Q3 2022 Hudbay Minerals Inc Earnings Call

[music].

Good morning, ladies and gentlemen, thank you for standing by welcome to the HUD Bay Minerals, Inc. Third quarter 2022 results conference call. At this time all participants are in listen only mode. Following the presentation. We will conduct a question and answer session to join the question queue. You May Press Star then one.

On your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would like to remind everyone that this conference call is being recorded today November three 2022 at 830, a M. Eastern time I will now turn the conference over to Candace Brule.

Vice President Investor Relations. Please go ahead.

Thank you operator, good morning, and welcome to <unk> 2022 third quarter results Conference call.

Financial results were issued yesterday and are available on our website at www Dot <unk> Dot com.

A corresponding Powerpoint presentation is available and we encourage you to refer to it during this call.

Our presenters Peter could guilty HUD based president and Chief Executive Executive Officer accompanying Peter for the call will be Eugene Lee, Our senior Vice President and Chief Financial Officer, and Andrea <unk>, Our senior Vice President and Chief operating Officer.

Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today.

Further information on these risks and uncertainties. Please consult the company's relevant filings on SEDAR and Edgar. These documents are also available on our website.

As a reminder, all amounts discussed on today's call are in U S dollars, unless otherwise noted and now I will pass the call over to Peter <unk> Peter.

Thank you Ken.

Good morning, everyone and thank you for joining us.

Before we jump into quarterly results I would like to congratulate Eugene Lee who was recently appointed senior Vice President and Chief Financial Officer.

<unk> has a 10 year history with HUD Bay progressing through a number of increasingly senior roles in executive responsibilities and is highly regarded within the industry.

He has over 20 years of global mining investment banking finance and corporate development experience and his transition into the CFO role has been seamless.

But Jim in the CFO role and Andre in the C. O. Overall I believe we have the right leadership team dynamics in place to continue to execute our exciting growth strategy, while remaining committed to deleveraging and disciplined capital allocation.

In conjunction with our announcement of Eugene's assumption of the CFO role I'm going to depart from tradition and have both Eugene and Andre loads on our C. O O talk to some of the key themes.

With our commitment to deleveraging and disciplined capital allocation in mind two.

2022 has presented us with a period of higher input prices and declining copper prices, resulting in industry margins being significantly reduced <unk> benefits from our consolidated cash costs being positioned in the first quartile of the global cash cost curve, our focus continues to be on cash flow and.

I'll touch on the steps we've taken to navigate this challenging environment, but first let me speak to our quarterly results beginning on slide three.

I'd characterize our third quarter results as a period of strong performance in our Peru operations and a period of transition in our Manitoba operations. After the planned closure of the Triple seven mine in June 2022.

Hello, onsite cost in Manitoba, partially offset by higher onsite cost in Peru, Hyatt treatment and refining charges higher freight costs and lower consolidated corporate production with the closure of Triple seven.

Consolidated sustaining cash cost of one dollar and 91 cents per pound in the third quarter compared to $1.87 in the prior quarter.

This slight increase was due to highest sustaining capital expenditures, partially offset by lower cash costs and lower royalties.

Both measures are tracking well with respect to the 2022 guidance ranges and we are reaffirming our full year consolidated corporate cash cost guidance of 60 cents to one dollar and five cents per pound and sustaining carpet cash cost guidance of one dollar and 60 cents to.

Two $2.25 per pound.

Consolidated all in sustaining cash costs increased to $2.16 in the third quarter from one dollar and 93 cents in the second quarter due to higher corporate selling and administrative expenses and accretion and amortization of decommissioning and community agreements.

Operating cash flow before changing non-cash working capital was $82 million during the third quarter, reflecting a decrease from the second quarter. This decrease was primarily the result of low as in sales volumes lower realized prices for all metals and inflationary pressures on mine operating costs.

Third quarter adjusted net loss per share was five after adjusting for a non-cash gain related to the revaluation of the environmental provision Andrew revaluation gain on the gold prepayment liability among other items.

Third quarter, adjusted EBITDA was $99 million, a decrease compared to the prior quarter's $141 million.

This was as a result of the same factors affecting cash flow as discussed.

We exited the quarter was $286 million in cash and increase of $28 million during the quarter as well as undrawn availability of nearly $370 million under our revolving credit facilities.

Turning to slide for our Peru operations benefited from higher copper grades and high molybdenum recoveries, partially offset by lower throughput due to a plan semi annual Miller maintenance program during the third quarter we've.

