Hudbay Minerals Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to HudBay Minerals' fourth quarter 2023 conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, too. If you have any difficulties hearing the conference, please press star zero for operator assistance at any time. As a reminder, this conference call is being broadcast live on the webcast and is being recorded. 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 2023 fourth quarter results conference call. HUD-based financial results were issued today 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, HUD-based President and Chief Executive Officer. Accompanying Peter for the Q&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 CDAR Plus 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 noted. And now I'll pass the call over to Peter Kokielski.

Thanks very much, Candice. Good morning, everyone, and thanks for joining us. I'm going to start a little bit informally by saying that we knocked it out of the park in 2023. It 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. The fourth quarter saw increased copper production record gold production, and record financial performance, resulting in the successful achievement of our annual guidance metrics. These strong results were because of many successful capital allocation initiatives at HUD-BAY. 2023 was the first year we saw the significant benefits from our recent brownfield capital investments in Peru and Manitoba. Through recovery improvement programs that were both on time and on budget, we increased recoveries at both the Constantia and Stahl mills. With continuous improvement initiatives, we increased throughput levels at the New Britannia Mill well beyond its nameplate capacity. We continue to demonstrate financial discipline in 2023 through reduced discretionary spending, free cash flow generation, and debt reduction. We successfully acquired and integrated the copper mountain mine to further enhance our strong, diversified operating platform and production profile. And throughout the year, we looked for other opportunities to drive long-term growth, including the consolidation of a significant land package in Snow Lake with the acquisition of the Rockcliff and Cook Lake properties near Larlo. As a company, we know our success is driven by the examples we set and the culture that drives our decision-making. In 2023, we launched our purpose statement that describes the positive impact we have on our people our communities, and our planet. As part of our climate change commitments, we took action in 2023 to progress towards our 2030 targets, including a renewable energy contract in Peru. The contract provides access to 100% renewable energy supply for Constantia starting in January 2026, which will reduce our company-wide greenhouse gas emissions by 40% during the life of the contract positioning us well to achieve our 50% reduction target by 2030. We've also entered into renewable diesel supply contracts and implemented electric equipment at our operations. We continue to examine ways to further reduce our emissions intensity at all of our operations through electrification and fuel efficiency initiatives. Our 2023 achievements are a testament to the outstanding team we have at HUD-Bay which continues to deliver the plan while always operating safely and efficiently. Our commitment to continued financial discipline, together with our increasingly 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. In the fourth quarter, we delivered on our plan for significantly higher production, revenue, and cash flow as we generated strong returns from our recent brownfield and growth investments across the business. We successfully doubled our production in the second half of the year compared to the first half as shown on slide four. Total copper equivalent production increased by 9% in the fourth quarter when compared to the already strong third quarter. Consolidated copper increased 8% quarter over quarter to a total of 45,000 tons, and consolidated gold production increased 11% quarter over quarter to 113,000 ounces. The increases in production were from the continued high mill recoveries in Peru and Manitoba, mining of the high copper and gold grade zones at the Pampa Cancha deposit, mining of the gold and copper zones at Lalor, record throughput at the New Britannia gold mill and incremental production from the copper mountain mine. This strong performance allowed us to achieve consolidated production guidance for all metals in 2023 and better than expected cash costs and sustaining cash costs for the year. Full year consolidated copper production increased by 26% year over year, while gold production increased by 41% and silver production increased by 13%. Slide 5 summarizes the strong financial performance driven by record production levels in the quarter. Consolidated cash costs were a remarkable $0.16 per pound of copper, an 85% improvement over the third quarter. Full year 2023 consolidated cash costs were $0.80 per pound at the very low end of the annual guidance range. Consolidated sustaining cash costs decreased to $1.09 per pound in the quarter, and $1.72 per pound for the full year 2023. The significant decrease in both cash cost measures was the result of higher copper production and higher byproduct credits, partially offset by higher operating costs from incorporating Copper Mountain. The full year sustaining cash costs were favorably impacted by lower sustaining capital expenditures than planned, resulted in annual sustaining cash costs performing better than guidance and coming in below the low end of cost guidance range. Adjusted net earnings was 20 cents per share in the fourth quarter. This compares to 7 cents per share in the prior quarter. Fourth quarter adjusted EBITDA was $274 million, increasing by 44% from the recent high in the third quarter. Full year adjusted EBITDA was $648 million, a 36% increase from 2022 levels. Operating cash flow before change in non-cash working capital increased to $247 million in the fourth quarter. After deducting sustaining capital expenditures and cash lease and community payments, we generated over $160 million in free cash flow this quarter. The improvements were a result of the greater sales volumes