Q3 2021 Hudbay Minerals Inc Earnings Call
Women in the third quarter demonstrates our continued focus on execution and delivery in 2021, we had the first full quarter of production at the pump a conscious satellite pit in Peru, and we started to see the benefits of a higher gold from the newly refurbished new Britannia mill in Manitoba.
This led to record gold production for <unk> this quarter we.
We also successfully commissioned the new copper flotation circuit at new Britannia in October marking the completion of our recent investment program into two high return growth projects.
With pump a culture in new Britannia now in operation. We are on the cusp of achieving significantly increased cash flows for many years to come.
And this is at a time when the commodity markets remained strong, including a robust outlook for copper due to a lack of long term copper mine supply coupled with the growing demand for copper to support global decarbonization efforts.
In the presentation today I'll speak to the highlights from our third quarter results.
The progress we've made at our growth projects in more detail, including exploration success at our Copperweld discovery in Arizona and I'll recap the many near term catalysts at high Bay.
Third quarter consolidated copper production was 23 2000 tons generally in line with the second quarter of 2021.
This was because of slightly lower copper production in Peru was offset by higher copper production in Manitoba.
Consolidated gold production in the quarter was 53 9000 ounces a record for <unk> and a 35% increase from the second quarter due to higher gold grades from Pampa Concha record gold recoveries in Peru, and significantly higher gold grades at Lalor.
Zinc production in the quarter decreased by 3%, while silver production increased by 11% versus the second quarter.
2021 production guidance for key metals contained in concentrate in Dore has been reaffirmed.
<unk> cash cost per pound of copper produced was 62 cents in the third quarter at 26% decrease from the second quarter as operating costs were generally lower.
Sustaining cash cost decreased by 12% to $1 97 in the third quarter, primarily due to the same factors affecting cash cost as well as slightly lower sustaining capital expenditures.
We continue to expect consolidated cash costs and sustaining cash costs to be within our annual guidance ranges for 2021.
Cash generated from operating activities increased to approximately $140 million in the third quarter compared to $96 million in the second quarter operating.
Operating cash flows before change in noncash working capital declined to $104 million during the third quarter, primarily because of lower base metal sales volumes and lower realized copper and precious metals prices, partially offset by higher precious metal sales volumes.
Third quarter, adjusted net earnings were $38 million or <unk> 15 per share after normalizing for an impairment due to an updated flimflam closure plan and <unk> restructuring charges.
Adjusted EBITA was $119 million lower than the second quarter of 2021, primarily due to the same factors affecting operating cash flow.
As it as at September 32021, our available liquidity, including $297 million in cash and equivalents, a slight increase compared to the second quarter.
This was because cash generated from operations was offset by $89 million in sustaining capital and investments in the new Britannia project as well as $34 million of interest paid on our bonds.
In October our liquidity position was further enhanced through the successful renegotiation of our credit facilities to increase available or borrower borrowings from $400 million to $450 million, while extending the maturity to October 2025.
We eliminated certain financial covenants, while remaining others to increase our financial flexibility and we reduced the effective interest rate.
Moving to slide four you will find a summary of the quarterly operating results from our Peru business unit.
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Constancia produced 18000 tonnes of copper $17 5000 ounces of gold.
521000 ounces of silver and 282 tons of molybdenum, while copper production was 5% lower than the second quarter due to a planned semi annual mill maintenance shutdown in July.
And silver production increased by 72% and 11% respectively.
This was due to significantly higher gold and silver head grades from Pampa, Concha and significantly higher gold recoveries, which led to record quarterly gold production in Peru.
As noted last quarter molybdenum production is a smaller part of our business and we expect it to fall slightly below the 2021 guidance range, but in line with the recently published mine plan for Constancia.
We expect the production of all key metals in Peru to be in line with the 2021 full year guidance ranges.
Ore mined during the third quarter decreased by 8% from the second quarter of 2021 as mining levels were optimized for mill throughput.
Amp up of mining activity that Concho has increased steadily since first production in April 2021.
Ore milled during the second quarter was 6% lower than the previous quarter due to the scheduled mill maintenance shutdown.
Milled grades for copper was slightly lower than the second quarter, but were in line with the mine plan.
Milled grades for gold and silver were 57% and 36% higher respectively than the second quarter due to a significantly higher precious metals head grades from Pampa contract.
As mentioned, Peru achieved record gold recoveries in the third quarter significantly above the second quarter, mainly due to higher ore grades from Pampa Concho.
Meanwhile, copper recoveries increased due to lower levels of contaminants.
Over recoveries decreased as a result of lower than expected recoverable silver values in the earlier more oxidized ores from pump contract.
Recent metallurgical test work indicates a pump conscious silver recoveries are expected to increase to targeted levels in 2022.
Combined unit operating costs in the third quarter were higher than the second quarter, primarily due to higher milling costs and fewer tons milled due to the scheduled mill maintenance program during the quarter.
Cost have been generally higher than in 2021, as a result of the higher ore hardness higher steel prices affecting grinding media costs higher fuel prices impacting holding costs and COVID-19 related expenditures.
