Hudbay Minerals Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the HUD-Bay Minerals, Inc. 3rd Quarter 2022 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0. I would like to remind everyone that this conference call is being recorded today, November 3, 2022, at 8.30 a.m. Eastern Time. I will now turn the conference over to Candice Brule, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to HUD-based 2022 Third Quarter Results Conference Calls. HUD-based financial results were issued yesterday and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available and we encourage you to refer to it during this call. Our presenter is Peter Kakilski, HUD-based President and Chief Executive Officer. Accompanying Peter for the call will be Eugene Lee, our Senior Vice President and Chief Financial Officer, and Andre Lauzon, our Senior Vice President and 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 CDAR and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noticed. And now I'll pass the call over to Peter Kikilski. Peter?

Peter Kikilski Thank you, Candice. Good morning, everyone, and thank you for joining us. Before we jump into quarterly results, I'd like to congratulate Eugene Lee, who was recently appointed Senior Vice President and Chief Financial Officer. Eugene has a 10-year history with HUD-BAY, progressing through a number of increasingly senior roles and executive responsibilities, and is highly regarded within the industry. He has over 20 years of global mining investment banking, finance, and corporate development experience, and his transition into the CFO role has been seamless. With Eugene in the CFO role and Andre in the COO role, I believe we have the right leadership team dynamics in place to continue to execute our exciting growth strategy while remaining committed to deleveraging and disciplined capital allocation. Now, in conjunction with our announcement of Eugene's assumption of the CFO role, I'm going to depart from tradition and have both Eugene and Andre Lauzon, our COO, talk to some of the key themes. With our commitment to deleveraging and disciplined capital allocation in mind, 2022 has presented us with a period of higher input prices and declining copper prices, resulting in industry margins being significantly reduced. While HUD-BAY benefits from our consolidated cash costs being positioned in the first quartile of the global cash cost curve, our focus continues to be on cash flow. And we will touch on the steps we've taken to navigate this challenging environment, but first let me speak to our quarterly results beginning on slide three. I'd characterize our third quarter results as a period of strong performance in our Peru operations, and a period of transition in our Manitoba operations after the planned closure of the 777 mine in June 2022. Our consolidated copper production in the third quarter was 24.5 thousand tons, a 5 percent decrease compared to the second quarter due to the closure of 777, but partially offset by higher copper grades in Peru. Consolidated gold production was 53.2 thousand ounces, a 9% decrease due to the closure of 777 and slightly lower gold grades in Peru, but partially offset by significantly higher grades at Lalor and higher recoveries in Snow Lake and Peru. Consolidated zinc production was 9.8,000 tons, lower than the prior quarter due to 777's closure and one-off production interruptions in Snow Lake during the quarter. We anticipate stronger production in the fourth quarter and have reaffirmed our 2022 production guidance for all metals. Consolidated cash costs decreased to 58 cents per pound of copper from 65 cents in the second quarter. This significant improvement was primarily a result of lower onsite costs in Manitoba, partially offset by higher onsite costs in Peru, higher treatment and refining charges, higher freight costs, and lower consolidated copper production with the closure of 777. Consolidated sustaining cash costs were $1.91 per pound in the third quarter compared to $1.87 in the prior quarter. This slight increase was due to higher sustaining capital expenditures partially offset by lower cash costs and lower royalties. Both measures are tracking well with respect to the 2022 guidance ranges, and we are reaffirming our full-year consolidated copper cash cost guidance of $0.60 to $1.05 per pound and sustaining copper cash cost guidance of $1.60 to $2.25 per pound. Consolidated all in sustaining cash costs increased to $2.16 in the third quarter from $1.93 in the second quarter due to higher corporate selling and administrative expenses and accretion and amortization of decommissioning and community agreements. Operating cash flow before change in non-cash working capital was $82 million during the third quarter, reflecting a decrease from the second quarter. This decrease was primarily the result of lower zinc sales volumes, lower realized prices for all metals, and inflationary pressures on mine operating costs. Third quarter adjusted net loss per share was 5 cents after adjusting for a non-cash gain related to the revaluation of the environmental provision and a revaluation gain on the gold prepayment liability among other items. Third quarter adjusted EBITDA was $99 million, a decrease compared to the prior quarter's $141 million. This was as a result of the same factors affecting cash flow as discussed. We exited the quarter with $286 million in cash, an increase of $28 