSM) Protocols at all of its operations, with the goal to
maintain a score of “A” or higher for all protocols. The
implementation of the TSM Tailings protocol and the company’s
commitment to ensuring that its Tailings Storage Facilities are
constructed following the Canadian Dam Safety Guidelines represents
substantial alignment to the new Global Tailings Standard released
in 2020.
- Over 50% of Hudbay’s total energy
consumption in 2020 was from renewable sources. All electricity at
Hudbay’s operations is supplied by third parties via regional
grids. Nearly all of the electricity produced in Manitoba is
through renewable hydropower and, in Peru, over 50% is from
renewable sources.
- The Peru business unit continued
its leading safety track record among Peruvian copper mines and was
the first mine in Peru to obtain the SafeGuard certification,
recognizing full compliance with all COVID-19 safety
protocols.
- The Manitoba business unit achieved
its annual safety targets and continuous operations in an
environment of enhanced COVID-19 safety protocols and controls,
while working closely with the local health authorities.
- Hudbay recognizes the opportunity
that the mining industry has to positively contribute to the 17 UN
Sustainable Development Goals (SDGs) that are a part of the UN’s
2030 Agenda for Sustainable Development.
Details of Hudbay’s sustainability performance
data can be found in the Disclosure Centre on the company’s
website, which includes updated greenhouse gas emissions data
revised in August to incorporate International Energy Agency scope
2 emissions factors.
Collective Bargaining
Agreements
Hudbay signed a new collective bargaining
agreement with the union at its Peru operations for three years,
effective November 10, 2020. The company also reached new
three-and-a-half year collective bargaining agreements with four of
its six unions in Manitoba, effective July 1, 2021. The company
continues its efforts to advance the collective bargaining process
with the remaining two unions in Manitoba.
Dividend Declared
A semi-annual dividend of C$0.01 per share was
declared on August 9, 2021. The dividend will be paid out on
September 24, 2021 to shareholders of record as of September 3,
2021.
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2021/Q2/MDA212.pdf
Financial Statements:
http://www.hudbayminerals.com/files/doc_financials/2021/Q2/FS212.pdf
Conference Call and Webcast
Date: |
Tuesday,
August 10, 2021 |
|
|
Time: |
8:30 a.m.
ET |
|
|
Webcast: |
http://services.choruscall.ca/links/hudbay20210810.html |
|
|
Dial
in: |
1-416-915-3239 or 1-800-319-4610 |
Qualified Person and NI
43-101
The technical and scientific information in this
news release related to the 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 company’s other material mineral projects contained in this
news release has been approved by Olivier Tavchandjian, P. Geo,
Hudbay’s Vice President, Exploration and Geology. Messrs. Meagher
and Tavchandjian 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 at Hudbay's material
properties, 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 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.
Non-IFRS Financial Performance
Measures
Adjusted net earnings (loss), adjusted net
earnings (loss) per share, adjusted EBITDA, net debt, cash cost,
sustaining and all-in sustaining cash cost per pound of copper
produced and per ounce of gold produced, and combined unit cost are
non-IFRS performance measures. 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.
Hudbay believes adjusted net earnings (loss) and
adjusted net earnings (loss) per share better reflect the company’s
performance for the current period and are better indications of
its expected performance in future periods. These measures are used
internally by the company to evaluate the performance of its
underlying operations and to assist with its planning and
forecasting of future operating results. As such, the company
believes these measures are useful to investors in assessing the
company’s underlying performance. The company provides adjusted
EBITDA to help users analyze its results and to provide additional
information about the company’s ongoing cash generating potential
in order to assess its capacity to service and repay debt, carry
out investments and cover working capital needs. Net debt is shown
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 and per ounce of gold
produced are shown because the company believes they help investors
and management assess the performance of its current and future
operations, including the margin generated by the operations and
the company. Combined unit cost is shown because the company
believes it helps investors and management assess the cost
structure and margins that are not impacted by variability in
by-product commodity prices.
The following tables provide detailed
reconciliations to the most comparable IFRS measures.