We produced approximately 22000 tons of copper 13000 ounces of gold 564000 ounces of silver and 437 tons of molybdenum.

Production of copper and molybdenum was higher than the second quarter, while production of gold and silver was lower primarily due to slightly lower precious metal grades.

We have seen successive quarterly increases in production this year in Peru, and as previously disclosed we expect that trend to continue into the fourth quarter with the benefit of significantly higher grades from pump a contract as.

As such fully production of all metals remains on track to achieve guidance ranges for 2022.

Total all mind increased quarter over quarter due to a higher amounts of all mine from <unk>.

Constancia performed well during the third quarter with all milk nearly unchanged from the second quarter. Despite the planned maintenance shutdown.

<unk> copper grades increased quarter over quarter due to better than planned grades from constancia.

Third quarter combined units operating costs in Peru, with 9% higher than the second quarter, primarily due to continued inflationary pressures on fuel consumables and energy costs.

<unk> expects to complete a four day afford a mill shutdown at Constancia in November 2022 to advance maintenance activities that were originally planned for the first quarter of 2023.

As a result of ongoing inflationary cost pressures and the additional mill maintenance in the fourth quarter full year units operating cost in Peru are expected to be near the top end of the 2022 guidance range.

Peruse cash cost in the third quarter declined by 8% to one dollar and 68 cents per pound of copper this improvement over the second quarter was primarily due to a higher byproduct credits and higher copper production.

Harper cash costs are expected to continue to decline in the fourth quarter with higher anticipated copper production and contributions from precious metals byproduct credits, how we have a full year cash cost in Peru are expected to exceed the upper end of the 2022 guidance range by approximately 5% primarily due to the inflationary cost environment.

Peruse sustaining cash cost declined by 6% compared to the second quarter, mainly due to the same factors affecting cash costs offset by slightly higher sustaining capital expenditures in royalties.

Moving to slide five we will discuss our Manitoba operations.

During the third quarter, the Manitoba operations produce over 40000 ounces of gold almost 10000 tons of zinc.

<unk> 2000 tons of carpet and 153000 ounces of silver.

Production of all metals was lower than the second quarter, primarily due to the triple seven closure.

We saw successive quarterly gold production increases out of snow Lake this year and that trend continued into the thoughts third quarter with an 8% quarter over quarter improvement.

This was due to higher law gold grades and increased called the coverage that both stole in new brittania.

Full year production of all metals in Manitoba is on track to achieve guidance range is for 2022.

After 18 years of steady production the triple seven insulin flan. The final reserves were depleted in June and the mine was decommissioned in early August .

<unk> was safely faced on long term care and maintenance during the third quarter.

Is your activities in Flint found included the zinc, including his influence was substantially completed in the quarter with most of our employees and equipment of value transition to the snow Lake operations to support laws ramp up 200 5300 tonnes per day in early 2023.

This was a key focus area for the snow Nick operations. During the quarter is the integration of the <unk> employees and equipment will allow us to ultimately transition away from the use of contractors.

Borrowers oil production was impacted by an underground scoop tram fire as well as a two day, Manitoba hydro power outage during the quarter.

Once production activities resumed following the power outage priority was placed on mining the higher value copper gold or to maintain throughput at the Britannia milk.

In addition, Lala completed the scheduled maintenance program at the end of the third quarter and into the beginning of the fourth quarter to replace surface or shoots and complete other pre winter maintenance activities.

Oil production.

Is expected to return to 4600 50 tons per day in the fourth quarter and is on track to ramp up to 5300 tonnes per day in early 2023.

All minded Lala decreased by 16% in the third quarter due to the noted transition and production interruptions impacting operations.

Mind gold zinc and copper grades with 23, seven and 1% higher respectively compared to the second quarter.

The whole process that the snow Lake Mills was lower quarter over quarter to match. The all feed from law. So recoveries were consistent with the metallurgical model for the head grades delivered.

The new Britannia achieved consistent production in the third quarter, averaging approximately 1400 40 times per day.

Metal recoveries of now stabilized near targeted levels additional improvement initiatives will continue to be advanced in the upcoming quarters with a focus on reducing reagents and grinding media consumption that has contributed to higher operating cost than planned.

These initiatives required minimum capital expenditures and will further improve overall metal recoveries in copper concentrate grades.

Manitoba combined unit operating costs significantly increased compared to the second quarter as we transition to the standalone cost structure of law.