million during the quarter, as well as undrawn availability of nearly $370 million under our revolving credit facilities. Turning to slide four, our Peru operations benefited from higher copper grades and higher molybdenum recoveries, partially offset by lower throughput due to a planned semiannual mill maintenance program during the third quarter. We produced approximately 22,000 tons of copper, 13,000 ounces of gold, 564,000 ounces of silver, and 437 tons of molybdenum. Production of copper and molybdenum was higher than the second quarter, while production of gold and silver was lower, primarily due to slightly lower precious metal grades. We have seen successive quarterly increases in production this year in Peru, and as previously disclosed, we expect that trend to continue into the fourth quarter with the benefit of significantly higher grades from Pampa Cancha. As such, full-year production of all metals remains on track to achieve guidance ranges for 2022. Total ore mined increased quarter-over-quarter due to higher amounts of ore mined from Pampa Concha. The Constantia mill performed well during the third quarter, with ore milled nearly unchanged from the second quarter despite the planned maintenance shutdown. Milled copper grades increased quarter-over-quarter due to better-than-planned grades from Constantia. Third quarter combined unit operating costs in Peru were 9% higher than the second quarter, primarily due to continued inflationary pressures on fuel, consumables, and energy costs. HUD-BEI expects to complete a four-day mill shutdown at Constantia in November 2022 to advance maintenance activities that were originally planned for the first quarter of 2023. As a result of ongoing inflationary cost pressures and the additional mill maintenance in the fourth quarter, Full-year unit operating costs in Peru are expected to be near the top end of the 2022 guidance range. Peru's cash costs in the third quarter declined by 8% to $1.68 per pound of copper. This improvement over the second quarter was primarily due to higher byproduct credits and higher copper production. Copper cash costs are expected to continue to decline in the fourth quarter with higher anticipated copper production and contributions from precious metals byproduct credits. However, full-year cash costs in Peru are expected to exceed the upper end of the 2022 guidance range by approximately 5%, primarily due to the inflationary cost environment. Peru's sustaining cash costs declined by 6% compared to the second quarter, mainly due to the same factors affecting cash costs, offset by slightly higher sustaining capital expenditures and royalties. Moving to slide five, we'll discuss our Manitoba operations. During the third quarter, the Manitoba operations produced over 40,000 ounces of gold, almost 10,000 tons of zinc, approximately 2,000 tons of copper, and 153,000 ounces of silver. Production of all metals was lower than the second quarter, primarily due to the 777 closure. We saw successive quarterly gold production increases out of Snow Lake this year, and that trend continued into the third quarter with an 8% quarter-over-quarter improvement. This was due to higher LARO gold grades and increased gold recoveries at both Stawell and New Britannia. Full year production of all metals in Manitoba is on track to achieve guidance ranges for 2022. After 18 years of steady production in the 777 in Flin Flon, the final reserves were depleted in June and the mine was decommissioned in early August. The Flin Flon mill was safely placed on long-term care and maintenance during the third quarter. Closure activities in Flin Flon, including the zinc plant, were substantially completed in the quarter, with most of our employees and equipment of value transitioned to the Snow Lake operations to support LALO's ramp up to 5,300 tons per day in early 2023. This was a key focus area for the Snow Lake operations during the quarter, as the integration of the Flin Flon employees and equipment will allow us to ultimately transition away from the use of contractors. Lalor's ore production was impacted by an underground scoop tram fire as well as a two-day Manitoba hydro power outage during the quarter. Once production activities resumed following the power outage, priority was placed on mining the higher value copper gold ore to maintain throughput at New Britannia Mill. In addition, Lalor completed a scheduled maintenance program at the end of the third quarter and into the beginning of the fourth quarter to replace surface ore chutes and complete other pre-winter maintenance activities. Larlo's ore production is expected to return to 4,650 tons per day in the fourth quarter and is on track to ramp up to 5,300 tons per day in early 2023. Ore mined at Larlo decreased by 16% in the third quarter due to the noted transition and production interruptions impacting operations. Mined gold, zinc, and copper grades were 23, 7, and 1% higher respectively compared to the second quarter. The ore processed at the Snow Lake mills was lower quarter over quarter to match the ore feed from Laal ore. Stalled recoveries were consistent with the metallurgical model for the head grades delivered. The New Britannia mill achieved consistent production in the third quarter, averaging approximately 1,440 tons per day. Metal recoveries have now stabilized near targeted levels Additional improvement initiatives will continue to be advanced