Adjusted Net Earnings (Loss) Reconciliation
|
Three Months Ended |
(in $ millions) |
Jun. 30, 2021 |
|
Mar. 31, 2021 |
|
Jun. 30, 2020 |
|
Profit (loss) for the period |
(3.4 |
) |
(60.1 |
) |
(51.9 |
) |
Tax expense (recovery) |
18.2 |
|
(9.5 |
) |
(22.7 |
) |
Profit (loss) before tax |
14.8 |
|
(69.6 |
) |
(74.6 |
) |
Adjusting items: |
|
|
|
Mark-to-market adjustments1 |
10.9 |
|
40.8 |
|
8.3 |
|
Peru inventory (reversal)/write-down |
(0.7 |
) |
(0.7 |
) |
(8.2 |
) |
Peru cost of sales direct charge from temporary shutdown |
— |
|
— |
|
25.6 |
|
Variable consideration adjustment - stream revenue and
accretion |
— |
|
(1.0 |
) |
— |
|
Foreign exchange loss |
1.7 |
|
1.7 |
|
1.8 |
|
Write-down of unamortized transaction costs |
— |
|
2.5 |
|
— |
|
Premium paid on redemption of notes |
— |
|
22.9 |
|
— |
|
Adjusted earnings (loss) before income taxes |
26.7 |
|
(3.4 |
) |
(47.1 |
) |
Tax (expense) recovery |
(18.2 |
) |
9.5 |
|
22.7 |
|
Tax impact of adjusting items |
(2.3 |
) |
(18.9 |
) |
(9.9 |
) |
Non-cash deferred tax adjustments |
(0.8 |
) |
(3.3 |
) |
(5.4 |
) |
Adjusted net earnings (loss) |
5.4 |
|
(16.1 |
) |
(39.7 |
) |
Adjusted net earnings (loss) ($/share) |
0.02 |
|
(0.06 |
) |
(0.15 |
) |
Basic weighted average number of common shares outstanding
(millions) |
261.5 |
|
261.3 |
|
261.3 |
|
Adjusted EBITDA Reconciliation
|
Three Months Ended |
(in $ millions) |
Jun. 30, 2021 |
|
Mar. 31, 2021 |
|
Jun. 30, 2020 |
|
Profit (loss) for the period |
(3.4 |
) |
(60.1 |
) |
(51.9 |
) |
Add back: Tax expense (recovery) |
18.2 |
|
(9.5 |
) |
(22.7 |
) |
Add back: Net finance expense |
43.7 |
|
108.5 |
|
47.8 |
|
Add back: Other expenses (income) |
1.0 |
|
(3.3 |
) |
1.3 |
|
Add back: Depreciation and amortization1 |
99.3 |
|
82.7 |
|
80.8 |
|
Less: Amortization of deferred revenue and variable consideration
adjustment |
(17.1 |
) |
(15.2 |
) |
(13.9 |
) |
|
141.7 |
|
103.1 |
|
41.4 |
|
Adjusting items (pre-tax): |
|
|
|
|
Peru inventory (reversal) / write-down |
(0.7 |
) |
(0.7 |
) |
(8.2 |
) |
Cash portion of Peru cost of sales direct charge from temporary
shutdown |
— |
|
— |
|
12.4 |
|
Share-based compensation expenses2 |
2.2 |
|
1.8 |
|
3.5 |
|
Adjusted EBITDA |
143.2 |
|
104.2 |
|
49.1 |
|
1 Includes the non-cash portion of the Peru cost
of sales direct charge from the temporary shutdown of $13.2 million
for the three months ended June 30, 2020. 2 Share-based
compensation expenses reflected in cost of sales and selling and
administrative expenses.