Covid related costs in Peru were approximately $5 million in the third quarter and are expected to continue at a similar run rate into the fourth quarter exclude.
Excluding these COVID-19 related costs unit operating cost in the third quarter were $10 93 per ton.
We expect Peru units operating costs to be near the top end of the guidance range. This year after adjusting for and budgeted COVID-19 related costs.
Produce cash cost in the third quarter were $1.26 per pound with 32% improvement over the prior quarter the.
This significant reduction was due to higher byproduct credits and lower operating costs, partially offset by lower copper production.
Similarly, Peru sustaining cash costs decreased to $2 31 per pound, a 14% reduction from the second quarter due to the same factors affecting cash costs offset by higher sustaining capital expenditures.
Turning to slide five on pump culture.
As mentioned first production that pump Concho was achieved in early April 2021.
Ramp up of mining activities has progressed well and in line with the recently published mine plan for Constancia operations.
Compared to the last quarter total <unk> increased by 109% to $2 1 million tons this quarter.
As you saw on the previous slide the higher gold grades pump <unk> have led to higher gold recoveries.
Activities continue to advance as planned with grades and tonnes reconciling well against the mine plan achieving the expected increased gold grades in 2021 and on track for achieving higher copper grades in 2022 in line with recent company guidance.
Tampa country is expected to contribute to an overall increase in constancia copper production to above 100000 tons per year.
This together with an increase in annual gold production is expected to significantly reduce constancia as average cash costs to approximately $1 15 per pound over the next several years.
Now moving to the next slide on Manitoba, we started to see the benefits from the commencement of gold production at the new Britannia mill during the third quarter.
Production of copper gold and silver increased during the quarter compared to the last quarter by production of zinc decreased.
The operations produced approximately 5200 tons of copper 36, $36 7000 ounces of gold 242000 ounces of silver and 28000 tons of zinc.
Continue to expect the production of all metals contained in concentrate in Dore and Manitoba to be in line with the 2021 full year guidance ranges.
Mining operations at Lalor has started to consistently produce and separate the gold and copper gold ores as feed for the new Britannia mill.
At the end of the third quarter, approximately 35000 tons of gold was ore was stockpiled as feed for the new Britannia Mill, a decrease of approximately 12000 tons from the end of the second quarter.
The Triple seven mine is now within nine months of closure and the focus continues to be on mining out the remaining reserves by completing the necessary ground rehabilitation in order to access all workings and remnants stopes.
Total ore mined at the Manitoba operations was higher this quarter than the second quarter due to higher production rates at Lalor copper.
Copper and gold grades were higher compared to the previous quarter, mainly due to the increased mining of gold and copper gold stopes at Lalor in line with the mine plan.
<unk> zinc grades were lower than the previous quarter as mining of the gold zones at Lalor were prioritized during the quarter.
During the third quarter, New Britannia mill processed 41, 8000 tons of high gold content ore and produced 404 ounces of gold in Dore.
Mill poured its first Dore bar on August 11th to gold and silver recoveries are expected to increase in the fourth quarter after ramp up of the mill during the third quarter.
Ore processed at the store concentrated in new Britannia mill during the quarter was 29% higher than the second quarter.
Combined stall and new Britannia recoveries during the third quarter were higher for zinc and lower for copper gold and silver versus the previous quarter, but were consistent with expectations as the third quarter was a partial ramp up period for the new Britannia mill.
Operations at the Flimflam concentrated during the third quarter were constrained by all feed availability from triple seven and as such all process decreased by 22% compared to the second quarter.
Recoveries of copper gold and silver at the <unk> fund concentrated during the third quarter were higher than the previous quarter, mainly due to higher copper head grades from the Triple seven mine consistent with the metallurgical model.
Manitoba combined unit operating costs slightly declined in the quarter compared to the second quarter, We expect Manitoba unit operating costs in 2021 to be in line with the annual guidance range.
Manitoba cash cost per pound of copper produced was negative $1 64.
Higher than the second quarter, primarily due to lower byproduct credits, partially offset by lower onsite costs sustained.
Sustaining cash cost was <unk> 75, compared to <unk> in the second quarter.
Primarily due to the same reasons affecting cash costs offset by lower sustaining capital expenditures.
On August 11th 2021 gold production commenced at the new Britannia mill after refurbishment commissioning and startup activities were completed earlier in the summer.
First gold production was achieved in line with the timelines assumed in recent guidance and ahead of the original schedule to produce first gold before the end of 2021.
The construction of a new copper flotation facility was completed in October followed by a brief commissioning period completed ahead of schedule.
The Capa facility consists of an innovative and first of its client flotation circuit based entirely on Jameson cells and modern pneumatic flotation design that offers a compact lay out low cost process and flexible flow sheet.
First production of copper concentrate was achieved in October and ramp up of the copper circuit is now underway, we expect to achieve the targeted 500 tonnes per day design capacity at new Britannia in the fourth quarter of 2021.
