Hudbay Minerals Inc. (“Hudbay” or the “company”) (TSX,
NYSE:HBM) today released its first quarter 2022 financial
results. All amounts are in U.S. dollars, unless otherwise noted.
First Quarter Operating and Financial
Results
- Consolidated production in the first quarter was 24,702 tonnes
of copper and 53,956 ounces of gold. Cash cost and sustaining cash
costi per pound of copper produced, net of by-product credits, were
$1.11 and $2.29, respectively.
- Full year 2022 production and cost guidance reaffirmed as first
quarter production was in line with quarterly cadence expectations
and Hudbay achieved strong unit operating cost performance despite
the inflationary environment.
- Peru's operations in the first quarter were impacted by
COVID-19 related employee absenteeism and high rainfalls resulting
in reduced Pampacancha production relative to the fourth quarter of
2021, as well as a semi-annual scheduled mill maintenance period in
January.
- Manitoba achieved first quarter gold production of 43,167
ounces at a cash cost per ounce of gold produced, net of by-product
creditsi, of $416 as New Britannia's gold metallurgical recoveries
improved significantly relative to previous months. Manitoba sales
volumes were impacted by the availability of railcars during the
quarter, with excess inventory of approximately 7,000 tonnes of
copper concentrate containing high gold content and 6 million
pounds of refined zinc at the end of the quarter, collectively
valued at approximately $45 million.
- First quarter net earnings and earnings per share were $63.8
million and $0.24, respectively. After adjusting for a non-cash
gain of $79.9 million mostly related to a quarterly revaluation of
the Flin Flon environmental provision given higher long term
risk-free discount rates, amongst other items, first quarter
adjusted net earningsi per share were $0.02.
- Operating cash flow before change in non-cash working capital
was $77.1 million and adjusted EBITDAi was $110.2 million in the
first quarter of 2022, benefiting from strong realized base metals
prices but negatively impacted by the temporary buildup of unsold
inventory in Manitoba.
- Cash and cash equivalents decreased during the first quarter to
$213.4 million, as at March 31, 2022, mainly as a result of $55.9
million of sustaining capital investments, $31.9 million of
interest payments and an $18.6 million partial repayment of the
gold prepay liability, partially offset by cash generated from
operations, which was negatively impacted by limited railcar
availability leading to an inventory buildup in Manitoba.
Executing on Growth
Initiatives
- The Copper World preliminary economic assessment is nearing
completion and is expected to reflect a two-phase mine plan
contemplating the development of the Copper World deposits in
conjunction with an alternative plan for the Rosemont deposit.
- In April 2022, the New Britannia mill consistently achieved
throughput greater than 1,500 tonnes per day after scheduled rod
mill liner maintenance was completed in the first quarter.
- Announced annual reserve and resource update with mineral
reserve growth replacing close to 100% of 2021 mining depletion and
extending the mine life at each of Constancia and Snow Lake by one
year to 2038.
- Significant exploration activity continues across the business
with seven drill rigs now turning at the Copper World site to
conduct infill and extension drilling and to support future
economic studies, winter drilling campaigns recently completed in
the Snow Lake region and at the Flin Flon tailings facility, and
the advancement of exploration initiatives in Peru.
“We maintained steady operations during the
first quarter despite being faced with a number of external
challenges, including COVID-related absenteeism, extreme weather
conditions and inflationary cost pressures,” said Peter Kukielski,
President and Chief Executive Officer. “This led to strong unit
cost performance which is a testament to our effective risk
management systems and focus on operating efficiencies. We have
seen strong performance from the New Britannia mill in Manitoba and
we are on track to mine the significantly higher grades in Peru
later this year. As such, we have reaffirmed our 2022 production
and cost guidance. We look forward to continuing to advance our
world-class project pipeline, including the release of a robust PEA
on our Copper World project in the second quarter.”
Summary of First Quarter
Results
Consolidated copper production in the first
quarter of 2022 was 24,702 tonnes, in line with expected quarterly
cadence for the year. Consolidated gold production decreased by 16%
compared to the fourth quarter, primarily due to lower gold
production in Peru as COVID-19 related absenteeism and high
rainfalls limited production from the Pampacancha pit during the
quarter. Consolidated zinc production in the first quarter was 4%
lower than the fourth quarter primarily due to lower zinc grades at
Lalor and 777.
Consolidated cash cost per pound of copper
produced, net of by-product creditsi, in the first quarter of 2022
was $1.11, compared to $0.51 in fourth quarter of 2021. This
increase was a result of higher milling costs and lower copper
production in Peru and higher general and administrative costs in
Manitoba, partially offset by slightly higher by-product credits
per pound. Consolidated sustaining cash cost per pound of copper
produced, net of by-product creditsi, was $2.29 in the first
quarter of 2022 compared to $1.95 in the fourth quarter. This
increase was primarily due to the same reasons outlined above,
partially offset by lower sustaining capital expenditures and
capitalized exploration. Both measures were slightly above the
company’s 2022 guidance ranges primarily as a result of the
by-product credit impact from lower sales volumes in the first
quarter, as described below, and therefore, consolidated cash cost
and sustaining cash cost are expected to decline in future quarters
to within the 2022 guidance ranges with higher expected copper
production and contributions from precious metal by-product
credits.
In the first quarter of 2022, Peru and Manitoba
maintained steady operations with unit operating cost performance
of $12.37 per tonne and C$176 per tonne, respectively, in line with
the 2022 guidance ranges. This strong cost performance was achieved
despite continuing to experience broad based inflationary pressures
caused by higher input prices for many services and consumables,
such as power, fuel, grinding media, freight and insurance, leading
to higher than budgeted operating costs during the first quarter of
2022. The company also continues to face intermittent operational,
labour and travel disruptions with periodic waves of COVID-19
cases.
Cash generated from operating activities in the
first quarter of 2022 decreased to $63.6 million compared to $95.8
million in the fourth quarter of 2021. Operating cash flow before
change in non-cash working capital was $77.1 million during the
first quarter of 2022, compared to $156.9 million in the fourth
quarter 2021. These decreases were due to lower sales volumes for
copper, gold and zinc, primarily as a result of limited railcar
availability in Manitoba as detailed below, partially offset by
higher silver sales volumes and higher base metals realized
prices.
As previously announced, first quarter Manitoba
sales were impacted by limited railcar availability resulting in
approximately 7,000 tonnes of copper concentrate inventory
containing high gold content, and 6 million pounds of refined zinc
inventory in excess of normal operating levels. Had the excess
copper concentrate and zinc inventory been sold during the first
quarter, Hudbay would have realized approximately $45 million of
incremental revenue, assuming end of quarter commodity prices. The
above quantities are expected to be recognized as revenue and
converted to cash as inventory levels are drawn down over the next
several months with increased railcar access as weather conditions
improve.
Net earnings and earnings per share in the first
quarter of 2022 were $63.8 million and $0.24, respectively,
compared to a net loss and loss per share of $10.5 million and
$0.04, respectively, in the fourth quarter of 2021. First quarter
earnings benefited from a non-cash gain of $79.9 million mostly
related to the quarterly revaluation of the Flin Flon environmental
provision, which was impacted by rising long term risk-free
discount rates. With Flin Flon operations closing in June of this
year and given the long-term nature of the reclamation cash flows,
quarterly revaluation of the corresponding environmental provision
remains highly sensitive to changes in long-term risk-free discount
rates and, as such, the company expects to continue to experience
quarterly environmental provision revaluations. The quarterly
financial results were also negatively impacted by $10.5 million in
non-cash mark-to-market losses arising from the revaluation of the
gold prepayment liability, among other items.
