Hudbay Minerals Inc. (“Hudbay” or the “company”)
(TSX, NYSE:HBM) today released its third quarter
2021 financial results. All amounts are in U.S. dollars, unless
otherwise noted.
Third Quarter Operating and Financial
Results
- Generated $359.0 million in
revenue, $103.5 million of operating cash flow before change in
non-cash working capital and $119.3 million of adjusted EBITDAi in
the third quarter of 2021 from higher realized base metals prices
and higher gold sales volumes, partially offset by lower base
metals sales volumes.
- Consolidated copper production in
the third quarter was 23,245 tonnes; quarterly consolidated gold
production increased by 35% to 53,872 ounces in the third quarter,
compared to the second quarter in 2021, a record for Hudbay.
- Consolidated cash cost and
sustaining cash cost per pound of copper produced, net of
by-product creditsi, were $0.62 and $1.97, respectively, an
improvement of 26% and 12% compared to the second quarter of
2021.
- Third quarter Peru production was
boosted by significantly higher gold grades from Pampacancha and
record gold recoveries, leading to record quarterly gold revenue.
Pampacancha production continues to ramp-up, achieving a 109%
increase in ore production quarter over quarter.
- Third quarter Manitoba production
benefited from higher throughput and higher gold grades at Lalor
but was negatively impacted by lower zinc grades and zinc
recoveries, limiting overall zinc concentrate feed to the zinc
plant. Manitoba results included initial gold production from New
Britannia's gold circuit.
- On track to meet annual production
guidance for copper, gold, zinc and silver in concentrate and doré,
consolidated sustaining capital expenditures, and Manitoba unit
operating cost in 2021. After adjusting for unbudgeted
COVID-related costs in Peru, full year unit operating costs for
Peru are expected to be around the top end of the 2021 guidance
range.
- Third quarter net loss and loss per
share were $170.4 million and $0.65, respectively. After
normalizing for an impairment charge related to higher estimated
closure costs associated with the company’s updated Flin Flon
closure plan and the Flin Flon restructuring charges, amongst other
items, third quarter adjusted net earningsi per share were
$0.15.
- Cash and cash equivalents increased
during the third quarter to $297.5 million as at September 30,
2021, mainly as a result of $139.8 million of cash generated from
operations, partially offset by $89.1 million of capital
investments primarily for the construction of the New Britannia
project and sustaining capital expenditures and $33.6 million
of interest paid on the company’s senior unsecured notes.
Executing on Growth
Initiatives
- New Britannia has achieved project
completion as construction activities at the new copper flotation
facility concluded in October. Refurbishment and commissioning
activities at the gold mill were completed in July 2021, and the
mill achieved first gold production on August 11, 2021.
Commissioning of the copper circuit was completed and first
production of concentrate was achieved in October, ahead of the
original schedule, while ramp-up activities at the flotation plant
continue. Annual gold production from Lalor and the Snow Lake
operations is on track 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 operation starting in 2022.
- Mining activities at the
Pampacancha satellite pit continue to advance as planned with
grades and tonnes reconciling well against the mine plan, achieving
the expected increase in gold grades in 2021 and on track for
achieving higher copper grades in 2022, in line with recent company
guidance.
- Recent Copper World drilling has
identified three new deposits for a total of seven distinct
deposits with a combined strike length of over seven kilometres.
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.
- Scoping study planned for 2022 to
examine the opportunity to reprocess tailings in Flin Flon after
the closure of the 777 mine, which could further increase metal
production, defer closure costs and reduce the environmental
footprint of the tailings facility.
- Amended and restated Hudbay’s
senior secured revolving credit facilities to increase available
borrowings to $450 million and enhance the company’s financial
flexibility, while extending the maturity to 2025.
“Our third quarter performance demonstrates our
continued focus on execution and delivery in 2021 as we enjoyed the
first full quarter of Pampacancha production and we started to see
the benefits of higher gold from the New Britannia mill,” said
Peter Kukielski, President and Chief Executive Officer. “We also
recently commissioned the new copper flotation circuit at New
Britannia, ahead of our expected timelines. With the completion of
the Pampacancha and New Britannia growth projects, we are on the
cusp of achieving significantly increased cash flows from these
high-return investments for many years to come. We are also very
pleased to have continued exploration success at our Copper World
project and look forward to advancing the opportunity for a private
land operation in Arizona to unlock further value for our
stakeholders.”
Summary of Third Quarter
Results
Cash generated from operating activities in the
third quarter of 2021 increased to $139.8 million, compared to
$96.4 million in the second quarter and $51.8 million in the first
quarter of 2021. Operating cash flow before change in non-cash
working capital was $103.5 million during the third quarter of
2021, reflecting a decrease of $29.3 million compared to the second
quarter of 2021, primarily as a result of lower base metals sales
volumes and lower realized copper and precious metals prices,
partially offset by higher precious metals sales volumes.
Consolidated copper production in the third
quarter of 2021 was 23,245 tonnes, generally in-line with the
second quarter of 2021 as slightly lower copper production in Peru
was offset by higher copper production in Manitoba. Consolidated
gold production in the third quarter of 2021 was 53,872 ounces, a
quarterly record for Hudbay and a 35% increase from the second
quarter of 2021, due to higher gold grades from Pampacancha and
record gold recoveries in Peru, along with significantly higher
gold grades at Lalor. Zinc production in the quarter was 20,844
tonnes, a slight decrease from the second quarter as production
volumes were lower in Flin Flon. Consolidated silver production
increased to 763,168 ounces, an 11% increase versus the second
quarter of 2021, primarily due to higher silver grades milled in
Peru and Snow Lake.
In the third quarter of 2021, consolidated cash
cost per pound of copper produced, net of by-product creditsi, was
$0.62, compared to $0.84 in the second quarter of 2021. This 26%
decrease was mainly a result of lower operating costs. Sustaining
cash cost per pound of copper produced, net of by-product creditsi,
decreased to $1.97 in the third quarter of 2021, from $2.25 in the
second quarter, primarily due to the same factors affecting cash
cost as well as slightly lower sustaining capital expenditures.
Consolidated cash cost and sustaining cash cost per pound of copper
produced, net of by-product credits, are expected to remain within
the guidance ranges for 2021.
