TORONTO, Feb. 23, 2024 (GLOBE NEWSWIRE) — Hudbay Minerals Inc. (“Hudbay” or the “company”) ((TSX, NYSE:HBM) today released its fourth quarter and full year 2023 financial results, and announced 2024 annual production and cost guidance. All amounts are in U.S. dollars, unless otherwise noted. All production and cost amounts reflect the Copper Mountain mine on a 100% basis, with Hudbay owning a 75% interest in the mine.
Delivering Record Fourth Quarter and Full Year Operating and Financial Results
Achieved record quarterly and annual revenue of $602.2 million and $1,690.0 million, respectively, with strong consolidated copper production of 45,450 tonnes and record consolidated gold production of 112,776 ounces in the fourth quarter from continued higher grades at the Pampacancha deposit in Peru and the Lalor mine in Manitoba and the contributions of the newly acquired Copper Mountain mine in British Columbia.
Delivered a significant increase in operating cash flow before change in non-cash working capital to $246.5 million in the fourth quarter, a 35% increase compared to $182.0 million in the third quarter, which was meaningfully higher than prior quarters.
Achieved 2023 consolidated production guidance for all metals. Full year 2023 copper production of 131,691 tonnes, gold production of 310,429 ounces and silver production of 3,575,234 ounces increased by 26%, 41% and 13%, respectively, compared to 2022.
Consolidated 2023 cash costi and sustaining cash costi were better than expected and significantly outperformed the 2023 guidance range. Full year 2023 consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, were $0.80 and $1.72, respectively, increasing by 7% and 17%, respectively, compared to 2022.
Consolidated cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter, were $0.16 and $1.09, respectively, improving by 85% and 42%, respectively, compared to the third quarter of 2023.
Peru operations benefited from continued higher grades at the Pampacancha satellite pit, resulting in 33,207 tonnes of copper production and 49,418 ounces of gold production in the fourth quarter. Full year copper production was within 2023 guidance ranges while gold production exceeded the top end of guidance. Peru cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter improved to $0.54, and full year cash costs significantly improved over 2022 levels and achieved the low end of the 2023 annual cost guidance range.
Manitoba operations produced 59,863 ounces of gold in the fourth quarter, a quarterly record as higher gold and copper grade zones were mined at Lalor and the New Britannia mill processed significantly higher amounts of gold ore. Full year gold production was well within the 2023 guidance range and exceeded recent expectations of being positioned at the lower end of the range. Manitoba cash cost per ounce of gold produced, net of by-product creditsi, was $434 during the fourth quarter and full year cash costs were within the 2023 annual guidance range.
British Columbia operations produced 8,508 tonnes of copper at a cash cost per pound of copper produced, net of by-product creditsi, of $2.67 in the fourth quarter. Full year production and cash costs were within Hudbay’s post-acquisition guidance ranges. Operational stabilization plans continue to be implemented at the Copper Mountain mine with a focus on opening additional mining faces, optimizing ore feed to the plant and improving plant reliability.
Fourth quarter net earnings and earnings per share were $33.5 million and $0.10, respectively. After adjusting for a non-cash loss of $34.0 million related to a quarterly revaluation of a closed site environmental reclamation provision and a non-cash revaluation loss of $9.0 million related to the gold prepayment liability, among other items, fourth quarter adjusted earningsi per share were $0.20.
Cash and cash equivalents increased by $4.6 million to $249.8 million during the fourth quarter due to strong operating cash flows bolstered by higher copper and gold prices and sales volumes enabling a $94.5 million reduction in net debti during the quarter.
Strong Operating Performance Driving Free Cash Flow Generation with Continued Financial Discipline
Executed on planned higher production levels and achieved continued operating and capital cost efficiencies to generate significant free cash flow in the fourth quarter.
Achieved adjusted EBITDAi of $274.4 million in the fourth quarter, the highest quarterly level over the last five years and a 44% increase from the previous recent high in the third quarter of 2023.
Completed $90 million in debt repayments during the fourth quarter with a $30 million net reduction in the company’s revolving credit facility balance and a $59.7 million redemption of the remaining Copper Mountain bonds, well ahead of the 2026 maturity to increase financial flexibility and lower financing costs. Deleveraging efforts continued into the first quarter of 2024 with an additional $10 million repayment of the company’s revolving credit facility balance in January 2024.
Increased cash and total liquidity by $34.1 million to $573.7 million compared to the end of the third quarter. Net debti reduced to approximately $1,038 million during the fourth quarter, which together with higher levels of adjusted EBITDA, improved the net debt to adjusted EBITDA ratioi to 1.6x compared to 2.0x at the end of 2022.
Delivered annual discretionary spending reduction targets for 2023 with lower growth capital and exploration expenditures compared to 2022. As a result of a continued focus on discretionary spending reductions, total capital expenditures for 2023 (excluding Copper Mountain) of approximately $243 million were $57 million lower than original guidance levels, a further decrease from the $30 million in reductions announced in the third quarter.
Executing on Growth Initiatives
Post-acquisition plans to stabilize the Copper Mountain operations are underway with a focus on mining fleet ramp-up activities, accelerated stripping and increasing mill reliability. Achieved the targeted $10 million in annualized corporate synergies as of January 2024.
Released a NI 43-101 technical report for the Copper Mountain mine in December 2023, which contemplates average annual copper production of 46,500 tonnes in the first five years, 45,000 tonnes in the first ten years and 37,000 tonnes over the 21-year mine life. Average cash costs and sustaining cash costs over the mine life are expected to be $1.84 and $2.53 per pound of copperi, respectively. Several opportunities to further increase production, improve costs and extend mine life are being evaluated for future mine plans.
Achieved record copper recoveries of 87.4% at the Constancia mill in the fourth quarter of 2023 as a result of the successful completion of the recovery improvement program in the second quarter, on time and on budget.
Achieved higher copper recoveries above 90% and gold recoveries above 65% at the Stall mill in the second half of 2023 because of the successful ramp up of the Stall mill recovery improvement project in the second quarter, on time and on budget.
The New Britannia mill achieved record throughput levels averaging 1,650 tonnes per day in 2023 and 1,800 tonnes per day in the fourth quarter, exceeding its original design capacity of 1,500 tonnes per day due to the successful implementation of process improvement initiatives.
Commenced largest annual exploration program in Snow Lake consisting of geophysical surveys and drill campaigns testing the newly acquired Cook Lake claims, former Rockcliff properties and near-mine exploration at Lalor.
Advancing a development and exploration drift at the 1901 deposit in Snow Lake, located within 1,000 metres from the underground ramp access to the Lalor mine, with a focus on confirming the optimal mining method for the base metal and gold lenses and converting the inferred mineral resources in the gold lenses to mineral reserves.
Continuing to evaluate the Flin Flon tailings reprocessing opportunity through advancing metallurgical test work studies and analyzing metallurgical technologies.
“We had a strong end to the year with increased copper production, record gold production and record financial performance in the fourth quarter, resulting in the successful achievement of our annual guidance metrics,” said Peter Kukielski, President and Chief Executive Officer. “2023 was a year of execution and delivery as we realized the higher grades in Peru, achieved record gold production in Manitoba and enhanced our operating base with the addition of the Copper Mountain mine. We continued to demonstrate financial discipline in 2023 through reduced discretionary spending to drive free cash flow generation and debt reduction. These 2023 achievements are a testament to our outstanding team, which continues to deliver the plan while always operating safely and efficiently. Our commitment to continued financial discipline, together with our resilient operating platform, will allow us to prudently advance and unlock value from our leading organic pipeline of brownfield expansion and greenfield exploration and development opportunities.”
2024 Annual Guidance and Outlook
Consolidated copper production is forecast to increase by 19% to 156,500 tonnesii in 2024, compared to 2023, with continued higher grades in Peru and a full year of British Columbia production.