in line with higher production levels. The strong free cash flow generation in the fourth quarter has resulted in approximately $320 million in annual free cash flow for 2023. This strong cash flow generation enabled us to make significant progress against our deleveraging targets by completing the full redemption of $60 million in outstanding Copper Mountain bonds and reducing the net balance on our revolving credit facilities by $30 million. Our available liquidity increased to $574 million in the fourth quarter as our cash position increased to $250 million, and we had undrawn availability of $324 million on our revolving credit facilities. We exited the year with a net debt to adjusted EBITDA ratio of 1.6 times, a significant reduction from two times at the end of 2022. Turning to slide six, our Peru operations had a tremendous quarter with a 14% increase in copper production, a 22% increase in gold production, and a 20% increase in silver production quarter over quarter. During the fourth quarter, the higher grades at Pampa Concha resulted in 33,000 tons of copper production and 49,000 ounces of gold production. The strong quarter led to full-year copper production that achieved the annual guidance range. Silver and molybdenum production were near the upper end of the guidance range and gold production exceeded the top end of the guidance range by 6%. The Constantia mill performed well during the quarter with total ore milled consistent with the prior quarter. The mill achieved record copper recoveries of 87.4% as a result of the successful completion of the recovery improvement program in the second quarter of 2023 ahead of the start of the significantly higher grades at Pampacuncha in the second half of 2023. The recoveries in the second half of the year have been better than expected for the ore characteristics, and we look forward to seeing how the mill performs in its first full year since the recovery improvement initiatives were implemented. Combined units operating costs for the quarter were $12.24, slightly higher than the third quarter due to the scheduled mill maintenance shutdown in the quarter. Peru's cash costs were at a record low of $0.54 compared to $0.83 per pound in the third quarter. This 35% improvement was a result of higher gold byproduct credits, higher capitalized stripping, lower waste mining, and higher copper production. Cash costs in 2023 were $1.07 per pound, achieving the lower end of cost guidance range. Sustaining cash costs in Peru also decreased by 20% in the fourth quarter, and by 23% for the year ended 2023. Total annual sustaining capital expenditures in Peru were $28 million lower than the original guidance, primarily as a result of lower capitalized stripping costs. Our Manitoba operations, summarized in slide 7, achieved production of approximately 60,000 ounces of gold, 3.7,000 tons of copper, 5.7,000 tons of zinc and 256,000 ounces of silver. Gold production increased by 6% compared to the already high third quarter. This was primarily a result of the continued focus on mining higher grade gold zones, continued strong recoveries at the New Britannia install mills, and above nameplate throughput at New Britannia, benefiting from the optimization initiatives and brownfield investments made earlier in 2023. The operations continue to place significant focus on improvement initiatives aimed at supporting higher production levels at Lalor, minimizing mining dilution, and enhancing metal recoveries. This is made possible by efforts to improve the quality of ore production at Lalor through implementing techniques such as stope redesigns, grade control practices prior to blasting, assaying blast hole cuttings, and mine design adjustments. By being proactive in our measures, The team has successfully reduced the inclusion of waste rock in the mining cycle and, in turn, increased gold, copper, and silver grades during the fourth quarter. At Lalor, optimization of development drift size has led to a 15% reduction in waste volume and an 18% decrease in unit development costs compared to 2022. Higher shaft availability has led to efficient ore hoisting and has eliminated the need for trucking ore to surface. This has also lowered LALO's greenhouse gas intensity by 13% in 2023 compared to 2022. The team is actively pursuing initiatives to continue to bolster efficiency and further enhance mucking productivity. 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. Additionally, we were able to advance 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. The stall mill recovery improvement program and subsequent optimization activities have proven to be highly effective, resulting in notably higher recoveries for copper above 90% and gold above 65% in the second half of 2023. We achieved targeted gold recovery levels of 67.5% in both the third and fourth quarters compared to 60% in the second quarter. The New Britannia Mill process improvement initiatives have elevated throughput levels to a new record of 1,800 tons per day in the fourth quarter, significantly exceeding its original design capacity of 1,500 tons per day. With the meaningful recovery improvement and optimization initiatives in 2023, the Snow Lake operations successfully achieved annual guidance ranges for all metals with gold production of 187,000 ounces, a 28% year-over-year increase. In addition, copper production exceeded the top end of the guidance range at 12.2,000 tons, and zinc and silver both came in within the 2023 guidance ranges. Combined unit operating costs of $216 Canadian dollars per ton is consistent with the prior quarter, reflecting lower overall costs partially offset by lower total ore milled. Manitoba's gold cash costs were $434 per ounce, 35% lower than the third quarter due to higher byproduct credits and higher gold production in accordance with the mine plan. Full year 2023 cash costs of $727 were within the annual guidance range. Gold sustaining cash costs were $788 per ounce, a decrease of 16% from the third quarter based on the same reasons affecting cash costs combined with lower sustaining capital expenditures. Moving on to our British Columbia business unit on slide eight. In the fourth quarter, we produced 8.5 thousand tons of copper 3.5 thousand ounces