Net loss and loss per share in the third quarter
of 2021 were $170.4 million and $0.65, respectively, compared to a
net loss and loss per share of $3.4 million and $0.01,
respectively, in the second quarter of 2021. Third quarter results
were negatively impacted by an updated closure plan reflecting
higher estimates for closure activities in Flin Flon, primarily
related to water treatment costs. The higher closure cost estimate
has resulted in an increase to the company’s environmental
obligation and a corresponding increase to Flin Flon’s property
plant and equipment. However, as the closure of Flin Flon is
expected to commence within 12 months, an impairment charge was
made resulting in a loss of $147.3 million. The quarterly financial
results were also negatively impacted by Flin Flon restructuring
charges comprising an inventory supplies write down of $5.4 million
and a severance accrual of $3.6 million for unionized employees, as
well as an increase in past service pension cost provision of $4.2
million related to pensions for Manitoba unionized employees.
Adjusted net earningsi and adjusted net earnings
per sharei in the third quarter of 2021 were $38.2 million and
$0.15 per share after normalizing for an impairment due to the
updated Flin Flon closure plan and the Flin Flon restructuring
charges, among other items. This compares to adjusted net earnings
and adjusted net earnings per share of $5.4 million and $0.02 per
share in the second quarter of 2021. Third quarter adjusted EBITDAi
was $119.3 million, compared to $143.2 million in the second
quarter of 2021, primarily due to lower base metal sales volumes
and lower realized copper and precious metals prices, partially
offset by higher precious metals sales volumes.
As at September 30, 2021, Hudbay’s liquidity
includes $297.5 million in cash and cash equivalents as well as
undrawn availability of $297.3 million under its credit facilities.
The company’s liquidity position was further enhanced in October
through the successful renegotiation of the credit facilities to
increase available borrowings to $450 million, while extending the
maturity to 2025.
Financial Condition ($000s) |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
Cash and cash equivalents |
|
297,451 |
294,287 |
439,135 |
Total long-term debt |
|
1,182,612 |
1,181,195 |
1,135,675 |
Net debt1 |
|
885,161 |
886,908 |
696,540 |
Working capital |
|
159,917 |
219,799 |
306,888 |
Total assets |
|
4,504,661 |
4,587,827 |
4,666,645 |
Equity |
|
1,490,180 |
1,658,924 |
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.
Financial Performance |
|
Three Months Ended |
|
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Revenue |
$000s |
358,961 |
404,242 |
316,108 |
Cost of sales |
$000s |
444,379 |
322,060 |
276,830 |
(Loss) earnings before tax |
$000s |
(147,830) |
14,819 |
(23,944) |
(Loss) earnings |
$000s |
(170,411) |
(3,395) |
(23,955) |
Basic and diluted (loss) earnings per share |
$/share |
(0.65) |
(0.01) |
(0.09) |
Adjusted earnings (loss) per share1 |
$/share |
0.15 |
0.02 |
(0.10) |
Operating cash flow before change in non-cash working capital |
$ millions |
103.5 |
132.8 |
84.4 |
Adjusted EBITDA1 |
$ millions |
119.3 |
143.2 |
96.1 |
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 |
|
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Contained metal in concentrate produced1 |
|
|
|
|
Copper |
tonnes |
23,245 |
23,474 |
25,395 |
Gold |
ounces |
53,872 |
39,848 |
29,277 |
Silver |
ounces |
763,168 |
685,916 |
671,685 |
Zinc |
tonnes |
20,844 |
21,538 |
30,570 |
Molybdenum |
tonnes |
282 |
295 |
392 |
Precious metal in doré produced |
|
|
|
|
Gold |
ounces |
404 |
— |
— |
Silver |
ounces |
10 |
— |
— |
Payable metal sold |
|
|
|
|
Copper |
tonnes |
21,136 |
25,176 |
25,903 |
Gold2 |
ounces |
47,844 |
38,205 |
30,605 |
Silver2 |
ounces |
701,601 |
577,507 |
705,495 |
Zinc3 |
tonnes |
21,619 |
25,361 |
26,520 |
Molybdenum |
tonnes |
304 |
265 |
313 |
Consolidated cash cost per pound of copper
produced4 |
|
|
|
|
Cash cost |
$/lb |
0.62 |
0.84 |
0.65 |
Peru |
$/lb |
1.26 |
1.85 |
1.54 |
Manitoba |
$/lb |
(1.64) |
(3.51) |
(3.41) |
Sustaining cash cost |
$/lb |
1.97 |
2.25 |
2.02 |
Peru |
$/lb |
2.31 |
2.69 |
2.29 |
Manitoba |
$/lb |
0.75 |
0.36 |
0.83 |
All-in sustaining cash cost |
$/lb |
2.18 |
2.48 |
2.25 |
1 Metal reported in concentrate is prior to deductions
associated with smelter contract terms.2 Includes total payable
gold and silver in concentrate and in doré sold.3 Includes refined
zinc metal sold and payable zinc in concentrate sold.4 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 |
|
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Constancia ore mined1 |
tonnes |
6,208,019 |
8,016,373 |
8,455,668 |
Copper |
% |
0.30 |
0.30 |
0.31 |
Gold |
g/tonne |
0.04 |
0.04 |
0.03 |
Silver |
g/tonne |
2.76 |
3.02 |
2.55 |
Molybdenum |
|
0.01 |
0.01 |
0.02 |
Pampacancha ore mined |
tonnes |
2,050,813 |
982,992 |
— |
Copper |
% |
0.27 |
0.26 |
— |
Gold |
g/tonne |
0.27 |
0.27 |
— |
Silver |
g/tonne |
3.58 |
4.43 |
— |
Molybdenum |
|
0.01 |
0.01 |
— |
Ore milled |
tonnes |
6,985,035 |
7,413,043 |
7,480,655 |
Copper |
% |
0.30 |
0.31 |
0.33 |
Gold |
g/tonne |
0.11 |
0.07 |
0.03 |
Silver |
g/tonne |
3.93 |
2.88 |
2.68 |
Molybdenum |
|
0.01 |
0.01 |
0.02 |
Copper recovery |
% |
84.9 |
83.3 |
83.3 |
Gold recovery |
% |
71.9 |
62.2 |
51.6 |
Silver recovery |
% |
59.1 |
68.2 |
66.7 |
Molybdenum recovery |
|
33.5 |
33.3 |
30.4 |
Contained metal in concentrate |
|
|
|
Copper |
tonnes |
18,072 |
19,058 |
20,803 |
Gold |
ounces |
17,531 |
10,220 |
3,333 |
Silver |
ounces |
521,036 |
468,057 |
430,208 |
Molybdenum |
tonnes |
282 |
295 |
392 |
Payable metal sold |
|
|
|
Copper |
tonnes |
16,065 |
19,946 |
21,654 |
Gold |
ounces |
16,902 |
5,638 |
3,753 |
Silver |
ounces |
457,263 |
315,064 |
433,595 |
Molybdenum |
tonnes |
304 |
265 |
313 |
Combined unit operating cost2,3,4 |
$/tonne |
11.62 |
11.25 |
9.85 |
Cash cost4 |
$/lb |
1.26 |
1.85 |
1.54 |
Sustaining cash cost4 |
$/lb |
2.31 |
2.69 |
2.29 |
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 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. 4
Includes approximately $4.8 million, or $0.69 per tonne, of
COVID-related costs during the three months ended September 30,
2021 and $6.3 million, or $0.85 per tonne, during the three months
ended June 30, 2021.