Adjusted net earningsi and adjusted net earnings
per sharei in the first quarter of 2022 were $5.2 million and $0.02
per share, respectively, after adjusting for the non-cash gain
related to the revaluation of the environmental provision, among
other items. This compares to an adjusted net earnings and adjusted
net earnings per share of $32.7 million, and $0.13 per share in
fourth quarter of 2021. First quarter adjusted EBITDAi was $110.2
million, compared to $180.3 million in the fourth quarter of 2021,
primarily as a result of the same factors affecting operating cash
flow noted above.
As at March 31, 2022, the company’s liquidity
includes $213.4 million in cash as well as undrawn availability of
$357.5 million under its revolving credit facilities. The company
expects that the current liquidity combined with cash flow from
operations will be sufficient to meet its liquidity needs for the
foreseeable future. Given the elevated inventory levels in Manitoba
at the end of the first quarter and the positive expected quarterly
production cadence, the company projects its cash balance to grow
throughout the remainder of the year based on current commodity
prices.
Consolidated Financial Condition ($000s) |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Cash |
|
213,359 |
270,989 |
310,564 |
Total long-term debt |
|
1,181,119 |
1,180,274 |
1,180,798 |
Net debt1 |
|
967,760 |
909,285 |
870,234 |
Working capital2 |
|
161,846 |
147,512 |
236,281 |
Total assets |
|
4,538,214 |
4,616,231 |
4,549,196 |
Equity |
|
1,561,978 |
1,476,828 |
1,660,250 |
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.2 Working capital is determined as total current
assets less total current liabilities as defined under IFRS and
disclosed on the consolidated financial statements
Consolidated Financial Performance |
|
Three Months Ended |
|
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Revenue |
$000s |
378,619 |
425,170 |
|
313,624 |
|
Cost of sales |
$000s |
293,351 |
343,426 |
|
261,112 |
|
Earnings (loss) before tax |
$000s |
88,861 |
(149) |
|
(69,592) |
|
Earnings (loss) |
$000s |
63,815 |
(10,453) |
|
(60,102) |
|
Basic and diluted earnings (loss) per share |
$/share |
0.24 |
(0.04) |
|
(0.23) |
|
Adjusted earnings (loss) per share1 |
$/share |
0.02 |
0.13 |
|
(0.06) |
|
Operating cash flow before change in non-cash working capital |
$ millions |
77.1 |
156.9 |
|
90.7 |
|
Adjusted EBITDA1 |
$ millions |
110.2 |
180.3 |
|
104.2 |
|
1 Adjusted earnings
(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 |
|
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Contained metal in concentrate and doré
produced1 |
|
|
|
Copper |
tonnes |
24,702 |
|
28,198 |
|
24,553 |
|
Gold |
ounces |
53,956 |
|
64,159 |
|
35,500 |
|
Silver |
ounces |
784,357 |
|
899,713 |
|
696,673 |
|
Zinc |
tonnes |
22,252 |
|
23,207 |
|
27,940 |
|
Molybdenum |
tonnes |
207 |
|
275 |
|
294 |
|
Payable metal sold |
|
|
|
|
Copper |
tonnes |
20,609 |
|
24,959 |
|
20,929 |
|
Gold2 |
ounces |
48,343 |
|
56,927 |
|
25,383 |
|
Silver2 |
ounces |
864,591 |
|
638,640 |
|
509,760 |
|
Zinc3 |
tonnes |
17,306 |
|
21,112 |
|
28,343 |
|
Molybdenum |
tonnes |
213 |
|
245 |
|
284 |
|
Consolidated cash cost per pound of copper
produced4 |
|
|
Cash cost |
$/lb |
1.11 |
|
0.51 |
|
1.04 |
|
Peru |
$/lb |
1.54 |
|
1.28 |
|
1.82 |
|
Manitoba |
$/lb |
(0.40) |
|
(2.77) |
|
(1.04) |
|
Sustaining cash cost |
$/lb |
2.29 |
|
1.95 |
|
2.16 |
|
Peru |
$/lb |
2.27 |
|
2.46 |
|
2.36 |
|
Manitoba |
$/lb |
2.33 |
|
(0.23) |
|
1.62 |
|
All-in sustaining cash cost |
$/lb |
2.54 |
|
2.20 |
|
2.37 |
|
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 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 |
|
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Constancia ore mined1 |
tonnes |
6,908,151 |
7,742,469 |
7,747,466 |
Copper |
% |
0.32 |
0.33 |
0.30 |
Gold |
g/tonne |
0.04 |
0.04 |
0.04 |
Silver |
g/tonne |
3.22 |
2.81 |
2.90 |
Molybdenum |
% |
0.01 |
0.01 |
0.01 |
Pampacancha ore mined1 |
tonnes |
847,306 |
2,107,196 |
— |
Copper |
% |
0.27 |
0.27 |
— |
Gold |
g/tonne |
0.43 |
0.34 |
— |
Silver |
g/tonne |
4.06 |
4.26 |
— |
Molybdenum |
% |
0.01 |
0.01 |
— |
Ore milled |
tonnes |
7,213,833 |
8,048,925 |
6,362,752 |
Copper |
% |
0.31 |
0.33 |
0.33 |
Gold |
g/tonne |
0.08 |
0.11 |
0.04 |
Silver |
g/tonne |
3.26 |
3.67 |
2.84 |
Molybdenum |
|
0.01 |
0.01 |
0.01 |
Copper recovery |
% |
85.3 |
86.0 |
84.1 |
Gold recovery |
% |
59.8 |
63.6 |
52.0 |
Silver recovery |
% |
66.9 |
60.8 |
69.9 |
Molybdenum recovery |
% |
21.1 |
26.7 |
33.4 |
Contained metal in concentrate |
|
|
|
Copper |
tonnes |
19,166 |
22,856 |
17,827 |
Gold |
ounces |
10,789 |
17,917 |
4,638 |
Silver |
ounces |
505,568 |
578,140 |
405,714 |
Molybdenum |
tonnes |
207 |
275 |
294 |
Payable metal sold |
|
|
|
Copper |
tonnes |
16,825 |
20,551 |
14,836 |
Gold |
ounces |
14,452 |
16,304 |
2,963 |
Silver |
ounces |
636,133 |
380,712 |
337,612 |
Molybdenum |
tonnes |
213 |
245 |
284 |
Combined unit operating cost2,3,4 |
$/tonne |
12.37 |
9.96 |
11.74 |
Cash cost4 |
$/lb |
1.54 |
1.28 |
1.82 |
Sustaining cash cost3,4 |
$/lb |
2.27 |
2.46 |
2.36 |
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 Excludes approximately
$2.3 million, or $0.32 per tonne, of COVID-19 related costs during
the three months ended March 31, 2022, $4.1 million, or $0.51 per
tonne, of COVID-related costs during the three months ended
December 31, 2021 and $4.6 million, or $0.72 per tonne, during the
three months ended March 31, 2021.4 Combined unit cost, cash cost
and 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.
The Peru operations were impacted by the
COVID-19 Omicron variant during January and February of 2022,
resulting in high employee absenteeism which had a direct impact on
the quarter's production. Despite the high absenteeism, COVID-19
containment costs have decreased considerably as the severity of
the variant appears lower and COVID-19 protocols have been modified
to align with recommended public health measures. Full year
production of all metals and costs in Peru are expected to be
within guidance ranges for 2022.