in the upcoming quarters with a focus on reducing reagents and grinding media consumption that has contributed to higher operating costs than planned. These initiatives require minimal capital expenditures and will further improve overall metal recoveries and copper concentrate grades. Manitoba combined unit operating costs significantly increased compared to the second quarter as we transition to the standalone cost structure of LALOR. Unit operating costs were also impacted by higher contractor costs during the transition period, higher costs at New Britannia, continued inflationary cost pressures, and lower tonnage with production interruptions. Costs are expected to decline in the fourth quarter, but due to continued inflationary pressures, we expect the full year combined unit costs in Manitoba to exceed the upper end of the guidance range by approximately 5%. Gold cash costs in the second quarter were $216 per ounce, higher than the second quarter primarily due to lower byproduct credits as gold revenue continues to increase and become the largest contributor to total Manitoba revenue. Cash costs were also impacted by higher treatment and refining charges, partially offset by lower onsite and zinc refining costs due to the closure of 777 and the zinc plant. Year-to-date gold cash costs of $136 per ounce continue to track well below the 2022 guidance range, and as such, we reiterate the guidance range for the full year. Our current focus at Copperworld is to de-risk the project through the completion of pre-feasibility activities, state-level permitting, and a bulk sampling program in 2023, as discussed on slide six. The pre-feasibility study is expected to include conversion of the remaining inferred mineral resources to measured and indicated. It will also optimize the layout and sequencing of the processing facilities, including concentrate leach technology tradeoffs and timing, in addition to evaluating other upside opportunities. The process plant pre-feasibility level engineering is 85% complete, and geotechnical and hydrogeological site investigation activities have been completed. Prefeasibility engineering design and metallurgical test book activities are on track to be completed before the end of 2022, with the results expected to be published in the study in the first half of 2023. Copper World requires state and local permits for phase one. We submitted an aquifer protection permit application to the Arizona Department of Environmental Quality, known as ADEQ, in September. and in October we submitted the application for an air quality permit to the ADEQ. We expect to receive these two remaining state permits by mid-2023. The other key state permit, the mined land reclamation plan, was received in July 2022. Upon receipt of the state permits for phase one, HUD-BAE expects to conduct a bulk sampling program to continue to de-risk the project by testing grade continuity variable cutoff effectiveness and metallurgical strategies in high-grade near-surface areas of the Peach, Elgin, and West pits. We have revisited the timing of a definitive feasibility study for Copperworld in light of the current price environment, but it is important to note that nothing has changed with respect to our view that this project is a robust, high-quality copper project that will be developed in the medium term. and our efforts to de-risk the project over the next 12 to 18 months will only add value to Copper World and prepare it for the definitive feasibility stage. Turning to slide eight, we recently executed a surface rights exploration agreement with the community of Uchakako that allows for exploration of the Maria Reina and Kabayito properties. HUD-BEI owns the mineral rights to these properties that are located within trucking distance of the Constantia Processing Facility and we completed geophysical surveys in the area that indicate large-scale potential at Maria Reina and Caballito. Shortly after the community exploration agreement was completed, we commenced baseline environmental and archaeological activities to advance the permitting process to allow for drilling the properties in the future. Our geological team commenced surface investigation activities and field evidence confirms that both Caballito and Maria Reina host sulfide and oxide-rich copper mineralization in scones, hydrothermal breccias, and large porphyry intrusive bodies. Similar to Pampacancha, Caballito is located about 5 kilometers from Constancia and includes an old open pit mine that was operated by Mitsui until the early 1990s. A United States geological survey from 1990 estimated a total resource of 91 million tons as 2.3% copper for the open pit mine. We have collected hand samples in the old Mitsui pit, which confirmed the mineralization is both copper oxides and sulfides rich with extensive occurrence of chalcopyrite and boronite. Maria Reina is approximately 10 kilometers from Constantia and hosts three types of mineralization, scarn, hydrothermal breccia, and porphyry, with magnetite and garnet scones and hydrothermal breccias having the potential to host high-grade zones. Artisanal mining activity is present in these high-grade areas, and the local operators reported producing an average grade between 2 and 6 percent copper in their small-scale selective mining activities. And now Andre will speak to our Yagen mineral resource update and recent drilling at our Flin Flon tailings. Andre?