Net Debt Reconciliation
(in $ thousands) |
|
|
Jun. 30, 2021 |
|
Mar. 31, 2021 |
|
Dec. 31, 2020 |
|
Total long-term debt |
1,181,195 |
|
1,180.798 |
|
1,135,675 |
|
Cash and cash equivalents |
(294,287 |
) |
(310,564 |
) |
(439,135 |
) |
Net debt |
886,908 |
|
870,234 |
|
696,540 |
|
Cash Cost Reconciliation
Consolidated |
Three Months Ended |
Net pounds of copper produced |
|
|
|
(in thousands) |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Peru |
42,015 |
39,302 |
25,361 |
Manitoba |
9,736 |
14,828 |
14,379 |
Net pounds of copper produced |
51,751 |
54,130 |
39,740 |
Consolidated |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Cash cost per pound of copper produced |
$000s |
|
$/lb1 |
|
$000s |
|
$/lb1 |
|
$000s |
|
$/lb1 |
|
Cash cost, before by-product credits |
218,899 |
|
4.23 |
|
209,866 |
|
3.88 |
|
141,374 |
|
4.05 |
|
By-product credits |
(175,470 |
) |
(3.39 |
) |
(153,515 |
) |
(2.84 |
) |
(129,939 |
) |
(3.11 |
) |
Cash cost, net of by-product credits |
43,429 |
|
0.84 |
|
56,351 |
|
0.94 |
|
99,781 |
|
0.94 |
|
Consolidated |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Supplementary cash cost information |
$000s |
|
$/lb 1 |
$000s |
|
$/lb 1 |
$000s |
|
$/lb 1 |
By-product credits2: |
|
|
|
|
|
|
Zinc |
77,707 |
|
1.50 |
82,315 |
|
1.52 |
60,094 |
|
1.51 |
Gold 3 |
68,880 |
|
1.33 |
45,134 |
|
0.83 |
54,163 |
|
1.56 |
Silver 3 |
15,443 |
|
0.30 |
15,135 |
|
0.28 |
13,108 |
|
0.33 |
Molybdenum & other |
13,440 |
|
0.26 |
10,931 |
|
0.20 |
2,574 |
|
0.06 |
Total by-product credits |
175,470 |
|
3.39 |
153,515 |
|
2.84 |
129,939 |
|
3.27 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash cost, net of by-product credits |
43,429 |
|
|
56,351 |
|
|
11,435 |
|
|
By-product credits |
175,470 |
|
|
153,515 |
|
|
129,939 |
|
|
Treatment and refining charges |
(15,243 |
) |
|
(11,936 |
) |
|
(11,464 |
) |
|
Share-based compensation expense |
274 |
|
|
184 |
|
|
284 |
|
|
Inventory adjustments |
(723 |
) |
|
(723 |
) |
|
(8,155 |
) |
|
Change in product inventory |
15,260 |
|
|
(22,864 |
) |
|
4,000 |
|
|
Royalties |
4,288 |
|
|
3,903 |
|
|
2,363 |
|
|
Overhead costs related to suspension of activities (cash) -
Peru |
— |
|
|
— |
|
|
12,358 |
|
|
Depreciation and amortization4 |
99,305 |
|
|
82,682 |
|
|
80,807 |
|
|
Cost of sales5 |
322,060 |
|
|
261,112 |
|
|
221,587 |
|
|
1 Per pound of copper produced. 2 By-product
credits are computed as revenue per financial statements,
amortization of deferred revenue and pricing and volume adjustments
3 Gold and silver by-product credits do not include variable
consideration adjustments with respect to stream arrangements.
Variable consideration adjustments are cumulative adjustments to
gold and silver stream deferred revenue primarily associated with
the net change in mineral reserves and resources or amendments to
the mine plan that would change the total expected deliverable
ounces under the precious metal streaming arrangement. For the
three months ended March 31, 2021 the variable consideration
adjustments amounted to net income of $1,617. 4 Depreciation is
based on concentrate sold. 5 As per IFRS financial statements.