Consolidated gold production is forecast to decrease slightly to 291,000 ouncesii in 2024, compared to 2023, due to higher than planned gold grades being mined in Peru in the fourth quarter of 2023 and a deferral of high grade gold zones in Peru to 2025. Total gold production in Peru over the 2023 to 2025 period is expected to be higher than previous guidance levelsii.
Consolidated cash cost, net of by-product creditsi, in 2024 is expected to be within a range of $1.05 and $1.25 per pound of copper, higher than 2023 as a result of lower gold by-product credits and a full year of contributions from British Columbia.
Total capital expenditures are expected to be $335 million in 2024, reflecting lower expenditures in Peru, Manitoba and Arizona, offset by higher expenditures in British Columbia associated with accelerated stripping to access higher grades and a reclassification of costs from operating to capitalized stripping versus the recent technical report.
Exploration expenditures are expected to increase in 2024 as the company executes its largest-ever exploration program in the Snow Lake region, which is being partially funded by a critical minerals premium flow-through financing that was completed in the fourth quarter.
Continued focus on reducing discretionary spending in 2024 with total growth capital expenditures 23% lower than 2023.
Summary of Fourth Quarter Results
Consolidated copper production in the fourth quarter of 2023 was 45,450 tonnes, an 8% increase from the third quarter of 2023, while consolidated gold production was 112,776 ounces, an 11% increase, and consolidated silver production was 1,197,082 ounces, a 13% increase. The increases in production were primarily due to continued high recoveries in Peru and Manitoba, mining of the high copper and gold grade zones at the Pampacancha deposit and higher gold and copper grade zones at Lalor, record throughput at the New Britannia gold mill, and incremental production from the Copper Mountain mine. Consolidated zinc production in the fourth quarter of 2023 decreased compared to the prior quarter primarily due to lower base metals throughput and lower zinc grades at Lalor, as planned.
Cash generated from operating activities in the fourth quarter of 2023 increased by 50% to $228.5 million compared to $151.9 million in the third quarter of 2023. Operating cash flow before change in non-cash working capital was a record $246.5 million, reflecting an increase of $64.5 million compared to the third quarter. The increase in operating cash flow before change in non-cash working capital was primarily the result of higher copper and gold sales volumes from mining the high copper and gold grade zones of the Pampacancha deposit and higher gold and copper grade zones at Lalor and higher copper and gold metal prices.
Net earnings and earnings per share in the fourth quarter of 2023 were $33.5 million and $0.10, respectively, compared to net earnings and earnings per share of $45.5 million and $0.13, respectively in the third quarter. The results were positively impacted by higher copper, gold and silver sales volumes as well as higher copper, gold and silver realized prices. This was partially offset by a non-cash loss of $34.0 million related to the quarterly revaluation of the environmental reclamation provision at closed sites and a non-cash revaluation loss of $9.0 million related to the gold prepayment liability.
Adjusted net earningsi and adjusted net earnings per sharei in the fourth quarter of 2023 were $71.3 million and $0.20 per share, respectively, after adjusting for the non-cash loss related to the revaluation of the company’s environmental provision and the revaluation loss on the gold prepayment liability, among other items. This compares to adjusted net earnings and adjusted net earnings per share of $24.4 million, and $0.07 in the prior quarter. Fourth quarter adjusted EBITDAi was $274.4 million, an increase of 44% compared to $190.7 million in the third quarter of 2023.
In the fourth quarter of 2023, consolidated cash cost per pound of copper produced, net of by-product creditsi, was $0.16, compared to $1.10 in the third quarter. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.09 in the fourth quarter of 2023 compared to $1.89 in the third quarter. The significant decrease in both was the result of higher copper production and higher by-product credits, partially offset by higher mining, milling and G&A costs from incorporating Copper Mountain.
Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.31 in the fourth quarter of 2023, lower than $2.04 in the third quarter, due to the same reasons outlined above as well as lower corporate selling and administrative expenses.
As at December 31, 2023, total liquidity increased to $573.7 million, including $249.8 million in cash and cash equivalents as well as undrawn availability of $323.9 million under the company’s revolving credit facilities. Net debt declined by $94.5 million to $1,037.7 million as at December 31, 2023. During the quarter, Hudbay redeemed, in full, the remaining $59.7 million of outstanding Copper Mountain bonds and reduced the net balance drawn under the revolving credit facilities by $30 million. Based on continued free cash flow generation in the fourth quarter of 2023, the company continues to make progress on the deleveraging targets set out in the “3-P” plan for sanctioning Copper World. Current liquidity combined with cash flow from operations is expected to be sufficient to meet liquidity needs for the foreseeable future.
Summary of Full Year Results
Hudbay achieved its 2023 consolidated production guidance for all metals. On a business unit stand-alone basis, Peru exceeded the top end of the gold production guidance range, Manitoba exceeded the top end of the copper production guidance range and Copper Mountain exceeded the top end of the silver production guidance range for the portion of 2023 since acquisition. Consolidated copper, gold and silver production for the full year 2023 increased by 26%, 41% and 13%, respectively, compared to 2022 with the acquisition of Copper Mountain as well as higher throughput and recoveries in Peru and Manitoba and higher overall copper, gold and silver grades.
Consolidated cash cost per pound of copper produced, net of by-product creditsi, in 2023 was $0.80, compared to $0.86 in 2022, and achieved the low end of the 2023 annual cost guidance range. This decrease was mainly the result of higher copper production and higher by-product credits, partially offset by higher mining and milling costs from incorporating Copper Mountain. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.72 in 2023, compared to $2.07 in 2022, outperforming 2023 guidance expectations. This decrease was driven by the above reasons as well as the lower cash sustaining capital expenditures. Consolidated all-in sustaining cash cost per pound of copper produced, net of by-product creditsi, was $1.92 in 2023, lower than $2.26 in 2022, due to the same reasons outlined above partially offset by higher corporate selling and administrative expenses.
Cash generated from operating activities decreased to $476.9 million in 2023 from $487.8 million in 2022 primarily due to a $189.2 million decrease in non-cash working capital caused by timing and changes in provisionally priced receivables and an increase in inventory. Operating cash flow before change in non-cash working capital increased to $570.0 million from $391.7 million in 2022. The increase in operating cash flow before change in non-cash working capital was primarily the result of higher copper and gold sales volumes and higher gold prices, partially offset by lower zinc sales volumes, lower copper and zinc metal prices and higher treatment and refining charges. Zinc sales volumes were lower than the prior year due to the planned closure of the 777 mine in June 2022.
Net earnings and earnings per share for 2023 were $69.5 million and $0.22, respectively, compared to 2022 net earnings and earnings per share of $70.4 million and $0.27, respectively. Full year 2023 net earnings were impacted by $21.4 million in non-cash mark-to-market losses arising from the revaluation of the gold prepayment liability, investments and share-based compensation, partially offset by a non-cash gain of $11.4 million related to the revaluation of the Flin Flon environmental reclamation provision. The prior period results benefited from a non-cash $133.5 million revaluation gain for the Flin Flon environmental reclamation provision, partially offset by a $95.0 million pre-tax impairment loss related to the previous stand-alone development plan for the Rosemont deposit. Full year 2023 adjusted EBITDAi was $647.8 million, an increase of 36% compared to $475.9 million in 2022.
Consolidated Financial Condition ($000s)
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Cash and cash equivalents
249,794
245,217
225,665
Total long-term debt
1,287,536
1,377,443
1,184,162
Net debt1
1,037,742
1,132,226
958,497
Working capital2
135,913
128,463
76,534
Total assets
5,312,634
5,250,596
4,325,943
Equity3
2,096,811
2,044,684
1,571,809
Net debt to adjusted EBITDA1,4
1.6
2.3
2.0
1 Net debt and net debit to adjusted EBITDA are non-IFRS financial performance measures with no standardized definition under IFRS. For further information, please see the “Non-IFRS Financial Performance 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.