Unit operating costs will also impacted by higher contractor costs during the transition period higher cost of new Brittania continued inflationary cost pressures and lower tonnage with production interruptions.

Costs are expected to decline in the fourth quarter, but due to continued inflationary pressures, we expect a full year combined unit costs in Manitoba to exceed the upper end of the guidance range by approximately 5%.

Gold cash cost in the second quarter with $216 per ounce higher than the second quarter, primarily due to lower byproduct credits is gold revenue continues to increase and become the largest contributor to total Manitoba revenue.

Ash costs will also impacted by treatment and refining charges, partially offset by lower on site and zinc refining costs due to the closure of triple seven and does implant.

Yet to date gold cash cost of $136 per ounce continues to attract well below the 2022 guidance range and as such we it's.

Right the guidance range for the full year.

A current focus at Copperweld is to Derisk. The project through the completion of Prefeasibility activities state level permitting and the bulk sampling program in 2023 as discussed on slide six.

The pre feasibility study is expected to include conversion of the remaining inferred mineral resources to measured and indicated it will also optimize the layout and sequencing of the processing facilities, including concentrate leach technology tradeoffs and timing.

In addition to evaluating other upside opportunities.

The process plant Prefeasibility level engineering is 85% complete and geotechnical and Hydrogeological site investigation activities have been completed pre.

Prefeasibility engineering design and metallurgical textbook activities are on track to be completed before the end of 2000 to 2022 with results expected to be published in the study in the first half of 2023.

Couple of World required state and local permits for phase one.

We submitted an aquifer protection permit application to the Arizona Department of environmental quality known as a.

In September .

And in October we submitted the application for an air quality permit to the <unk> cute.

We expect to receive these two remaining state permits by mid 2023, the other key states permit the mind land Reclamation plan was received in July 2022.

Upon receipt of the state permits for phase one hudbay expects to conduct a bulk sampling program to continue to Derisk. The project by testing great continuity variable cost of effectiveness and metallurgical strategies and high grade near surface areas of the feature Elgin in west pits.

We have revisited the timing of a definitive feasibility study for copperweld in light of the current price environment, but it is important to note that nothing has changed with respect to our view that this project is a robust high quality project that will be developed in the medium term.

And our efforts to Derisked the project over the next 12 to 18 months will only add value to copperweld and prepared for the definitive feasibility stage.

Turning to slide eight we.

We recently executed the surface rights exploration agreement with the community of which a cargo that allows for exploration of the Maria Regina and cover Utah properties.

Hudbay owns the mineral rights to these properties that are located within trucking distance of the Constancia processing facility and re completed geophysical surveys in the area that indicate large scale potential at Maria Raina and cover Utah.

Shortly after the community expiration agreement was completed recommenced baseline environmental an archaeological archaeological activities to advance the permitting process to allow for joining the properties in the future.

Geological team commenced surface investigation activities and field evidence confirms that both <unk> and Maria Regina hosts sulfite, an oxide rich complimentary realization ensconce hydrothermal breshears and large porphyry intrusive buddies.

Similar to pump Contra Cup of Utah was located about five kilometers from Constancia and includes an old open pit mine that was operated by Mitsui until the early 19 nineties.

The United States Geological Survey from 1990 estimated a total resource of 91 million tonnes is 2.3% copper for the open pit mine.

We have collected hand samples and the old Mitsui pit, which confirmed demineralization as both copper oxides and Sulphides rich with extensive occurrence of chalcopyrite and bow night.

Maria Reyna is approximately 10 kilometers from Constancia and hosts three types of mineralization scorn hydrothermal breccia and porphyry with magnetite and gone its cons and hydrothermal breshears, having the potential to host high grade zones.

Physical mining activity is present in these high grade areas and the local operators reported producing an average grade between two and 6% copper and they're small scale selective mining activities.

And now Andre will speak to our yoga and mineral resource update in recent drilling at offense lawn tailings Andre.

Thanks Peter.

Yesterday, we provided a detailed exploration update with our quarterly results, which included the announcement of an initial mineral resource for our yanking properties on slide nine.

Yeah.

Copper molybdenum porphyry deposit located in the <unk> region in northwestern Peru.

The project is 100% on my head.

And as favorably located near the city of <unk>.

Close proximity to existing infrastructure water and power supply.

A bit of background, we option the property from valley in 2017 and has since leveraged our Peru community relations expertise to complete an exploration agreement with the local community.