During the first quarter of 2022, the Constancia
operations produced 19,166 tonnes of copper, 10,789 ounces of gold,
505,568 ounces of silver and 207 tonnes of molybdenum. Production
of all metals was lower than the fourth quarter of 2021 primarily
due to a planned semi-annual mill maintenance shutdown in January
and lower grades. As previously disclosed, full year production in
Peru is expected to benefit from significantly higher grades in the
fourth quarter of 2022.
Total ore mined declined during the first
quarter of 2022, relative to the fourth quarter of 2021, due to
high rainfalls and labour shortages, which resulted in delays
affecting the water management system and lower production from
Pampacancha. Ore milled during the first quarter of 2022 was lower
compared to the fourth quarter of 2021 due to the planned mill
maintenance shutdown in January. Milled copper grades and
recoveries were lower than the previous quarter’s levels but were
consistent with the mine plan. Milled gold grades and recoveries
were lower than the previous quarter due to a lower contribution of
Pampacancha ore in the quarter.
Combined mine, mill and G&A unit operating
costs in the first quarter of 2022 were $12.37 per tonne, and
higher than the fourth quarter of 2021, primarily due to continued
inflationary pressures on consumables and energy costs and fewer
tonnes of ore milled due to the planned mill maintenance shutdown.
Hudbay experienced unbudgeted inflationary pressure on costs in the
first quarter of 2022 as a result of higher fuel prices, higher
power prices, higher steel prices affecting grinding media costs,
higher community costs and higher insurance costs. Despite these
inflationary cost pressures, full year unit operating costs in Peru
are expected to be within the 2022 guidance range.
Peru’s cash cost per pound of copper produced,
net of by-product credits, in the first quarter of 2022 was $1.54,
higher than the fourth quarter primarily due to higher milling
costs and lower copper production. Cash costs in the first quarter
were above the upper end of the 2022 guidance range in part due to
lower production and higher costs related to the scheduled
semi-annual plant maintenance shutdown in the quarter. Cash cost
per pound of copper produced, net of by-product credits, is
expected to decline and full year cash costs are expected to remain
within the 2022 guidance range with higher expected copper
production and contributions from precious metal by-product credits
later this year.
Peru’s sustaining cash cost per pound of copper
produced, net of by-product credits, in the first quarter of 2022
improved to $2.27, compared to $2.46 in the fourth quarter, as
lower sustaining capital expenditures and lower capitalized
exploration more than offset the higher milling costs and lower
production in the quarter.
Manitoba Operations Review
Manitoba Operations
|
|
Three Months Ended |
|
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Lalor ore mined |
tonnes |
386,752 |
422,208 |
421,602 |
Copper |
% |
0.80 |
0.78 |
0.57 |
Zinc |
% |
4.06 |
4.19 |
5.20 |
Gold |
g/tonne |
3.76 |
3.92 |
2.67 |
Silver |
g/tonne |
22.94 |
30.35 |
22.75 |
777 ore mined |
tonnes |
258,069 |
266,744 |
275,260 |
Copper |
% |
1.19 |
1.13 |
2.06 |
Zinc |
% |
4.12 |
4.16 |
4.00 |
Gold |
g/tonne |
1.69 |
1.80 |
2.39 |
Silver |
g/tonne |
21.05 |
25.02 |
29.32 |
Stall Concentrator & New Britannia Mill: |
|
Ore milled |
tonnes |
397,301 |
419,727 |
361,344 |
Copper |
% |
0.82 |
0.75 |
0.60 |
Zinc |
% |
4.24 |
4.12 |
5.53 |
Gold |
g/tonne |
3.87 |
3.90 |
2.57 |
Silver |
g/tonne |
23.16 |
30.07 |
23.40 |
Copper recovery |
% |
87.5 |
88.7 |
85.7 |
Zinc recovery |
% |
85.7 |
87.4 |
91.1 |
Gold recovery |
% |
58.4 |
54.6 |
57.5 |
Silver recovery |
% |
60.0 |
53.9 |
56.2 |
Flin Flon Concentrator: |
|
|
|
Ore milled |
tonnes |
254,032 |
262,565 |
283,386 |
Copper |
% |
1.20 |
1.12 |
1.88 |
Zinc |
% |
4.13 |
4.16 |
4.20 |
Gold |
g/tonne |
1.70 |
1.78 |
2.34 |
Silver |
g/tonne |
21.23 |
25.04 |
28.01 |
Copper recovery |
% |
87.6 |
86.7 |
91.3 |
Zinc recovery |
% |
83.2 |
83.1 |
81.8 |
Gold recovery |
% |
57.7 |
59.2 |
64.0 |
Silver recovery |
% |
52.5 |
45.6 |
54.1 |
Total contained metal in concentrate |
|
|
Copper |
tonnes |
5,536 |
5,342 |
6,726 |
Zinc |
tonnes |
22,252 |
23,207 |
27,940 |
Gold |
ounces |
36,887 |
37,644 |
30,862 |
Silver |
ounces |
268,743 |
315,054 |
290,959 |
Total metal in doré |
|
|
|
|
Gold |
ounces |
6,280 |
8,598 |
- |
Silver |
ounces |
10,046 |
6,519 |
- |
Total payable metal sold |
|
|
|
Copper |
tonnes |
3,784 |
4,408 |
6,093 |
Zinc1 |
tonnes |
17,306 |
21,112 |
28,343 |
Gold2 |
ounces |
33,891 |
40,623 |
22,420 |
Silver2 |
ounces |
228,458 |
257,928 |
172,148 |
Combined unit operating cost3,4 |
C$/tonne |
176 |
168 |
151 |
Gold cash cost4,5 |
$/oz |
416 |
— |
— |
Gold sustaining cash cost4,5 |
$/oz |
1,187 |
— |
— |
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 per ounce of gold 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.5 Cash cost and sustaining cash cost
per ounce of gold produced were introduced in 2022 and do not have
a published comparative.
During the first quarter of 2022, the Manitoba
operations produced 43,167 ounces of gold, 22,252 tonnes of zinc,
5,536 tonnes of copper and 278,789 ounces of silver. Copper
production increased by approximately 4%, whereas gold, zinc and
silver production decreased by 7%, 4% and 13%, respectively,
compared to the fourth quarter due to expected grade variability
quarter-to-quarter and lower ore milled. As previously mentioned,
sales volumes in Manitoba were impacted by limited railcar
availability, and the resulting excess copper concentrate and
refined zinc inventory buildup is expected to normalize over the
next several months with increased access to railcars as weather
conditions improve. Full year production of all metals and costs in
Manitoba are expected to be within guidance ranges for 2022.
Ore mined at the Manitoba operations during the
first quarter of 2022 was lower than the fourth quarter of 2021 due
to employee absenteeism caused by COVID-19, unplanned maintenance
requirements of the ore handling system that temporarily affected
hoisting ability at Lalor and planned lower production at 777 as
the mine approaches closure in June 2022.
Lalor production processes to separate gold and
base metal ores are fully established to optimally provide feed for
both the New Britannia and Stall mills based on the ore metal
content. Higher gold content ore is processed at the New Britannia
facility and higher base metal content ore is directed towards
Stall. A production ramp-up strategy to achieve 5,300 tonnes per
day at Lalor by the end of 2022 is underway and includes advancing
development for new mining fronts, additions to the mine equipment
fleet, transition of workforce from the 777 mine upon closure, and
expansion of change house and office facilities. A planned Lalor
maintenance period has been advanced to the second quarter of 2022
in order to allow for increased availability during the third
quarter after 777 has closed and the additional workforce and
equipment have transitioned to Lalor. The 777 equipment relocation
strategy will commence in the second quarter of 2022, ahead of
expected timeframes to advance the production ramp-up to 5,300
tonnes per day.
