Hudbay Minerals(HBM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated adjusted EBITDA of $245 million in the second quarter, resulting in a record annual trailing twelve-month adjusted EBITDA of $996 million as of June 30 [10] - Net earnings were $0.30 per share, and adjusted net earnings were $0.19 per share in the second quarter after adjustments for non-cash gains [10] - Cash generated from operating activities increased to $260 million compared to the first quarter, driven by higher gross margins and positive working capital management [10] - Free cash flow for the quarter was $88 million, with over $400 million generated in the last twelve months [11] - The company ended the quarter with $626 million in cash and cash equivalents, and net debt reduced to $434 million, improving the leverage ratio to 0.4 times [11] Business Line Data and Key Metrics Changes - Consolidated copper production in the second quarter was 30,000 tons, and consolidated gold production was 56,000 ounces, with copper production in line with the first quarter [8] - Consolidated silver production was 815,000 ounces, and zinc production was 5,000 tons in the second quarter [9] - In Peru, copper production was 22,000 tons, with gold production of 7,000 ounces and silver production of 552,000 ounces [12][13] - Manitoba operations produced 43,000 ounces of gold, 1,600 tons of copper, 5,100 tons of zinc, and 198,000 ounces of silver, lower than the first quarter due to wildfire impacts [16] - British Columbia operations produced 6,600 tons of copper and 5,700 ounces of gold, with production expected to increase in the second half of the year [20] Market Data and Key Metrics Changes - The company reaffirmed its full-year consolidated production guidance for all metals, tracking well below its full-year consolidated cost guidance for 2025 [9] - The cost guidance range for 2025 was improved to $0.65 to $0.85 per pound, down from the original range of $0.80 to $1 per pound [9] Company Strategy and Development Direction - The company announced a minority joint venture agreement with Mitsubishi Corporation for the Copper World project, reducing funding requirements and enhancing financial strength [6][7] - The joint venture is expected to unlock significant value in the copper growth pipeline and establish a long-term strategic partnership [7][25] - The company aims to maintain a strong balance sheet while advancing high-return growth projects, including the Copper World project [12][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year production guidance despite challenges from wildfires and operational disruptions [19] - The current federal environment in the U.S. is viewed as constructive for project development, with bipartisan support for the Copper World project [48] - Management emphasized the importance of focusing on Phase one of the Copper World project before considering Phase two [48] Other Important Information - The company has committed over CAD 2 million in funding support to evacuated employees due to wildfires [15] - The Copper World project is expected to create over 1,000 jobs during the construction period and contribute significantly to U.S. taxes and the domestic copper supply chain [30][31] Q&A Session Summary Question: Will Mitsubishi have commercial off-take rights? - Yes, Mitsubishi will have rights to 30% off-take consistent with their ownership share [38] Question: Is there potential to bring forward the concentrate leach facility? - Yes, it is a possibility that will be studied in the feasibility study [39] Question: What is the strategic interest of Mitsubishi in the deal? - Mitsubishi's equity contribution significantly reduces Hudbay's capital requirement, allowing for a lower level of debt [41] Question: Any discussions with the U.S. Administration regarding Copper World Phase II? - Currently, the focus is entirely on Phase one, which is fully permitted [48] Question: Is there any major cost inflation expected for Copper World? - There may be modest increases in CapEx due to inflation, but higher copper prices are also expected [51] Question: What is the status of exploration programs in Manitoba and Peru? - Exploration in Manitoba has been paused due to wildfires, while in Peru, drilling will commence once the Consulta Previa process is completed [78]