Conducted geological mapping geochemical sampling and completed a 2008 or confirmation drill program in 2021, and 2000 2000 to.

The initial resource estimate was developed based on this drove program combined with a twenty-three hall historical drove program completed by Val April 2006% of 2008.

Mineralization in most cases starts from surface with the lowest strip ratio of 0.9 and the initial <unk> estimate is at a higher level of geological confidence than we expected at this age due to the continuous nature of the mineralization.

The resource estimate includes 271 million tons of indicated at four two copper equivalent and.

And 83 million tons of inferred at 3% corporate corporate.

The global resource contains a higher grade portion at the center of the deposit which starts from service.

The high grade resource includes 113 million tons of and indicated.

Six per cent copper equivalent.

We have initiatives preliminary technical studies of yoga, and including metallurgical tests work as well as geotechnical and hydrological studies, which are expected to be incorporated into a preliminary economic assessment at a later date.

<unk> remains open to the northeast northwest ended depth as well as several and test the geophysical targets exist in the region, which could add to the mineral resource estimate in the future.

The last slide in our exploration update us on slide 10.

R 2022 exploration efforts in Manitoba, Manitoba has been focused on completing ongoing in billing drilling at Lawlor in 19 O. One.

As well as confirmatory drilling in our front lawn tales.

Facility holds in excess of 100 million tons of tailings that had been deposited over the span of 90 years.

The results from recent drilling indicate higher zinc copper and silver grades and reported from a historical mill Records and we also confirm the historical gold greed.

Given these results we plan to complete metallurgical tests work on the <unk> tales to assess metallurgical recovery.

Our Anderson tails facility and slowly also contains signal significant amounts of Goldman deposited over many years.

Given our enhanced call processing capacity and smelly, we intend to evaluate a similar opportunity to reprocess the editor Anderson tailings.

And now I'll pass it over to Eugene.

Thanks laundry moving.

Moving to slide 11, the short term pullback and copper prices only enhanced our longterm conviction for copper.

Add greats declining and we haven't seen any new copper projects being sanctioned and it's clear that global mind supply will be unable to meet demand from global Decarbonized additional initiatives for these reasons, we believe that the long term supply and demand fundamentals for copper remained strong.

However in the short term, we've all been faced with higher input prices coupled with the recent decline in copper prices significantly squeezing margins, while we do benefit from having our minds physician in the first quartile of the cost curve.

We have focused our efforts on maximizing operating efficiencies and implementing discretionary cost reductions in this challenging environment.

In light of this we have taken several steps to reduce discretionary spending by $30 million for the remainder of 2022 and are targeting in more than $50 million and destruction, Harry spending cuts as part of our 2023 budgeting process as we focus on jarring free cash flow.

In Arizona, we are reducing our 2000 2000 to exploration evaluation and growth spending by $10 million as Peter mentioned, we are also delaying the expected timing for corporate world definitive feasibility study to 2024, which will reduce Arizona growth expenditures in 2023.

We will prioritize the completion of that priest pre feasibility study and state level permits next year, which will allow us to begin our joint venture efforts.

Planned bulk sample program will Derisk project and kick off our feasibility work without further spending on drilling and detailed engineering in 2023.

And Manitoba, where they're forming plans for early development of the 19 O one deposit, resulting in a savings of $5 million of gross spending in 2022.

An additional announced that were previously planned to be accelerated into 2023. These deferrals do not impact our ability to change of 2026, starting as laid out in our current line plan, which contemplates the first stand in 19 O one and 2024.

In Peru, we are evaluating low capital alternatives installing a public crusher saving $22 million of growth capital next year.

Furthermore, we're deferring 15 million of 2022 growth spending in Peru in Manitoba relating to the mill recovery improvement programs and other capital projects.

These high return recovery projects remain on track for completion in 2023 with their capital spending profile to smooth over the next six to 12 months.

We are also rationalizing are non core asset portfolio with the divestiture of the 100 per cent interest in our Lord struck property in New Mexico, which was acquired through the nascent acquisition in 2018 and yesterday, we complete the sale of our equity interest in Fireweed, which received in 202018 and exchanged from the sale of our time.

And Jason properties in the Yukon.

We have reinvigorated our focus on deleveraging and disciplined capital location to unlock value in our pipeline is shown on slide 12.

After completing a recent brownfield investment program in the first quarter. We are now entering a period of significant free cash flow over the next few years.