of gold and 105 thousand ounces of silver. As a result, our BC operations achieved the post-acquisition 2023 production guidance for both copper and gold and exceeded silver production guidance for the year. The mine operations team executed a fleet production ramp-up plan to capture the full value of all idle capital equipment onsite. This plan entailed remobilization of the mining fleet from 14 trucks to 28 trucks by the end of the year, which allowed for increased waste removal during the fourth quarter. We continue 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. Benefiting from stabilization initiatives within the comminution circuit, the mill processed 3.3 million tons of ore during the quarter, with an average mill availability of 86.7%, a 3% increase versus the third quarter. The initiatives included changes in screen sizes, reduction in grinding media loading rates, and a change in the SAG mill operational strategy. Maintenance practices to improve mill availability continue to be a key pillar of our stabilization initiatives. Popper recoveries were 78.8% in the fourth quarter, We are implementing changes to the flotation operational strategy that mirror the company's successful processes at Constantia, including reagent selection and dose modification, reactivation and reprogramming of the expert control system, and circuit configuration changes. The benefits of these operational strategy improvements are expected to start to be realized in the second half of 2024. DC cash costs were $2.67 per pound, and we're in line with the annual guidance range. Sustaining cash costs were $3.93 per pound in the fourth quarter, reflecting the beginning of a period of accelerated stripping, which I'll touch on in a moment. Now turning to slide nine, I'll discuss our stabilization and optimization plans for Copper Mountain in more detail. In early December, we released our initial technical report for Copper Mountain outlining a mine plan with average annual production of 46.5,000 tons of copper in the next five years and 37,000 tons of annual copper production 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 copper respectively. The team is focused on improving reliability and driving sustainable long-term value. This will be done through increased mining activities, accelerated stripping to access higher grades, improved mill throughput and recoveries, unlocking operating efficiencies and corporate synergies, and ensuring stabilized near-term cash flows. Additionally, there are several opportunities to further increase production improve costs and extend mine life as upside potential beyond the technical report. We believe the stabilization initiatives will lead to consistent production levels and reduced cash costs over the mine life, representing 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. As mentioned earlier, we have commenced the fleet ramp-up plan to remobilize idle haul trucks to increase mining activities and improve flexibility in the mine with additional mining faces. To open up the mine, we have begun a campaign of accelerated stripping over the next three years to enable access to higher grade ore and to mitigate the reduced stripping undertaken by Copper Mountain over the four years prior to our acquisition. The accelerated stripping program is expected to improve operating efficiencies and lower unit operating costs. To ensure reliability of production, the implementation of improved maintenance management processes is planned throughout 2024. We also intend to implement improved practices around material handling and transportation in the comminution circuit. Work has begun to analyze the tradeoff among the various alternatives to further enhance mill performance. The new mine plan assumes a mill ramp up to its nominal capacity of 45,000 tons per day in 2025 and an expansion to the permitted capacity of 50,000 tons per day in 2027. To accomplish this, the mine plan assumes $23 million in growth capital spending over 2025 and 2026. HUD-BAE intends to improve mill recoveries with a more consistent ore feed grade, changes to the flotation reagents, and replacement of key pumps. In January 2024, we achieved the targeted $10 million in annual corporate synergies, and we are on track to generate more than $20 million in annual operating efficiencies over the next three years through our stabilization efforts. To ensure stability in cash flows while we invest in stabilizing the operations, we entered into copper hedging contracts for about 25% of 2024 production as a prudent measure. In January 2024, John Ritter joined HudBay as Vice President of the British Columbia Business Unit. His focus on operational excellence and value creating improvements will be instrumental as he leads the stabilization and optimization plans at Copper Mountain. The addition of the Copper Mountain mine to the portfolio has a meaningful impact on our diversified production profile. The contribution of this operation ensures that HUD-Bay maintains copper production levels above 150,000 tons annually through to the end of this decade. Copper Mountain provides stability in our consolidated cash flows and strongly positions us to prudently advance and unlock value from our development pipeline, including Copper World. We delivered on our plan for strong production and EBITDA growth in the quarter, as seen on slide 10. Delivering our second successful quarter of growing cash flows enabled us to continue to reduce debt and significantly improve our leverage ratio at the end of 2023. We achieved adjusted EBITDA of $274 million in a quarter, the highest quarterly level over the last five years, and a 44% increase from the previous high in the third quarter. As mentioned earlier, we generated over $160 million of free cash flow in the fourth quarter, an increase of $50 million from the prior quarter. During the quarter, we reduced net debt by $95 million through $90 million in debt repayments. This included a $30 million net repayment under the revolving credit facility, as well as the redemption of the remaining $60 million of Copper Mountain bonds. The leveraging efforts have continued into the first quarter of 2024. with an additional $10 million repayment on the credit facilities in January. And