Peru |
Three Months Ended |
(in thousands) |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Net pounds of copper
produced1 |
42,015 |
39,302 |
25, 361 |
1 Contained copper in concentrate.
Peru |
Three Months Ended |
|
Q2 2021 |
Q1 2021 |
Q2 2020 |
Cash cost per pound of copper produced |
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
Mining |
26,133 |
|
0.62 |
|
21,539 |
|
0.55 |
|
7,595 |
|
0.30 |
|
Milling |
40,286 |
|
0.96 |
|
43,320 |
|
1.10 |
|
18,703 |
|
0.74 |
|
G&A |
16,910 |
|
0.40 |
|
14,420 |
|
0.37 |
|
7,493 |
|
0.30 |
|
Onsite costs |
83,329 |
|
1.98 |
|
79,279 |
|
2.02 |
|
33,791 |
|
1.33 |
|
Treatment & refining |
9,824 |
|
0.23 |
|
6,614 |
|
0.17 |
|
5,165 |
|
0.20 |
|
Freight & other |
11,555 |
|
0.29 |
|
8,688 |
|
0.22 |
|
4,817 |
|
0.19 |
|
Cash cost, before by-product credits |
104,708 |
|
2.50 |
|
94,581 |
|
2.41 |
|
43,773 |
|
1.73 |
|
By-product credits |
(27,137 |
) |
(0.65 |
) |
(22,864 |
) |
(0.58 |
) |
(10,575 |
) |
(0.42 |
) |
Cash cost, net of by-product credits |
77,571 |
|
1.85 |
|
71,717 |
|
1.82 |
|
33,198 |
|
1.31 |
|
Peru |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Supplementary cash cost information |
$000s |
|
$/lb |
$000s |
|
$/lb |
$000s |
|
$/lb |
By-product credits2: |
|
|
|
|
|
|
Gold3 |
8,835 |
|
0.21 |
4,155 |
|
0.11 |
2,129 |
|
0.08 |
Silver3 |
7,466 |
|
0.18 |
9,337 |
|
0.24 |
6,827 |
|
0.27 |
Molybdenum |
10,836 |
|
0.26 |
9,372 |
|
0.24 |
1,619 |
|
0.06 |
Total by-product credits |
27,137 |
|
0.65 |
22,864 |
|
0.58 |
10,575 |
|
0.42 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash cost, net of by-product credits |
77,571 |
|
|
71,717 |
|
|
33,198 |
|
|
By-product credits |
27,137 |
|
|
22,864 |
|
|
10,575 |
|
|
Treatment and refining charges |
(9,824 |
) |
|
(6,614 |
) |
|
(5,165 |
) |
|
Inventory adjustments |
(723 |
) |
|
(723 |
) |
|
(8,155 |
) |
|
Share-based compensation expenses |
52 |
|
|
19 |
|
|
49 |
|
|
Change in product inventory |
4,465 |
|
|
(10,575 |
) |
|
(1,916 |
) |
|
Royalties |
578 |
|
|
1,165 |
|
|
578 |
|
|
Overhead costs related to suspension of activities (cash) |
— |
|
|
— |
|
|
12,358 |
|
|
Depreciation and amortization4 |
52,710 |
|
|
40,435 |
|
|
33,152 |
|
|
Cost of sales5 |
151,966 |
|
|
118,288 |
|
|
74,674 |
|
|
1 Per pound of copper produced. 2 By-product
credits are computed as revenue per financial statements,
amortization of deferred revenue and pricing and volume
adjustments. 3 Gold and silver by-product credits do not include
variable consideration adjustments with respect to stream
arrangements. 4 Depreciation is based on concentrate sold. 5 As per
IFRS financial statements.
Manitoba |
Three Months Ended |
(in thousands) |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Net pounds of copper