To that end, we've improved our net debt position by $71 million to $897 million at the end of the third quarter. We also repaint, 38% of the gold prepaying liability during 2022 year to date and the remaining $80 million will be repaid by the end of next year.

As part of our discipline capital allocation approach, we have introduced a three prerequisite plan, which I'm, calling the three P plan.

Green Lightning copper world.

This three P plan includes specific targets and milestones that will need to be achieved prior to making an investment decision in this project.

First prerequisite is permits we need to receive all state level permits acquired for phase one. The second is a plan. This includes the completion of a definitive feasibility study with an internal rate of return greater than 15% and third most importantly, it's a prudent financial strategy.

This multifaceted strategy contemplates a committed minority joint venture partner Ah renegotiated precious claim agreements.

Ah net debt to EBITDA ratio of less than one two times, a minimum cash balance of $600 million.

And limited non recourse project level that up to $500 million.

This three P plan will ensure hudbay will be in the best position to move the copper World project Board with the lowest carpel lowest cost of capital and highest risk adjusted return on investment.

Based on current estimated timelines, we think the earliest we will be in a position to prudently sanction copperweld would be late 2024.

Copperweld will ultimately be evaluate against other competing and investment opportunities as part of a robust capital location process to ensure we are delivering the highest returns for our shareholders.

Dr. Peter.

Thanks Eugene.

Concluding on slide 13, and reiterating what Eugene said earlier on our continued view of strong long term fundamentals for carpet. We believe we are well positioned to reap the rewards from the strong copper outlook with a high quality corporate growth pipeline.

We have the highest <unk> in terms of free cash flow growth and the highest leverage to copper among our mid tier based middle tiers.

And we have successfully increased our copper equivalent resources per share by more than two and a half times over the past 10 years.

For these reasons, we believe hudbay is uniquely positioned to offer attractive copper production growth and longterm optionality for shareholders and with that we're happy to take your questions.

Thank you ladies and gentlemen, we will now begin the question and answer session to join the question queue. You May Press Star one on your telephone keypad, you'll hear a tone acknowledging your request.

You're using a speaker phone please pick up your handset before pressing any teeth.

China. Your question. Please press Star then too.

Our first question comes from Jackie priest Laski of BMO capital markets. Please go ahead.

Thanks, very much for taking my call and congrats on the corner and it gets congrats July two the.

The new appointees I know [laughter], it's been a while now but congratulations.

And Andre I guess I wanted to ask maybe three junior Minister Peter a question about.

Statements and the MBNA about reducing discretionary spending and showing up the balance sheet.

I understand that they need to do that and that definitely seems prudent to do that but how do you. How do you do that at the same time, it's moving forward.

Exploration projects, whether it's covered rump exploration or yoga or elsewhere.

Alright.

Where do you see the priorities for your spending.

Thanks, Jackie and things things will those kind words too I think it's all a matter of you say of Reprioritization.

So no matter, what we do we do want to continue to move forward or strategic.

Objectors of growth and carpet, but let me ask Eugene to talk a little bit more directly to the specifics of your question.

Hi, Jackie.

The focus on deleveraging and generating free cash flow manifest itself in many ways and the first is we wanted to continue to invest in those opportunities in like the brownfield ones that we completed that generates we'll call. It near term cash flow so to that end where at completing the <unk>.

Recovery program over the course of the next six to 12 months and we've done with that as smooth some of the spending and to allow us to to fund it.

In a way that.

Reduce the strain on the balance sheet based on the current corporate environment.

Similarly, our our focus on top of World is to spend on the preliminary PFS and to get the project ready for bulk sampling, we think that that's the highest return.

Doing a bunch of feasibility level drilling and completing the feasibility study in the next six months doesn't really generate a lot of returns Russell again, it's just require enticing, where where the capital goes for the maximum benefit without losing schedule.

As I said before a cop world, we see the earliest sanctioning.

Of that being late 2024, so there's really no need to do to the feasibility study in 2003.

If we're currently allocating capital.

And can put that money to stall or something or any of the other projects within our pipeline that generates at near term cash flow.

I would also add in addition to that Jackie that.

We as soon as we have access to start drilling at the satellites that Maria Raymond Carver, Utah, we're going to drill.

Regardless of whether we have appropriated the money in the next six to 12 months or whatever so we are pushing as hard as we can to get drilling permits in in Peru. So that we can start that work because I guess for those in the lining on aware if you don't know the satellites. These are potentially the future of the company they are incredibly.