as I already mentioned, our net debt to adjusted EBITDA ratio improved to 1.6 times compared to two times at the end of 2022. Additionally, we continued with our efforts for capital cost efficiencies, reducing annual capital expenditures by $57 million in 2023 compared to original guidance levels, and I'll touch on this in a few slides. As shown on slide 11, we successfully met all production guidance ranges for all metals in 2023 with a few regional outperformers. Peru exceeded the top end of the gold production guidance range. Manitoba exceeded the top end of the copper production guidance range, while Copper Mountain exceeded the top end of the silver production guidance range for the portion of 2023 since acquisition. In 2024, we anticipate consolidated copper production to increase by 19% to 157,000 tons. This growth will result from continued higher grade ore from Pampa Cancha 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 be 291,000 ounces, a slight year-over-year decline due to smoothing of the Pampa Concha high-grade gold zones over the 2023 to 2025 period. Specifically for Peru, 2024 copper production is expected to increase by 8% year-over-year to 109,000 tons. As the mill ore feed will revert back to the typical split of one-third Pampa Concha and two-thirds Constantia in 2024, we can expect to see more consistent grades and production levels throughout the year. Gold production is expected to be 84,500 ounces, lower than 2023 levels due to the smoothing of Pampa Concha high-grade gold zones. Additional high-grade areas were mined in 2023 ahead of schedule, resulting in gold production exceeding 2023 guidance levels. Total gold production in Peru over the 2023 to 2025 period is expected to be higher than the previous guidance levels. The Pampa Concha deposit is now expected to be depleted in the third quarter of 2025 as opposed to mid-2025 previously. In Manitoba, 2024 gold production is anticipated to be 185,000 ounces. consistent with 2023 production levels as high gold grades and recoveries are expected to continue into 2024. We expect LALO to operate at 4,500 tons per day, and the New Britannia Mill is expected to see higher throughput levels of 1,800 tons per day in 2024. Zinc production is expected to decline 10% year over year as certain high-grade zinc areas were shifted to 2023. and the mine continues to prioritize higher gold and copper grade zones in 2024. In British Columbia, 2024 copper production is expected to be 37,000 tons in line with the technical report for Copper Mountain issued in December 2023. In March we will release updated three year production guidance with our annual mineral reserve and resource update. Looking at cash cost guidance on slide 12, In 2023, consolidated cash costs of 80 cents per pound achieved the low end of our annual cost guidance range, as mentioned earlier. 2024 consolidated cash costs are expected to be approximately $1.15 per pound, and consolidated sustaining cash costs are expected to be approximately $2.25 per pound. These are higher than 2023 due to lower byproduct credits and a full year of contributions from British Columbia. In Peru, 2024 cash costs are expected to increase to approximately $1.43 per pound, primarily due to lower byproduct credits and higher mining costs associated with lower capitalized stripping, partially offset by higher copper production. In Manitoba, 2024 gold cash costs are expected to increase to approximately $800 per ounce as a result of lower zinc and copper byproduct credits, and higher mining costs associated with less capitalized development costs. In BC, copper cash costs are expected to decrease by 10% in 2024 compared to 2023 and will be significantly lower than the $2.69 per pound cash cost contemplated in the technical report due to a reclassification of a portion of mining costs from operating expenses to capitalized costs. This is because we have continued to optimize the mine plan design since publishing the technical report and have made some enhancements. We moved from contractor mining to owner-operated mining as a more cost-effective approach for the additional required stripping. Additionally, we eliminated the mining of low-grade ore to stockpile in 2024, which increases the strip ratio and allocates a higher percentage of mining costs to capitalize stripping versus operating expenses. 2024 costs also reflect reduced discretionary tons moved with total material moved now expected to be 97 million tons compared to 104 million tons in the technical report. Our capital expenditures guidance is shown in slide 13. With our continued efforts to reduce discretionary spending, we were able to deliver on our spending reduction targets for 2023. Total capital expenditures for 2023 excluding Copper Mountain was $243 million, a 19% reduction in total capital expenditures as compared to the initial guidance for 2023. British Columbia capital expenditures were in line with HUD-based 2023 guidance levels. In 2024, we anticipate total capital expenditures to be $335 million, reflecting year-over-year capital reductions in Peru and Manitoba. while increased spending in British Columbia will be focused on stabilization initiatives and accelerated stripping activities. Discretionary growth spending and capitalized exploration are expected to remain at low levels in 2024 and reflect a 20% decrease from 2023. Peru's 2024 sustaining capital expenditures are expected to decrease to $130 million as a result of lower capitalized stripping. Manitoba's sustaining capital expenditures are expected to be consistent with the lower 2023 spending of $55 million. We are also excited to be advancing a development and exploration drift at the 1901 deposit, located near the existing underground ramp at Tulalor. The 1901 growth expenditures will be partially funded by $3 million of flow-through financing proceeds received in December. In British Columbia, 2024 sustaining capital expenditures are expected to be $35 million, and we expect to spend about $70 million on capitalized stripping as the team executes the accelerated stripping campaign. As mentioned earlier, with the lower BC cash costs, the 2024 sustaining capital includes a reclassification of mining costs from operating expenses to capitalized