While Peru has experienced notable improvements
in COVID-19 statistics throughout 2021, Hudbay continues to
maintain stringent COVID-19 measures and controls to ensure the
safety of its workforce, partners and the communities in which the
company operates. This has allowed Constancia to continue to
operate safely although it has resulted in elevated unit operating
costs due to the ongoing COVID-related protocols.
During the third quarter 2021, the Constancia
operations produced 18,072 tonnes of copper, 17,531 ounces of gold,
521,036 ounces of silver and 282 tonnes of molybdenum. While copper
production was 5% lower than the second quarter due to a planned
semi-annual mill maintenance shutdown in July, gold and silver
production increased by 72% and 11%, respectively, due to
significantly higher gold and silver head grades from Pampacancha
and significantly higher gold recoveries. This was a record quarter
for gold production, grades and recoveries in Peru. 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 other metals in Peru to be in
line with the 2021 full year guidance.
Total ore mined during the third quarter of 2021
decreased by 8% from the second quarter of 2021 as mining levels
were optimized for mill throughput. Ramp-up of mining activity at
Pampacancha has increased steadily since first production in April
2021. Total Pampacancha ore mined during the third quarter
increased by 109% to 2.1 million tonnes compared to the second
quarter of 2021. Tonnes of ore milled during the third quarter of
2021 were 6% lower than the second quarter of 2021 due to the
scheduled mill maintenance shutdown. Milled grades for copper were
slightly lower than the second quarter but were in line with the
mine plan. Milled grades for gold and silver were 57% and 36%
higher, respectively, than the second quarter due to significantly
higher precious metal head grades from Pampacancha.
Peru achieved record gold recoveries in the
third quarter of 2021, significantly above the second quarter of
2021, mainly due to higher grades from Pampacancha. Meanwhile,
copper recoveries increased due to lower levels of contaminants and
silver recoveries decreased as a result of lower-than-expected
recoverable silver values in the earlier, more oxidized ores from
Pampacancha. Recent metallurgical test work indicates that
Pampacancha silver recoveries are expected to increase to targeted
levels in 2022.
Combined mine, mill and G&A unit operating
costs in the third quarter of 2021 were $11.62 per tonne, compared
to $11.25 in the second quarter of 2021, primarily due to higher
milling costs and fewer tonnes milled due to the scheduled mill
maintenance program during the quarter. Costs have been generally
higher in 2021 as a result of higher ore hardness, higher steel
prices affecting grinding media costs, higher fuel prices impacting
hauling costs and COVID-19 expenditures. COVID-related costs in
Peru were $4.8 million in the third quarter and are expected to
continue at a similar run-rate into the fourth quarter of 2021.
Unit operating costs in the third quarter were $10.93 per tonne
excluding these COVID-related costs. Hudbay expects Peru unit
operating costs to be around the top end of 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 third quarter of 2021 was $1.26,
a 32% improvement over the second quarter. The significant
reduction in cash cost was due to higher by-product credits and
lower operating costs, partially offset by lower copper production.
Peru’s sustaining cash cost per pound of copper produced, net of
by-product credits, in the third quarter of 2021 decreased to
$2.31, compared to $2.69 in the second quarter of 2021, due to same
factors noted above affecting cash costs, offset by higher
sustaining capital expenditures.
Manitoba Operations Review
Manitoba Operations |
|
Three Months Ended |
|
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Lalor ore mined |
tonnes |
392,380 |
356,951 |
357,213 |
Copper |
% |
0.86 |
0.64 |
0.66 |
Zinc |
% |
3.60 |
3.81 |
5.98 |
Gold |
g/tonne |
3.85 |
3.19 |
2.28 |
Silver |
g/tonne |
22.13 |
22.98 |
21.23 |
777 ore mined |
tonnes |
256,536 |
255,170 |
264,905 |
Copper |
% |
1.06 |
0.82 |
0.98 |
Zinc |
% |
3.88 |
3.57 |
3.95 |
Gold |
g/tonne |
1.96 |
1.97 |
2.01 |
Silver |
g/tonne |
22.99 |
23.35 |
24.25 |
Stall Concentrator & New Britannia Mill: |
|
|
|
Ore milled |
tonnes |
408,201 |
317,484 |
335,739 |
Copper |
% |
0.82 |
0.68 |
0.68 |
Zinc |
% |
3.58 |
4.06 |
6.11 |
Gold |
g/tonne |
3.84 |
3.19 |
2.35 |
Silver |
g/tonne |
23.32 |
22.02 |
22.08 |
Copper recovery |
% |
84.3 |
88.8 |
84.0 |
Zinc recovery |
% |
88.2 |
88.1 |
92.7 |
Gold recovery |
% |
53.4 |
55.5 |
57.4 |
Silver recovery |
% |
52.7 |
55.1 |
57.5 |
Flin Flon Concentrator: |
|
|
|
Ore milled |
tonnes |
258,062 |
329,503 |
322,156 |
Copper |
% |
1.06 |
0.89 |
0.99 |
Zinc |
% |
3.86 |
3.65 |
4.07 |
Gold |
g/tonne |
1.96 |
2.06 |
1.99 |
Silver |
g/tonne |
22.93 |
23.65 |
24.01 |
Copper recovery |
% |
85.2 |
84.8 |
83.9 |
Zinc recovery |
% |
82.2 |
84.8 |
87.9 |
Gold recovery |
% |
58.1 |
52.9 |
55.3 |
Silver recovery |
% |
42.4 |
37.5 |
42.0 |
Total
contained metal in concentrate and doré |
|
|
|
Copper |
tonnes |
5,173 |
4,416 |
4,592 |
Zinc |
tonnes |
20,844 |
21,538 |
30,570 |
Gold |
ounces |
36,745 |
29,628 |
25,944 |
Silver |
ounces |
242,141 |
217,859 |
241,477 |
Total payable metal sold |
|
|
|
Copper |
tonnes |
5,071 |
5,230 |
4,249 |
Zinc1 |
tonnes |
21,619 |
25,361 |
26,520 |
Gold2 |
ounces |
30,941 |
32,567 |
26,852 |
Silver2 |
ounces |
244,338 |
262,443 |
271,900 |
Combined unit operating cost3,4 |
C$/tonne |
147 |
148 |
126 |
Cash cost4 |
$/lb |
(1.64) |
(3.51) |
(3.41) |
Sustaining cash cost4 |
$/lb |
0.75 |
0.36 |
0.83 |
1 Includes refined zinc metal sold and payable
zinc in concentrate sold.2 Includes total payable precious metals
in concentrate and in doré 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.