produced1 |
9,736 |
14,828 |
14,379 |
1 Contained copper in concentrate.
Manitoba |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Cash cost per pound of copper produced |
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
Mining |
54,714 |
|
5.62 |
|
54,420 |
|
3.67 |
|
44,820 |
|
3.12 |
|
Milling |
13,655 |
|
1.40 |
|
12,662 |
|
0.85 |
|
11,466 |
|
0.80 |
|
Refining (Zinc) |
17,908 |
|
1.84 |
|
19,607 |
|
1.32 |
|
16,617 |
|
1.16 |
|
G&A |
14,749 |
|
1.51 |
|
15,787 |
|
1.06 |
|
11,042 |
|
0.77 |
|
Onsite costs |
101,026 |
|
10.38 |
|
102,476 |
|
6.91 |
|
83,945 |
|
5.85 |
|
Treatment & refining |
5,419 |
|
0.56 |
|
5,322 |
|
0.36 |
|
6,299 |
|
0.44 |
|
Freight & other |
7,746 |
|
0.80 |
|
7,487 |
|
0.50 |
|
7,357 |
|
0.51 |
|
Cash cost, before by-product credits |
114,191 |
|
11.73 |
|
115,285 |
|
7.77 |
|
97,601 |
|
6.80 |
|
By-product credits |
(148,333 |
) |
(15.24 |
) |
(130,651 |
) |
(8.81 |
) |
(119,364 |
) |
(8.31 |
) |
Cash cost, net of by-product credits |
(34,142 |
) |
(3.51 |
) |
(15,366 |
) |
(1.04 |
) |
(21,763 |
) |
(1.51 |
) |
Manitoba |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Supplementary cash cost information |
$000s |
|
$/lb |
$000s |
|
$/lb |
$000s |
|
$/lb |
By-product credits2: |
|
|
|
|
|
|
Zinc |
77,707 |
|
7.98 |
82,315 |
|
5.55 |
60,094 |
|
4.18 |
Gold3 |
60,045 |
|
6.17 |
40,979 |
|
2.76 |
52,034 |
|
3.62 |
Silver3 |
7,977 |
|
0.82 |
5,798 |
|
0.39 |
6,281 |
|
0.44 |
Other |
2,604 |
|
0.27 |
1,559 |
|
0.11 |
955 |
|
0.07 |
Total by-product credits |
148,333 |
|
15.24 |
130,651 |
|
8.81 |
119,364 |
|
8.31 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash cost, net of by-product credits |
(34,142 |
) |
|
(15,366 |
) |
|
(21,763 |
) |
|
By-product credits |
148,333 |
|
|
130,651 |
|
|
119,364 |
|
|
Treatment and refining charges |
(5,419 |
) |
|
(5,322 |
) |
|
(6,299 |
) |
|
Share-based compensation expenses |
222 |
|
|
165 |
|
|
235 |
|
|
Change in product inventory |
10,795 |
|
|
(12,289 |
) |
|
5,916 |
|
|
Royalties |
3,710 |
|
|
2,738 |
|
|
1,785 |
|
|
Depreciation and amortization4 |
46,595 |
|
|
42,247 |
|
|
47,655 |
|
|
Cost of sales5 |
170,094 |
|
|
142,824 |
|
|
146,893 |
|
|
1 Per pound of copper produced. 2 By-product
credits are computed as revenue per financial statements,
amortization of deferred revenue and pricing and volume
adjustments. 3 Gold and silver by-product credits do not include
variable consideration adjustments with respect to stream
arrangements. 4 Depreciation is based on concentrate sold. 5 As per
IFRS financial statements.