costs when compared to the December technical report. Total aggregate operating and capital costs for 2024 in BC are expected to be in line with the December 2023 technical report. Arizona growth capital spending of $20 million includes annual carrying and permitting costs for the Copper World and Mason projects in 2024. In terms of exploration expenditures, on slide 14, we expect to spend $43 million in 2024 roughly 35% higher than 2023, primarily as a result of an extensive exploration program underway in Manitoba. Our 2024 exploration activities are focused on areas with high potential for new discovery and mineral reserve and resource expansion. In Peru, 2024 exploration activities will continue to focus on permitting and drill preparation for the Maria Reina and Caballito properties near Constancia, The drill permit application for the Maria Reyna property was submitted in November 2023, and a similar application for the Caballito property is planned for the first half of 2024. We also continue to execute a limited drill program and technical evaluations at the Constantia deposit to confirm the economic viability of adding an additional mining phase to the current mine plan. These results will be incorporated in the annual mineral reserve and resource update in March. In Manitoba, the team is excited to have initiated the largest exploration program in the company's history in Snow Lake. The 2024 program will focus on testing the deep extensions of the gold and copper gold zones at Lalor, the Lalor Northwest Target, and the newly acquired Cook Lake and Rock Cliff claims. This property consists of drilling and modern deep geophysics, which I'll touch on shortly. We raised $11 million in critical minerals premium flow-through financing in December to help fund this large program in 2024. Slide 15 summarizes some of the exciting follow-up drilling we have planned at LALOR in 2024. Recall that in 2023, for the first time since LALOR's initial discovery, HUD-BAE initiated a step-out drill program focused on down-plunge extensions and other targets near LALOR. This included step-out drilling approximately 500 meters northwest of Lalor, which intersected a series of base metal and copper-gold zones, including a high-grade copper-gold-silver zone of comparable grade to Lalor's current mineral reserves, and we are calling this new zone Lalor Northwest. Additionally, the down-plunge drilling indicated that the alteration zone at Lalor continues for at least two kilometers to the north. As part of our 2024 winter exploration program, we have seven drill rigs turning at Lalor, completing surface drilling currently. Six drills are at Lalor Deep, following up on the successful down plunge drilling from last year, and one drill rig is completing follow-up drilling at Lalor Northwest. It is anticipated that these rigs will be relocated later in the season to explore other areas of our expanded land package after target generation from geophysics. The development and exploration drift at the 1901 deposit is shown on slide 16. This drift is being advanced from the existing underground access ramp to Lalor. We expect this program will take place over 2024 and 2025 and will include drill platforms and diamond drilling to further conform 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. Our expanded Snow Lake land package is shown on slide 17. The Cook Lake properties near Lalo provide additional potential for a new discovery and have promising historical drilling intersecting base metal and gold mineralization, but we're limited to an average depth of only 275 meters, a fraction of Lalo's current known depth. The acquisition of Rockcliff, one of the largest landholders in the Snow Lake area, provides significant additional land within trucking distance of our Snow Lake processing facilities. The 2024 exploration program will include a large geophysics program consisting of surface electromagnetic surveys using cutting edge techniques that will enable us to detect targets at depths of up to 1,000 meters below surface. We will use the results from the geophysics program to generate drill targets to be tested later this year. We are very excited to be exploring these new land claims, with the goal of finding a new anchor deposit to maximize and extend the life of the Snow Lake operations well beyond the current 2038. HUD-MAY is set up for another highly successful year in 2024. Our key objectives are shown on slide 18, and I know that we will again deliver on our plan in 2024 to continue to drive value for all of our stakeholders. We've touched on many of these objectives throughout the presentation and at the core of our organization, we are always focused on operating safely and sustainably, aligned with our purpose to ensure that the company's activities have a positive impact on our people, communities, and the planet. We intend to generate strong cash flow by delivering copper production growth and maintaining strong gold production. This will enhance our ability to deliver our leading copper growth pipeline. To conclude on slide 19, we believe that copper has the best long-term supply-demand fundamentals in the sector, as global copper mine supply will be unable to meet demands from global decarbonization initiatives. HUD-BAY is uniquely positioned to benefit from the strong outlook for copper with attractive copper production growth and significant long-term optionality for investors through our leading organic growth pipeline. Our strong operating platform with multiple assets in Tier 1 mining jurisdictions delivers a robust copper platform with more than 150,000 tons of annual copper production through to the end of this decade. Our leading copper exposure with complementary gold revenue offers portfolio resilience and diversification while we offer unique copper optionality with our world-class organic growth pipeline of development assets, including Copper World in Arizona and the highly prospective exploration satellite properties near Constantia. And equally important, we remain committed to the highest sustainability standards with social and environmental goals that will continue to deliver many benefits to all of our stakeholders. And with that, we're pleased to take your questions.