As the Manitoba business started to see the
benefits from the commencement of gold production at the New
Britannia mill, production of copper, gold and silver increased
during the third quarter, compared to the second quarter of 2021,
while production of zinc decreased. Production during the quarter
included 5,173 tonnes of copper, 36,745 ounces of gold, 242,141
ounces of silver and 20,844 tonnes of zinc. Hudbay expects the
production of all metals contained in concentrate and doré in
Manitoba to be in line with the 2021 full year guidance.
Mining operations at Lalor have started to
consistently produce and separate the gold and copper-gold ores as
feed for the New Britannia mill. At the end of the third quarter of
2021, approximately 35,000 tonnes of gold ore is stockpiled as feed
for New Britannia, a decrease of approximately 12,000 tonnes from
the end of the second quarter of 2021. The 777 mine is now within
nine months of closure and the focus continues to be on mining out
the remaining reserves by completing the necessary ground
rehabilitation in order to access old workings and remnant
stopes.
Ore mined at the Manitoba operations during the
third quarter of 2021 was higher than the second quarter of 2021
due to higher production rates at Lalor. Copper and gold grades
were higher compared to the previous quarter, mainly due to
increased mining of gold and copper-gold stopes at Lalor, in line
with the mine plan. Mined zinc grades were lower than the previous
quarter as mining of the gold zones at Lalor were prioritized
during the quarter.
During the third quarter of 2021, New Britannia
processed 41,827 tonnes of high gold content ore and produced 404
ounces of gold in doré after pouring its first doré bar on August
11. The gold and silver recoveries are expected to increase in the
fourth quarter after ramp-up of the mill during the third quarter.
Construction of the new copper flotation circuit was completed in
October 2021, followed by a brief commissioning period completed
ahead of schedule. Ramp-up activities at the copper circuit are
underway and are on track for completion in the fourth quarter of
2021.
Ore processed at the Stall concentrator and New
Britannia mill during the third quarter was 29% higher than the
second quarter. Combined Stall and New Britannia recoveries during
the third quarter of 2021 were higher for zinc and lower for
copper, gold and silver, versus the previous quarter, but were
consistent with expectations as the third quarter was a partial
ramp-up period for the New Britannia mill. Operations at the Flin
Flon concentrator during the third quarter were constrained by ore
feed availability from 777 and, as such, ore processed decreased by
22% compared to the second quarter of 2021. Recoveries of copper,
gold and silver at the Flin Flon concentrator during the second
quarter of 2021 were higher than the previous quarter mainly due to
higher copper head grades from the 777 mine, consistent with the
metallurgical model.
Combined mine, mill and G&A unit operating
costs in the third quarter of 2021 slightly decreased compared to
the second quarter of 2021. Hudbay expects Manitoba unit operating
costs in 2021 to be in line with the annual guidance range.
Manitoba’s cash cost per pound of copper
produced, net of by-product credits, for the third quarter of 2021
was negative $1.64, higher than the second quarter primarily due to
lower by-product credits, partially offset by lower onsite costs.
Manitoba’s sustaining cash cost per pound of copper produced, net
of by-product credits, in the third quarter of 2021 was $0.75
compared to $0.36 in the second quarter, primarily due to the same
reasons listed above, offset by lower comparative sustaining
capital expenditures.
COVID-19 Business Update
On a population adjusted basis, Hudbay continues
to see a steady decline in the number of new cases of COVID-19 in
the regions in which it operates. Despite these encouraging
declines, the company is maintaining stringent COVID-19 measures
and controls to ensure the safety of its workforce, partners and
communities. As such, the company continues to experience an
ongoing financial and, to a lesser extent, operating impact from
COVID-19.
New Britannia First Gold Production
Achieved and Copper Flotation Facility Fully
Commissioned
On August 11, 2021, gold production commenced at
the New Britannia mill after refurbishment, commissioning and
start-up activities were completed earlier in the summer. First
gold production was achieved in line with the timelines assumed in
recent guidance and 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 was completed in October 2021, followed by a brief
commissioning period completed ahead of the project timeline
expectations. The copper facility consists of an innovative and
first-of-its-kind flotation circuit based entirely on Jameson
cells, a modern pneumatic flotation design that offers a compact
layout, low-cost process and flexible flowsheet. First production
of copper concentrate was achieved in October and ramp-up of the
copper circuit is now underway. New Britannia is expected to
achieve its targeted design capacity and commercial production in
the fourth quarter of 2021.
Advancing the Copper World
Discovery
On September 22, 2021, the results from drilling
completed at Copper World between January and June 2021 were
released. The drill program totaled over 91,000 feet and
intersected additional high-grade copper sulphide and oxide
mineralization on the company’s wholly-owned private land in
Arizona. The Copper World project is located within seven
kilometres of the Rosemont copper project and has mineralization
located closer to surface than Rosemont, indicating the possibility
of lower strip ratios at Copper World. Hudbay recently increased
its private land package to approximately 2,400 acres in the west,
which together with patented mining claims, now totals
approximately 4,500 acres to support an operation entirely on
private land.
The 2021 drilling identified three new deposits,
for a total of seven deposits at Copper World, covering a combined
seven kilometres with mineralized occurrences. The three new
deposits are called Bolsa, South Limb and North Limb. The program
also confirmed and increased the confidence in the size and quality
of the existing Copper World, Broad Top Butte, Peach and Elgin
deposits.
There remains the potential for continuity
between the Bolsa discovery and the Rosemont deposit as highlighted
by three new holes drilled on the western edge of Rosemont, which
intersected high-grade copper mineralization similar to the
mineralization intersected at Bolsa. For example, drill hole #177
intersected 833 feet of 0.40% copper, including 121 feet at 1.32%
copper (please refer to the news release dated September 22, 2021
for additional drill hole information). There remains a 1,500-foot
gap in drilling coverage between these three holes and the Bolsa
discovery, and the company is developing plans to test this
unexplored area.