3 Equity attributable to owners of the company.
4 Net debt to adjusted EBITDA for the 12 month period.
Consolidated Financial Performance
Three Months Ended
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Revenue
$000s
602,189
480,456
321,196
Cost of sales
$000s
405,433
374,057
251,520
Earnings (loss) before tax
$000s
80,982
84,149
(14,287)
Earnings (loss)
$000s
33,528
45,490
(17,441)
Basic and diluted earnings (loss) per share
$/share
0.10
0.13
(0.07)
Adjusted earnings per share1
$/share
0.20
0.07
0.01
Operating cash flow before change in non-cash working capital
$ millions
246.5
182.0
109.1
Adjusted EBITDA1
$ millions
274.4
190.7
124.7
Year Ended
Dec. 31, 2023
Dec. 31, 2022
Revenue
$000s
1,690,030
1,461,440
Cost of sales
$000s
1,297,469
1,184,552
Earnings before tax
$000s
151,830
95,815
Earnings
$000s
69,543
70,382
Basic and diluted earnings per share
$/share
0.22
0.27
Adjusted earnings per share1
$/share
0.23
0.10
Operating cash flow before change in non-cash working capital
$ millions
570.0
391.7
Adjusted EBITDA1
$ millions
647.8
475.9
1 Adjusted (loss) earnings 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 Performance Measures” section.
Consolidated Production and Cost Performance5
Three Months Ended
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Contained metal in concentrate and doré produced1
Copper
tonnes
45,450
41,964
29,305
Gold
ounces
112,776
101,417
53,920
Silver
ounces
1,197,082
1,063,032
795,015
Zinc
tonnes
5,747
10,291
6,326
Molybdenum
tonnes
397
466
344
Payable metal sold
Copper
tonnes
44,006
39,371
25,415
Gold2
ounces
104,840
74,799
47,256
Silver2
ounces
1,048,877
748,955
559,306
Zinc3
tonnes
7,385
7,125
8,230
Molybdenum
tonnes
468
426
421
Consolidated cash cost per pound of copper produced4
Cash cost
$/lb
0.16
1.10
1.08
Sustaining cash cost
$/lb
1.09
1.89
2.21
All-in sustaining cash cost
$/lb
1.31
2.04
2.41
Year Ended
Dec. 31, 2023
Dec. 31, 2022
Contained metal in concentrate and doré produced1
Copper
tonnes
131,691
104,173
Gold
ounces
310,429
219,700
Silver
ounces
3,575,234
3,161,294
Zinc
tonnes
34,642
55,381
Molybdenum
tonnes
1,566
1,377
Payable metal sold
Copper
tonnes
124,996
94,473
Gold2
ounces
276,893
213,415
Silver2
ounces
3,145,166
2,978,485
Zinc3
tonnes
28,779
59,043
Molybdenum
tonnes
1,462
1,352
Consolidated cash cost per pound of copper produced4
Cash cost
$/lb
0.80
0.86
Sustaining cash cost
$/lb
1.72
2.07
All-in sustaining cash cost
$/lb
1.92
2.26
1 Includes production results from the Copper Mountain mine following the June 20, 2023 acquisition completion date. Production results from the Copper Mountain mine represents the period from June 20, 2023 acquisition completion date through to the end of the fourth quarter of 2023. Includes 100% of Copper Mountain mine production. Hudbay owns 75% of the Copper Mountain mine. As Copper Mountain was acquired on June 20, 2023, there were no comparative 2022 figures.
2 Includes total payable gold and silver in concentrate and in doré sold.
3 Metal reported in concentrate is prior to deductions associated with smelter contract terms.
4 For the three months ended December 31, 2023 and September 30, 2023, this metric includes payable zinc in concentrate sold. For the three months ended December 31, 2022, this metric also included refined zinc metal and payable zinc in concentrate sold. For the year ended December 31, 2023, this metric includes payable zinc in concentrate sold. For the year ended December 31, 2022, this metric also included payable refined zinc metal sold.
5 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 Performance Measures” section of this news release.
Peru Operations Review
Peru Operations
Three Months Ended
Year Ended
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Constancia ore mined1
tonnes
973,176
1,242,198
5,614,918
9,265,954
25,840,435
Copper
%
0.30
0.30
0.40
0.32
0.35
Gold
g/tonne
0.04
0.04
0.04
0.04
0.04
Silver
g/tonne
2.26
2.91
3.48
2.53
3.40
Molybdenum
%
0.01
0.01
0.01
0.01
0.01
Pampacancha ore mined
tonnes
5,556,613
5,894,013
3,771,629
14,756,416
8,319,250
Copper
%
0.56
0.53
0.37
0.51
0.33
Gold
g/tonne
0.32
0.30
0.29
0.33
0.29
Silver
g/tonne
4.84
4.22
3.84
4.28
4.06
Molybdenum
%
0.01
0.02
0.01
0.01
0.01
Total ore mined
tonnes
6,529,789
7,136,211
9,386,547
24,022,370
34,159,685
Strip ratio2
1.26
1.36
0.97
1.51
1.13
Ore milled
tonnes
7,939,044
7,895,109
7,795,735
30,720,929
30,522,294
Copper
%
0.48
0.43
0.41
0.39
0.34
Gold
g/tonne
0.25
0.21
0.12
0.16
0.09
Silver
g/tonne
4.20
3.75
3.93
3.62
3.58
Molybdenum
%
0.01
0.02
0.01
0.01
0.01
Copper recovery
%
87.4
85.2
85.1
84.2
85.0
Gold recovery
%
77.6
74.8
69.6
71.8
63.6
Silver recovery
%
78.0
73.2
66.5
70.0
65.7
Molybdenum recovery
%
33.6
37.2
37.7
35.8
34.8
Contained metal in concentrate
Copper
tonnes
33,207
29,081
27,047
100,487
89,395
Gold
ounces
49,418
40,596
20,860
114,218
58,229
Silver
ounces
836,208
697,211
655,257
2,505,229
2,309,352
Molybdenum
tonnes
397
466
344
1,566
1,377
Payable metal sold
Copper
tonnes
31,200
27,490
23,789
96,213
79,805
Gold
ounces
38,114
32,757
15,116
97,176
49,968
Silver
ounces
703,679
460,001
411,129
2,227,419
2,045,678
Molybdenum
tonnes
468
426
421
1,462
1,352
Combined unit operating cost3,4,5
$/tonne
12.24
12.20
13.64
12.47
12.78
Cash cost5
$/lb
0.54
0.83
1.34
1.07
1.58
Sustaining cash cost5
$/lb
1.21
1.51
2.09
1.81
2.35
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled.
2 Strip ratio is calculated as waste mined divided by ore mined.
3 Reflects combined mine, mill and general and administrative (“G&A”) costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
4 Excludes approximately $0.7 million, or $0.09 per tonne, of COVID-related costs during the three months ended December 31, 2022 and $5.2 million or $0.17 per tonne, during the twelve months ended December 31, 2022.
5 Combined unit costs, 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 Performance Measures” section of this news release.
During the fourth quarter of 2023, the Peru operations produced 33,207 tonnes of copper, 49,418 ounces of gold, 836,208 ounces of silver and 397 tonnes of molybdenum. Fourth quarter 2023 production of copper, gold and silver increased 14%, 22% and 20%, respectively, over the third quarter with continued higher copper and precious metal grades, higher recoveries and higher throughput. Peru’s full year 2023 production of copper, gold, silver and molybdenum was 12%, 96%, 8% and 14% higher, respectively, than 2022 for the same reasons outlined above. Copper production was in line with the company’s annual guidance range, whereas silver and molybdenum production were near the upper end and gold production exceeded the top end of the annual guidance range by 6%.