Thank you. Ladies and gentlemen, we will now conduct the analyst question and answer session.

If you would like to add a question, please press the star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. There will be a brief pause while we compile the Q&A roster.

Your first question is from from Scotiabank.

Please ask your question.

Hi, good morning. Nice to see the deleveraging continue here. I assume that's the focus for the next two years or so, but I did notice in your slide deck you didn't include the previous three prerequisites for Copper World. Can you just remind us if those criteria still exist in terms of where you want to see the balance sheet before you consider moving ahead with Copperworm?

Good morning, Orison. Thank you very much for your comments. Absolutely. The 3P program that Eugene outlined back in October of 2022 absolutely remain in place. One was permits, permits in hand, which we expect to obtain this year. The other was obviously was a prudent financing plan. And the other one was a, Eugene, remind me, a partner. So that's part of the prudent financing plan. So all of those initiatives remain in place. But Eugene, any further comments from you?

Yeah, thanks, Orest. And we're really pleased with the progress we made in 2023 to reduce our net debt to EBITDA ratio from 2.0 times to 1.6 times, as Peter mentioned. And that's ahead of the plan. And the plan is to get this to 1.2 times. And We'll continue to make progress on that plan in 2024 with prudent capital management and a focus on discretionary spending. But in 2024, looking ahead, we really improved our exposure to both copper and gold. And so for every 25 cent increase in copper, that's $75 million of additional net free cash flow. $100 of gold is another $25 million of net free cash flow. So we're really going to start to see the benefits of this enhanced diversified production platform that will allow us for accelerated leveraging, and that continues to be a focus for us.

Thanks. Just as a follow-up, I think I noticed your languaging in the release talked about permits now as a 24 event rather than a mid-year 24 event. Are you expecting some, I guess, delays there? And I'm just wondering if the JV partner process – is waiting for permits before it gets going, or is that in the background happening independently?

No, there are no delays in the permits. The ACFA protection plan has been drafted, and it's now in the statutory public comment period, and we expect to receive permits during the year. I think it's likely in the third quarter, but no, there's no delay in anything at all. Your question with respect to the JV partnering process, We want to have the permits in hand before we initiate that, but it's safe to say that, you know, we have a lot of interest expressed by various parties, and, you know, we'll bring them along in due course.

Perfect. Thank you very much.

Thank you. Your next question is from Ralph from Eighth Capital.

Please ask your question.

Thanks, operator. Good morning, everyone. The accelerated stripping at Copper Mountain over the next three years, there doesn't seem to be a significant increase versus the technical report. There was a lot of this captured in some of the discretionary stripping decisions. So I'm just wondering, is it safe to say that this $70 million number in 2024 is a good carryover number into 2025 and 2026?

Yeah, thanks, Ralph. This is Andre. So what you see for 2024 is the ramp-up. So the teams have done an excellent job of ramping up to the 28 trucks, and we're ramping up the truck drivers as we speak. We continue ramping up into 25, so we'll be hitting levels very close to the technical report.

Mm-hmm.

We mentioned that some of it was discretionary. We rolled out the technical report. So the technical report was, was then, you know, it was a snapshot in time. And when, when we had six months to get it out. And so we, we put together a really sound conservative tech report and there's lots of opportunities that the teams are working on blast practices and, and looking at ways to, to go with the more traditional stripping slope angles. We put in a very conservative slope angle. into our technical report. So there are some reductions based on permanent elimination of waste with new mine designs and the like. So there'll be some subtleties as we improve and optimize the technical report, but those are positives.

Great. Yes, it's good to see. You know, my follow-up question is, and I don't want to jump the gun on the three-year guidance that's coming, but the original guidance had 2025 as a down year at Constantia, but given some of the numbers that we're seeing in the new guidance, and it looks to be Papa Concha, you may have for another full quarter in 2025. Would it be safe to say that Constantia may actually look like on copper production a flat year-over-year in 2025 versus 2024?

Thanks again. We're working on opportunities. I know the teams have been looking at Again, similar theme to what's in Copper Mountain. Steeper slope angles, geotechnical, hydrology, and they're looking to try and get a little deeper in Papa Concha, but the overall for 2025 is still coming down. The teams are continuing to look at it, but it's not going to be the exact same, but there will be a tail in 2025, similar to what it was previously. Gotcha. Okay.

Thanks, Andre. Well done. Thank you.

Thank you. Your next question is from Lawson Winder from Bank of America.

Please ask your question.

Hey, thanks, Operator, and good morning, Peter and team. Thank you for the update today. I wanted to ask about Copperworld, a similar question to what our staff, but just in a slightly different way. So as you discuss with potential partners, is the feedback you're getting – that any sort of agreement is dependent on receipt of permits, or are there any other sort of conditions that are coming up that might be limiting an announcement?

Morning, Lawson. No, and thanks for your congruence. Look, absolutely not. I think that the feedback that we're getting is all value-driven. Nobody is focused on what's happening with the permits. I think there's a high degree of confidence in the state permitting process. And I think the focus from everybody that we've spoken to is completely value-driven.

Okay, fantastic. And then just in terms of the social license situation around Copperwell, what is your sort of sense of whether there might be any degree of legal challenges once the state permits arise? And has there been any community engagement that might help you uh, gauge that potential reaction?

Um, I, you know, I, so the first comment that I would make is that we are extremely, uh, open to working with anybody and everybody. Now the state permitting process has, uh, a process that involves public comment, but the comment has to be associated with the specifics associated with the technical aspects of the, uh, the permit. So it's not like the NIFA process which sort of allows for broader type of comment period. We, you know, you will recall during the Rosemont project that the state permits were issued and that they were in fact challenged by opponents. It's not unlikely that that won't happen again. But remember that we overcame those or the state overcame those challenges and the permits were upheld. Now, in this case, the work that has been done by both ourselves and the Arizona Department of Environmental Quality has been huge because we are ensuring, they are ensuring, that they can withstand any challenge. So our feeling is that there may be a challenge, but they will be fairly easily overcome because of the technical merits associated with the permits. Now, also remember, that once we have the permits in hand, the next step is definitive feasibility. So it allows us time in which to resolve any of those outstanding issues in any case. From a PR perspective, we are making sure that we engage with a broader population as well as with the tribes in order to ensure that there's much better understanding of what it is that we are trying to do. And we have very, very significant engagement with the tribes currently being experienced.