Given the continued positive results from the
exploration program at Copper World, the 2021 drill program was
previously expanded from an original 70,000 feet of drilling to
over 200,000 feet to be completed by the end of the year with four
drill rigs continuing to operate at site. Hudbay is testing the
opportunity to use reverse circulation drilling to fast-track
future infill drilling programs. This drilling is intended to
delineate and upgrade the resource for the seven deposits, while
focusing on bridging the gap between the Bolsa discovery and the
area west of the Rosemont deposit. The drill program will also
continue to explore prospective areas outside of the known
deposits.
Hudbay expects to complete an initial inferred
mineral resource estimate for the seven deposits at Copper World
before the end of 2021. These mineral resource estimates will form
the basis for a preliminary economic assessment (“PEA”) expected to
be released in the first half of 2022. Mineralogical studies and
metallurgical testing programs are underway, and the preliminary
results are expected to be incorporated into the PEA. Hudbay
continues to progress geotechnical and hydrogeological studies over
the Copper World area.
In October, Hudbay received approval from the
Arizona State Mine Inspector for its Mined Land Reclamation Plan
(“MLRP”) for Copper World. The MLRP approval includes the
requirement for reclamation cost bonding prior to initiating work
on the company’s private lands and represents the first step in the
state-level permitting process for a private land operation.
The budget for Copper World in 2021 is expected
to total approximately $34 million, which increased from the
original $10 million budget, to fund the larger drill program and
complete the various technical studies. Hudbay will also continue
to examine future potential synergies with an operation at
Rosemont.
Other Exploration Updates
Peru Regional Exploration
Ongoing evaluation of the underground potential
at Constancia Norte supports plans for additional drilling
activities in the fourth quarter of 2021. The drilling is expected
to confirm continuity and test extensions, which together with the
results from an underground scoping study, are expected to be
incorporated into the annual mineral reserve and resource update
for Constancia in March 2022.
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.
Drilling continues 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 is expected to total 6,000
metres in 14 holes with two drill rigs presently turning at site.
Five holes totaling 2,795 metres have been completed with all holes
intersecting mineralization. Pending positive results from this
initial drilling phase, a second phase aimed at defining an initial
inferred mineral resource for Llaguen would follow in the second
quarter of 2022 after the rainy season.
Snow Lake Regional Exploration
The company’s regional exploration efforts in
the Snow Lake area continue, following on the 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. A 2022 drill program is planned for 1901 to test the
down-plunge extensions of the copper-gold rich feeder zone.
Hudbay’s 2021 summer program included regional
surface mapping and ground geophysical surveys to delineate the
higher priority drill targets for 2022. One of the more promising
targets was identified from a borehole survey immediately north of
Lalor and is expected to be drill tested in early 2022 both from
surface and from underground.
Ongoing infill drilling continues at Lalor and
the results are expected to be incorporated into the annual mineral
reserve and resource estimates to be published at the end of March
2022.
Flin Flon Reclamation Obligations and
Tailings Reprocessing Opportunity
As part of the company’s ongoing efforts to
update its Flin Flon closure plan, a comprehensive update completed
in the third quarter of 2021 resulted in an increase to the
decommissioning and restoration (“DRO”) provision of approximately
$144 million compared to June 30. This increase is mostly
attributable to long-term water treatment and monitoring
obligations, along with cost inflation for other remediation
activities. The increase in water management costs is primarily a
result of the addition of 22 years to the post-closure water
management period (to the year 2122), which after applying a very
low discount rate, represents a significant portion of the DRO
increase. As of September 30, 2021, on an undiscounted basis, the
total estimated environmental obligations related to the company’s
Flin Flon operations were $322 million, of which approximately 25%
is expected to occur over the next 15 years in connection with the
closure of the Flin Flon operations, while approximately 75% of the
obligations are scheduled to be incurred after the closure of the
Snow Lake operations, which is currently expected in 2037 based on
reserves. The full breakdown is as follows:
- $23 million for previously announced tailings stability
activities that will be completed in 2021 and 2022;
- $13 million for demolition costs between the cessation of
operations in Flin Flon and 2030;
- $33 million for the construction and operation of a water
treatment plant between 2030 and 2042;
- $46 million for demolition and tailings remediation costs after
Snow Lake mining activities conclude in 2037 (based on current
reserves) until 2042;
- $161 million in post-closure environmental management
activities (such as water collection and
treatment) from 2037 to 2122; and
- $46 million in other site management costs and remediation
activities.
As part of the engineering work done to update
the closure plan, Hudbay has identified the opportunity to
reprocess tailings at its Flin Flon Tailings Impoundment System
(“FFTIS”) where tailings from processing activities in Flin Flon
have been deposited for over 90 years. The company is in the early
stages of technical evaluation and confirmatory drilling to support
the completion of a scoping study in 2022. Pending positive results
from the scoping study, further feasibility studies would follow.
This opportunity could utilize the Flin Flon concentrator, with
modifications, after closure of the 777 mine, creating operating
and economic benefits to the Flin Flon community. It could also
provide the opportunity to redesign the closure plans, increase
metal production, defer certain closure costs and reduce the
environmental footprint of the FFTIS.
Collective Bargaining Agreements
Ratified in Manitoba
New three-and-a-half year collective agreements
were ratified by the members of USW Local 7106 and USW Local 9338
in September 2021. Members of the other four unions at Hudbay’s
Manitoba operations ratified their respective three-and-a-half year
collective agreements in July. This completed the collective
bargaining process with all six of the company’s unions in
Manitoba.
Credit Facility Extension and
Amendments
On October 26, 2021, Hudbay amended and restated
its senior secured revolving credit facilities (the "Credit
Facilities") to increase the total amount of available borrowings
to $450 million, eliminate certain financial covenants while
amending others to increase the company’s financial flexibility,
reduce the effective interest rate and extend the maturity to
October 26, 2025. The remaining financial covenants include
maintaining a net debt to EBITDA ratio of less than 4.00:1, a
senior secured debt to EBITDA of less than 3.00:1 and an interest
coverage ratio of greater than 3.00:1.