Total ore mined in the fourth quarter of 2023 decreased by 9% compared to the third quarter due to continued phase five stripping activities at Constancia and a significant increase in Pampacancha mining activity which entails a higher amount of stripping. The decrease in total mined ore was in line with the mine plan, with ore stockpiles supplementing mill feed during the quarter. Ore mined from Pampacancha during the fourth quarter was 5.6 million tonnes, at average grades of 0.56% copper and 0.32 grams per tonne gold.
Ore milled during the fourth quarter of 2023 was consistent with the prior quarter. Milled copper and gold grades increased by 12% and 19%, respectively, in the fourth quarter compared to the third quarter due to continued contribution of higher grade copper and gold ore from Pampacancha.
Recoveries of copper, gold and silver during the fourth quarter of 2023 were 87.4%, 77.6% and 78.0%, respectively, with recoveries of all metals improving quarter over quarter, in line with metallurgical models. The Constancia mill achieved record copper recoveries as a result of the successful completion of the recovery improvement program in the second quarter of 2023, as planned, ahead of the start of the period of significantly higher grades from the Pampacancha pit. The program scope was to increase copper recoveries by 2% by increasing the rougher mass, and the mill continues to achieve the targeted higher copper recoveries. Copper recoveries in the fourth quarter also benefited from higher overall head grades and lower contaminants.
Ore mined during 2023 was 30% lower than 2022 due to the same factors as the quarterly variance as well as increased stockpile processing early in 2023 to ration fuel during the protests and civil unrest experienced in Peru. Copper recoveries in 2023 were 1% lower than 2022 due to higher levels of contaminants in processed stockpile ore during the first half of 2023. Gold and silver recoveries in 2023 were 13% and 7% higher, respectively, than 2022 due to increased processing of higher grade Pampacancha ore.
Combined mine, mill and G&A unit operating costsi in the fourth quarter were slightly higher than the third quarter primarily due to the costs associated with the scheduled semi-annual plant maintenance shutdown. Combined mine, mill and G&A unit operating costsi for the full year 2023 were 2% lower than 2022 primarily due to lower mining costs as a result of lower ore mined and higher capitalized stripping.
Peru’s cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter of 2023 was $0.54, a decrease of 35% compared to the third quarter due to higher by-product credits mainly from gold, higher capitalized stripping and higher copper production. This was partially offset by higher profit-sharing expenses and higher treatment, refining and freight costs. Cash cost per pound of copper produced, net of by-product creditsi, in 2023 was $1.07, a 32% reduction from 2022, and achieved the lower end of the cost guidance range due to the same factors noted above.
Sustaining cash cost per pound of copper produced, net of by-product creditsi, for the fourth quarter and for the year ended 2023 were 20% and 23% lower, respectively, than the third quarter and the prior year primarily due to the same factors affecting cash cost noted above and lower sustaining capital expenditures. Total annual sustaining capital expenditures in Peru were $27.9 million lower than the original guidance, exceeding the $10 million previously reduced target, primarily a result of lower capitalized stripping costs.
Manitoba Operations Review
Manitoba Operations
Three Months Ended
Year Ended
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Lalor
Ore mined
tonnes
372,384
367,491
369,453
1,526,729
1,516,203
Gold
g/tonne
5.92
5.08
4.00
4.74
4.00
Copper
%
1.04
1.02
0.73
0.86
0.73
Zinc
%
2.20
3.31
2.17
3.00
3.14
Silver
g/tonne
28.92
27.80
19.37
24.51
21.96
New Britannia
Ore milled
tonnes
165,038
146,927
141,142
596,912
542,269
Gold
g/tonne
8.03
6.93
6.11
6.76
6.28
Copper
%
1.46
1.22
0.91
1.03
0.81
Zinc
%
0.85
0.90
0.67
0.84
0.80
Silver
g/tonne
27.97
23.88
22.09
25.11
20.97
Gold recovery – concentrate
%
58.1
64.7
56.6
60.0
60.3
Copper recovery – concentrate
%
91.6
97.4
89.3
93.3
90.7
Silver recovery – concentrate
%
61.0
63.2
55.4
60.7
60.6
Stall Concentrator
Ore milled
tonnes
228,799
255,516
204,350
965,567
968,638
Gold
g/tonne
4.22
3.70
2.50
3.45
2.86
Copper
%
0.73
0.77
0.61
0.74
0.71
Zinc
%
3.20
4.88
3.43
4.36
4.70
Silver
g/tonne
28.63
28.82
19.24
24.19
22.81
Gold recovery
%
67.5
67.8
62.4
64.8
58.0
Copper recovery
%
92.0
93.9
89.0
90.4
87.2
Zinc recovery
%
78.5
82.6
90.1
82.2
86.6
Silver recovery
%
61.8
64.9
56.6
61.4
56.8
Total contained metal in concentrate and doré1
Gold
ounces
59,863
56,213
33,060
187,363
161,471
Copper
tonnes
3,735
3,580
2,258
12,154
14,778
Zinc
tonnes
5,747
10,291
6,326
34,642
55,381
Silver
ounces
255,579
264,752
139,758
851,723
851,942
Total payable metal sold
Gold2
ounces
63,635
36,713
32,140
171,297
163,447
Copper
tonnes
3,687
2,925
1,626
10,708
14,668
Zinc3
tonnes
7,385
7,125
9,230
28,779
59,043
Silver2
ounces
246,757
197,952
148,177
728,304
932,807
Combined unit operating cost4,5
C$/tonne
216
217
241
217
195
Gold cash cost5
$/oz
434
670
922
727
297
Gold sustaining cash cost5
$/oz
788
939
1,795
1,077
1,091
1 Doré includes sludge, slag and carbon fines in three months ended December 31, 2023 and September 30, 2023.
2 Includes total payable precious metals in concentrate and doré sold.
3 Includes refined zinc metal and payable zinc in concentrate sold.
4 Reflects combined mine, mill and G&A costs per tonne of ore milled.
5 Combined unit operating 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 Performance Measures” section of this news release.
The Manitoba operations produced a record 59,863 ounces of gold during the fourth quarter of 2023, along with 3,735 tonnes of copper, 5,747 tonnes of zinc and 255,579 ounces of silver. Production of gold and copper increased by 6% and 4%, respectively, in the fourth quarter compared to the third quarter, while production of silver and zinc decreased by 3% and 44%, respectively. This was due to mining of higher grade gold zones with a focus on higher quality ore production and higher recoveries at the New Britannia and Stall mills. Despite significantly higher metal production in the fourth quarter, 2023 production of copper and zinc was lower by 18% and 37%, respectively, than in 2022, mainly due to the loss of production from the closure of the 777 mine in June 2022 and lower comparative zinc grades. Production of gold in 2023 was 16% higher than in 2022 while silver production was unchanged year-over-year. The production of all metals achieved 2023 production guidance, while copper exceeded the top end of 2023 annual guidance range.
In Manitoba, the company continues to focus on improvement initiatives aimed at supporting higher production levels, minimizing dilution and enhancing metal recoveries at the Snow Lake operations. A significant focus continues to be placed on improving the quality of ore production at Lalor mine, employing techniques such as stope redesigns, grade control practices prior to blasting, assaying blasthole cuttings and implementing mine design adjustments to mitigate dilution. These proactive measures have successfully reduced the inclusion of waste rock in the mining cycle and increased gold, copper, and silver grades during the fourth quarter.
Optimization of development drift size has led to a 15% reduction in waste volume and an 18% decrease in unit development costs in 2023 compared to 2022. Higher shaft availability has led to efficient ore hoisting and has eliminated the need for trucking ore to surface, resulting in a 5% increase in tonnes hoisted in 2023 compared to 2022. Despite encountering some production challenges in deeper mining areas due to longer haul distances, smaller stope dimensions, and lower ore bulk density, the team is actively pursuing initiatives to continue to bolster efficiency and further enhance mucking productivity.