Sustaining and All-in Sustaining Cash Cost
Reconciliation
Consolidated |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
All-in sustaining cash cost per pound of copper
produced |
$000s |
|
$/lb |
$000s |
|
$/lb |
$000s |
|
$/lb |
Cash cost, net of by-product credits |
43,429 |
|
0.84 |
56,351 |
|
1.04 |
11,435 |
|
0.29 |
Cash sustaining capital expenditures |
68,803 |
|
1.33 |
56,456 |
|
1.04 |
49,467 |
|
1.24 |
Royalties |
4,288 |
|
0.08 |
3,903 |
|
0.07 |
2,363 |
|
0.06 |
Sustaining cash cost, net of by-product
credits |
116,520 |
|
2.25 |
116,710 |
|
2.16 |
63,265 |
|
1.59 |
Corporate selling and administrative expenses & regional
costs |
10,995 |
|
0.22 |
10,765 |
|
0.20 |
11,608 |
|
0.29 |
Accretion and amortization of decommissioning and community
agreements1 |
705 |
|
0.01 |
579 |
|
0.01 |
1,049 |
|
0.03 |
All-in sustaining cash cost, net of by-product
credits |
128,220 |
|
2.48 |
128,054 |
|
2.37 |
75,922 |
|
1.91 |
Reconciliation to property, plant and equipment additions: |
|
|
|
|
|
|
Property, plant and equipment additions |
96,090 |
|
|
82,378 |
|
|
31,719 |
|
|
Capitalized stripping net additions |
22,506 |
|
|
18,625 |
|
|
18,969 |
|
|
Decommissioning and restoration obligation net additions |
11,039 |
|
|
(64,504 |
) |
|
16,690 |
|
|
Total accrued capital additions |
129,635 |
|
|
36,499 |
|
|
67,378 |
|
|
Less other non-sustaining capital costs2 |
63,694 |
|
|
2,655 |
|
|
33,527 |
|
|
Total sustaining capital costs |
65,941 |
|
|
33,844 |
|
|
33,851 |
|
|
Right of use leased assets |
(9,101 |
) |
|
(1,321 |
) |
|
(4,716 |
) |
|
Capitalized lease cash payments - operating sites |
8,331 |
|
|
9,188 |
|
|
7,609 |
|
|
Community agreement cash payments |
108 |
|
|
235 |
|
|
546 |
|
|
Accretion and amortization of decommissioning and restoration
obligations |
3,524 |
|
|
14,510 |
|
|
12,177 |
|
|
Cash sustaining capital expenditures |
68,803 |
|
|
56,456 |
|
|
49,467 |
|
|
Peru |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash cost, net of by-product credits |
77,571 |
1.85 |
71,717 |
1.82 |
33,198 |
1.31 |
Cash sustaining capital expenditures |
34,898 |
0.83 |
19,802 |
0.50 |
12,855 |
0.51 |
Royalties |
578 |
0.01 |
1,165 |
0.03 |
578 |
0.02 |
Sustaining cash cost per pound of copper
produced |
113,047 |
2.69 |
92,684 |
2.36 |
46,631 |
1.84 |
Manitoba |
Three Months Ended |
|
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Sustaining cash cost per pound of copper
produced |
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
$000s |
|
$/lb |
|
Cash cost, net of by-product credits |
(34,142 |
) |
(3.51 |
) |
(15,366 |
) |
(1.04 |
) |
(21,763 |
) |
(1.51 |
) |
Cash sustaining capital expenditures |
33,905 |
|
3.49 |
|
36,654 |
|
2.47 |
|
36,612 |
|
2.55 |
|
Royalties |
3,710 |
|
0.38 |
|
2,738 |
|
0.18 |
|
1,785 |
|
0.12 |
|
Sustaining cash cost per pound of copper
produced |
3,473 |
|
0.36 |
|
24,026 |
|
1.62 |
|
16,634 |
|
1.16 |
|
Combined Unit Cost Reconciliation
Peru |
Three Months Ended |
(in thousands except ore tonnes milled and unit cost per
tonne) |
|
|
|
Combined unit cost per tonne processed |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Mining |