We've been very pleased with the construction of the new copper flotation facility. This is yet. Another example of our core expertise and successful project development and delivery. We completed construction of this new copper flotation project ahead of schedule with what we believe to be a record setting commissioning and ramp up period.
Annual gold production from Lalor and the Snow Lake operations is expected to increase to over 180000 ounces at an average cash cost and sustaining cash cost net of byproduct credits of 412 and $788 per ounce of gold respectively. During the first six full years of new Britannia is.
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As part of the ongoing efforts to update offline fund closure plans a comprehensive update completed in the third quarter of 2021 resulted in a $144 million increase to the decommissioning and restoration provision.
This increase is largely attributable to longer dated water treatment and monitoring obligations.
Long with cost inflation for other remediation activities the.
The higher water management costs are primarily a result of the addition of 22 years to the post closure of water management period, which after applying a very low discount rate represents a significant portion of the increase.
The total estimated <unk> environmental obligations are $322 million on an undiscovered basis of which approximately 25% is expected to occur in the next 15 years in connection with the closure of the Flint flung operations, while approximately 75% relates to longer dated closure.
And environmental costs around the time of Snow Lake closure in 2037 based on current reserves.
As part of the engineering work done to update the Flimflam closure plan, we've identified the opportunity to reprocess tailings at <unk> tailings impoundment system.
Tailings from processing activities influence <unk> have been deposited in this area for over 90 years and through several commodity price cycles technology has come a long way over these 90 years and we are in the early stages of technical evaluation and confirmatory drilling to support the completion of a scoping study in 2022.
But we're excited about this opportunity as it could utilize the <unk> concentrated with modifications after closure of the Triple seven mine, creating operating and economic benefits to the <unk> community.
It could also provide the opportunity to redesign the closure plans increased metal production.
First certain closure costs and reduce the environmental footprint of the tailings area.
On slide nine we discuss the continued exploration success at our Copperweld project in Arizona.
In September we released the results from drilling completed a couple wells between January and June of 2021.
The drill program totaled over 91000 feet and intersected additional high grade copper sulfide and oxide mineralization on our wholly owned private land.
Mineralization is within seven kilometers of the Rosemont copper project and is located closer to surface then Rosemont <unk>.
Recently, we increased our private land package, which together with patented mining claims now totals approximately 4500 acres to support an operation entirely on private land.
2021 drilling program identified three new deposits for a total of seven deposits at copperweld, covering a combined seven kilometers with mineralized occurrences to.
The three new deposits are called Bolsa, south limb and North Lim.
The program also confirmed and increase the confidence in the size and quality of the existing copper world brought up Butte Peach and Elgin deposits.
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There remains the potential for continuity between the bulk of discovery and the Rosemont deposit as highlighted by three new holes drilled on the western edge of Rosemont, which intersected high grade copper mineralization similar to the mineralization intersected at Bolsa.
There remains a 500 foot gap in drilling coverage between these three holes and the Basel discovery and we are developing plans to test this unexplored area.
We expect to complete an initial mineral resource estimate for the seven deposits at copperweld before the end of 2021.
These mineral resource estimates will form the basis for our pega expected to be released in the first half of 2022.
Mineralogical studies and metallurgical testing programs are underway and the preliminary results are expected to be incorporated into the pega.
Lastly on Copperweld in October we received approval from the Arizona State mine Inspector for our mined land reclamation plan.
This approval represents the first step in the state level permitting process for a private land operation.
Slide 10 provides highlights of the exciting exploration initiatives underway in each of our regions.
In Peru ongoing evaluation of the underground potential at Constancia Naughty support plans for additional drilling activities in the fourth quarter of 2021.
The drilling is expected to confirm continuity and test extensions, which together with the results from an underground scoping study are expected to be incorporated into the annual mineral reserve and resource update for Constancia in March 2022.
We continue to progress discussions with the community of which a cargo on the Maria Arena and cover our Utah properties, both of which are located within 10 kilometers of Constancia.
Drilling continues at the AGA and copper porphyry target located in northern Peru, near the city of to here and in close proximity to existing infrastructure.
The initial confirmatory phase of the drill program is expected to total 6000 meters in 14 holes with two drill rigs presently training site.
Five holes totaling 2795 meters have been completed with all hold intersecting mineralization.
Pending positive results from this initial drilling phase the second phase aimed at defining an initial inferred mineral resource for yogurt would follow in the second quarter of 2022 after the rainy season.
In Manitoba are regional exploration efforts in the Snow Lake area continue following on the success from the 2021 winter drill program in the Chisel basin, where the copper gold rich feeder of the $19. One deposit was discovered and high grade zinc and gold mineralization was confirmed through infill and extension.
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The 2022 drill program is planned for 901 to test the down plunge extensions of the copper gold rich feeder zones.
Our 2021 Summer program included regional surface mapping and ground Geophysical survey to delineate our higher priority drill targets for 2022.
One of our most promising targets was identified from a borehole survey immediately north of La <unk> and is expected to be drill tested in early 2022, both from surface and from underground.
Ongoing infill drilling continues at <unk>, where we've had a strong track record of converting inferred resources to reserves in the past. The results are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.