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
https://www.hudbayminerals.com/files/doc_financials/2021/q3/MDA213.pdf
Financial Statements:
https://www.hudbayminerals.com/files/doc_financials/2021/q3/FS213.pdf
Conference Call and Webcast
Date: |
Thursday, November
4, 2021 |
Time: |
8:30 a.m. ET |
Webcast: |
http://services.choruscall.ca/links/hudbay20211105.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) |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Profit
(loss) for the period |
(170.4) |
(3.4) |
(24.0) |
Tax expense |
22.6 |
18.2 |
0.1 |
Profit
(loss) before tax |
(147.8) |
14.8 |
(23.9) |
Adjusting
items: |
|
|
|
Mark-to-market adjustments1 |
1.7 |
10.9 |
1.9 |
Peru
inventory (reversal) |
— |
(0.7) |
— |
Variable
consideration adjustment - stream revenue and accretion |
— |
— |
(14.1) |
Foreign
exchange (gain) loss |
(3.1) |
1.7 |
(1.2) |
Write-down of unamortized transaction costs |
— |
— |
3.8 |
Premium
paid on redemption of notes |
— |
— |
7.3 |
Impairment - environmental obligation |
147.3 |
— |
— |
Restructuring charges - Manitoba2 |
9.0 |
— |
— |
Past
service pension cost |
4.2 |
— |
— |
Loss on disposal of plant and equipment - Manitoba |
5.4 |
— |
— |
Adjusted
earnings (loss) before income taxes |
16.7 |
26.7 |
(26.2) |
Tax
expense |
(22.6) |
(18.2) |
(0.1) |
Tax
impact of adjusting items |
34.6 |
(2.3) |
0.1 |
Non-cash deferred tax adjustments |
9.5 |
(0.8) |
0.8 |
Adjusted net earnings (loss) |
38.2 |
5.4 |
(25.4) |
Adjusted net earnings (loss) ($/share) |
0.15 |
0.02 |
(0.10) |
Basic weighted average number of common shares outstanding
(millions) |
261.5 |
261.5 |
261.3 |
1 Includes changes in fair value of the embedded
derivative on redeemed notes, gold prepayment liability, Canadian
junior mining investments, other financial assets and liabilities
at fair value through profit or loss and share-based compensation
expenses2 Includes severance accrued for unionized employees and
write down of materials and supply inventories at the Flin Flon
operations.
Adjusted EBITDA Reconciliation
|
Three Months Ended |
(in $ millions) |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Loss for the period |
(170.4) |
(3.4) |
(24.0) |
Add back: Tax expense |
22.6 |
18.2 |
0.1 |
Add back: Net finance expense |
30.2 |
43.7 |
44.8 |
Add back: Other expenses |
16.0 |
1.0 |
4.8 |
Add back: Depreciation and amortization |
86.0 |
99.3 |
96.0 |
Less: Amortization of deferred revenue and variable consideration
adjustment |
(23.5) |
(17.1) |
(30.2) |
|
(39.1) |
141.7 |
91.5 |
Adjusting items (pre-tax): |
|
|
|
Peru inventory (reversal) |
— |
(0.7) |
— |
Impairment - environmental obligation |
147.3 |
— |
— |
Restructuring charges – Manitoba1 |
5.4 |
— |
— |
Past service pension cost |
4.2 |
— |
— |
Share-based compensation expenses2 |
1.5 |
2.2 |
4.6 |
Adjusted EBITDA |
119.3 |
143.2 |
96.1 |
1 Represents the write-down of materials and
supply inventories at the Flin Flon operations.2 Share-based
compensation expenses reflected in cost of sales and selling and
administrative expenses.
Net Debt Reconciliation
(in $ thousands) |
|
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
Total
long-term debt |
1,182,612 |
1,181,195 |
1,135,675 |
Cash and cash equivalents |
(297,451) |
(294,287) |
(439,135) |
Net debt |
885,161 |
886,908 |
696,540 |
Cash Cost Reconciliation
Consolidated |
Three Months Ended |
Net pounds of copper produced |
|
|
|
(in thousands) |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Peru |
39,842 |
42,015 |
45,862 |
Manitoba |
11,404 |
9,736 |
10,124 |
Net pounds of copper produced |
51,246 |
51,751 |
55,985 |
Consolidated |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Cash cost per pound of copper produced |
$000s |
$/lb1 |
$000s |
$/lb1 |
$000s |
$/lb1 |
Cash cost, before by-product credits |
206,615 |
4.04 |
218,899 |
4.23 |
188,699 |
3.37 |
By-product credits |
(175,057) |
(3.42) |
(175,470) |
(3.39) |
(152,403) |
(2.72) |
Cash cost, net of by-product credits |
31,558 |
0.62 |
43,429 |
0.84 |
36,296 |
0.65 |
Consolidated |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Supplementary cash cost information |
$000s |
$/lb 1 |
$000s |
$/lb 1 |
$000s |
$/lb 1 |
By-product credits2: |
|
|
|
|
|
|
Zinc |
67,695 |
1.32 |
77,707 |
1.50 |
66,918 |
1.20 |
Gold 3 |
76,241 |
1.49 |
68,880 |
1.33 |
58,093 |
1.04 |
Silver 3 |
15,957 |
0.31 |
15,443 |
0.30 |
19,656 |
0.35 |
Molybdenum & other |
15,164 |
0.30 |
13,440 |
0.26 |
7,736 |
0.14 |
Total
by-product credits |
175,057 |
3.42 |
175,470 |
3.39 |
152,403 |
2.72 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash
cost, net of by-product credits |
31,558 |
|
43,429 |
|
36,296 |
|
By-product credits |
175,057 |
|
175,470 |
|
152,403 |
|
Treatment
and refining charges |
(14,531) |
|
(15,243) |
|
(15,006) |
|
Share-based
compensation
expense |
145 |
|
274 |
|
411 |
|
Inventory
adjustments |
5,445 |
|
(723) |
|
— |
|
Change in
product inventory |
5,672 |
|
15,260 |
|
2,229 |
|
Royalties |
3,489 |
|
4,288 |
|
4,499 |
|
Depreciation and amortization4 |
86,010 |
|
99,305 |
|
95,998 |
|
Cost of sales5 |
297,074 |
|
322,060 |
|
276,830 |
|
1 Per pound of copper produced.2 By-product
credits are computed as revenue per financial statements, including
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 September 30, 2020, the variable
consideration adjustments amounted to net income of $9,482.4
Depreciation is based on concentrate sold.5 As per IFRS financial
statements.
