Q4 2024 Hudbay Minerals Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to the Hudson Minerals, Inc. Fourth quarter 2024 results conference call.
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Following the presentation, we will conduct a question and answer session.
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Worry maintained 2025 at 11, a M eastern time.
Speaker Change: I will now turn the conference over to Candace Brule, Vice President Investor Relations. Please go ahead.
Candace Brule: Thank you operator, good morning, and welcome to <unk> 2024 fourth quarter results Conference call.
Speaker Change: Hi, based financial results were issued this morning and are available on our website at www Dot Hebei dotcom, a corresponding Powerpoint presentation is available on the investor events section of our website and we encourage you to refer to it during this call are.
Speaker Change: Our presenter today is Peter Cahill ski had bass, President and Chief Executive Officer accompanying Peter for the Q&A portion of the call will be Eugene Lee, Our Chief Financial Officer, and Andre Luzon, Our Chief operating officer.
Speaker Change: Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties and as such actual results may differ materially from the views expressed today for.
Speaker Change: For further information on these risks and uncertainties. Please consult the company's relevant filings on SEDAR plus and Edgar. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U S dollars, unless otherwise noted and now I'll pass the call over to Peter could kill ski.
Peter Kodzielski: Thank you Candice good morning, everyone and thank you for joining us for today's call.
Speaker Change: Start by saying we had another incredible year in 2024, it was a year of execution as we delivered record financial performance and fully transformed our balance sheet. We proudly achieved consolidated production guidance for all metals with gold production significantly exceeding the top end of the guidance range Andrew.
Outperformed our twice improved consolidated cash cost guidance, demonstrating industry, leading cost performance.
Speaker Change: These strong operating results enabled us to achieve a record revenues of more than $2 billion and record free cash flow generation of more than $350 million in 2024.
Speaker Change: This was driven by our enhanced and diversified operating platform, where we continue to demonstrate operational excellence and disciplined capital allocation.
Speaker Change: Our Peru operations delivered steady copper production and better than expected gold production in 2024 as mill throughput continued to exceed design capacity and we took advantage of the recent government initiative to allow mining companies to operate above permitted throughput levels.
Speaker Change: Upper Concho also continued to contribute high grade copper and gold ore.
Speaker Change: In addition, the team is advancing studies on future opportunities to further increase mill throughput in Peru.
Speaker Change: Our Manitoba operations achieved record annual gold production, increasing by 14% from 2023 and exceeding the top end of our production guidance range I am very proud of the team's continuous improvement efforts, which resulted in an impressive cost performance that significantly exceeded.
Speaker Change: Our expectations.
Speaker Change: This success was impart due to the contribution from the new Britannia Mill, which was refurbished in 2021, and we continue to deliver high returns from this brownfield investment project.
Speaker Change: British Columbia operations have enhanced our operating platform with 2024 being the first full year of having a third operating assets.
Speaker Change: We continued our stabilization and optimization efforts in 2024, including increasing mining activities and our focus for 2025 will be on mill optimization initiatives to enhance mill throughput.
Speaker Change: As a result of the free cash flow generation from the enhanced business plus the proceeds from the successful equity offering we completed in May we have proudly reduced net debt by more than $500 million in 2024.
Speaker Change: We have transformed our balance sheet to now be in the lowest leverage position of our peers a significant change from one of the highest leverage positions more than a year ago.
Speaker Change: We are in the best financial position, we have ever been in to prudently deliver our attractive pipeline of growth opportunities and this is timely as our copperweld project in Arizona has received the final key permits and we are now advancing the project through feasibility studies and the minority joint venture partner process.
Speaker Change: I'll go into more detail on our recent achievements throughout today's presentation, along with our outlook for 2025, and our plans for advancing many exciting growth initiatives to continue to unlock value for all stakeholders.
Speaker Change: Turning to slide four the fourth quarter of 2024 had strong production and operating cost performance across the business.
