Hudbay Minerals (TSX:HBM) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=hcYqCUqf
Summary
Hudbay Minerals reported record quarterly revenue of $757 million, adjusted EBITDA of $422 million, and adjusted net earnings of $159 million for Q1 2026.
The company highlighted its strong cash position, ending the quarter with over $1 billion in cash, and emphasized its focus on cost control and maintaining low consolidated cash costs.
Hudbay Minerals plans to advance the development of the Copper World project and has received $420 million from Mitsubishi as part of a joint venture, enhancing financial flexibility.
Operational highlights included record mill throughput in Peru and strategic advancements in Manitoba and British Columbia, with all operations on track to meet 2026 production guidance.
The company maintained a positive outlook on copper and gold production growth, expecting a 24% increase in copper output over the next three years and a pathway to 500,000 tonnes of copper production by the mid-2030s.
Management expressed confidence in managing external cost pressures, such as fuel price increases, and indicated that the company is well-positioned to handle potential political changes in Peru.
Hudbay Minerals is advancing its U.S. copper growth pipeline, with significant progress in Copper World and an acquisition of Arizona Sonoran, aiming for long-term growth and increased production.
Full Transcript
OPERATOR
Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. First Quarter 2026 Results Conference Call. At this time all participants are in listen only mode. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press Star then one on your telephone keypad. You’ll hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing Star then zero. I would like to remind everyone that this conference call is being recorded on May 1, 2026 at 11:00am Eastern Time. I would now like to turn the conference over to Candace Brulee, Senior Vice President, Capital Markets and Corporate Affairs. Please go ahead. Thank you Operator. Good morning and welcome to Hudbay Minerals’ first quarter 2026 results conference call. Hudbay Minerals’ financial results were issued this morning and are available on our website at www.hudbay.com. a corresponding PowerPoint presentation is available in the Investor Events section of our website and we encourage you to refer to it during this call. Our presenter today is Peter Kokilski, Hudbay Minerals’ President and Chief Executive Officer. Accompanying Peter for the Q and A portion of the call will be Eugene Lee, our Chief Financial Officer, and Andre Lauzon, our Chief Operating Officer. Please note that comments made on today’s call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company’s relevant filings on SEDAR+ and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today’s call are in US Dollars unless otherwise noted. And now I’ll pass the call over to Peter Kukilski.
Peter Kukilski
Thank you. Candace Good morning everyone and thank you for joining us on today’s call. We’ve had a great start to the year, achieving several key operational, financial and growth milestones. Hudbay delivered another quarter of record revenue, record adjusted EBITDA and record adjusted earnings in the first quarter. This was driven by steady operating performance, our focus on cost control and the continued benefit from margin expansion with our unique mix of copper and gold exposure. Our leading operating cost performance resulted in record low consolidated cash costs in the first quarter which contributed to continued strong free cash flow generation. With the strong performance in the quarter, all our operations are on track to achieve 2026 production and cost guidance. Building on our commitment to prudent balance sheet management we ended the quarter with over $1 billion in cash and cash equivalents benefiting from $420 million received from Mitsubishi for their initial cash contribution on closing of the Copper World Joint venture transaction in January. Our enhanced financial flexibility has positioned us well to continue advancing the development of Copper World, reinvest in high return opportunities at each of our operations and de risk the Cactus project upon completion of the acquisition of Arizona Sonoran to deliver attractive growth and maximize long term risk adjusted returns at each of our operations for stakeholders. Slide 3 provides an overview of our first quarter operational and financial performance. The first quarter demonstrated strong operating performance with higher mill throughput across the three operations compared to the previous quarter, delivering consolidated copper production of 28,000 tonnes and consolidated gold production of 62,000 ounces. We achieved record quarterly revenues of $757 million and record adjusted EBITDA of $422 million in the first quarter. Cash generated from operating activities was $211 million, remaining relatively consistent with the fourth quarter as a result of favorable changes in non cash working capital. First quarter adjusted net earnings was a record of $159 million or $0.40 per share, reflecting higher realized metal prices and strong cost control across the operations resulting in higher gross profit margins. During the first quarter we continued to demonstrate industry leading cost performance, delivering record low consolidated cash costs of negative $1.80 per pound of copper and sustaining cash costs of $0. This incredible