Peru |
Three Months Ended |
(in thousands) |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Net pounds of copper produced1 |
39,842 |
42,015 |
45,862 |
1 Contained copper in concentrate.
Peru |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Cash cost per pound of copper produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Mining |
22,772 |
0.57 |
26,133 |
0.62 |
18,220 |
0.40 |
Milling |
44,750 |
1.12 |
40,286 |
0.96 |
42,836 |
0.93 |
G&A |
13,948 |
0.35 |
16,910 |
0.40 |
12,538 |
0.27 |
Onsite
costs |
81,470 |
2.04 |
83,329 |
1.98 |
73,594 |
1.60 |
Treatment
& refining |
7,292 |
0.18 |
9,824 |
0.23 |
10,694 |
0.23 |
Freight & other |
9,464 |
0.24 |
11,555 |
0.29 |
10,201 |
0.22 |
Cash
cost, before by-product credits |
98,226 |
2.46 |
104,708 |
2.50 |
94,489 |
2.06 |
By-product credits |
(47,984) |
(1.20) |
(27,137) |
(0.65) |
(23,675) |
(0.52) |
Cash cost, net of by-product credits |
50,242 |
1.26 |
77,571 |
1.85 |
70,814 |
1.54 |
Peru |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Supplementary cash cost information |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
By-product credits2: |
|
|
|
|
|
|
Gold3 |
24,196 |
0.61 |
8,835 |
0.21 |
6,099 |
0.13 |
Silver3 |
10,557 |
0.26 |
7,466 |
0.18 |
12,006 |
0.26 |
Molybdenum |
13,231 |
0.33 |
10,836 |
0.26 |
5,570 |
0.12 |
Total
by-product credits |
47,984 |
1.20 |
27,137 |
0.65 |
23,675 |
0.52 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash cost, net of
by-product credits |
50,242 |
|
77,571 |
|
70,814 |
|
By-product credits |
47,984 |
|
27,137 |
|
23,675 |
|
Treatment and refining
charges |
(7,292) |
|
(9,824) |
|
(10,694) |
|
Inventory
adjustments |
— |
|
(723) |
|
— |
|
Share-based compensation
expenses |
31 |
|
52 |
|
89 |
|
Change in product
inventory |
(3,126) |
|
4,465 |
|
4,824 |
|
Royalties |
998 |
|
578 |
|
1,664 |
|
Overhead costs related
to suspension of activities (cash) |
— |
|
— |
|
— |
|
Depreciation and amortization4 |
47,185 |
|
52,710 |
|
53,021 |
|
Cost of sales5 |
136,022 |
|
151,966 |
|
143,393 |
|
1 Per pound of copper produced.2 By-product
credits are computed as revenue per financial statements, including
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) |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Net pounds of copper produced1 |
11,404 |
9,736 |
10,124 |
1 Contained copper in concentrate.
Manitoba |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Cash cost per pound of copper produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Mining |
54,634 |
4.79 |
54,714 |
5.62 |
42,224 |
4.17 |
Milling |
14,484 |
1.27 |
13,655 |
1.40 |
11,901 |
1.18 |
Refining
(Zinc) |
15,868 |
1.39 |
17,908 |
1.84 |
17,504 |
1.73 |
G&A |
8,680 |
0.76 |
14,749 |
1.51 |
11,909 |
1.18 |
Onsite
costs |
93,666 |
8.21 |
101,026 |
10.38 |
83,538 |
8.25 |
Treatment
& refining |
7,239 |
0.63 |
5,419 |
0.56 |
4,312 |
0.43 |
Freight & other |
7,484 |
0.66 |
7,746 |
0.80 |
6,360 |
0.63 |
Cash
cost, before by-product credits |
108,389 |
9.50 |
114,191 |
11.73 |
94,210 |
9.31 |
By-product credits |
(127,073) |
(11.14) |
(148,333) |
(15.24) |
(128,728) |
(12.72) |
Cash cost, net of by-product credits |
(18,684) |
(1.64) |
(34,142) |
(3.51) |
(34,518) |
(3.41) |
Manitoba |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Supplementary cash cost information |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
By-product credits2: |
|
|
|
|
|
|
Zinc |
67,695 |
5.94 |
77,707 |
7.98 |
66,918 |
6.61 |
Gold3 |
52,045 |
4.56 |
60,045 |
6.17 |
51,994 |
5.14 |
Silver3 |
5,400 |
0.47 |
7,977 |
0.82 |
7,650 |
0.76 |
Other |
1,933 |
0.17 |
2,604 |
0.27 |
2,166 |
0.21 |
Total
by-product credits |
127,073 |
11.14 |
148,333 |
15.24 |
128,728 |
12.72 |
Reconciliation to
IFRS: |
|
|
|
|
|
|
Cash cost, net of
by-product credits |
(18,684) |
|
(34,142) |
|
(34,518) |
|
By-product credits |
127,073 |
|
148,333 |
|
128,728 |
|
Treatment and refining
charges |
(7,239) |
|
(5,419) |
|
(4,312) |
|
Inventory
adjustments |
5,445 |
|
— |
|
— |
|
Past service pension
cost |
4,229 |
|
— |
|
— |
|
Share-based compensation
expenses |
114 |
|
222 |
|
322 |
|
Change in product
inventory |
8,798 |
|
10,795 |
|
(2,595) |
|
Royalties |
2,491 |
|
3,710 |
|
2,835 |
|
Depreciation and amortization4 |
38,825 |
|
46,595 |
|
42,977 |
|
Cost of sales5 |
161,052 |
|
170,094 |
|
133,437 |
|
1 Per pound of copper produced.2 By-product
credits are computed as revenue per financial statements, including
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 |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 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 |
31,558 |
0.62 |
43,429 |
0.84 |
36,296 |
0.65 |
Cash
sustaining capital expenditures |
65,694 |
1.28 |
68,803 |
1.33 |
72,461 |
1.29 |
Royalties |
3,489 |
0.07 |
4,288 |
0.08 |
4,499 |
0.08 |
Sustaining cash cost, net of by-product
credits |
100,741 |
1.97 |
116,520 |
2.25 |
113,256 |
2.02 |
Corporate
selling and administrative expenses & regional costs |
10,177 |
0.20 |
10,995 |
0.22 |
11,705 |
0.21 |
Accretion and amortization of decommissioning and community
agreements1 |
652 |
0.01 |
705 |
0.01 |
995 |
0.02 |
All-in sustaining cash cost, net of by-product
credits |
111,570 |
2.18 |
128,220 |
2.48 |
125,956 |
2.25 |
Reconciliation to property, plant and equipment additions: |
|
|
|
|
|
|
Property, plant and equipment additions |
76,435 |
|
96,090 |
|
84,440 |
|
Capitalized stripping net additions |
19,094 |
|
22,506 |
|
19,183 |
|
Decommissioning and restoration obligation net additions |
4,563 |
|
11,039 |
|
(7,642) |
|
Total accrued capital additions |
100,092 |
|
129,635 |
|
95,981 |
|
Less other non-sustaining capital costs2 |
37,622 |
|
63,694 |
|
37,694 |
|
Total sustaining capital costs |
62,430 |
|
65,941 |
|
58,287 |
|
Right of use leased assets |
(9,549) |
|
(9,101) |
|
(10,200) |
|
Capitalized lease cash payments - operating sites |
8,453 |
|
8,331 |
|
8,517 |
|
Community agreement cash payments |
82 |
|
108 |
|
1,106 |
|
Accretion and amortization of decommissioning and restoration
obligations |
4,278 |
|
3,524 |
|
14,751 |
|
Cash sustaining capital expenditures |
65,964 |
|
68,803 |
|
72,461 |
|
1 Includes accretion of decommissioning relating
to non-productive sites, and accretion and amortization of current
community agreements.2 Other non-sustaining capital costs include
Arizona capitalized costs, capitalized interest, capitalized
exploration, growth capital expenditures and decommissioning and
restoration obligation adjustments.