Speaker Change: Consolidated copper production was 43000 tons in the quarter, an increase of 38% compared to the third quarter and in line with quarterly production cadence expectations.
Speaker Change: Consolidated gold production was 94000 ounces, which significantly exceeded our expectations for the quarter and increased 6% from the strong levels achieved in the prior quarter.
Speaker Change: This was primarily due to higher grades in Peru, and continued strong gold production in Manitoba.
Speaker Change: As a result, we achieved a consolidated full year production guidance for all metals and significantly exceeded the top end of our production guidance range for gold.
Speaker Change: We had another quarter of industry, leading cost performance with consolidated cash costs of 45 cents per pound of copper and sustaining cash costs of one dollar and 37 cents per pound.
Speaker Change: While the majority of our revenues continued to be from copper.
Speaker Change: Copper and gold diversification adds further cash flow resiliency and strong leverage to higher metal prices.
Speaker Change: This is seen through the increasing portion of our revenues from gold representing 35% of total revenues in 2024 compared to 29% in 2023.
Speaker Change: Fourth quarter, adjusted EBITDA was $257 million or 25% increase compared to the prior quarter, resulting in full year 'twenty 'twenty four adjusted EBITDA of $823 million, a substantial increase from eight $648 million a year ago.
Speaker Change: Adjusted net earnings was 18 cents per share in the fourth quarter, a 40% increase compared to the third quarter.
Speaker Change: Our financial results would have been even higher if excess copper concentrate in Peru was sold in the quarter.
Speaker Change: As a result of the strong ramp up of production during the quarter. They remained approximately 30000 tons of copper concentrate inventory at the end of December compared to the typical levels of 15000 tonnes. The excess copper concentrate is expected to be sold in the first quarter of 2025.
Speaker Change: Slide five highlights our efforts to transform our balance sheet in 2024, which has positioned us as the lowest Levered company in our peer group as I mentioned.
Speaker Change: We ended the year with $582 million in cash and cash equivalents, an increase of $332 million over the course of 'twenty 'twenty four due to a successful equity offering and record free cash flows bolstered by strong copper and gold prices.
Speaker Change: HUD Bay has successfully delivered six consecutive quarters of meaningful free cash flow generation as a result of recent brownfield investments continuous operational improvement efforts and steady cost control across the business.
Speaker Change: We used part of the equity offering use of proceeds and the free cash flow generation to make $245 million of debt repayments during the year.
Speaker Change: This included repurchasing and retiring a total of $83 million of senior unsecured notes as well as completing the repayment of $100 million on our revolving credit facilities.
Speaker Change: We also fully repaid the gold prepay facility with $62 million in gold deliveries during 2024.
Speaker Change: As a result, we have reduced our net debt by over $500 million in 2024 and as of December 31st we have $526 million of Mezz debt.
Speaker Change: The net debt reduction together with higher levels of adjusted EBITDA over the last 12 months has significantly improved our net debt to adjusted EBITDA ratio at two 0.6 times in comparison to a ratio of one six times at the end of 2023 and over two times at the end of 2022.
Speaker Change: In addition to these efforts in November we took further action to improve balance sheet resilience and financial flexibility by proactively extending our senior secured revolving credit facilities from October 2025 to November 'twenty 'twenty eight.
Speaker Change: This provides increased financial flexibility to accretively maintain a 4.5% coupon bonds until maturity in 2026 and advanced copperweld towards a sanction decision in accordance with the three P plan.
Speaker Change: The newly extended $450 million revolving credit facility includes an improved pricing grid, reflecting the enhanced financial position of HUD Bay and features an opportunity to increase the facility by an additional $150 million at our discretion, providing additional financial flexibility.
Speaker Change: Looking at our Peru operations on slide six in the fourth quarter. We produced 34000 tons of copper 38000 ounces of gold 970000 ounces of silver and 195 tons of molybdenum.