Additionally, the company advanced optimization initiatives at New Britannia mill to achieve higher throughput rates by prioritizing process improvements and seamlessly integrating additional gold ore feed from the Lalor mine. This reallocation of ore has led to reduced feed to Stall mill, prompting a careful evaluation of lower tonnage set points to optimize plant operations. The team has also started exploring opportunities to share maintenance services with New Britannia during shutdown periods which, if successful, would reduce overall contractor requirements.
At Lalor, Hudbay achieved higher development advance rates during the fourth quarter compared to prior quarters of 2023. A comprehensive review of the long-range mine plan for zone 40 has led to significantly reduced future capital development needs by transitioning to a more selective mining method, thereby enhancing the reserve grade for this mining front. Lalor ore mined during the fourth quarter increased by 1% compared to the third quarter. Notably, gold grades were 5.92 grams per tonne in the quarter, a 17% increase from the third quarter.
Total ore mined at the Manitoba operations in 2023 was 24% lower than in 2022 mainly due to the planned closure of the 777 mine in June 2022. However, total ore mined at Lalor in 2023 was 1% higher than in 2022. Gold, copper and silver grades mined at Lalor during 2023 were 19%, 18% and 12% higher than in 2022, reflecting the successful execution of the strategic mine plan. Zinc grades mined at Lalor for the full year 2023 were 4% lower compared to the same period in 2022, consistent with the mine plan.
The Stall mill processed slightly less ore in the fourth quarter of 2023 compared to the third quarter, due to more ore being sent to New Britannia as the mill exceeded design throughput. After the commissioning of the Stall mill recovery improvement project in the second quarter of 2023, the operations continue to focus on optimizing circuits to achieve targeted recoveries by reducing primary grind size, refining the flotation circuit balance and mass pull and reagent selection. These adjustments have proven highly effective, resulting in notably higher recoveries for copper above 90% in the second half of 2023. In addition, the Stall mill achieved its targeted gold recovery levels of 67.5% in the fourth quarter, bringing the 2023 annual recovery to 64.8%, compared to 58.0% in 2022.
Process improvement initiatives at New Britannia have been successfully implemented with minimal capital outlays, enabling the company to reach progressively higher production targets during the fourth quarter. The New Britannia mill averaged approximately 1,800 tonnes per day in the fourth quarter, approximately 12% above average levels in the third quarter of 2023.
Combined mine, mill and G&A unit operating costsi in the fourth quarter of 2023 slightly decreased compared to the third quarter reflecting lower overall costs partially offset by lower total ore milled. Combined mine, mill and G&A unit operating costs for the full year 2023 were C$217 per tonne reflecting the standalone cost structure of the Snow Lake operations in 2023 after the closure of the Flin Flon operations in June 2022.
Manitoba’s cash cost per ounce of gold produced, net of by-product creditsi, has trended lower throughout 2023, averaging $434 in the fourth quarter. Cash costs were significantly lower in the fourth quarter, with higher by-product credits and higher gold production, in accordance with the mine plan. Full year 2023 cash cost per ounce of gold produced, net of by-product creditsi, was $727, which was higher than 2022 costs primarily due to significantly lower by-product credits partially offset by lower overall costs due to the closure of the 777 mine in June 2022 and higher gold production. Full year 2023 cash cost per ounce of gold produced, net of by-product creditsi, was within annual guidance range.
Sustaining cash cost per ounce of gold produced, net of by-product creditsi, for the fourth quarter of 2023 was $788, a decrease of 16% compared to the third quarter due to the same factors affecting cash cost combined with lower sustaining capital expenditures. Total annual sustaining capital expenditures in Manitoba are $19 million lower than the original 2023 guidance levels of $75 million primarily a result of lower capital development costs realized at Lalor as the team focuses on cost efficiencies. Sustaining cash cost per ounce of gold produced, net of by-product creditsi, in 2023 was $1,077, a decrease of 1% from 2022, primarily due to the same factors affecting fourth quarter sustaining cash cost noted above.
British Columbia Operations Review
British Columbia Operations5
Three Months Ended
Year Ended5
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2023
Ore mined1
tonnes
2,627,398
3,792,568
6,975,389
Waste mined
tonnes
14,032,093
11,233,917
26,634,805
Strip ratio2
5.34
2.96
3.82
Ore milled
tonnes
3,261,891
3,158,006
6,862,152
Copper
%
0.33
0.36
0.35
Gold
g/tonne
0.06
0.08
0.07
Silver
g/tonne
1.36
1.40
1.36
Copper recovery
%
78.8
80.9
79.69
Gold recovery
%
54.1
56.1
55.88
Silver recovery
%
73.8
71.3
72.96
Total contained metal in concentrate
Copper
tonnes
8,508
9,303
19,050
Gold
ounces
3,495
4,608
8,848
Silver
ounces
105,295
101,069
218,282
Total payable metal sold
Copper
tonnes
9,119
8,956
18,075
Gold
ounces
3,091
5,329
8,420
Silver
ounces
98,441
91,002
189,443
Combined unit operating cost3,4
C$/tonne
20.90
24.88
21.38
Cash cost4
$/lb
2.67
2.67
2.50
Sustaining cash cost4
$/lb
3.93
3.39
3.41
1 Reported tonnes and grade for ore mined are estimates based on mine plan assumptions and may not reconcile fully to ore milled.
2 Strip ratio is calculated as waste mined divided by ore mined.
3 Reflects combined mine, mill and G&A costs per tonne of ore milled. Reflects the deduction of expected capitalized stripping costs.
4 Combined unit operating 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 Performance Measures” section of this news release.
5 Includes 100% of Copper Mountain mine production, Hudbay owns 75% of Copper Mountain mine. As Copper Mountain was acquired on June 20, 2023, there were no comparative 2022 figures. Year ended December 31, 2023 results from the date of acquisition, June 20, 2023, through to the end of the fourth quarter of 2023.
During the fourth quarter of 2023, the British Columbia operations produced 9,119 tonnes of copper, 3,091 ounces of gold and 98,441 ounces of silver. Hudbay achieved the post-acquisition 2023 production guidance for copper and gold and exceeded the post-acquisition guidance for silver.
Total ore mined at Copper Mountain in the fourth quarter of 2023 was 2.6 million tonnes, less than initially planned but production was supplemented with stockpile rehandle of 1.5 million tonnes. The mine operations team has initiated a fleet production ramp up plan to capture the full value of idle capital equipment at the Copper Mountain site. This plan entailed remobilization of the mining fleet from 14 trucks to 28 trucks by the end of 2023, allowing for increased waste removal during the fourth quarter. The company continues to focus on hiring additional haul truck drivers, and a fully trained complement of truck drivers are expected to be in place in the first half of 2024. The utilization of the full truck fleet enabled additional 2023 pre-stripping to access higher head grades.
Benefitting from stabilization initiatives within the comminution circuit, the mill processed 3.3 million tonnes of ore during the fourth quarter reflecting average mill availability of 86.7%, a 3% increase versus the third quarter of 2023. The initiatives included, but were not limited to, changes in screen sizes, a reduction in grinding media loading rates and a change in semi-autogenous grinding (SAG) mill operational strategy. The SAG mill throughput in the fourth quarter has been impacted by lower freshwater availability for processing, higher coarse feed from stockpiled ore and reduced reliability of the crushing circuit, driven principally by significant interruptions caused by the removal of scrap metal from the material handling system as the mining progresses through areas of historical underground workings.