Okay. Fantastic. And it's nice to see that deleveraging accelerate. Nice one.

Thank you.

Thank you. Once again, ladies and gentlemen, please press star one should you wish to ask a question.

The next question is from Jackie Drizil-Vilowski from BMO Capital Markets. Please ask your question.

Thanks very much, and congratulations on the quarter. It's really terrific. I guess my first question will be on Manitoba. You mentioned that you're planning to start the exploration drift to 1901, and you've got some other properties that you're working to get started on drilling. Can you just maybe give us a quick overview as things stand now on where you see the next production coming from and how that fits into your existing mills and your existing infrastructure? Thanks.

Sure, Jackie. No, and thanks for the kind comments. I think that Andre and I were actually on site in Manitoba last week, and we spent some time with the exploration team. And it is, I have to tell you, there is a lot of excitement there. But I think to answer your questions a little bit more specifically, let me get Andre to do that.

Sure, sure. So specifically to your question, Jackie, around what are the next lines of production. And so obviously the very, very nearest stuff is the 1901, right? We have identified some mineral resources and some reserves in that deposit. We started the drift. It's on track, and the teams are fully focused on that. And that drift itself, what it does, it also opens up some exploration targets for copper gold zones that we previously couldn't drill from surface along the way. So later on this year, we'll come into some new drill horizons that we haven't been able to test for the downstream. the down plunge, if you will, of the copper gold zones of 1901. Our hope through this program is better grade and higher value material, and potentially we'll see on the tons. So that's the nearest term one that we see. We have a number of other satellite deposits that we have in our portfolio. There's probably, if you add them all up, there's over 15 million tons of these satellite deposits, and we have teams looking at them as we speak Our successes at New Britannia, the teams there just continue to please us. The mill and the quarter, we ramped up to over 1,800 tons per day in the last month of December, and we're running up very close to 2,000 as we speak. In fact, if I comment on New Brit, we just recently got the permit yesterday to go to 2,500 tons per day. So, you know, our goals will be to put more gold through there, which frees up more capacity for base metal at Stahl. And so 1901 is the start. Talbot, we just with the Rockliff acquisition, we, you know, now we own the whole thing back again. Teams are looking at it and we have exploration plans to test some geophysical anomalies nearby. And we're also looking at Burr. Burr, if you recall, was a high zinc base metal one. it was a high focus at the time prior to the discovery of Lawlor. And then when Lawlor happened, it sort of got shelved. But now with the milk capacity, teams are looking at all of these at the same time. So there's a lot of ones that we already know about, and we're looking at them in very different ways. And the exploration, we hope to extend further the copper gold as well at Lawlor to extend the life, and that's just a natural progression for us. There's more I could talk for a long time on it, maybe offline, but it's very exciting.

Thanks. I mean, maybe just to follow up quickly on that, I guess, is it fair to say that with the satellite deposits not using the shaft at Lowell or your overall production from the Snow Lake Camp could go up with extra capacity in the mills and not being shaft constrained? Is that the right way to think about it?

Absolutely. Absolutely. And we're not shaft constrained yet. So there's still room in the shaft and our intention is the 1901 someday, once we get it coming in in the near future, that'll go up the shaft as well. But yes, those additional fees, just like reed mine, there's a number of all these smaller one to three to four million ton deposits. They're not the big anchor like Waller, but we're looking at them, you know, if they run, like some of them need roads and the like, if they run like a logging, operation and only run for in the wintertime, if maybe, but others might be a steady, small, high-margin producer. So, yeah, there's lots of opportunities.

I'm going to – sorry, to carry on, Jackie.

Yeah, sorry. I was just going to – I just wanted to ask Andre to repeat that. The 1901 would go up the shaft, you said.

1901 will go up the shaft. And so, one of the things we're trialing this year with the 1901 is some battery electric vehicles. It's a downhill run with the battery electric trucks, and we see that as a positive from the greenhouse gas perspective. But going downhill recharging is our plan, the trucks, and coming back up on battery. And we do have the capacity. The teams have done a great job in terms of increasing the skip capacity and optimizing the uptime in the shop, but also increasing the amount of material and volume that we can put into the measuring flask and the skips.

I was just going to add, Jackie, to what Andre was saying. So I've got to back to my comment that Andre and I were in Manitoba last week. And I have to tell you that the atmosphere there is electric. So there's all of this exploration stuff going on, but the collaboration amongst the team towards performance improvement is just amazing. So a lot of you and a lot of our investors visited Constantia in September last year, and you saw the sort of interaction and the pride that exists amongst the team there, and how they're doing exactly the same thing exists in Manitoba right now. And we just can't wait to show that. And now we're busy sort of sowing those seeds at Copper Mountain, and it's going to be fun.