Speaker Change: Copper gold and silver production was significantly stronger than the third quarter as a result of high grades from pump of Concho as the planned stripping program was successfully completed in the third quarter as well as a larger portion of all mill feed coming from public Concha.
Speaker Change: The strong fourth quarter in Peru resulted in the full year annual guidance ranges being achieved for all metals with the production of 99000 tonnes of copper and 98000 ounces of gold in 2024.
Speaker Change: <unk> gold production exceeded the upper end of the guidance range by 6%, primarily a result of additional gold benches that we mined in the pump Concha pace ahead of schedule and pulled forward from 2025.
Speaker Change: The Peru operations continued to benefit from strong and consistent mill throughput, averaging approximately 87000 tonnes per day in the fourth quarter and full year of 2020 for.
Speaker Change: The mill achieved record copper recoveries of 88% in the fourth quarter higher than the previous record of 87% achieved in the fourth quarter of 2023.
Speaker Change: The root demonstrated strong cost performance and exceeded our expectations in the fourth quarter. As a result full year cash cost were $1.18 per pound in 2020 for outperforming the low end of our annual cost guidance range.
Speaker Change: Strong mill performance and focus on cost efficiencies has proudly positioned constancia has the lowest cost open pit copper mines in South America, we continue to evaluate opportunities to further increase mill throughput in the coming years with the government regulatory allowance to exceed permitted levels by 10%.
Speaker Change: This opportunity has the potential to increase production volumes to partially offset grade declines following the depletion of pump a country in late 2025.
Speaker Change: Slide seven highlights the record year, we had in Manitoba, a snow Lake operations delivered exceptional operating performance and continued to exceed expectations in both production and efficiency in the fourth quarter.
Speaker Change: We also proudly achieved a significant milestone in December with the production of a total of 1 million ounces of gold from the Lalor mine, reflecting the success of our strategy to maximize gold production from the Snow Lake operations.
Speaker Change: Record annual gold production of 214000 ounces was achieved in 2024 through a combination of higher metallurgical recoveries at the new brittania install mills and the strategic allocation of more gold ore feed to the new Britannia mill.
Speaker Change: This success reflects the positive impact of ongoing continuous improvement initiatives across the entire business unit.
Speaker Change: Full year gold and copper production both exceeded the upper end of the 2020 full guidance ranges zinc.
Speaker Change: Zinc production was in line with guidance and silver production was at the top end of the guidance range.
Speaker Change: The Lalor mine achieved strong results, averaging 4600 tonnes per day in the fourth quarter, marking the highest quarterly oil production in 2024.
Speaker Change: This strong performance was driven by positive Mark fragmentation, stope availability and improved mobile equipment availability.
Speaker Change: The new Britannia mill had another quarter of exceptional performance with the mill operating consistently above nameplate capacity, achieving an average throughput of above 2000 tonnes per day in the fourth quarter.
Speaker Change: Collins availability remains strong supported by ongoing low capital projects aimed at further increasing throughput, while maintaining targeted gold recoveries of 90%.
Speaker Change: Okay.
Speaker Change: At the stall base metal mill, we produced a similar quantity of all in the quarter compared to the prior one.
Speaker Change: Annual processing declined by 7% year over year aligned with our strategy to allocate more lalor ore feed two new brittania to maximize gold recoveries.
Speaker Change: Manitoba gold cash costs with $607 per ounce in the fourth quarter and $606 per ounce for the full year.
Speaker Change: These costs remain better than expected as a result of continued operating efficiencies and focus on strong cost control, resulting in full year, Manitoba cash costs significantly outperforming the low end of the 2024 guidance range.
Speaker Change: Similarly, our sustaining cash costs remained stable throughout the year in Manitoba, averaging an impressive $868 per ounce in 2024.
Speaker Change: I'll Snow Lake operations are generating significant cash flows as operating costs remained stable and we benefit from expanding margins in the current high gold price environment.