26,133 |
|
21,539 |
|
7,595 |
|
Milling |
40,286 |
|
43,320 |
|
18,703 |
|
G&A 1 |
16,910 |
|
14,420 |
|
7,493 |
|
Other G&A 2 |
52 |
|
19 |
|
49 |
|
Unit cost |
83,381 |
|
79,298 |
|
33,840 |
|
Tonnes ore milled |
7,413 |
|
6,363 |
|
4,355 |
|
Combined unit cost per tonne |
11.25 |
|
12.46 |
|
7.77 |
|
Reconciliation to IFRS: |
|
|
|
Unit cost |
83,381 |
|
79,298 |
|
33,840 |
|
Freight & other |
11,555 |
|
8,688 |
|
4,817 |
|
Other G&A |
(52 |
) |
(19 |
) |
(49 |
) |
Share-based compensation expenses |
52 |
|
19 |
|
49 |
|
Inventory adjustments |
(723 |
) |
(723 |
) |
(8,155 |
) |
Change in product inventory |
4,465 |
|
(10,575 |
) |
(1,916 |
) |
Royalties |
578 |
|
1,165 |
|
578 |
|
Overhead costs related to suspension of activities (cash) |
— |
|
— |
|
12,358 |
|
Depreciation and amortization |
52,710 |
|
40,435 |
|
33,152 |
|
Cost of sales3 |
151,966 |
|
118,288 |
|
74,674 |
|
1 G&A as per cash cost reconciliation above.
2 Other G&A primarily includes profit sharing costs. 3 As per
IFRS financial statements.
Manitoba |
Three Months Ended |
(in thousands except tonnes ore milled and unit cost per
tonne) |
|
|
|
Combined unit cost per tonne processed |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Mining |
54,714 |
|
54,420 |
|
44,820 |
|
Milling |
13,655 |
|
12,662 |
|
11,466 |
|
G&A 1 |
14,749 |
|
15,787 |
|
11,042 |
|
Less: G&A allocated to zinc metal production |
(3,724 |
) |
(3,818 |
) |
(3,264 |
) |
Less: Other G&A related to profit sharing costs |
(1,274 |
) |
(2,179 |
) |
— |
|
Unit cost |
78,120 |
|
76,872 |
|
64,064 |
|
USD/CAD implicit exchange rate |
1.23 |
|
1.27 |
|
1.39 |
|
Unit cost - C$ |
95,927 |
|
97,341 |
|
88,753 |
|
Tonnes ore milled |
646,987 |
|
644,730 |
|
659,507 |
|
Combined unit cost per tonne - C$ |
148 |
|
151 |
|
135 |
|
Reconciliation to IFRS: |
|
|
|
Unit cost |
78,120 |
|
76,872 |
|
64,064 |
|
Freight & other |
7,746 |
|
7,487 |
|
7,357 |
|
Refined (zinc) |
17,908 |
|
19,607 |
|
16,617 |
|
G&A allocated to zinc metal production |
3,724 |
|
3,818 |
|
3,264 |
|
Other G&A related to profit sharing |
1,274 |
|
2,179 |
|
— |
|
Share-based compensation expenses |
222 |
|
165 |
|
235 |
|
Change in product inventory |
10,795 |
|
(12,289 |
) |
5,916 |
|
Royalties |
3,710 |
|
2,738 |
|
1,785 |
|
Depreciation and amortization |
46,595 |
|
42,247 |
|
47,655 |
|
Cost of sales2 |
170,094 |
|
142,824 |
|
146,893 |
|
1 G&A as per cash cost reconciliation above.
2 As per IFRS financial statements.
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 expressions). All of the forward-looking information in
this news release is qualified by this cautionary note.
Forward-looking information includes, but is not
limited to, production, cost and capital and exploration
expenditure guidance and potential revisions to such guidance,
anticipated production at Hudbay’s mines and processing facilities,
expectations regarding the impact of the COVID-19 pandemic on
operations, financial condition and prospects, and the company’s
ability to effectively engage with local communities in Peru and
other stakeholders, the anticipated timing, cost and benefits of
developing the Rosemont project and the outcome of litigation
challenging Rosemont's permits, expectations regarding the Copper
World exploration program, expectations regarding the Lalor gold
strategy, including the refurbishment, commissioning and ramp-up of
the New Britannia mill and the expectations regarding the mine plan
for the 1901 deposit, increasing the mining rate at Lalor and
optimizing the Stall and New Britannia mills, the possibility of
converting inferred mineral resource estimates to higher confidence
categories, the potential and Hudbay’s anticipated plans for
advancing the mining of its properties surrounding Constancia and
elsewhere in Peru, 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, 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 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
has identified and applied in drawing conclusions or making
forecasts or projections are set out in the forward-looking
information include, but are not limited to:
- Hudbay’s ability to continue to operate safely and at full
capacity during the COVID-19 pandemic;
- the availability, global supply and effectiveness of COVID-19
vaccines, the effective distribution of such vaccines in the
countries in which the company operates, the lessening of
restrictions related to COVID-19, and the anticipated rate and
timing for each of the foregoing;
- the ability to achieve production and unit cost guidance;
- no significant interruptions to operations or significant
delays to the company’s development projects in Manitoba and Peru
due to the COVID-19 pandemic;
- the availability of spending reductions and liquidity
options;
- the successful completion of the New Britannia project on
budget and on schedule;
- the successful outcome of the Rosemont litigation;