Sitting and we will do whatever needs to be done to expose the value.

X P. That's an excellent point too.

And that drilling is more important than drilling.

Feasibility drilling for comparable so again.

Repairing the company to.

To make those decisions in the best possible way in.

That's really helpful. Thank you and maybe a follow up question on our survey semi related question for Andre on telling.

Tailing us reprocessing work that's happening in Manitoba.

I'm just wondering if <unk> priorities.

Priorities change between doing that tailings for your prices and work a triple seven Christians around like Snow Lake area. It sounds like <unk>.

You mentioned that there's excess capacity. It's no lake now does that does that sort of move smell like up in the priority, let's giving your client.

Triple seven you probably don't have as big of a workforce there anymore and and you set a rallying cry shifting or Orange Triple seven area code plenary as Kelvin priority for that project.

Thanks for the question Jack Yates, it's an interesting one.

Right now, we're taking a very measured approach with with the with the Flimflam Tales. Soon so we completed the initial initial drilling in the logical the logical next step is to progress and develop a.

<unk> from metallurgical testing and so.

And when would you just highlighted as as we have many many opportunities in Manitoba.

Not just the Flimflam Tales, we also have Anderson tales, which is which is quite exciting and and so.

We'll put them through a rigorous.

Capital allocation process, but what I would say is it.

Would you kind of alluded to as as as the Anderson Snow Lake Tales, and we're already recovering from Lawler mind any further enhancements that will enhance.

Improve goal recovery in Manitoba, whether it's.

We are currently looking at stall mill.

They are called opportunities, which could tie in with the Anderson tales.

The future of Waller, which is still open at depth will benefit from those improvements and so.

So it's probably logical for us if we're if your prior to using resources, we haven't Deprioritized flip one I would say is we just were not aggressively fast tracking it.

That definitely top of mind Anderson is it definitely fits with the current operations to be advancing that in parallel and and where it makes sense to fast track that to line up with the mind life of Lawler.

Thanks again that that's all the questions I have thank you very much.

Our next question comes from our erstwhile Canal Scotiabank. Please go ahead.

Hi, Good morning wanted to get some color on the cost situation in Manitoba, we shot pretty big jump up and and cost per ton narrowed at 235, a ton in Q3, I realize it's a transition quarter with triple seven workforce moving over but can you give us a sense of of how quickly though.

Cost per ton may decline.

Assuming that the inflationary pressures just stay the same.

Thanks.

I'll provide a couple of comments and then maybe Oscar Eugene and Andre two two at a little bit more but.

We expected the unit cost to increase in the second half as a result of removing the lower cost triple seven from the calculation.

So we've been experiencing continued increases in the prices of materials and consumables, such as fuel reagents grinding media and contract a cost that I mentioned earlier.

And also a.

Q3 was a period of transition for Manitoba, and we were focused on training the flimflam workforce within new positions in Snow Lake and this transition process takes time and additional contractors were required during the period two onboard are flimflam employees. So we will continue to see lower contractor cost in fourth.

Quarter ended 2023 as contractors are released and we have a fully trained workforce and I guess the third element was that in the third quarter.

We were impacted by one of production interruptions, which we don't expect to occur going forwards. So in the fourth quarter unit costs should below the Q3, and we should trained towards those lower cost going into the new year.

Andre would you add any more to that.

Alright.

The.

<unk>, and it's going well and it's going a little bit slower and Peter had mentioned.

With the plan was is to have while we are training our people as they came over from Flint time, we're having a contract resources Peter is alluding to.

Think we had close to over 200 people of contract resources supporting us in the transition and that's what's happened has been a little bit more turnover than we had expected people people moving from Flint line and from the Lake and decided to look for other opportunities and so that's that's slow that process, but as Peter alluded.

It's a one time thing and the transition we expect to be down to about 25% to 50 or so contractors by December .

As the plan and so we definitely energy.

You will see decreases and and also.

The focus has been very much so on nuber tenure getting the global recoveries, which we have been really successful and we're very happy with and now we're focusing on costs and we've probably been putting a little bit too much cyanide aggressively to make sure we get the recoveries and over the course of this last month, we've we've really dialed that back which reduces our cost tremendously at new Brit.

Both in the Sinai consumption as well as the cyanide destruction your agents and so we will see benefits going forward as well. So so it's it's definitely not.