Okay.
On slide 11, I wanted to reiterate the point that with our major brownfield investment programs now behind US we are entering a period of significant production and cash flow growth at high Bay.
Higher copper grades at <unk> are expected to contribute to a 46% increase in our copper production by 2024. Similarly, the higher gold grades from new Britannia and Pampa Concha are expected to increase our consolidated gold production by over 150% by 2024.
This translates to a three fold increase in our annual EBITDA.
And we believe our attractive portfolio of development and exploration opportunities will further add to this growth.
I'll conclude the presentation on slide 12, summarizing the many catalysts that we have coming up in the near term.
In Manitoba, we are on track for commercial production at the new copper flotation circuit before the end of the year.
We will also continue our work on preparing for the ramp up to 5300 tonnes per day at Lalor and advancing the recovery improvement program at the stall mill.
As I mentioned previously we will incorporate the results from drilling in the Snow Lake region into our and our annual mineral reserve and resource update next year.
And we will advance our plans towards completing the scoping study on the <unk> tailings reprocessing opportunity in 2022.
In Peru drilling continues at yogurt with a potential to initiate a second phase aimed at defining an initial mineral resource estimate in 2022.
We are hopeful that we will achieve an exploration agreement with the community of which a cocker unexciting greenfield properties to the north of Constancia.
In Arizona, we are advancing our wholly owned copperweld discovery and plans for an operation entirely on private land. We are also awaiting a decision at the U S. Ninth circuit court of appeals relating to the Rosemont federal permits before the end of 2021.
We are disciplined copper focused growth company and we look forward to delivering on these catalysts in the near and long term, while remaining vigilant for other opportunities that match, our strategic criteria to create value for all of our stakeholders and with that we're pleased to take your questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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Our first question comes from Rs.
Bank. Please go ahead.
Hi, good morning, Peter I'm intrigued by that.
The number one we have to actually drove those tailing during when they frozen so that we can before we can do some analysis as well as to figure out a flow sheet for the concentrator, specifically what size what size requirements in the concert concentrated would be actually don't really knows.
I will turn into casual to provide some additional color around that sure. Thanks, Peter Yeah, or if there are a number of things to consider where early days, we're working through our scoping studies on this as Peter mentioned one of the critical aspects to understand what the mineral inventory as you sort of.
No that we've been putting tailings into that lakes and for 90 years, and we're well above the lake and it's one of the reasons that we have.
Long term liabilities with the closure and so it got us to thinking there are a lot of tailings re process for.
Precious metals, but also technology has changed in mineral processing and there is a high intensity grinding Isa mills in these various things that we can add and modify or Flynn foreign concentrator.
So when we speak about throughput and the possibility it's different than what would be a normal run up mine because obviously the introduced material would be a different size and so the communist <unk> circuit would be somewhat different so too would be the treatment for the flotation and maybe any sort of bleach.
King that's required for the gold so we're working through all those things, but we do believe that will get payable metals set of copper zinc and gold and silver.
We're very excited about this because of the prospects it.
Presents to us for Reconsolidation.
Tailings liability itself.
Whether we get.
Options to put the sulfide portion back into subaqueous or we can.
Isolate them into separate cells to really reduce or limit the amount of acid.
Run off in the future I think it's.
Good very good ESG project, it's one of those things I am very proud to talk to my daughter about we're working on that we're going to leave the place better than we found it and we're very excited about it and I think it's just one of those things stay tuned stay patient.
We're very positive that this will be a great.
Great project and it will be an asset to hudbay.
I would also add that.
Sort of.
Coming of age of technical been strengths there'll be really all starting to utilize the Penn state that we have on the team you know I've always said that we have the punch above I'll wait for the company of our size. So we're really pleased about that.
[noise]. Thanks for that color is it fair to say, though this is fairly low capital intensity.
Yeah, there's a number of things to figure out as you can well imagine working on tailings you've got to think about the stability and so we have to understand the sequencing. We have to understand what is available to us because some of those tailings are built out of tailings some of the dams and those types of things.
So.
Yeah. The idea that this is a brownfields environment. The idea that much of this doesn't require obviously crushing you. It's just Tommy <unk> circuit. The idea that we have installed capacity that said on a conventional mine have run it's six to 7000 ton of de Mille.
Minor modifications I would say for what the mineral inventory would be it would be less capital required than what a normal mind would take because it would be essentially.
Opencast mining, we have to think about that mining method, all those sorts of things, but definitely cheaper than underground mining yet so in general the answer to your question is yes, we think so but there's some work to be done.
Okay. Thank you and just a quick follow up on Manitoba, I know you reaffirmed your 21 guidance, but zinc really seems like it's tracking fairly below the guidance I'm. Just wondering if you are anticipating some kind of really strong fourth quarter to perhaps make the low end of guidance or or just wondering why why that guy in touch.
It changed.
Yeah.
What it is is you can well imagine you're limited in the type of sequencing you can do when you're mining out the final throes of a mind like Triple seven as Peter said, we have sort of nine months of production and is very well planned out.
