Hudbay Minerals(HBM) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2023, the company nearly doubled its copper equivalent production compared to Q2, with copper accounting for 65% of consolidated revenues and approximately 42,000 tons produced, a 93% increase from the previous quarter [3][30] - Consolidated cash costs for the quarter were $1.10 per pound, a significant improvement from the second quarter, driven by strong copper and gold production [19][31] - The company generated over$110 million in free cash flow during the quarter, primarily due to higher copper sales volumes [31][46] - Net debt was reduced to $1.13 billion, reflecting a$58 million decline, which improved the net debt to EBITDA ratio [47] Business Line Data and Key Metrics Changes - Peru operations produced 29,000 tons of copper and 41,000 ounces of gold in Q3, with cash costs at a record low of $0.83 per pound, a 61$670 per ounce, a 39% reduction from the previous quarter [34][71] - The Copper Mountain Mine produced 9.3 thousand tons of copper, 4.6 thousand ounces of gold, and 101 thousand ounces of silver, with cash costs at $2.67 per pound [72][74] Market Data and Key Metrics Changes - The company expects to achieve full-year production guidance for all metals, with gold production trending towards the lower end of guidance and copper and zinc production towards the upper end [35][29] - The company anticipates strong production in Q4, benefiting from higher grades and recoveries, particularly in Peru [22][30] Company Strategy and Development Direction - The company is focused on advancing its deleveraging efforts while maintaining disciplined capital spending, with total capital expenditures expected to be approximately$30 million lower than previous guidance [18][48] - The company is exploring potential partnerships and optimizing operations at Copper Mountain, with a focus on stabilizing and improving throughput [76][90] - The company has entered into agreements to consolidate land holdings in Snow Lake, aiming to find new deposits to extend the life of operations beyond 2038 [54][110] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position for continued cash flow generation and emphasized the importance of delivering on operational efficiencies and capital allocation [81][78] - The company highlighted the strong long-term fundamentals for copper, driven by global decarbonization initiatives, positioning itself to benefit from this outlook [110] Other Important Information - The company completed the Rockcliff acquisition, expanding land holdings in Snow Lake and consolidating ownership of the Talbot Copper Gold Deposit [17][109] - The pre-feasibility study for Phase 1 at Copper World indicates a simplified project design with an anticipated initial capital expenditure of 1.3 billion and significant annual EBITDA contributions [49][51] Q&A Session Summary Question: What is the current status of the Copper World JV process? - Management indicated that the process will kick off once permits are secured, which will significantly de-risk the project and enhance value for potential partners [4][100] Question: How much of the capital expenditure reduction is due to deferrals versus efficiencies? - Management stated that the capital savings are a combination of both deferrals and efficiencies, with 30 million in savings across various operations [93][94] Question: What are the plans for future optimizations in Snow Lake? - Management highlighted the potential for exploration and optimization in Snow Lake, focusing on increasing throughput and recovery rates at the New Britannia mill [120][121]