Long term thing.

For Manitoba.

It's a combination of what Peter said as his transition.

Tailender, the ramp up and working through the refinements and those one time events with that unfortunately, the power outage and the fire and with.

We are looking much better cost in queue for February .

Okay no. Thanks for that and just following up on Jackie's question.

Your release talks about 50 million and identified savings for next year I realize it's probably budgeting season, and you have an issue any guidance yet, but can we how much of a year over year decline do you think we can anticipate in total capex next year from.

From the 340 number this year like would it be below 300 or four.

Or not so much.

We're still in the midst of the budgeting Horace and I think we've identified 50, and obviously, we've seen some inflationary pressures we're going to.

We're going to make the announcement the most capital efficient plan as we can early in the new year.

But rest assured we're we're pouring over every dollar.

Across all business lines.

Okay. Thank you.

Our next question comes from Greg Barns of PD Securities. Please go ahead.

Yes. Thank you.

<unk>, obviously, a part the steps taken to recoup discretionary spending but.

A lot of it some of it seems to be focused on projects that we're going to improve recoveries imprudent efficiencies at the mills.

Are you taking some risks here and that you don't get those efficiencies.

And that you in fact in mind plans and recoveries and production.

Thanks, Greg look.

I don't think so for example.

We said that we were going to.

Not to look at the <unk> table threshold.

Yeah.

But at the same time.

I will not doing that we still going to look at.

The potential to reject pillows tables to prioritize higher grade ore and tons of in the middle So so.

It's not like we are taking stuff out to put ourselves at risk, we just trying to do stuff better.

Eugene Andre any further comments.

None of these cuts impact of mine plans that we that we have for the next two years.

Actually a focus and we're.

We're looking at capital spending in.

The spread between needs and wants and.

Making allocation appropriately.

So the project is going as fast as it possibly can in terms of delivering the metal metallurgical improvements. There. So there's any any sort of shifting there isn't because we wanted to shift it's either dealing with some supply chain challenges.

And then with the with the pulley.

Forward of the maintenance shutdown it.

Through the court R in November .

Next week would that does is it pulls forward. The second shutdown later on next year and it actually we're looking to potential earlier commissioning of the global recovery Army and the copper recovery projected constancia, because it's tied to tying intimate finalized pumps at the end and that was originally going to be later on in the year and and that'll be.

Pull forward now that we've shifted those.

Those shutdowns ahead by a couple of months. So there is we really just <unk>.

Focused on the ones like Peter said as we found a better way, we found a better way with the public pressure, where we think that we don't need it and it's.

And it's aligned with our variable cutoff strategy and with.

The drilling and the stuff that's going on like like Eugene talked about earlier and corporate World. Originally we were drilling ahead of schedule, because we thought we wouldn't be able to secure drillers because of the market was so tight obviously that's changed and.

And so so now we're not as concerned about re securing drills when we need it and were pacing the drills to when we actually needed and schedule. So we're just being diligent around throughout our procurement. This point okay. Great. Thank you and just a secondary question on yoga and it looks like an interesting little project does that fit within your pipeline projects. There is.

But some of the strategy looking at to move that forward.

Big I would say it fits in the pipeline to the same extent as Mason does it.

A large project with potentially severely very significant.

Economics around it but it is it is a longer dated project and so we will move it forward.

Prudently, where you're going to spend very little on it but I think the next step is like <unk>.

To assess its potential.

And you know you never know there's potential for us actually perhaps to advance work a little bit further in conjunction with somebody else, but I would say it fits into the same space in Peru, as Mason fits into the space in the U S.

Okay. Thanks Peter.

Once again, if you have a question please press star one.

Our next question comes from Latin Wander of Bank of America Securities. Please go ahead.

Good morning, Peter Eugene and Andre It's nice to hear from New Orleans, and definitely right that congratulations to you to you Eugene.

I wanted to ask about.

Copper world and just stuck with the benefit of additional time to spend on the various studies.

Do you continue to believe that the or will be optimally processed using a sulfide leach approach first but then one that uses no pressure and heat and are now how is it has the capex kind of developing relative to the PDA. Thanks very much.

Look I I will take the first stab at in Oslo, enrich expand a little bit.

What we say it I guess, what I said in my opening remarks was that we've progressing the pre feasibility study looking at a variety of options and also looking at the timing of various options and sort of the modular nature of those options as well as trade offs.

Of the various technologies.