Peru |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash
cost, net of by-product credits |
50,242 |
1.26 |
77,571 |
1.85 |
70,814 |
1.54 |
Cash
sustaining capital expenditures |
40,921 |
1.03 |
34,898 |
0.83 |
32,354 |
0.71 |
Royalties |
998 |
— |
578 |
0.01 |
1,664 |
0.04 |
Sustaining cash cost per pound of copper
produced |
92,161 |
2.31 |
113,047 |
2.69 |
104,832 |
2.29 |
Manitoba |
Three Months Ended |
|
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash cost, net of by-product credits |
(18,684) |
(1.64) |
(34,142) |
(3.51) |
(34,518) |
(3.41) |
Cash sustaining capital expenditures |
24,773 |
2.17 |
33,905 |
3.49 |
40,107 |
3.96 |
Royalties |
2,491 |
0.22 |
3,710 |
0.38 |
2,835 |
0.28 |
Sustaining cash cost per pound of copper
produced |
8,580 |
0.75 |
3,473 |
0.36 |
8,424 |
0.83 |
Combined Unit Cost Reconciliation
Peru |
Three Months Ended |
(in
thousands except ore tonnes milled and unit cost per tonne) |
|
|
|
Combined unit cost per tonne processed |
Sep. 30, 2021 |
Jun. 30, 2021 |
Sep. 30, 2020 |
Mining |
22,772 |
26,133 |
18,220 |
Milling |
44,750 |
40,286 |
42,836 |
G&A
1 |
13,948 |
16,910 |
12,538 |
Other G&A 2 |
(286) |
52 |
89 |
Unit
cost |
81,184 |
83,381 |
73,683 |
Tonnes ore milled |
6,985 |
7,413 |
7,481 |
Combined unit cost per tonne |
11.62 |
11.25 |
9.85 |
Reconciliation to IFRS: |
|
|
|
Unit
cost |
81,184 |
83,381 |
73,683 |
Freight
& other |
9,464 |
11,555 |
10,201 |
Other
G&A |
286 |
(52) |
(89) |
Share-based compensation expenses |
31 |
52 |
89 |
Inventory
adjustments |
— |
(723) |
— |
Change in
product inventory |
(3,126) |
4,465 |
4,824 |
Royalties |
998 |
578 |
1,664 |
Depreciation and amortization |
47,185 |
52,710 |
53,021 |
Cost of sales3 |
136,022 |
151,966 |
143,393 |
1 G&A as per cash cost reconciliation
above.2 Other G&A primarily includes profit sharing costs.3 As
per IFRS financial statements.
Manitoba |
Three Months Ended |
(in thousands except tonnes ore milled and unit cost per
tonne) |
|
|
|
Combined unit cost per tonne processed |
Sep. 30, 2021 |
Jun. 31, 2021 |
Sep. 30, 2020 |
Mining |
54,634 |
54,714 |
42,224 |
Milling |
14,484 |
13,655 |
11,901 |
G&A 1 |
8,680 |
14,749 |
11,909 |
Less: G&A allocated to zinc metal production |
(3,280) |
(3,724) |
(3,707) |
Less: Other G&A related to profit sharing costs |
3,381 |
(1,274) |
(10) |
Unit cost |
77,899 |
78,120 |
62,317 |
USD/CAD implicit exchange rate |
1.26 |
1.23 |
1.33 |
Unit cost - C$ |
98,151 |
95,927 |
82,962 |
Tonnes ore milled |
666,263 |
646,987 |
657,895 |
Combined unit cost per tonne - C$ |
147 |
148 |
126 |
Reconciliation to IFRS: |
|
|
|
Unit cost |
77,899 |
78,120 |
62,317 |
Freight & other |
7,484 |
7,746 |
6,360 |
Refined (zinc) |
15,868 |
17,908 |
17,504 |
G&A allocated to zinc metal production |
3,280 |
3,724 |
3,707 |
Other G&A related to profit sharing |
(3,381) |
1,274 |
10 |
Share-based compensation expenses |
114 |
222 |
322 |
Inventory adjustments |
5,445 |
— |
— |
Past service pension cost |
4,229 |
— |
— |
Change in product inventory |
8,798 |
10,795 |
(2,595) |
Royalties |
2,491 |
3,710 |
2,835 |
Depreciation and amortization |
38,825 |
46,595 |
42,977 |
Cost of sales2 |
161,052 |
170,094 |
133,437 |
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, expectations regarding the Rosemont project and
the outcome of litigation challenging Rosemont's permits,
expectations regarding the Copper World exploration program and
timelines for an initial resource estimate and preliminary economic
assessment, expectations regarding the Snow Lake gold strategy,
including the continuing ramp-up of the New Britannia mill,
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, expectations
regarding the costs and schedule of the recently approved updated
closure plan for Flin Flon, the potential to reprocess Flin Flon
tailings in the future and the possible benefits of such a project,
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 due to the COVID-19
pandemic or social or political unrest in the regions Hudbay
operates;
- the ability to obtain all required permits for the Copper World
project;
- the successful outcome of the Rosemont litigation;
- the ability to ramp-up the New Britannia mill and achieve
anticipated production;
- the economic prospects of reprocessing Flin Flon tailings;
- 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 direct and indirect impacts of the change in
government in Peru, future uncertainty with respect to the Peruvian
mining tax regime and social unrest in Peru, 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 ongoing Rosemont litigation process and other legal challenges
that could affect Rosemont or Copper World, risks related to the
new Lalor mine plan, including the continuing ramp-up of the New
Britannia mill and the ability to convert inferred mineral resource
estimates to higher confidence categories, risks related to the
technical and economic prospects of reprocessing Flin Flon
tailings, the potential that additional financial assurance will be
required to support the updated Flin Flon closure plan, 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 “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), zinc metal and silver/gold doré. 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 BrûléDirector, Investor Relations(416) 814-4387
________________________
i 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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