The 777 mine is within months of closure and the
focus continues to be on safely mining out the remaining reserves
by completing the necessary ground rehabilitation to access remnant
and pillar stoping blocks. Challenging ground conditions continue
to cause delays in the production sequence and result in higher
dilution than planned. These challenges are expected to continue
until the end of the mine life in June 2022. Pre-closure activities
are well underway in mined out areas to decommission stationary
equipment of value for redeployment at Lalor. As development
requirements wind down, personnel and equipment are being
redeployed to Lalor as part of the Lalor ramp-up strategy.
The New Britannia mill averaged approximately
1,400 tonnes per day in the first quarter of 2022, slightly below
the targeted 1,500 tonnes per day as a result of completing
scheduled rod mill liner maintenance during the quarter. Since
completing the mill maintenance, New Britannia has consistently
achieved greater than 1,500 tonnes per day in April. With the
inclusion of doré, the gold and silver recoveries at the New
Britannia mill have also improved significantly with metallurgical
recoveries in March higher in relation to previous months.
Additional initiatives are planned in the second quarter to further
improve recoveries to be in line with metallurgical models.
The combined Snow Lake mills processed less ore
in the first quarter compared to the fourth quarter as a result of
less ore being mined at Lalor. Stall recoveries were consistent
with the metallurgical model for the head grades delivered. The
Flin Flon concentrator consumed the available ore feed from the 777
mine in the first quarter of 2022. Recoveries were consistent with
the metallurgical model for the head grades delivered.
Combined mine, mill and G&A unit operating
costs in the first quarter of 2022 increased by 5% compared to the
fourth quarter of 2021. The increase was primarily due to higher
propane usage during the colder winter coupled with continued
inflationary cost pressures for bulk commodities and fuel, and
lower tonnes processed. Full year combined unit costs are expected
to remain within 2022 guidance ranges.
Cash cost per ounce of gold produced, net of
by-product credits, in the first quarter of 2022 was $416 and in
line with the 2022 guidance range for Manitoba.
Supply Chain and Cost
Inflation
The company continues to experience higher
operating costs as a result of higher input prices for many
services and consumables, such as power, fuel and grinding media,
due to global supply chain disruptions. Hudbay also continues to
face intermittent operational labour and travel disruptions with
periodic waves of COVID-19 cases. However, these external
challenges are effectively being managed and Hudbay has been able
to maintain steady operations during the first quarter while
continuing to track in line with 2022 unit operating cost
guidance.
Copper World Preliminary Economic
Assessment Nearing Completion
The initial technical studies for Copper World
have been completed and the results are being incorporated into a
Preliminary Economic Assessment (“PEA”) contemplating the
development of the Copper World deposits in conjunction with an
alternative plan for the Rosemont deposit to capitalize on regional
synergies. The PEA is expected to incorporate a two-phase mine plan
with the first phase reflecting a standalone operation utilizing
Hudbay’s private land for processing infrastructure and
contemplating mining portions of Copper World and Rosemont located
on patented mining claims. The first phase is designed as an
economically viable standalone plan, requiring only state and local
permits and is expected to reflect an approximate 15-year mine
life. The second phase of the mine plan is expected to extend
the mine life and incorporate an expansion onto federal lands to
mine the entire Rosemont and Copper World deposits. The second
phase of the mine plan would be subject to the federal NEPA
permitting process. Hudbay expects the PEA to demonstrate positive
economics for this low-cost, long-life copper project and the
company is on track to publish the results in a NI 43-101 Technical
Report in the second quarter of 2022.
In April, Hudbay commenced early site works at
Copper World with initial grading and clearing activities taking
place on the company’s private land. The company has also increased
the number of drill rigs at site to seven to conduct infill
drilling and to support future feasibility studies.
Rosemont / Copper World Litigation
Update
In April, two groups of project opponents
provided separate notices of their intent to bring citizen suits
against Rosemont under the Clean Water Act. In each case, project
opponents have alleged that Copper World contains jurisdictional
waters of the United States (“WOTUS”) and that Rosemont requires a
Section 404 Clean Water Act permit to advance the project. The Army
Corps of Engineers has never determined that there are WOTUS on the
site and Hudbay has independently concluded that none of the dry
washes in the area are WOTUS.
In addition to the citizen suits under the Clean
Water Act, the same groups subsequently filed motions for a
preliminary injunction in the two lawsuits challenging the 404
permit for the Rosemont project. These lawsuits had been stayed
following the suspension of the 404 permit in 2019. Hudbay is in
the process of relinquishing the suspended 404 Permit and has a
filed a motion to dismiss these cases as moot on that basis.
Hudbay continues to await a decision from the
U.S. Court of Appeals for the Ninth Circuit relating to the
District Court’s 2019 ruling to vacate the final record of decision
(“FROD”) in respect of the Rosemont project. The FROD was issued by
the U.S. Forest Service and is based upon a standalone development
plan for the Rosemont project, as set forth in Hudbay’s 2017
feasibility study.
Mineral Reserve and Resource Growth at
Constancia and Snow Lake
Hudbay provided its annual mineral reserve and
resource update on March 28, 2022. In Peru, mine planning gains and
economic re-evaluations have resulted in additional mineral
reserves at Constancia which have largely offset 2021 mining
depletion. Current mineral reserve estimates at Constancia total
521 million tonnes at 0.31% copper with over 1.6 million tonnes of
contained copper. As a result, Constancia’s expected mine life has
been extended one year to 2038. The inferred mineral resources have
also increased in 2022 due to the inclusion of the Constancia Norte
underground mineral resource estimates.
In 2021, a positive scoping study was completed,
which resulted in an inferred mineral resource estimate of 6.5
million tonnes at 1.2% copper in two high grade skarn lenses
located below the open pit in the Constancia Norte area. The study
concluded these two lenses could be mined by underground methods
starting in 2029 to supplement the open pit production. The company
intends to conduct infill drilling and an internal pre-feasibility
study in hopes of converting the underground mineral resources to
mineral reserves for inclusion in the mine plan for the Constancia
operations.
As a result of exploration success in Manitoba
in 2021, additional mineral reserves were identified at Lalor and
the 1901 deposit, which are expected to extend the mine life of the
Snow Lake operations by one year until 2038, maintaining the
17-year mine life. Resource to reserve conversion has more than
offset 2021 mining depletion with a net gain for all metals,
including an additional 218,000 ounces of gold contained in
reserves after adjusting for 2021 mining depletion.
Inferred mineral resources at Lalor and 1901
increased by 1.1 million tonnes despite delays in underground drill
programs caused by COVID-19 related restrictions. This increases
the total inferred mineral resources at Lalor and 1901 to 8.1
million tonnes. These inferred mineral resources have the potential
to maintain the 5,300 tonnes per day production level in Snow Lake
beyond 2028 and further extend the mine life.
Other Exploration Updates
Peru Regional Exploration
Hudbay controls a large, contiguous block of
mineral rights with the potential to hold mineable deposits within
trucking distance of the Constancia processing facility, including
the past producing Caballito property and the highly prospective
Maria Reyna and Kusiorcco properties. Exploration agreement
discussions with the communities of Uchucarcco and Anahuichi on the
Maria Reyna, Kusiorcco and Caballito properties are in
progress.