Maintenance practices to improve mill availability continue to be a key pillar of the company’s stabilization initiatives. These include the implementation of improved maintenance management processes planned for the first half of 2024 and a change in the maintenance organizational structure which was completed in the fourth quarter of 2023. Beyond maintenance practices, material handling and transportation in the comminution circuit, particularly in the winter months, have a significant impact on mill performance. Work has begun to analyze the trade-off among the various alternatives to further enhance mill performance.
Milled copper grades during the fourth quarter of 2023 averaged 0.33%, an 8% reduction from the third quarter, but were significantly higher than the reserve grade of 0.25%. Copper recoveries of 78.8% were lower than the third quarter of 2023 due to volumetric restriction in the regrind circuit limiting the rougher circuit performance. Following a period of investigation, changes to the flotation operational strategy that mirror the company’s successful processes at Constancia were implemented, including reagent selection and dose modification, reactivation and reprogramming of expert controls and circuit configuration changes. The benefits of these operational strategy improvements are expected to start to be realized in the second half of 2024.
Combined mine, mill and G&A unit operating costsi in the fourth quarter of 2023 were C$20.90 per tonne milled, 3% below the third quarter. Combined unit operating costs are expected to decrease over time as the company continues to implement stabilization and optimization initiatives at Copper Mountain.
British Columbia’s cash cost and sustaining cash cost per pound of copper produced, net of by-product creditsi, in the fourth quarter of 2023 were $2.67 and $3.93, respectively. Cash costs were within the post-acquisition guidance range.
Advancing Copper Mountain Mine Stabilization Plans
Since completing the acquisition of Copper Mountain on June 20, 2023, Hudbay has been focused on advancing stabilization plans, including opening up the mine by adding additional mining faces and re-mobilizing idle haul trucks, optimizing the ore feed to the plant and implementing plant improvement initiatives.
On December 5, 2023, the company released its first NI 43-101 technical report in respect of the 75%-owned Copper Mountain mine. As detailed in the technical report, the mine plan contemplates average annual copper production of 46,500 tonnes in the first five years, 45,000 tonnes in the first ten years and 37,000 tonnes over the 21-year mine life. Average cash costs and sustaining cash costs per pound of copper produced, net of by-product creditsi, over the mine life are expected to be $1.84 and $2.53, respectively. The updated mine plan represents an approximate 90% increase in average annual copper production and an approximate 50% decrease in cash costs over the first 10 years compared to 2022.
Hudbay’s stabilization plans are focused on improving reliability and driving sustainable long-term value:
Increased mining activities – Commenced a fleet ramp-up plan to remobilize idle haul trucks. The plan entails remobilization of the mining fleet from 14 trucks to 28 trucks by the end of 2023. A fully trained complement of truck drivers is expected to be in place in the first half of 2024. Once the fleet ramp up plan is complete, the company expects to have improved flexibility in the Copper Mountain mine with additional mining faces.
Accelerated stripping to access higher grades – Hudbay has commenced a campaign of accelerated stripping over the next three years to enable access to higher grade ore and to mitigate the substantially reduced stripping undertaken by Copper Mountain over the four years prior to completion of the acquisition. The accelerated stripping program is expected to improve operating efficiencies and lower unit operating costs.
Improved mill throughput and recoveries – Hudbay’s mine plan assumes a mill ramp up to its nominal capacity of 45,000 tonnes per day in 2025. An expansion to the permitted capacity of 50,000 tonnes per day is planned in 2027. The mine plan assumes approximately $23 million in growth capital spending over 2025 and 2026 in connection with the mill expansion. Hudbay intends to improve mill recoveries with a more consistent ore feed grade, changes to the flotation reagents and replacement of key pumps.
Operating efficiencies and corporate synergies – Hudbay’s stabilization plans are expected to generate more than $20 million in annual operating efficiencies over the next three years, compared to Copper Mountain’s performance in 2022, through improvements in copper recovery, higher throughput rates and lower combined unit operating costs. In addition, Hudbay has realized the targeted $10 million in annual corporate synergies and is on track to exceed the target.
Ensure stabilization of near-term cash flows – Recently entered into copper hedging contracts representing approximately 25% of expected Copper Mountain production in 2024 as a prudent measure to secure cash flows during the stabilization period.
The mine plan is based on a revised resource model and was constructed using consistent methods applied at the Constancia, Copper World and Mason deposits. The mineral reserve estimates total 367 million tonnes at a copper grade of 0.25% and a gold grade of 0.12 grams per tonne, supporting a 21-year mine life. An additional 140 million tonnes of measured and indicated resources at 0.21% copper and 0.10 grams per tonne gold and 370 million tonnes of inferred resources at 0.25% copper and 0.13 grams per tonne gold, exclusive of mineral reserves, provide significant upside potential for reserve conversion and extending mine life. Infill drilling is planned for 2024 to target reserve conversion.
There are several opportunities to further increase production, improve costs and extend mine life for Copper Mountain. While these opportunities have not been considered in the technical report as they are not yet at the level of required engineering, the company is advancing studies to evaluate the potential for these to be reflected in future mine plans.
Please see “Qualified Person and NI 43-101” for further details regarding the technical and scientific information included in the technical report.
Delivered Brownfield Capital Projects On Time and On Budget
The Constancia mill achieved record copper recoveries of 87.4% in the fourth quarter primarily as a result of the successful completion of the recovery improvement program in the second quarter of 2023, as planned, ahead of the start of significantly higher grades being mined from the Pampacancha pit in the second half of 2023. The program scope was to increase copper recoveries by 2% by increasing the rougher mass, and the mill continues to achieve the targeted higher copper recoveries.
After the commissioning of the Stall mill recovery improvement project in the second quarter of 2023, subsequent optimization activities proved highly effective, resulting in notably higher recoveries for copper above 90% and gold above 65% in the second half of 2023. Specifically, the Stall mill achieved its targeted gold recovery levels of 67.5% in the third and fourth quarters, compared to 60% in the second quarter.
The total growth capital expenditures in 2023 associated with the completion of these recovery improvement projects were in line with the company’s guidance of $25 million.
The New Britannia mill has consistently achieved higher throughput levels, averaging 1,650 tonnes per day in 2023 and approximately 1,800 tonnes per day in the fourth quarter, significantly exceeding its original design capacity of 1,500 tonnes per day. The company has successfully implemented process improvement initiatives that required minimal capital outlays in pursuit of higher output that aligns with increased gold production from the Lalor mine.
Generating Free Cash Flow with Increased Production and Continued Financial Discipline
Hudbay delivered a second successive quarter of positive free cash flow during the fourth quarter of 2023 as it executed the plan for higher copper and gold production from Pampacancha and higher gold production at Lalor, both driven by higher grades. The company continues to expect to see strong production levels throughout 2024 from sustained higher grades in Peru and Manitoba, along with additional production from the recently acquired Copper Mountain mine.
During the fourth quarter, Hudbay completed $30 million in net repayments on its revolving credit facilities and redeemed, in full, the remaining $59.7 million of Copper Mountain’s bonds from treasury. The company also recommenced deliveries under the gold forward sale and prepay agreement in October 2023, further reducing the outstanding gold prepayment liability, and the company is on schedule to fully repay the gold prepay facility by August 2024. Despite these debt repayments, the company increased cash and cash equivalents to $249.8 million and reduced overall net debt to $1,037.7 million as at December 31, 2023, compared to $245.2 million and $1,132.2 million, respectively, as at September 30, 2023. The $94.5 million decline in net debt, together with higher levels of adjusted EBITDA1 in the fourth quarter, have improved the net debt to adjusted EBITDA ratioi to 1.6x compared to 2.0x at the end of 2022. Subsequent to quarter-end, the company continued its deleveraging efforts with an additional $10 million repayment on its revolving credit facilities.