We don't have the flexibility we have at all or we used to have a triple seven where we could jump the sequence and get to other stopes. So there's a couple stopes that are high grade zinc and they were scheduled to come out in the third quarter, but they got delayed by a month to month and a half so they're gonna come out in the fourth quarter and they will be impactful to get us on pack.
On range for the low end of guidance on zinc.
Thank you.
Our next question comes from Jackie Lasky of BMO capital markets. Please go ahead.
Thank you very much.
Have a few questions that will train narrow it down to a couple maybe Peter if we could get an update from you.
About what's happening in Arizona, specifically.
I know you guys. It said for the last year and a half or so that.
Expecting a decision from the ninth circuit Court of Appeals sorry.
This year by year and give her we're in November is that is that still the case.
Hi, Jackie Thanks for that I think that is that is actually the case, we don't know definitively, but when we look at the number of cases that remained with decisions pending that list has reduced down to I think some five cases.
And we anticipate that they will probably get through them by the end of the year. That's why we expect this to be done in 2021, but we have no real visibility into that.
Okay, we will wait and see and obviously year working in the meantime on copper World and I know, there's a comment about.
I think it's a permit and started reclamation plan. That's been accepted can you talk about how the permitting process for copperweld is going and what.
What are you still outstanding.
Sure. So so there are effectively three permits required at the state level full coupled with the first payment.
Is the mines land.
Hello Nation plan.
Which is effectively the preliminary dizzy.
Design for the mine, which is provided in order to determine what the bonding requirements awful reclamation. So we submitted that that plan to the state of Arizona. It was approved in <unk>.
Tobar.
So that basically state the bonding requirements did to further.
State level permits that are required lane is.
Aquifer protection plan and the other one is the <unk>.
Quality plan.
So those remain to be submitted to the states, but of course, we would complete our technical work ahead of submitting those but the first one was required in order to kick things off.
Okay, and maybe one just really quick one building.
Building, an orange question about tearing.
I know you guys have a long history of mining.
Is there other opportunities tighter plant one.
To to do the same the snow Lake like I'm thinking of the old turtle and some of them.
They're all mindset, there's similar opportunity maybe they're in the future as well.
Hi, Jackie casual here.
Absolutely and what.
One of the unique things about the chisel camp is when you look at the tenor of gold and silver in it.
Against BMS camps around the world, it's well known to have the highest amount of gold and silver.
Certainly if we're successful at utilizing the.
On care and maintenance splint fond mill that we have the opportunity to use that first it will be.
Applicable.
Two snow Lake and we will also in parallel will be looking at those opportunities over the next couple of years.
So if.
If we look at the tales grade two we assume that the goal grade is probably higher I would say in the snow Lake region than it was in the.
In the tails and the snow Lake region than it is in the wind ponytails that would add more economic.
Economic value for us and more emphasis for us to look at that very closely good question.
Thanks, that's great I mean, obviously and Ethan they'll capacity there, but that's great to hear and I apologize for the nice things very much that's all my questions.
Thanks Jackie.
Our next question comes from practice Adams CIBC capital markets. Please go ahead.
Yes. Good morning, Thanks for taking my questions.
First step a question on the exploration agreements for Maria Ryan and Kevin.
Does it still in the presentation of 2021 events.
Is that realistic at this time or is it more of a 2022 event and possibly even a twenty-three deliverable.
Hi, Bryce look.
So we have a very good relationship with the community of which we are in actively in discussions with that community, but as you can imagine based on our experience that.
At pump a concert with a cheer Royal community these things take time.
We are.
Driving towards securing an agreement with the community of which Chicago by the end of this year, but we can by no means say definitively that that will occur. So so you are quite right that could be of 2023.
Milestone I'm, sorry of 2022 milestones, but we are pretty confident that it will not drag beyond that in fact, our anticipation is that it will be earlier in 2022, then later.
And we're driving towards this year, but as you suggest this year is driving towards the toast.
Okay. Thanks, that's tasteful.
Question for me is on the <unk> closure reassessment. The first part of it. The question is on the timing of the Diarra is that something that could have been held back and included in Q4 year and financials.
And then regarding the info on tilings reprocessing you.
You indicated the scoping studies coming next year. When that's delivered to you then revalue the closure liabilities or that reevaluation as is done every five years and every five years only.
So the first part of the operation Bryce is it could we have sort of held us back until later I think obligations with respect to disclosure would prevent us from doing that and we always intend to be transparent with the market in any case.
So so even if we could have we probably would not have.
I would say, we definitively would not have.
With respect to the changing of the longer term.
Ah retirement obligations, resulting out of his studies related to tailings reprocessing I think we would certainly make the mark you in the market aware of the opportunity, but we are only required every five years to update our obligations. So I think it'll be a combination of the two <unk>.
He would disclose what it looks like but we would ultimately update the plan after five years.
Yeah, maybe I can just add to that well that is certainly what the.
Regulatory authorities out of a Saskatchewan with requires the five year. We would also be under the obligation submitting a new mind plan and when you submit a new mind plan you submit a new closure plan. So we would get the opportunity also to recast the closure plan, which we believe will be.