Speaker Change: Slide eight ranks our operations against other large scale gold mines in Canada.
Speaker Change: At $868 per ounce and sustaining cash costs Snow Lake is the lowest cost gold mine in Canada, achieving margins of roughly 70% at current gold prices.
Speaker Change: Through our continuous improvement efforts focus on cost control efforts to maximize gold production and benefits from base metal byproduct diversification. We are proud to say that our snow Lake business was the highest margin gold operation in Canada in 2024.
Speaker Change: Moving to our third operating business units on slide nine.
Speaker Change: A British Colombia operations produced 6000 tons of copper 4.6 thousand ounces of gold and 59000 ounces of silver in the fourth quarter.
In the quarter was impacted by lower mill throughput due to planned and unplanned maintenance shutdowns.
Speaker Change: Full year copper production was below the guidance range, primarily as a result of lower grades and stockpiled ore and lower throughput during the ramp up of stabilization and optimization efforts throughout the year.
Speaker Change: Full year gold production was in line with annual guidance.
Speaker Change: Since acquiring copper mountain in June 2023, we have been focused on advancing operational stabilization plans, including opening up the mine by reactivating that full mining fleet, adding additional hold trucks, adding additional mining faces optimizing the ore feed to the plant and implementing plant improvement initiatives.
Speaker Change: That mirror HUD based successful processes at Constancia.
Speaker Change: These stabilization plans have successfully increased the total tonnes moved and resulted in stronger mill performance as demonstrated by high mill availability of 92% and copper recoveries of eight 2% in 2024 compared to 85% and 80% respectively in 2023.
Speaker Change: The focus in the fourth quarter of 'twenty 'twenty four was on mining efficiencies and operator recruitment to effectively utilize the available hold truck fleet.
Speaker Change: As a result total material moved is expected to continue to increase in 2025 as per the mine plan.
As I mentioned earlier mill performance in the fourth quarter was impacted by the ramp up periods. Following the planned and unplanned maintenance shutdowns.
Speaker Change: In addition, elevated clay material impacted the secondary crushing circuit several initiatives, we are advancing in the quarter to address these issues.
Speaker Change: Full year cash cost in British Columbia, with $2.74 per pound and were above the high end of the annual cost guidance range due to lower copper production as mentioned.
Speaker Change: Progressive operational improvements are expected throughout 2025.
Speaker Change: Mining activities will continue to execute the three year accelerated stripping program intended to bring higher grade ore into the mine plan.
Speaker Change: And in January we completed feasibility engineering to Debottleneck and increase the nominal plant capacity to its permitted capacity of 50000 tons per day earlier than contemplated in the technical report.
Speaker Change: We released our 2025 annual guidance with our 2024 results and our production guidance is summarized on slide 10.
Speaker Change: The 2025 consolidated copper production guidance midpoint of 133000 tons is expected to remain consistent with 2024 levels.
Speaker Change: This is a result of higher expected production in British Columbia as mill throughput optimization plans are implemented offset by a lower portion of ore feed from pump a country in Peru as it depletes this year the.
Speaker Change: The 2025 consolidated gold production guidance midpoint of 278000 ounces reflects continued strong gold production in Manitoba offset by lower gold grades in Peru is high grade gold benches, where mind ahead of schedule in 2024 as well as the lower portion of all feed from pump of Concho in 2025.
Speaker Change: Specifically for Peru, the 2025 copper production guidance midpoint is expected to be 88.5 thousand tonnes and gold production is expected to be 54.5 thousand ounces lower than 2024 levels is less mill all feed will be coming from Pampa culture.
Speaker Change: As mentioned earlier additional high grade gold benches, reminding late 'twenty 'twenty, four and pulled forward from 2025.
Speaker Change: The pumper pension deposit is now expected to be depleted in early December 2025, as opposed to October as the mine plan as smooth pampa country production throughout the year.