Drilling continues at the Llaguen copper
porphyry target in northern Peru with a total of 9,250 metres in 21
holes completed to-date. Assays have been received for eight holes
and all holes have intersected mineralization. Based on the
positive results from the initial drilling, a second phase of
drilling has been initiated aimed at defining an initial inferred
mineral resource estimate for Llaguen in the third quarter of
2022.
Snow Lake Regional Exploration
The company has been actively conducting surface
and underground winter drilling activities in the Snow Lake area,
primarily focused on the copper-gold rich feeder zone at the 1901
deposit, the drilling gap between 1901 and lens 17 at Lalor, and a
high-priority geophysical target located immediately north of
Lalor. In addition, Hudbay continues to compile results from
ongoing infill drilling programs at Lalor and 1901.
Arizona Regional Exploration
In addition to infill drilling to support
feasibility studies at Copper World, Hudbay continues to test
regional exploration targets. There remain several opportunities to
further extend economic mineralization within the private land
limits at Copper World and Rosemont, including to the north and
south of Bolsa through infill drilling to bridge the gaps.
Flin Flon Tailings Reprocessing Opportunity
Hudbay is exploring the concept to potentially
reprocess the Flin Flon tailings in the future. In early January
2022, the company commenced a confirmatory drill program on the
tailings facility in Flin Flon to support the evaluation of the
tailings reprocessing opportunity. This opportunity could utilize
the Flin Flon concentrator, with modifications, after the closure
of the 777 mine, creating operating and economic benefits in
northern Manitoba and Saskatchewan. It could also provide the
opportunity to redesign the closure plans, increase metal
production, defer or reduce certain closure costs and reduce the
environmental impacts of the tailings facility.
Website Links
Hudbay:
www.hudbay.com
Management’s Discussion and Analysis:
http://www.hudbayminerals.com/files/doc_financials/2022/Q1/MDA221.pdf
Financial Statements:
http://www.hudbayminerals.com/files/doc_financials/2022/Q1/FS221.pdf
Conference Call and Webcast
Date: |
Tuesday, May 10, 2022 |
Time: |
8:30 a.m. ET |
Webcast: |
www.hudbay.com |
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 company’s material mineral projects has
been approved by Olivier Tavchandjian, P. Geo, Vice President,
Exploration and Technical Services. Mr. Tavchandjian is a qualified
person 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, cash cost and sustaining cash cost 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.
Management believes adjusted net earnings (loss)
and adjusted net earnings (loss) per share provides an alternate
measure of the company’s performance for the current period and
gives insight into 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. Hudbay provides
adjusted EBITDA to help users analyze the company’s results and to
provide additional information about its 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 are shown
because the company believes they help investors and management
assess the performance of its operations, including the margin
generated by the operations and the company. Cash cost and
sustaining cash cost per ounce of gold produced are shown because
the company believes they help investors and management assess the
performance of its Manitoba operations. Combined unit cost is shown
because Hudbay believes it helps investors and management assess
the company’s cost structure and margins that are not impacted by
variability in by-product commodity prices.
During 2021, there were non-recurring
adjustments for Manitoba operations, including severance, past
service pension costs, write-downs of certain machinery and
equipment, and inventory supplies write-downs as well as non-cash
impairment charges related to an updated Flin Flon closure plan and
lower long term discount rates in the fourth quarter, none of which
management believes are indicative of ongoing operating performance
and have therefore been excluded from the calculations of adjusted
net earnings (loss) and adjusted EBITDA.
Cash cost and sustaining cash cost per pound of
zinc produced was a previously disclosed non-IFRS measure, most
recently published in the company’s MD&A for the year ended
December 31, 2021, dated February 23, 2022. With the planned
closure of 777 mine and Flin Flon operations, including the zinc
plant, in the second quarter of 2022, the production profile of
Manitoba has shifted from zinc to gold and therefore the company
has ceased providing this measure on a go forward basis.
The following tables provide detailed
reconciliations to the most comparable IFRS measures.
Adjusted Net Earnings (Loss) Reconciliation
|
Three Months Ended |
(in $ millions) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Profit (loss) for the period |
63.8 |
|
(10.5 |
) |
(60.1 |
) |
Tax expense (recovery) |
25.0 |
|
10.3 |
|
(9.5 |
) |
Profit
(loss) before tax |
88.8 |
|
(0.2 |
) |
(69.6 |
) |
Adjusting
items: |
|
|
|
Mark-to-market adjustments |
10.5 |
|
13.3 |
|
40.8 |
|
Peru
inventory reversal |
(0.5 |
) |
— |
|
(0.7 |
) |
Variable
consideration adjustment - stream revenue and accretion |
(5.8 |
) |
— |
|
(1.0 |
) |
Foreign
exchange loss |
1.5 |
|
1.1 |
|
1.7 |
|
Environmental obligation adjustments |
(79.9 |
) |
— |
|
— |
|
|
|
|
|
Restructuring charges – Manitoba1 |
0.7 |
|
3.4 |
|
— |
|
Evaluation expenses |
7.0 |
|
— |
|
— |
|
Impairment - environmental obligation |
— |
|
46.2 |
|
— |
|
Write-down of unamortized transaction costs |
— |
|
— |
|
2.5 |
|
Premium
paid on redemption of notes |
— |
|
— |
|
22.9 |
|
Past
service pension cost |
— |
|
0.7 |
|
— |
|
Loss on disposal of plant and equipment - Manitoba |
— |
|
2.4 |
|
— |
|
Adjusted
earnings (loss) before income taxes |
22.3 |
|
66.9 |
|
(3.4 |
) |
Tax
(expense) recovery |
(25.0 |
) |
(10.3 |
) |
9.5 |
|
Tax
impact of adjusting items1 |
7.9 |
|
(23.9 |
) |
(22.2 |
) |
Adjusted net earnings (loss) |
5.2 |
|
32.7 |
|
(16.1 |
) |
Adjusted net earnings (loss) ($/share) |
0.02 |
|
0.13 |
|
(0.06 |
) |
Basic weighted average number of common shares outstanding
(millions) |
261.7 |
|
261.6 |
|
261.3 |
|
1 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) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
(Loss) profit for the period |
63.8 |
|
(10.5 |
) |
(60.1 |
) |
Add back: Tax expense (recovery) |
25.0 |
|
10.3 |
|
9.5 |
|
Add back: Net finance expense |
36.7 |
|
38.6 |
|
108.5 |
|
Add back: Other expenses |
2.0 |
|
16.1 |
|
1.1 |
|
|
|
|
|
Add back: Evaluation expenses |
7.0 |
|
— |
|
— |
|
Add back: Depreciation and amortization |
81.1 |
|
89.9 |
|
82.7 |
|
Add back: Environmental obligation adjustments |
(79.9 |
) |
— |
|
(4.4 |
) |
Less: Amortization of deferred revenue and variable
consideration adjustment |
(28.2 |
) |
(17.3 |
) |
(15.7 |
) |
|
107.5 |
|
127.1 |
|
103.1 |
|
Adjusting items (pre-tax): |
|
|
|
Peru inventory reversal |
(0.5 |
) |
— |
|
(0.7 |
) |
Impairment - environmental obligation |
— |
|
46.2 |
|
— |
|
Past service pension cost |
— |
|
0.7 |
|
— |
|
Share-based compensation expenses1 |
3.2 |
|
6.3 |
|
1.8 |
|
Adjusted EBITDA |
110.2 |
|
180.3 |
|
104.2 |
|
1 Share-based compensation expenses reflected in
cost of sales and selling and administrative expenses.