That's fantastic. Yeah, it was a great atmosphere in Peru. Thanks very much, and congrats again.

Thank you.

Thank you. Your next question is from Stefan Lianone.

from Hallmark Securities. Please ask your question.

Yeah, thanks very much, guys. And again, great to see the quarter. Just curious, in Peru, obviously, you mentioned, you know, obviously, permits for or applications to drill at Caballito and Marina are either in or going in. And, you know, planning to drill those projects, any sort of timeline and when you think you might actually have those permits? I know it's kind of been vague and a bit of a vague sort of timeline, but anything guidance on that?

Yeah. Hi, Stefan. Thanks. So we submitted the Maria Reyna permit application in November. We're in the process of putting the Cabellito one together. We expected to submit it in the first half of the year, so in the next several months. You know, the rough guess of the time that it takes to get one of these approved is roughly a year. So I assume that during 2025, we'll be able to start drilling. But I think that one of the things that I would observe is that we have, once again, a very large contingent of Peruvian government officials coming to PDAC. And I'm sure that there'll be lots of discussions at PDAC about the process and how to streamline it. And I'm pretty sure we'll get a lot of support from the Peruvian government to streamline the process. But I think, you know, from a planning perspective, we imagine it's going to take roughly a year to get those permits. Okay. Okay, great. That's helpful.

And then great, you know, shifting gears over to Manitoba, it's great to see New Brit running so well. and the fact that you're closer to 2,000 ton a day now, and then you just mentioned that you've got a permit now to go to 2,500. Just out of curiosity, could you get to the 2,500 by just continuing to push hard on that thing, or at some point do you have to invest some more capital into it to actually get it there?

So this is all very, very low capital improvements that the teams are looking at, and so right now in the month of January they've been trialing in a trialing to send more stall, call it base metal light feed, not really heavy base metal feed that wasn't traditionally thought or envisioned for New Britannia. And they've been successful at getting it with just slight decreases in recovery, but significantly better gold recoveries than we would get at stall. So we're able to send more of the feed that we're currently producing and generate more gold ounces out the door. So there's a real drive and focus on it. And so right now, our current process, we send copper concentrate over to be processed at New Brit through a pipeline. And right now, with the base metal feeds that we're putting over to New Britannia, we're producing so much copper there now that our filter presses can't keep up. So what they're contemplating is repurposing that that pipeline where we're sending the copper concentrate over to New Brit to be filtered is to use that pipeline as a tailings line to go the other way and put a filter in to manage copper at Stahl, which is low capex. We just put in two there, two new ceramic filters. So very low capex, and we're looking at dialing up the gold recovery, and we'll see what, especially as... 1901 comes online in the future, you know, there'll be a lot more to come there. Okay, great to see.

And maybe just one last one for me real quick. You know, following on Jackie's question, obviously a lot of excitement in Manitoba, in Snow Lake. Should we be thinking at all about Flin Flon right now, or is all excitement actually focused in Snow Lake proper?

Look, you know, Flin Flon is... I'm going to let Andre comment first, but Flin Flon is... we're very focused on flint flan as well. And a separate team is looking after flint flan and tailings, addressing the tailings recovery potential. There's two, obviously, there's two initiatives. One is on the traditional tailings, and the other is the ZPL tailings from the zinc plant. And we're making a fair amount of progress there. I think the goal initially is to reduce our environmental performance and turn it into a cash neutral camp, and if not, turn it into a mine that actually produces cash flows. But it's progressing well. Andre, any comments from your side?

I think you hit it. So yes, the Maribene exploration, we're expecting to get an agreement with them shortly. They're on a plan. We have all the targets laid out, and drills are ready to go, just waiting for us to sign that agreement. And what's really exciting, like Peter said, is there's two different tailings ones. The zinc plant tails is something that we've is very, very low risk, right? It's very low risk from the perspective. We had a flow sheet design metallurgically. It was there. It's been sitting on the shelf for years. And so, you know, it's something that's relatively, I'd say, for an open pit, it's very, very high NSR. I won't say what it is. They think that it's very early. We're hoping to see some studies on it in the near future. And the cobalt blue process around the bigger flint-flon tails, that's progressing very well. And They've been successful at converting pyrite to pyrotite, which Peter described as what that does is we're working at eliminating the acid generation of the tails and basically wiping out any water treatment out for the next 100 years is our goal. And so we see that as a huge upside. It almost becomes, like Peter says, another mine, and we own it. And so the teams are working very hard at that.

Okay, so bottom line, don't forget about SunSun. All right, great.

Thanks very much for the time, guys. Appreciate it.

Thank you. There are no further questions at this time.

I will now hand the call back to Candice Berlay for the closing remarks.

Great. Thank you, Operator. And thank you, everyone, for joining us today. If you have any further questions, feel free to reach out to our investor relations team. Thank you.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.