Technologies themselves.

We think that the sulphide leaching process, approximately 400 million dollar sort of plug and play module.

And we'll make the decision during the course of Prefeasibility, where the that is now whether that is later and will also make the decision where they in fact, we go with atmospheric lethal whether we go with the medium pressure or whether it was similar to what the fee for using in Arizona. So the Pfa's will take those things into consideration and then to come out of that.

We will have made much better decisions and we'd be able to make better decisions and also take a look at the optionality of the various mud.

Modules, whether they get plugged in an hour later anything clearly you would add to that Andre.

Okay.

Just on the cost question part of it is so the initial work that we've and when we're trading off a variety of different sulphide leach.

To come scenarios, whether it's a high temperature medium temperature or the Albion.

And what we're finding at this stage right now is they're all kind of a watch so so there's not.

You're not picking one versus the other because it's benefitting from Capex.

We continue to think that the atmosphere gleaves has the opportunity for us to really go into it slowly.

It's very modular you can start off with the trial of something very small and it's.

Just a small percentage of the final capacity to verify that that's where you want to go whereas when you were looking at the larger.

Larger capex ones that are you have to design it to the right size forever.

With a high pressure in each those ones are big commitments it but in any case like Peter mentioned as as we have that option Alley, we don't have to do it right away and.

And it will all be laid out in the pre fees.

And our focus though is we still believe that.

Leeching leeching sulfides in producing finished copper in the U S is aligned to to all of our stakeholders.

Insurance, particularly in the U S with the demand for property within the near future.

Yes. The report the approach you guys are taking makes a lotta sense.

If I'm if I'm hearing you correctly, I guess, you're kind of reserving the right to.

Follow sort of a traditional smelter approach at least in the initial years as you kind of develop the stuff at least technology that would that be a fair interpretation.

Well, except for developing the technology. So we don't develop technologies. So the technology is already has developed improving but it from a risk based process. We we can go at it in a step wise manner.

We feel tested feel comfortable and where the cost isn't that large so we can take a measured approach from traditional santos smelter by Trialling.

At a smaller scale to go one way or we we can look to the high pressure medium temperature ones, which were very familiar with from platform.

A lot of options.

That's.

Great commentary great. Thank you very much and then just one final question for me with the last bond. This community disruptions are.

Obviously, it had a pretty significant impact on on operations. There we heard very little from Hudbay. So would it be fair to conclude that there.

There has been little to no disruptions on contingency operations, particularly with respect to the shared.

Road access really here to date.

Hello.

It would be fair to conclude that so the most recent blockades would actually in fact, bucketed less bombous don't impact us because they are upheld.

In the opposite direction.

To the port from Us, it's really brocades more down towards and that impact us.

But in the recent blockade, which was not aimed at and the <unk> was actually aimed at the government, but it was downhill from us.

There was no impact on us the only impact was that we build up concentrate for Ah.

A little bit of time and when the matter is resolved and off it goes down the hill. What we have done is we recently helped to establish co op trucking enterprise with the local communities, where the by the communities now truck some 30% of our concentrate to the port and that's just really helpful in navigating things.

So so overall yet no impact.

Thank you very much.

Our next question.

Our next question comes from Ralph procedures of eight capital. Please go ahead.

Thanks, operator.

Peter in Eugene maybe if I can ask a question just how long should be thinking about this $500 million.

Non recourse project level of debt.

What is it easy to consider that this could be sort of a maximum level that banks were willing to sort.

Put up in your initial discussions or is that more sort of a voluntary thresholds in terms of hide based comfort level.

[noise] Hi, Ralph.

It's actually had based comfort level and so.

What I would envision as that's the project level that that'd be the last piece of financing and the sort of allow us to over fund.

The potential build of it and.

We want to kind of build this project and the most prudent financial structure, given what we've seen with cats.

Capex bills recently.

And so.

We don't want to layer on too much debt, particularly at the front. So it'd be kinda last piece of financing and we think that approximately 25% debt financing would be a very prudent structure for us.

There's there's more than 500 available to us we're choosing to limit it to 500 up nonrecourse project level.

Yeah understood. Okay. Thank you and congratulations to yourself and Andre.

Thank you.

This concludes the question and answer session I would like to turn the conference back over to Canada for any closing remarks.

Thank you operator, and thank you everyone for joining today do you have any further questions. Please feel free to reach out to the Investor Relations team you may not know disconnect your lines.