Net Debt Reconciliation
(in $ thousands) |
|
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Total long-term debt |
1,181,119 |
1,180,274 |
|
1,180,798 |
Cash and cash equivalents |
213,359 |
(270,989 |
) |
310,564 |
Net debt |
967,760 |
909,285 |
|
870,234 |
Copper Cash Cost Reconciliation
Consolidated |
Three Months Ended |
Net pounds of copper produced |
|
|
|
(in thousands) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Peru |
42,254 |
50,389 |
39,302 |
Manitoba |
12,205 |
11,777 |
14,828 |
Net pounds of copper produced |
54,459 |
62,166 |
54,130 |
Consolidated |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Cash cost per pound of copper produced |
$000s |
$/lb1 |
$000s |
$/lb1 |
$000s |
$/lb1 |
Cash cost, before by-product credits |
242,058 |
|
4.45 |
|
232,224 |
|
3.73 |
|
209,866 |
|
3.88 |
|
By-product credits |
(181,673 |
) |
(3.34 |
) |
(200,306 |
) |
(3.22 |
) |
(153,515 |
) |
(2.84 |
) |
Cash cost, net of by-product credits |
60,385 |
|
1.11 |
|
31,918 |
|
0.51 |
|
56,351 |
|
1.04 |
|
1 Per pound of copper produced.
Consolidated |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Supplementary cash cost information |
$000s |
$/lb 1 |
$000s |
$/lb 1 |
$000s |
$/lb 1 |
By-product credits2: |
|
|
|
|
|
|
Zinc |
67,129 |
|
1.23 |
74,585 |
|
1.20 |
82,315 |
|
1.52 |
Gold 3 |
84,174 |
|
1.55 |
99,728 |
|
1.60 |
45,134 |
|
0.83 |
Silver 3 |
18,639 |
|
0.34 |
14,853 |
|
0.24 |
15,135 |
|
0.28 |
Molybdenum & other |
11,731 |
|
0.22 |
11,140 |
|
0.18 |
10,931 |
|
0.20 |
Total
by-product credits |
181,673 |
|
3.34 |
200,306 |
|
3.22 |
153,515 |
|
2.84 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash
cost, net of by-product credits |
60,385 |
|
|
31,918 |
|
|
56,351 |
|
|
By-product credits |
181,673 |
|
|
200,306 |
|
|
153,515 |
|
|
Treatment
and refining charges |
(12,083 |
) |
|
(13,721 |
) |
|
(11,936 |
) |
|
Share-based
compensation
expense |
448 |
|
|
744 |
|
|
184 |
|
|
Inventory
adjustments |
(461 |
) |
|
— |
|
|
(723 |
) |
|
Past
service pension cost |
— |
|
|
737 |
|
|
|
|
Change in
product inventory |
(20,920 |
) |
|
(16,247 |
) |
|
(22,864 |
) |
|
Royalties |
3,218 |
|
|
3,594 |
|
|
3,903 |
|
|
Depreciation and amortization4 |
81,091 |
|
|
89,927 |
|
|
82,682 |
|
|
Cost of sales5 |
293,351 |
|
|
297,258 |
|
|
261,112 |
|
|
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 March 31, 2022 the variable consideration adjustments
amounted to income of $3,245. For the three months ended December
31, 2021 - nil. For the three months ended March 31, 2021 - income
of $1,617.4 Depreciation is based on concentrate sold.5 As per IFRS
financial statements.
Peru |
Three Months Ended |
(in thousands) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Net pounds of copper produced1 |
42,254 |
50,389 |
39,302 |
1 Contained copper in concentrate.
Peru |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Cash cost per pound of copper produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Mining |
28,402 |
|
0.67 |
|
27,756 |
|
0.55 |
|
21,539 |
|
0.55 |
|
Milling |
47,655 |
|
1.13 |
|
40,121 |
|
0.80 |
|
43,320 |
|
1.10 |
|
G&A |
16,100 |
|
0.38 |
|
18,351 |
|
0.36 |
|
14,420 |
|
0.37 |
|
Onsite
costs |
92,157 |
|
2.18 |
|
86,228 |
|
1.71 |
|
79,279 |
|
2.02 |
|
Treatment
& refining |
7,585 |
|
0.18 |
|
8,636 |
|
0.17 |
|
6,614 |
|
0.17 |
|
Freight & other |
9,477 |
|
0.22 |
|
11,609 |
|
0.23 |
|
8,688 |
|
0.22 |
|
Cash
cost, before by-product credits |
109,219 |
|
2.58 |
|
106,473 |
|
2.11 |
|
94,581 |
|
2.41 |
|
By-product credits |
(43,997 |
) |
(1.04 |
) |
(41,900 |
) |
(0.83 |
) |
(22,864 |
) |
(0.58 |
) |
Cash cost, net of by-product credits |
65,222 |
|
1.54 |
|
64,573 |
|
1.28 |
|
71,717 |
|
1.82 |
|
Peru |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Supplementary cash cost information |
$000s |
$/lb1 |
$000s |
$/lb1 |
$000s |
$/lb1 |
By-product credits2: |
|
|
|
|
|
|
Gold3 |
21,712 |
|
0.51 |
24,325 |
|
0.49 |
4,155 |
|
0.11 |
Silver3 |
12,991 |
|
0.31 |
7,793 |
|
0.15 |
9,337 |
|
0.24 |
Molybdenum |
9,294 |
|
0.22 |
9,782 |
|
0.19 |
9,372 |
|
0.24 |
Total
by-product credits |
43,997 |
|
1.04 |
41,900 |
|
0.83 |
22,864 |
|
0.58 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash cost, net of
by-product credits |
65,222 |
|
|
64,573 |
|
|
71,717 |
|
|
By-product credits |
43,997 |
|
|
41,900 |
|
|
22,864 |
|
|
Treatment and refining
charges |
(7,585 |
) |
|
(8,636 |
) |
|
(6,614 |
) |
|
Inventory
adjustments |
(461 |
) |
|
— |
|
|
(723 |
) |
|
Share-based compensation
expenses |
98 |
|
|
145 |
|
|
19 |
|
|
Change in product
inventory |
(4,772 |
) |
|
(4,507 |
) |
|
(10,575 |
) |
|
Royalties |
854 |
|
|
762 |
|
|
1,165 |
|
|
Depreciation and amortization4 |
48,362 |
|
|
54,078 |
|
|
40,435 |
|
|
Cost of sales5 |
145,715 |
|
|
148,315 |
|
|
118,288 |
|
|
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) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Net pounds of copper produced1 |