Much more optimal and much more beneficial to hudbay.
With the recast closure closure plan and so that would just be.
The timing of whenever we get to sort of a feasibility level on this reprocessing of tales, which could be as late as five years, which is 2000 2000 2025 or could be earlier, it's just the progress we make on the project.
If I could add maybe from the fan's perspective.
I think it's important to remember that are always our obligations always frankly, what we do is consistently accordingly look at these obligations and reassess them in the context of everything we know good in that.
I think the first question you ask.
The answer was we had our best estimate at the point in time and regardless of when that was.
Accreted accordingly, so and I think.
Bigger question on.
You guys are absolutely right, but obviously our job is to deal with affirmative and the actual things that we know and once we get a better perspective on the potential for these sailings reprocessing, we can reevaluate the context of the overall project, but for the time being what we normally do is that <expletive>.
The chips fall where they are.
Okay perfect. Thanks, So that's it for me keep well everyone chest. Thank you Brian.
Our next question comes from Laughing lender of Bank of America. Please go ahead.
Hi, Thank you for the I think the morning.
I wanted to start off by just asking about Rosemont. So.
Just to get an idea of how you're thinking about the case now so regardless of outcome weather Hyundai wins are successfully and then it has successfully appealed to the Supreme court or they lose it.
What is the benefit to Hudbay to continue fighting the case, where.
N.
A private land solution seems to be.
And appearing option at this point are very appealing option.
Morning, listen looked at that is a very good question and it's more of a.
Industry question.
We believe that.
It is if there was to be a negative decision on rosemont that it would be worth appealing because that negative decision has a very very significant impact on copper mine in the United States in general.
And so so from an industry perspective, we believe that we would be supported by many many other players in pursuing an appeal.
That's the pursuing an appeal does not prevent us as you suggest from continuing with couple willed and our own private line option. So so we would likely move.
Move forward with both in parallel.
Yeah, that's great. Thanks for clarifying that.
And then just to I guess touch touch back on some.
Topics that have already been discussed so on copperweld very nice to see the Mannlein reclamation plan approach.
The color on the next two permits required are great.
Maybe just a little bit of detailed on the timing around those next to permit so what level of study do you need before you can submit for the the.
The Aqua for air quality.
Approvals and what do you suspect the timeline went beyond submitting for those in that in that actually getting them. Thanks.
Hello casual here.
Look.
We were into new territory on our private land sort of west of the rich we can utilize some of the baseline work that was done previously obviously at Rosemont, but we're adding to that and we're doing that in parallel with our.
Are are normal geological and engineering work that we require to be able to submit a mine plan, but be able to calculate the impact on an aquifer or to be able to calculate.
Calculate the impact on an air quality permit what is required is a mine plan at it's sort of a feasibility level that you're sort of convinced you are bringing that forward. So it's going to be.
A couple of years, yet before we have definitively advance those things and having those things in advance feasibility study, there's not a huge benefit because if the feasibility study is contrary to what those two permits might.
Might allow you to do.
It sort of unique one with the other and so I think what it would be safe to say is over the next couple of years. This story will mature and so too will the advancement of seeking these permits with the additional base lining in studies that we're doing now.
I think I would also add to that loss of them at once we've completed the sort of the feasibility.
Feasibility work.
And submitted those permits we would proceed in any case with the engineering because it will be based on the level of confidence that we have and that would allow us sort of timeless parallel.
Execution of permitting activities in engineering work Preconstruction.
Okay. That's great and then just finally on Marina Ranga and caviar detail Uhm I'm.
I'm not sure if you if you're comfortable doing this but I think it might be helpful. Just have a little detail and kind of what the issues are that are that are being discussed now and this sort of thing.
You sort of final stages of the discussion you know for example, with.
Upon the contra when it came down to it there is sort of like.
Just a handful of hold outs that we're using the ladder and she came down too.
Getting their sign off is it similar to that.
I would say, it's much simpler than that because remember that at Pumpkins show, we were talking to a community about.
And exploitation will extraction agreement.
And.
These guys have very very solid advice they know that.
Where the revenues derived from in the case of an exploration agreement.
Revenue derived from that is only opportunity and these guys are.
Fully aware of that so what's the discussion is now is.
But just with it relates to reach agreement on numbers and.
As always we stopped far apart and we eventually moved closer and closer and closer and that occurs over a number of iterations and so the question really is how long will those iterations take.
And that remains to be seen but we are fully engaged with them and there are no issues outstanding other than really aligning around what the numbers.
Okay. That's fantastic and then on that exploitation permit isn't the case at once you have the exploration permit I mean can you theoretically move directly into the discussions and exploitation or is there some sort of like cooling off period that's required.
No because then we would need to drill and resorts and understand what.
What the.
What the results might look like.
And that we would need to follow all the traditional methodologies associated with the mind bending and full feasibility et cetera. So there would be a fairly significant polls.
Understood. That's very helpful. Thanks, so much guys.
Welcome.
