Hudbay Minerals(US:HBM)2023-05-09 18:19Financial Data and Key Metrics Changes - In Q1 2023, consolidated copper production was 23,000 tonnes, a decrease compared to the previous quarter due to lower copper grades in Peru [28] - Consolidated copper cash costs improved to $0.85 per pound from $1.08 in the prior quarter, primarily due to lower mining and freight costs and higher byproduct credits [40] - First quarter operating cash flow before changes in non-working capital was $86 million and adjusted EBITDA was $102 million, a decline from the previous quarter due to lower copper and zinc sales volumes [56] Business Line Data and Key Metrics Changes - In Peru, Constancia produced 21,000 tonnes of copper, 11,000 ounces of gold, and 552,000 ounces of silver, with production levels lower than in Q4 2022 due to lower grades from stockpiles [31] - Manitoba operations included 36,000 ounces of gold, approximately 10,000 tonnes of zinc, 2,000 tonnes of copper, and 151,000 ounces of silver, with production of gold, zinc, and silver higher than in the previous quarter [46] - Consolidated gold production was 47,000 ounces, a decrease primarily due to lower gold grades in Peru, partially offset by higher throughput and recoveries in Snow Lake [39] Market Data and Key Metrics Changes - The company expects to achieve full year 2023 Peru production guidance with expected production to be higher in the second half of the year following a period of higher stripping activities in the Pampacancha pit [62] - Cash costs in Peru for Q1 were relatively unchanged from the prior quarter at $1.36 per pound, expected to decline with higher expected copper production later in the year [63] Company Strategy and Development Direction - The company is focused on generating positive cash flow and strong returns on invested capital in 2023, committed to deleveraging and disciplined capital allocation [42] - The acquisition of Copper Mountain is expected to enhance the scale of the business and geographically balance the portfolio, with a pro forma net asset value estimated to be 55% from North America and 45% from South America [50] - The company is pursuing brownfield expansions and greenfield development opportunities, particularly around the Constancia area [74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the stabilization of the political environment in Peru, which is expected to facilitate exploration permit processes [104] - The company is confident in its ability to navigate supply chain disruptions and maintain steady operations at Constancia [60] - Management anticipates stronger production levels in the second half of 2023, with significant initiatives underway to improve operational efficiency [28][62] Other Important Information - The company has committed to achieving net zero greenhouse gas emissions by 2050, with an interim target of a 50% reduction in Scope 1 and Scope 2 emissions by 2030 [10] - A new power purchase agreement for 100% renewable energy at Constancia is set to begin in January 2026, which is expected to contribute to cost savings [107] Q&A Session Summary Question: What is the target for reducing Peru exposure through the Copper Mountain acquisition? - Management confirmed that they are reducing exposure by increasing North American assets but still value their operations in Peru [102] Question: Can you elaborate on the renewable energy sources for Constancia starting in 2026? - The renewable energy contract will provide approximately 720 gigawatt hours a year, starting in 2026, with the current consumption being about 710 gigawatt hours [107] Question: Why are extraordinary measures being taken to protect cash flows in the second half of the year? - Management indicated that these measures are to ensure strong free cash flow generation and to meet deleveraging targets, especially in light of market volatility [112][134]