12,205 |
11,777 |
14,828 |
1 Contained copper in concentrate.
Manitoba |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Cash cost per pound of copper produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Mining |
59,433 |
|
4.87 |
|
58,891 |
|
5.01 |
|
54,420 |
|
3.67 |
|
Milling |
21,509 |
|
1.76 |
|
22,193 |
|
1.88 |
|
12,662 |
|
0.85 |
|
Refining
(Zinc) |
18,376 |
|
1.51 |
|
19,008 |
|
1.61 |
|
19,607 |
|
1.32 |
|
G&A |
22,893 |
|
1.88 |
|
13,746 |
|
1.17 |
|
15,787 |
|
1.06 |
|
Onsite
costs |
122,211 |
|
10.01 |
|
113,838 |
|
9.67 |
|
102,476 |
|
6.91 |
|
Treatment
& refining |
4,498 |
|
0.37 |
|
5,085 |
|
0.43 |
|
5,322 |
|
0.36 |
|
Freight & other |
6,130 |
|
0.50 |
|
6,828 |
|
0.58 |
|
7,487 |
|
0.50 |
|
Cash
cost, before by-product credits |
132,839 |
|
10.88 |
|
125,751 |
|
10.68 |
|
115,285 |
|
7.77 |
|
By-product credits |
(137,676 |
) |
(11.28 |
) |
(158,406 |
) |
(13.45 |
) |
(130,651 |
) |
(8.81 |
) |
Cash cost, net of by-product credits |
(4,837 |
) |
(0.40 |
) |
(32,655 |
) |
(2.77 |
) |
(15,366 |
) |
(1.04 |
) |
Manitoba |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Supplementary cash cost information |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
By-product credits2: |
|
|
|
|
|
|
Zinc |
67,129 |
|
5.50 |
74,585 |
|
6.33 |
77,593 |
|
6.15 |
Gold3 |
62,462 |
|
5.12 |
75,403 |
|
6.40 |
55,616 |
|
4.41 |
Silver3 |
5,648 |
|
0.46 |
7,060 |
|
0.60 |
7,040 |
|
0.56 |
Other |
2,437 |
|
0.20 |
1,358 |
|
0.12 |
1,595 |
|
0.13 |
Total
by-product credits |
137,676 |
|
11.28 |
158,406 |
|
13.45 |
141,844 |
|
11.24 |
Reconciliation to
IFRS: |
|
|
|
|
|
|
Cash cost, net of
by-product credits |
(4,837 |
) |
|
(32,655 |
) |
|
(15,366 |
) |
|
By-product credits |
137,676 |
|
|
158,406 |
|
|
130,651 |
|
|
Treatment and refining
charges |
(4,498 |
) |
|
(5,085 |
) |
|
(5,322 |
) |
|
Past service pension
cost |
— |
|
|
737 |
|
|
— |
|
|
Share-based compensation
expenses |
350 |
|
|
599 |
|
|
165 |
|
|
Change in product
inventory |
(16,148 |
) |
|
(11,740 |
) |
|
(12,289 |
) |
|
Royalties |
2,364 |
|
|
2,832 |
|
|
2,738 |
|
|
Depreciation and amortization4 |
32,729 |
|
|
35,849 |
|
|
42,247 |
|
|
Cost of sales5 |
147,636 |
|
|
148,943 |
|
|
142,824 |
|
|
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 |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
All-in sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash cost, net of by-product credits |
60,385 |
|
1.11 |
31,918 |
|
0.51 |
56,351 |
|
1.04 |
Cash
sustaining capital expenditures |
60,963 |
|
1.12 |
77,539 |
|
1.25 |
56,456 |
|
1.04 |
Capitalized exploration |
— |
|
— |
8,000 |
|
0.13 |
— |
|
— |
Royalties |
3,218 |
|
0.06 |
3,594 |
|
0.06 |
3,903 |
|
0.07 |
Sustaining cash cost, net of by-product
credits |
124,566 |
|
2.29 |
121,051 |
|
1.95 |
116,170 |
|
2.16 |
Corporate
selling and administrative expenses & regional costs |
13,060 |
|
0.24 |
14,729 |
|
0.24 |
10,765 |
|
0.20 |
Accretion and amortization of decommissioning and community
agreements1 |
721 |
|
0.01 |
894 |
|
0.01 |
579 |
|
0.01 |
All-in sustaining cash cost, net of by-product
credits |
138,347 |
|
2.54 |
136,674 |
|
2.20 |
128,054 |
|
2.37 |
Reconciliation to property, plant and equipment additions: |
|
|
|
|
|
|
Property, plant and equipment additions |
39,399 |
|
|
91,432 |
|
|
82,378 |
|
|
Capitalized stripping net additions |
24,146 |
|
|
19,201 |
|
|
18,625 |
|
|
Total accrued capital additions |
63,545 |
|
|
110,633 |
|
|
101,003 |
|
|
Less other non-sustaining capital costs2 |
12,832 |
|
|
43,176 |
|
|
67,159 |
|
|
Total sustaining capital costs |
50,713 |
|
|
67,457 |
|
|
33,844 |
|
|
Right of use leased assets |
(7,772 |
) |
|
(6,714 |
) |
|
(1,321 |
) |
|
Capitalized lease cash payments - operating sites |
9,259 |
|
|
9,099 |
|
|
9,188 |
|
|
Community agreement cash payments |
3,772 |
|
|
1,266 |
|
|
235 |
|
|
Accretion and amortization of decommissioning and restoration
obligations |
4,991 |
|
|
6,431 |
|
|
14,510 |
|
|
Cash sustaining capital expenditures |
60,963 |
|
|
77.539 |
|
|
56,456 |
|
|
|
|
|
|
|
|
|
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.
Peru |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash
cost, net of by-product credits |
65,222 |
1.54 |
64,573 |
1.28 |
71,717 |
1.82 |
Cash
sustaining capital expenditures |
30,039 |
0.71 |
50,423 |
1.00 |
19,802 |
0.50 |
Capitalized exploration1 |
— |
0.00 |
8,000 |
0.16 |
— |
0.00 |
Royalties |
854 |
0.02 |
762 |
0.02 |
1,165 |
0.03 |
Sustaining cash cost per pound of copper
produced |
96,115 |
2.27 |
123,758 |
2.46 |
92,684 |
2.36 |
1 Only includes exploration costs incurred for locations near to
existing mine operations.