- the successful renegotiation of collective agreements with the
labour unions that represent certain of Hudbay’s employees in
Manitoba;
- the success of mining, processing, exploration and development
activities;
- the scheduled maintenance and availability of Hudbay’s
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 business and growth strategies, including the
success of the company’s 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 Hudbay’s ability to develop its
projects;
- the timing and receipt of various regulatory and governmental
approvals;
- the availability of personnel for exploration, development and
operational projects and ongoing employee relations;
- maintaining good relations with the labour unions that
represent certain of Hudbay’s employees in Manitoba and Peru;
- maintaining good relations with the communities in which Hudbay
operates, including the neighbouring Indigenous communities and
local governments;
- no significant unanticipated challenges with stakeholders at
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 Indigenous peoples or
challenges to the validity of Hudbay’s unpatented mining
claims;
- 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, changes in taxation policies 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 the 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 associated with the
COVID-19 pandemic and its effect on the company’s operations,
financial condition, projects and prospects, the possibility of a
global recession arising from the COVID-19 pandemic and attempts to
control it, the change in government in Peru, future
uncertainty with respect to the Peruvian mining tax regime, 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 Hudbay’s projects, risks
related to the U.S. district court's recent decisions to set aside
the U.S. Forest Service's FROD and the Biological Opinion for
Rosemont and related appeals and other legal challenges, risks
related to the new Lalor mine plan, including the schedule for the
refurbishment, commissioning and ramp-up of the New Britannia mill
and the ability to convert inferred mineral resource estimates to
higher confidence categories, dependence on key personnel and
employee and union relations, risks related to political or social
instability, unrest or change, risks in respect of Indigenous and
community relations, rights and title claims, operational risks and
hazards, including the cost of maintaining and upgrading the
Company's tailings management facilities and any 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 Hudbay’s reserves, volatile
financial markets that may affect its ability to obtain additional
financing on acceptable terms, the failure to obtain required
approvals or clearances from government authorities 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 “Financial Risk Management”
in the company’s Management’s Discussion and Analysis dated August
9, 2021 and under the heading “Risk 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 implied 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 explain 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 a diversified mining
company primarily producing copper concentrate (containing copper,
gold and silver) and zinc metal. Directly and through its
subsidiaries, Hudbay owns three polymetallic mines, four ore
concentrators and a zinc production facility in northern Manitoba
and Saskatchewan (Canada) and Cusco (Peru), and copper projects in
Arizona and Nevada (United States). The company’s growth strategy
is focused on the exploration, development, operation and
optimization of properties it already controls, as well as other
mineral assets it may acquire that fit its strategic criteria.
Hudbay’s vision is to be a responsible, top-tier operator of
long-life, low-cost mines in the Americas. Hudbay’s mission is to
create sustainable value through the acquisition, development and
operation of high-quality, long-life deposits with exploration
potential in jurisdictions that support responsible mining, and to
see the regions and communities in which the company operates
benefit from its presence. The company is governed by the Canada
Business Corporations Act and its shares are listed under the
symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange
and Bolsa de Valores de Lima. Further information about Hudbay can
be found on www.hudbay.com.
For further information, please
contact:
Candace Brûlé Director, Investor Relations (416)
814-4387
______________________1 Adjusted net loss; adjusted net loss per
share; adjusted EBITDA; cash cost, sustaining cash cost and all-in
sustaining cash cost per pound of copper produced and per ounce of
gold produced, net of by-product credits; unit operating costs; and
net debt 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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