Our next question comes from Stephanie Ml of Cormac Securities. Please go ahead.
Okay. Thanks, very much guys. Just just curious I mean, if you're going down the path of at least thinking about tearing three processing.
<unk> does that potentially open the door to also maybe think about bringing in additional or feeds from the district that may bolster the greater the tailings focused operation.
Hi casual here.
It's what will put through the mill is whatever has the highest MSR to hudbay and the highest margin to hudbay.
I suspect knowing the satellite deposits that are within the vicinity of Hudbay the.
The reason, we're shutting down our mill now is because there is no anchor feed for the Pentagon.
Would the tailings presents an opportunity for for that absolutely and then we would have to evaluate the incremental value of any satellite deposits over just digging up more tailings and we'd have to be presented with those opportunities are options at the time.
Got it got it no. That's that's helpful. And then maybe just just for my own clarification or just a little bit of housekeeping you just mention that constancia during the quarter that.
Mining levels were optimized.
For the mill throughput just just to be just I want to make sure I'm clear and that was that when when you talk about optimizing for the mill throughput was that a reflection of the downtime this quarter for the preventive maintenance or are you starting to maybe see some potential bottlenecks and then they'll know that tech can't just going through the system.
No actually when it was is.
Under the pandemic, we're sort of on restrictive work schedule and also restrictive on the number of people wavering to cite just two limits are.
Vulnerability to Covid and what it's done is it's we've had to sort of modify some of our deferred stripping and so when we say we're optimizing the mind feed to the mill.
What we're doing is is sometimes we have to sacrifice some of our previously.
Optimized stockpiling strategies and or are deferred stripping strategies on the fly to be able to keep the mill Bowl.
With the compliments of the workforce should we be short.
Week here a week, there and what it's done it's just minorly modified what that sequencing is and that's what that optimization reversed.
Okay. Okay got it that's great. Thanks, very much guys.
Once again, if you have a question please press star one.
Our next question comes from Dalton Brando Canaccord. Please go ahead.
Thanks apprehended good morning, Peter and team.
I want to start by asking you about copper world, we've talked a lot about the permitting process from a regulatory perspective, and how simple the state level processes relative to federal and so on but process. Aside rosemont attracted a fair bit of NGO and other attention I'm. Just wondering how you how are you thinking about copper roof.
My social license perspective.
Good morning Delta.
Okay.
That's a great question I think that it's fair to say that.
We have the benefit of hindsight Ya.
And so we know what the key issues are with respect to the.
The approaches that have been taken on Rosemont.
I mean, the other writing simplification of course is that this is on private land and if you take a look at the price.
Couple World has received to date you will see in general that it is.
It's a reasonable price is both the pros and cons, but what is absolutely sticks out is our right to mine on a private land and that right is held is pretty set percent.
So we have every intention of engaging with any and all stakeholders who.
Who interested in discussions.
That would help us to move this forward positively and I think we know we have a much better sense of how to do that then.
Then might've been the case.
With the predecessor company when we purchased Rosemont so so.
I think Andre and his team will farting, a sort of a very very fulsome engagement process.
They're talking openly with whoever wants to talk to us.
But I think the big differentiating factor here is that we will be mining on private land, but we will be absolutely respecting the needs to ensure that we just.
This mine is built to the highest standards of environmental and social integrity.
Okay, and that's great painter, maybe switching gears a little bit.
Asked about capital allocation, but there's really two parts from this question.
The first part is on new Brad and kind of a goal in mind there up in Manitoba, you had mentioned in the past that you would really look at how that fits in the portfolio and once the mail is ramped up and we're almost there now just wondering if I can get your updated thoughts on that.
Sure again, a great question, because we are now sort of moving towards the tail end of what I always referred to as Daylighting value.
In Manitoba.
And as you know I've stated in the past it once we have daylight that value we of course would be open to entertaining.
Options around it however.
Things out is that Manitoba appears to be the gift that keeps on giving and what's really happening is that as we execute against our strategy. We keep on uncovering new opportunities and so now with the new opportunities ahead of us related to improvement over recoveries at stall potential expansion of productions through new Brit.
Expansion of production at Lawlor itself and the additional assets that are satellites complimented or supplemented by now what is a very potentially a very attractive tailings reprocessing program.
We are reluctant to just give that away without any value.
On the other hand, if somebody wants you to come and pay us full value for the Kim we would absolutely be prepared to consider is noting as I've always said that we don't really want to be a single operating single operating company. So they were all of these things that we need to consider but we think we are on the cusp of so the second.
Well, the third innings with respect to value creation that.
Influence and we're going to pursue that until an alternative to mix it manifests itself.
Okay, Great and then just maybe part b of that question.
Your balance sheets in really great shape now generating tons of cash.
Any meaningful capital uncompromising at least a few years away.
How are you thinking about M&A and then given what your shares how your shares perform this year are you considering any form of a buyback at all.
Look I think.
Steve coming in more detail, but I think that it certainly is part of our ambition and long. So I'm go to so it's sustainably returned capital to shareholders over the course of the cycle, but in the Meanwhile, and there are a lot of competing investment priorities.