Manitoba |
Three Months Ended |
|
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Sustaining cash cost per pound of copper
produced |
$000s |
$/lb |
$000s |
$/lb |
$000s |
$/lb |
Cash cost, net of by-product credits |
(4,837 |
) |
(0.40 |
) |
(32,655 |
) |
(2.77 |
) |
(15,366 |
) |
(1.04 |
) |
Cash
sustaining capital expenditures |
30,924 |
|
2.53 |
|
27,116 |
|
2.30 |
|
36,654 |
|
2.47 |
|
Royalties |
2,364 |
|
0.19 |
|
2,832 |
|
0.24 |
|
2,738 |
|
0.18 |
|
Sustaining cash cost per pound of copper
produced |
28,451 |
|
2.33 |
|
(2,707 |
) |
(0.23 |
) |
24,026 |
|
1.62 |
|
Manitoba Gold Cash Cost and Sustaining Cash Cost
Reconciliation
Manitoba |
Three Months Ended |
|
Mar. 31, 2022 |
Net ounces of gold produced |
43,167 |
Manitoba |
|
|
|
|
Three Months Ended |
|
|
|
|
|
Mar. 31, 2022 |
Cash cost per ounce of gold produced |
|
$000s |
$/oz |
Cash cost, net of by-product credits |
|
|
|
|
132,839 |
|
3,077 |
|
By-product credits |
|
|
|
|
(114,874 |
) |
(2,661 |
) |
Gold cash cost, net of by-product credits |
|
|
|
|
17,965 |
|
416 |
|
Manitoba |
|
|
|
|
Three Months Ended |
|
|
|
|
|
Mar. 31, 2021 |
Supplementary cash cost information |
|
|
|
|
$000s |
$/oz1 |
By-product credits2: |
|
|
|
|
|
|
Copper |
|
|
|
|
39,660 |
|
919 |
Zinc |
|
|
|
|
67,129 |
|
1,555 |
Silver3 |
|
|
|
|
5,648 |
|
131 |
Other |
|
|
|
|
2,437 |
|
56 |
Total
by-product credits |
|
|
|
|
114,874 |
|
2,661 |
Reconciliation to IFRS: |
|
|
|
|
|
|
Cash
cost, net of by-product credits |
|
|
|
|
17,965 |
|
|
Treatment
and refining charges |
|
|
|
|
114,874 |
|
|
Share-based compensation expenses |
|
|
|
|
(4,498 |
) |
|
Change in
product inventory |
|
|
|
|
350 |
|
|
Royalties |
|
|
|
|
(16,148 |
) |
|
Depreciation and amortization4 |
|
|
|
|
2,364 |
|
|
Cost of sales5 |
|
|
|
|
32,729 |
|
|
1 Per ounce of gold produced.2 By-product
credits are computed as revenue per financial statements,
amortization of deferred revenue and pricing and volume
adjustments. For more information, please see the realized price
reconciliation table in the Q1 2022 Management Discussion and
Analysis posted on hudbayminerals.com3 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 |
|
|
|
Mar. 31, 2022 |
Sustaining cash cost per ounce of gold
produced |
|
|
|
|
$000s |
$/oz |
Gold cash
cost, net of by-product credits |
|
|
|
|
17,965 |
416 |
Cash
sustaining capital expenditures |
|
|
|
|
30,924 |
716 |
Royalties |
|
|
|
|
2,364 |
55 |
Gold sustaining cash cost, net of by-product
credits |
|
|
|
|
51,253 |
1,187 |
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 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Mining |
28,402 |
|
27,756 |
|
21,539 |
|
Milling |
47,655 |
|
40,121 |
|
43,320 |
|
G&A
1 |
16,100 |
|
18,351 |
|
14,420 |
|
Other G&A2 |
(571 |
) |
(1,937 |
) |
19 |
|
|
91,586 |
|
84.291 |
|
79,298 |
|
Less: Covid related costs |
2,321 |
|
4,041 |
|
4,601 |
|
Unit Cost |
91,586 |
|
80,250 |
|
79,298 |
|
Tonnes
ore milled |
7,214 |
|
8,049 |
|
6,363 |
|
Combined unit cost per tonne |
12.37 |
|
9.96 |
|
11.74 |
|
Reconciliation to IFRS: |
|
|
|
Unit
cost |
89,265 |
|
80,250 |
|
74,697 |
|
Freight
& other |
9,477 |
|
11,609 |
|
8,688 |
|
Covid
related costs |
2,321 |
|
4,041 |
|
4,601 |
|
Other
G&A |
571 |
|
1,937 |
|
(19 |
) |
Share-based compensation expenses |
98 |
|
145 |
|
19 |
|
Inventory
adjustments |
(461 |
) |
— |
|
(723 |
) |
Change in
product inventory |
(4,772 |
) |
(4,507 |
) |
(10,575 |
) |
Royalties |
854 |
|
762 |
|
1,165 |
|
Depreciation and amortization |
48,362 |
|
54,078 |
|
40,435 |
|
Cost of sales3 |
145,715 |
|
148,315 |
|
118,288 |
|
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 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Mining |
59,433 |
|
58,891 |
|
54,420 |
|
Milling |
21,509 |
|
22,193 |
|
12,662 |
|
G&A 1 |
22,893 |
|
13,746 |
|
15,787 |
|
Less: G&A allocated to zinc metal production |
(13,407 |
) |
(3,762 |
) |
(3,818 |
) |
Unit cost |
90,428 |
|
91,068 |
|
76,872 |
|
USD/CAD implicit exchange rate |
1.27 |
|
1.26 |
|
1.27 |
|
Unit cost - C$ |
114,504 |
|
114,751 |
|
97,341 |
|
Tonnes ore milled |
651,333 |
|
682,292 |
|
644,730 |
|
Combined unit cost per tonne - C$ |
176 |
|
168 |
|
151 |
|
Reconciliation to IFRS: |
|
|
|
Unit cost |
90,428 |
|
91,068 |
|
76,872 |
|
Freight & other |
6,130 |
|
6,828 |
|
7,487 |
|
Refined (zinc) |
18,376 |
|
19,008 |
|
19,607 |
|
G&A allocated to zinc metal production |
13,407 |
|
3,762 |
|
3,818 |
|
Share-based compensation expenses |
350 |
|
599 |
|
165 |
|
Past service pension cost |
— |
|
737 |
|
— |
|
Change in product inventory |
(16,148 |
) |
(11,740 |
) |
(12,289 |
) |
Royalties |
2,364 |
|
2,832 |
|
2,738 |
|
Depreciation and amortization |
32,729 |
|
35,849 |
|
42,247 |
|
Cost of sales2 |
147,636 |
|
148,943 |
|
142,824 |
|
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, expectations regarding the impact of COVID-19
and inflationary pressures on the cost of operations, financial
condition and prospects, expectations regarding our cash balance
and liquidity for the remainder of the year, expectations regarding
future railcar availability and selling down excess inventory,
expectations regarding the preliminary economic assessment of the
Copper World project, including the timeline for completion,
positive results and a potential alternative development plan for
Rosemont, expectations regarding the litigation that has been
commenced against Copper World and ongoing litigation in respect of
Rosemont, expectations regarding the permitting requirements for
Copper World, expectations regarding the Snow Lake gold strategy,
including anticipated timelines for achieving target
throughput and recoveries at the New Britannia mill, increasing the
mining rate at Lalor to 5,300 tonnes per day and implementing the
Stall mill recovery improvement program, expectations regarding
the Flin Flon closure process and the transition of personnel
and equipment to Snow Lake, expectations regarding 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 despite COVID-19 related challenges;
- 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 cost guidance;
- no significant interruptions to operations due to COVID-19 or
social or political unrest in the regions Hudbay operates;
- a positive preliminary economic assessment in respect of Copper
World;
- the successful outcome of the Copper World and Rosemont
litigation proceedings;
- the ability to ramp-up the New Britannia mill to target
throughput and recoveries and achieve the 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 COVID-19
and its effect on our operations, financial condition, projects and
prospects, uncertainties related to the closure of the 777 mine and
the Flin Flon operations, 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 and the current
geopolitical environment, including future commodity prices,
currency and interest rate fluctuations, energy and consumable
prices, supply chain constraints and general cost escalation in the
current inflationary environment, uncertainties related to the
development and operation of our projects, risks related to the
preliminary economic assessment of Copper World, including its
effect on the current Rosemont mineral reserves and the potential
for it to trigger an indicator of impairment or impairment reversal
with respect to Rosemont, risks related to the ongoing Copper World
and Rosemont litigation processes and other legal challenges that
could affect the permitting timeline for Copper World or Rosemont,
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 our reserves, volatile financial markets
and interest rates that may affect our 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, our ability to comply with our pension and
other post-retirement obligations, our ability to abide by the
covenants in our debt instruments and other material contracts, tax
refunds, hedging transactions, as well as the risks discussed under
the heading “Financial Risk Management” in Hudbay’s Management’s
Discussion and Analysis for the period ended March 31, 2022 and
“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 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 BrûléVice President, Investor Relations(416)
814-4387candace.brule@hudbay.com
________________________i Adjusted net earnings and adjusted net
earnings per share; adjusted EBITDA; cash cost, sustaining cash
cost and all-in sustaining cash cost per pound of copper produced,
net of by-product credits; cash cost and sustaining cash cost per
ounce of gold produced, net of by-product credits; 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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