During the fourth quarter, Hudbay continued to take steps to ensure free cash flow generation and continued financial discipline into 2024 and 2025. To this end, the company entered into forward sales contracts at Copper Mountain for a total of 3,600 tonnes of 2024 copper production over the twelve-month period from May 2024 to April 2025 at an average price of $3.93 per pound as well as a zero-cost collars for 6,000 tonnes of copper production over the twelve-month period from May 2024 to April 2025 at an average floor price of $3.83 per pound and an average cap price of $4.03 per pound. As at December 31, 2023, 7.9 million pounds of copper forwards and 13.2 million pounds of copper collars were outstanding.
Hudbay successfully delivered on its annual discretionary spending reduction targets for 2023. As a result of continued financial discipline and capital cost efficiencies achieved, total capital expenditures of approximately $243 million for Peru, Manitoba and Arizona in 2023 were approximately $57 million lower than the original guidance levels, a further decrease from the $30 million reduction announced in the third quarter, representing a 19% reduction from the original 2023 total capital expenditure guidance of $300 million.
Senior Management Team Appointments
In November 2023, Hudbay promoted Luis Santivañez to Vice President, South America. Mr. Santivañez joined Hudbay in Peru in 2018 and was promoted to General Manager of the South America operations in 2022. Mr. Santivañez has over 20 years of experience at global mining companies working across Peru, Central America and Australia. Under his leadership, the Constancia operations have delivered a successful ramp up at Pampacancha, navigated through a period of politically driven social unrest in Peru and further enhanced the company’s partnerships with the local communities.
In January 2024, Hudbay appointed John Ritter as Vice President, British Columbia Business Unit. Mr. Ritter brings a diverse background with over 30 years of experience in technical, operational and senior leadership roles at global mining companies. He was most recently the General Manager of the New Afton mine in B.C and has strong ties with the local community near the Copper Mountain mine. His focus on operational excellence and value-creating improvements will be instrumental as he leads the stabilization and optimization plans at the Copper Mountain mine.
Advancing Permitting at Copper World
The first key state permit required for Copper World, the Mined Land Reclamation Plan, was initially approved by the Arizona State Mine Inspector in October 2021 and was subsequently amended to reflect a larger private land project footprint. This approval was challenged in state court, but the challenge was dismissed in May 2023 as having no basis. In late 2022, Hudbay submitted the applications for an Aquifer Protection Permit and an Air Quality Permit to the Arizona Department of Environmental Quality. The company expects to receive these two outstanding state permits in 2024.
Hudbay intends to initiate a minority joint venture process prior to commencing a definitive feasibility study, which will allow the joint venture partner to participate in the final Copper World project design and the funding of definitive feasibility study activities. The opportunity to sanction Copper World is not expected until late 2025 based on current estimated timelines. The decision to sanction Copper World will ultimately be evaluated against other competing investment opportunities as part of Hudbay’s capital allocation process.
Hudbay released results of the de-risked and enhanced Copper World pre-feasibility study for Phase I in September 2023, which demonstrated a simplified mine plan with an extended 20-year mine life requiring only state and local permits, an after-tax net present value (8%) of $1.1 billion and a 19% internal rate of return at a copper price of $3.75 per pound. Average annual copper production over the first ten years is expected to be approximately 92,000 tonnes at cash costs and sustaining cash costs per pound of copperi of $1.53 and $1.95, respectively. Copper World is one of the highest-grade open pit copper projects in the Americasiii with proven and probable mineral reserves of 385 million tonnes at 0.54% copper.
Snow Lake Exploration
Hudbay continues to compile results from ongoing infill drilling at Lalor, which will be incorporated into the next annual mineral reserve and resource estimate update expected to be announced in March 2024.
The planned 2024 exploration program is Hudbay’s largest Snow Lake program in the company’s history and it is currently underway with plans to continue testing the deep extensions of the gold and copper zones at Lalor and complete follow up drilling at the Lalor Northwest target. The 2024 program will also explore the newly acquired Cook Lake claims and the former Rockcliff claims located within trucking distance of the existing Snow Lake processing infrastructure. As previously disclosed, both the Cook Lake and former Rockcliff claims were acquired by the company as part of transactions completed in 2023. A majority of the Cook Lake and former Rockcliff claims have been untested by modern deep geophysics, which was the discovery method for the Lalor deposit. Hudbay’s 2024 exploration program includes a large geophysics program consisting of surface electromagnetic surveys using cutting-edge techniques that enable the team to detect targets at depths of almost 1,000 metres below surface. The company is exploring its newly expanded land package in hopes of finding a new anchor deposit to maximize and extend the life of the Snow Lake operations beyond 2038.
The company also expects to advance a development and exploration drift at the 1901 deposit located within 1,000 metres of the haulage ramp to Lalor. The program is expected to take place over 2024 and 2025 with the development of an access drift, drill platforms and diamond drilling to further confirm the optimal mining method to extract the base metal and gold lenses and to convert the inferred mineral resources in the gold lenses to mineral reserves.
Advancing Metallurgical Test Work for the Flin Flon Tailings Reprocessing Opportunity
Hudbay identified the opportunity to reprocess Flin Flon tailings, with initial confirmatory drilling completed in 2022 indicating higher zinc, copper and silver grades than predicted from historical mill records while confirming the historical gold grade. In 2023, Hudbay advanced metallurgical test work and evaluated metallurgical technologies, including the signing of a test work co-operation agreement with Cobalt Blue Holdings (“COB”) examining the use of COB technology to treat Flin Flon tailings. Initial results from preliminary roasting test work were encouraging in converting more than 90% of pyrite into pyrrhotite and elemental sulphur. Final test work results will support the development of an overall flowsheet. Hudbay expects to continue these metallurgical activities throughout 2024 as it assesses the economic viability of the various metallurgical technologies.
Peru Exploration Update
The company continues to execute a limited drill program and technical evaluations at the Constancia deposit to confirm the economic viability of adding an additional mining phase to the current mine plan that would convert a portion of the mineral resources to mineral reserves. The results from this drill program and technical and economic evaluations are expected to be incorporated in the annual mineral reserve and resource estimate update in March 2024.
Hudbay controls a large, contiguous block of mineral rights with the potential to host satellite mineral deposits in close proximity to the Constancia processing facility, including the past producing Caballito property and the highly prospective Maria Reyna property. The company commenced early exploration activities at Maria Reyna and Caballito after completing a surface rights exploration agreement with the community of Uchucarcco in August 2022. A drill permit application was submitted for the Maria Reyna property in November 2023, and a similar application for the Caballito property is planned for the first half of 2024. In parallel, Hudbay continues to advance community engagement activities. Surface mapping and geochemical sampling confirm that both Caballito and Maria Reyna host sulfide and oxide rich copper mineralization in skarns, hydrothermal breccias and large porphyry intrusive bodies.
Progressing Towards Climate Change Commitments
In December 2022, Hudbay announced its commitment to achieve net zero greenhouse gas (“GHG”) emissions by 2050 and the adoption of interim 2030 GHG reduction targets to support this commitment. While the company’s operations are well-positioned in the lower half of the global GHG emissions curve for copper operations, Hudbay recognizes its role in mitigating climate change and that copper and the metals Hudbay produces play an important role in the world’s transition to a greener future. Hudbay’s GHG emissions reduction plan includes pursuing a 50% reduction in absolute Scope 1 and Scope 2 emissions from existing operations by 2030 and achieving net zero total emissions by 2050.
In 2023, the company made significant progress towards its climate change goals, including:
Peru Renewable Power Supply Agreement – During the first quarter of 2023, Hudbay signed a new 10-year power purchase agreement with ENGIE Energía Perú for access to a 100% renewable energy supply to Constancia. The agreement will come into effect in January 2026 following the conclusion of Constancia’s existing power supply agreement. Total Scope 1 and Scope 2 GHG emissions company-wide at Hudbay’s current operations are expected to decline by 40% during the life of the contract, positioning the company well to achieve its 50% reduction target by 2030.