cost performance was partially driven by higher gold by product credits reflecting the benefits of Hudbay’s unique commodity diversification. Turning to Slide 4, Hudbay has delivered several quarters of significant free cash flow generation as a result of steady operating performance, expanding margins from strong copper and gold exposure and our cost control efforts. With our enhanced balance sheet and diversified free cash flow generation, we are well positioned to fund our attractive growth pipeline. Our cost control efforts are focused on navigating emerging external cost pressures such as higher fuel prices and short term labor challenges. We have not experienced any disruption to fuel availability and have been able to mitigate the cost pressures through initiatives to further improve throughput and enhance operating efficiencies. We are well insulated from external cost pressures due to our diversified platform with significant byproduct credits from gold production and the polymetallic nature of our ore deposits. While most of our revenues continue to be derived from copper, revenue from gold represents a meaningful portion of total revenues with 39% of gross revenues from gold in the first quarter. After accounting for our sustaining capital investments but before growth investments, we generated $102 million in free cash flow during the quarter, bringing our trailing 12 month free cash flow generation to approximately $400 million. As mentioned earlier, we ended the first quarter with over a billion dollars in cash and cash equivalents and as of March 31st our total liquidity was $1.4 billion. Our net debt at the end of the quarter was nearly zero, bringing our net debt to EBITDA ratio to its lowest point in more than a decade. Consistent with our prudent balance sheet management and focus on cost of capital following the quarter, we repaid our outstanding 2026 Senior Unsecured Notes on maturity on April 1st. We used a combination of cash on hand and a $272 million draw on our low cost revolving credit facilities. After giving effect to this repayment, Hudbay’s total liquidity decreased by $473 million to $957 million. This continues to provide us with significant financial flexibility as we advance Copper World towards a sanctioning decision later this year. Turning to Slide 5, the Peru operations continued to demonstrate steady operating performance with production and costs in line with expectations. The operations produced 21,000 tonnes of copper, 9,000 ounces of gold, 530,000 ounces of silver and 380 tonnes of molybdenum during the first quarter. Production of copper and gold were lowered in the fourth quarter due to the depletion of the higher grade pampacuntu ore in late 2025. Mill throughput levels averaged approximately 90,700 tons per day in the first quarter of 2026, achieving a new quarterly record. The team’s efforts to increase mill throughput align with the Peru Ministry of Energy and Mines regulatory change to allow mining companies to operate up to 10% above permitted levels. On March 6, Hudbay received a permit approval to increase annual mill throughput capacity to 31.1 million tons from 29.9 million tonnes, setting a new base for the 10% permitted allowance. We continue to advance the installation of pebble crushers later this year to further increase mill throughput rates in the second half of 2026 and we are on track to achieve 2026 production guidance for all metals in Peru. First quarter cash costs in Peru were $0.70 per pound of copper, a 23% increase compared to the fourth quarter due to lower byproduct credits offset by lower profit sharing, lower power costs and lower treatment and refining charges. Cash costs in the quarter outperformed the low end of the annual guidance range as a result of strong operating cost performance and temporarily higher gold by product sales from Pampacancha. Despite emerging external cost pressures, we are well positioned to achieve the full year cost guidance range in Peru during the quarter. Constancia was recognized as the safest open pit operation in Peru during the National Mining Safety Contest for our performance in 2025. This reflects our company’s unwavering commitment to safety and validates Constancia’s compliance with the highest operational safety and regulatory standards. Moving to our Manitoba Operations on slide 6, the first course demonstrated strong operational agility in mitigating lower equipment utilization and labor availability at the Lalor mine while continuing to prioritize gold ore feed for the new Britannia mill. This strategy successfully maintained strong gold production in the first quarter supported by higher mill recoveries compared to the fourth quarter of 2025. Our Manitoba operations produced 48,000 ounces of gold, 2,500 tons of copper, 5,000 tonnes of zinc and 213,000 ounces of silver in the quarter. Production of gold was higher than in the fourth quarter due to higher gold recoveries and higher mill throughput while all other metals were lower, primarily due to lower grades. Production in the second half of 2026 is expected to be higher than the first half of 2026 due to grade sequencing and and higher ore output from Lalor. With solid operating Results in the first quarter, we are on track to achieve 2026 production guidance for all metals in Manitoba. The Lalor mine hoisted an average of 3,900 tons of ore per day in the first quarter, strategically prioritizing gold zones to secure optimal feed for