But at the same time returning value to our shareholders is always top of mind. So as you say, there's a couple of us a little bit data at least is a little bit further out although there will be expenditures in the interim that need to be addressed.
We've got the sole mill recovery program, we potentially have some other.
Project work in Manitoba, So I think we would we would contemplate share buybacks or.
Other forms of capital returns in the interim if it makes sense.
But it needs to of course compete against the opportunities that Steve is would you add anything to that.
Think direct theater, we had seen.
It's easy to be tempted by short term disconnect between our perception of our own value and obviously the market, but I think you're right. When you plan to kind of.
The runway ahead of US does have a lot of significant capital opportunities.
English and very long term promising return levels. So.
For me I think of course remains.
Somewhat unchanged.
Inflection point, where we've completed two major brownstone a brownfield projects in the form of Pharmacogenomic New Brit.
Starting both of which are starting to bear fruit.
We will start to generate additional capital and recognizing in this business.
A year to two years is a blink of an Ivy League with research contemplating kind of dollars will be spending and optionality that we have so I think it's always incumbent on us to balances and this is something that is a.
Constant tension between whether or not we in fact.
And that's for the longer term or perhaps potentially take advantage of those disconnects demonstrated people believed in our business and I think for US right now the remains focused on.
Conversion of those opportunities into cash and then exploring opportunities thereafter.
Okay, and just Peter your thoughts on acquisitions now.
Oh of course.
We have been always been pretty clear about that that we have always said that we would like to add.
A third operating and I said to the portfolio.
From a risk reduction put perspective, but also from a diversification.
Perspective, so we do continue to look for another operating United States to add to the portfolio, but I think you know as well as most.
Those are few and far between but we will continue to be creative in how we think about this but at the same time, we will continue to be very disciplined, but we would love to add another operating I said to the portfolio and <expletive>, but we will exercise discipline.
That's great. That's all for me guys. Thank you.
Thanks to Wilson.
Our next question comes from peer Vaillancourt I've Heywood. Please go ahead.
Hi, Peter Uhm could you comment on the.
Blockaded taka and more generally just.
How these communities.
Are acting now.
Are they being more empowered as a result of the <unk>.
New government and what Howard.
Can we expect to come out of this who just how dear.
Discussions with the government and progressing and what an what impact on a broader sense that that might have on them.
On operations.
Good morning, and thank you for that look.
No doubt that there's been a period of heightened social tension in Peru as the country continues to experience the impacts of the pandemic and some communities may feel empowered by the radical speeches from different actors and this is not being limited by any stretch of the imagination to Constancia and we've heard a recent protest and to <unk>.
And it from Iowa, Goldmine and of course at last numbers.
I do think that the key here is engagement with.
With our communities as well as educational contact with government entities.
Either a cabinet level or at.
Congress level to make sure that people are educated with respect to what we are doing for our communities. So that's sort of.
Tones down.
The level of approaches, but maybe before we wrap up on the question asked casually to provide a little bit of historical perspective from his time in Peru, and how that my how he sees that relating to the current <unk>.
Environment.
I've got a bit of an anecdote that sort of sort of tricked me earlier this week and.
Somebody sent me an a news article seeing new months Unicode show was.
Interrupted and I didn't look at the date and I was like Oh, My Lord there's another one after the end demeanour, but.
But the date was from October 2011.
And it was just after Homola got in and <unk> was interrupted and they're a stream of 1.5 million ounces of year was interrupted then I looked up in the data I didn't think they would do it anymore and it's deja vu.
That's the way I feel about it while it's a different party and it's a different process the sentiment to sustain.
With this left sort of leaning.
Ruling.
Administration I think it does in power many of the locals that someone that they can see themselves in.
Might finally bring them some sort of justice and to be honest with you. It is the mining companies that bring development and progress to these rural areas and that was born trues over the 10 years since homola came into power.
And to be honest with you I am optimistic the same thing is going to happen again and it will have its own path in its own trajectory, but I think.
The people of Peru, certainly through this pandemic no that the revenues are mostly generated.
By the mining community and that's what advances the progress for these.
These these these sort of remote areas in these places where the government is less influential.
So I'm optimistic that we've sort of seen Ms playbook before and I'm optimistic that similar remedies will come out of it and cooler heads will prevail.
What I would just wrap it up by saying is look we continue to have the objective that the communities in all mining region benefit.
From our prisons and have your del Rio and our team in Peru continue to maintain dialogue and discussions at every different level, including at the district and regional levels improve but also as I said earlier as the cabinets and congressional levels uhm, so so to be clear.
These these protests that we are experiencing.
All they are they are impactful the impact is not be material on our operations that constancia and frankly, we think we will get through them.
I think we have a period of volatility ahead of us, but as casual says we think we will get through them.
This concludes the question and answer session I would like to turn the conference back over to Candace purely for any closing remarks.
Thank you operator, and thank you everyone for participating.
Do you have any further questions feel free to recant turn better relations team, thanks and have a great day.
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