Electric Shovel at Copper Mountain – In September 2023, Hudbay commissioned a new Komatsu PC8000 electric shovel at the Copper Mountain mine, which reduces carbon intensity by displacing existing diesel shovel production.
Renewable Diesel at Copper Mountain – In 2023, Hudbay tested the use of renewable diesel in two of its non-trolley assist haul trucks at Copper Mountain in an effort to further reduce GHG emissions. The test results were promising and the company subsequently entered into renewable diesel contracts for approximately 80% of the expected fuel to be purchased in 2024.
Electric Scooptram at Lalor – In the first quarter of 2023, Hudbay initiated the trial of an electric Epiroc scooptram ST14 SG at the Lalor mine, which reduces carbon intensity by lowering emissions and reduces the temperature in the lower areas of the mine to improve ventilation. The trial was successful and, in the third quarter, a second electric scooptram was added to the fleet.
2024 Key Objectives and Annual Guidance
Hudbay’s key objectives for 2024 are to:
Enhance Hudbay’s position to deliver its leading copper growth pipeline;
Deliver copper production growth and maintain strong gold production from its diversified operating platform to generate strong cash flow;
Execute stabilization plan at Copper Mountain to drive improved operating performance and achieve operating synergies;
Maintain continued focus on financial discipline as the company progresses towards achieving deleveraging targets by managing discretionary spending and generating strong returns on invested capital;
Evaluate the viability of an additional mining phase at Constancia that could convert a portion of mineral resources to mineral reserves;
Evaluate opportunities to utilize excess capacity at the Stall mill in Snow Lake to enhance production and achieve greater economies of scale;
Progress de-risking of the Copper World project through final state permitting activities and a potential joint venture partnership to prudently advance the three pre-requisites plan required for sanctioning;
Execute the large exploration program on the expanded land package in Snow Lake to target new discoveries;
Advance plans to drill the prospective Maria Reyna and Caballito properties near Constancia;
Assess economic viability of various metallurgical technologies for the reprocessing of Flin Flon tailings;
Advance exploration partnership with Marubeni to explore for new discoveries within trucking distance of the Flin Flon processing facilities;
Continue to identify and evaluate opportunities to further reduce greenhouse gas emissions in alignment with the company’s climate change commitments and global decarbonization goals;
Assess growth opportunities that meet Hudbay’s stringent strategic criteria and allocate capital to pursue those opportunities that create sustainable value for the company and its stakeholders; and
As always, continue to operate safely and sustainably, aligned with Hudbay’s purpose to ensure that the company’s activities have a positive impact on its people, its communities and its planet.
Hudbay’s annual production and operating cost guidance, along with its annual capital and exploration expenditure forecasts are discussed in detail below.
Production Guidance
Contained Metal in Concentrate and Doré1
2024 Guidance
Year Ended
Dec. 31, 2023
2023 Guidance
Peru
Copper
tonnes
98,000 – 120,000
100,487
91,000 – 116,000
Gold
ounces
76,000 – 93,000
114,218
83,000 – 108,000
Silver
ounces
2,500,000 – 3,000,000
2,505,229
2,210,000 – 2,650,000
Molybdenum
tonnes
1,250 – 1,500
1,566
1,300 – 1,600
Manitoba
Gold
ounces
170,000 – 200,000
187,363
175,000 – 205,000
Zinc
tonnes
27,000 – 35,000
34,642
28,000 – 36,000
Copper
tonnes
9,000 – 12,000
12,154
9,000 – 12,000
Silver
ounces
750,000 – 1,000,000
851,723
750,000 – 1,000,000
British Columbia
Copper
tonnes
30,000 – 44,000
19,050
18,500 – 20,500
Gold
ounces
17,000 – 26,000
8,848
8,000 – 10,000
Silver
ounces
300,000 – 455,000
218,282
190,000 – 210,000
Total
Copper
tonnes
137,000 – 176,000
131,691
118,500 – 148,500
Gold
ounces
263,000 – 319,000
310,429
266,000 – 323,000
Zinc
tonnes
27,000 – 35,000
34,642
28,000 – 36,000
Silver
ounces
3,550,000 – 4,455,000
3,575,234
3,150,000 – 3,860,000
Molybdenum
tonnes
1,250 – 1,500
1,566
1,300 – 1,600
1 Metal reported in concentrate and doré is prior to refining losses or deductions associated with smelter terms.
On a consolidated basis, Hudbay successfully achieved 2023 production guidance for all metals. On a business unit stand-alone basis, Peru exceeded the top end of the gold production guidance range, Manitoba exceeded the top end of the copper production guidance range, while British Columbia exceeded the top end of the silver production guidance range for the portion of 2023 since the acquisition of the Copper Mountain mine.
In 2024, consolidated copper production is forecast to increase to 156,500 tonnesii, an increase of approximately 19% compared to 2023 actual production levels. This growth is a result of continued higher grade ore from Pampacancha in Peru and continued higher recoveries in both Peru and Manitoba, as well as the contribution from a full year of production at the Copper Mountain mine. Consolidated gold production in 2024 is expected to slightly decline to 291,000 ouncesii, due to a smoothing of Pampacancha high grade gold zones over the 2023 to 2025 period, as described further below.
2024 copper production in Peru is expected to increase by 8% from 2023 levels to 109,000 tonnesii. Mill ore feed throughout 2024 is expected to revert back to the typical one-third from Pampacancha and two-thirds from Constancia, unlike 2023 when a majority of the ore feed was from Pampacancha in the second half of the year. Gold production is expected to be 84,500 ouncesii, lower than 2023 levels due a smoothing of Pampacancha high grade gold zones over the 2023 to 2025 period as additional high grade areas were mined in 2023 ahead of schedule, resulting in gold production exceeding 2023 guidance levels, and other high grade areas were deferred to 2025. Total gold production in Peru over the 2023 to 2025 period is expected to be higher than previous guidance levelsii. The Pampacancha deposit is now expected to be depleted in the third quarter of 2025, as opposed to mid-2025 previously. Peru’s 2024 production guidance reflects periods of higher stripping activities in the Pampacancha pit in the second and third quarters, as well as regularly scheduled semi-annual mill maintenance shutdowns at Constancia during the second and fourth quarters of 2024.
In Manitoba, 2024 gold production is anticipated to be 185,000 ouncesii, consistent with 2023 production as the company expects the high gold grades and recoveries to continue into 2024. The production guidance anticipates Lalor operating at 4,500 tonnes per day and an increase in New Britannia mill throughput to 1,800 tonnes per day given the mill has been consistently operating above its 1,500 tonnes per day nameplate capacity. Zinc production for 2024 is expected to be 31,000 tonnesii, a 10% year-over-year decline as certain high grade zinc areas were shifted to 2023 and the Lalor mine continues to prioritize higher gold and copper grade zones in 2024. Manitoba’s production guidance reflects a scheduled maintenance period at the Lalor mine during the third quarter of 2024.
In British Columbia, 2024 copper production is expected to be 37,000 tonnesii, in line with the technical report for Copper Mountain issued in December 2023.
Hudbay will release its updated three-year production outlook together with its annual mineral reserve and resource update in March 2024.
Cash Cost Guidance
Copper remains the primary revenue contributor on a consolidated basis, and therefore, consolidated cost guidance has been presented as cash cost per pound of copper produced. The company has also provided cash cost guidance for each of its operations based on their respective primary metal contributors.
Cash cost1
2024 Guidance
Year Ended
Dec. 31, 2023
2023 Guidance
Peru cash cost per pound of copper2
$/lb
1.25 – 1.60
1.07
1.05 – 1.30
Manitoba cash cost per ounce of gold3
$/oz
700 – 900
727
500 – 800
British Columbia cash cost per pound of copper2
$/lb
2.00 – 2.50
2.50
2.40 – 2.85
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