the new Britannia mill. Total ore mined was lowered in the prior quarter because of lower effective utilization of equipment to due to reduced workforce availability. This was offset by successfully onboarding nearly 80 new employees as recruitment and upskilling of employees are underway to increase proficiency of frontline employees. The new Britannia mill averaged approximately 2,000 tons per day in the first quarter and benefited from continuous improvement initiatives to unlock future throughput capacity. Gold recoveries of 90% at the new Britannia mill reflects ongoing optimization efforts. Similarly, the Stall mill achieved improved gold recoveries of 73% in the first quarter, reflecting process optimisation and enhanced gold recovery initiatives. The 1901 deposit delivered 11,000 tonnes of development ore in the first quarter. The team continues to advance haulage and exploration drifts to further delineate the ore body and support ongoing infrastructure projects. Looking ahead, we plan to prioritize exploration definition, drilling ore body access and establish critical infrastructure at 1901 in preparation for full production in 2027 Manitoba gold cash costs in the first quarter were $408 per ounce, outperforming the low end of the guidance range. We are well positioned to achieve our 2026 cash cost guidance range in British Columbia. We continue to focus on advancing our multi year optimization plans, achieving significant milestones in both mining productivity and project permitting in the first quarter, and remain on track to deliver the benefits of the stripping program and unlock higher grade ore later this year. As shown on slide 7, Copper Mountain produced 4.8 thousand tons of copper, 5.2 thousand ounces of gold and 43,000 ounces of silver in the first quarter. In line with our guidance and planned mine sequencing. Production was supported by a higher mill throughput offset by lower grades compared to the fourth quarter. We remain on track to achieve our 2026 production guidance expectations for all metals in British Columbia, with higher production expected in the second half of the year as mill improvements take effect. Mining activities reached a record total material movement of over 25 million tonnes in the first quarter, driven by an optimized mining sequence in the main pit and increased contributions from the north pit. This ramp up was supported by the successful commissioning of a new production loader in January to further bolster the equipment fleet and add to this momentum, a new shovel has been recently commissioned. Drilling throughput benefited from the completion of the second SAG mill and the mill optimization initiatives implemented in late 2020 resulting in increased mill throughput in the first quarter of 2026. The second SAG mill achieved increased throughput in the quarter and averaged 10,000 tonnes per day in March. The primary sag mill continues to operate under a reduced load and is being rigorously monitored prior to the head replacement scheduled for late June and into July. The mill remains on track to achieve its permitted capacity of 50,000 tonnes per day in the second half of 2026. British Columbia cash costs were lower than the prior quarter, delivering cash costs of $2.41 per pound of copper as a result of higher gold byproduct credits and resolving the unplanned maintenance downtime issues experienced in the prior quarter. First quarter cash costs were within the guidance range and despite emerging external cost pressures, we remain on Track to achieve 2026 cash cost guidance in British Columbia during the quarter. The new Ingabel project reached a major milestone in February with the receipt of the Mines act and the Environmental Management act amended permits from provincial regulators. The new Ingabel project supports continued copper production, increased gold production and further mine life extensions. The project is designed to access higher grade mineralization while improving operational efficiency with a stripping ratio approximately three times lower than current mining areas. With these permit approvals, we are advancing critical infrastructure required for the expansion. This includes the construction of an access road, a bridge across the Similkameen river and the development of an East Hall Road link to New Ingabel with existing operations. A large drill program was initiated during the first quarter at Newingerbell to improve resource definition and expansion. We are pleased to receive the news this week that the B.C. government has added the New Ingabel project to the province’s list of priority resource projects. This list highlights the acceleration of major projects that strengthens economic growth, support resource development and create jobs and long term value. Turning to Slide 8, we announced our annual mineral reserve and resource update along with an improved three year production outlook. During the quarter we extended Snow Lake’s mine life by four years to 2041, maintained Constancia’s mine life to 2040 and extended Copper Mountain’s mine life by two years to 2045. Consolidated copper production is expected to average 147,000 tonnes per year over the next three years, representing a 24% increase from 2025. This growth is driven by higher expected copper production in British Columbia from the mill throughput ramp up in 2H20, higher grades in British Columbia in 2027, from …
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