Speaker Change: Total mill ore feed from pump a country is expected to be approximately 25% in 2025 lower than the typical one third in prior years.
Speaker Change: In Manitoba, we expect to produce 200000 ounces of gold based on the midpoint of the 2025 guidance range. The impressive operating performance. We saw in 2024 was expected to continue into 2025, resulting in our updated 2025 gold production guidance to be 8% higher than the previous.
Speaker Change: The announced guidance of 185000 ounces.
Speaker Change: Zinc production for 2025 is expected to be 24000 tons, which is lower than 2020 full production due to low grade base metals in the mining sequence at Lalor as we continued to prioritize the gold zones.
Speaker Change: In British Columbia, 20, twenty-five copper production is expected to be approximately 35000 tons based on the midpoint.
Speaker Change: This is a 31% increase from the 2024 levels as a result of mill throughput ramp up and higher grades in the second half of the year.
Speaker Change: This is a result of several mill initiatives, including the conversion of the third ball mill to a second Sag mill and higher grades from the accelerated stripping schedule.
The mill throughput ramp up reflects the first half 2025 at similar throughput levels seen in 2024 with a significant increase in the second half of 2025 concurrent with the completion of the second signal project ramping up towards 50000 tonnes per day in 2026.
Speaker Change: As shown on slide 11, consolidated copper cash cost in 2025 are expected to be within the 80 cents and one dollar per pound as we continue to focus on maintaining strong cost control across our operations to drive industry leading margins.
Speaker Change: Sustaining cash costs are expected to be within $2.25 and $2.65 per pound, reflecting slightly lower copper production lower byproduct credits and higher sustaining capital expenditures compared to 2024.
Speaker Change: In Peru, 2025 cash costs are expected to be between the dollar and 35 cents to a dollar and 65 cents per pound as continued strong cost control offsets lower production and byproduct credits compared to 2024.
Speaker Change: In Manitoba 2025 gold cash costs are expected to be between 650 and $850 per ounce remaining at industry low levels during strong margins at current gold prices.
Speaker Change: In British Columbia cash costs are expected to be between $2 45 and $3.45 per pound.
Speaker Change: This is an increase from 2024 due to higher mining costs related to more material moved as we execute the planned accelerated stripping program and higher milling costs as we implement the mill improvement projects this year offset by higher copper production.
Speaker Change: Our capital expenditures guidance is shown on slide 12.
Speaker Change: In 2020 for total capital spending was $10 million lower than guidance of $360 million is lower growth capital in certain sustaining capital deferrals with partially offset by higher sustaining capital in British Columbia.
Speaker Change: For 2025 total capital expenditures are expected to be $518 million.
Speaker Change: This increase reflects higher growth capital spending as we reinvest in several high return growth projects as well as higher sustaining capital at the operations, including some that was deferred from 2024.
Speaker Change: Peru's 2025, sustaining capital expenditures are expected to be $170 million with higher capitalized stripping and required mine equipment purchases along with some capital deferrals from 2024.
Speaker Change: Growth capital of $25 million in Peru is related to the installation of the pebble crusher to increase mill throughput starting in 'twenty six 'twenty 'twenty six and the other mill optimization initiatives.
Speaker Change: Anatol, there's 20 twenty-five sustaining capital expenditures are expected to increase to $60 million.
Speaker Change: Primarily the result of additional underground capitalized development costs.
Speaker Change: We also plan to spend $15 million of growth capital in 2025 for the exploration and haulage drifts at the 19, though one deposit and the portion of the cost is being funded by a premium flow through financing that was completed in the fourth quarter.
Speaker Change: In British Columbia, 2025, sustaining capital is expected to remain consistent with 2024 at $50 million per mine and mill equipment capital.
Speaker Change: And we expect to spend $85 million in capitalized stripping costs related to the continued accelerated stripping program.
Speaker Change: Gross capital at copper mountain is expected to be $75 million in 2025, including $55 million for the conversion of the third ball mill to secondary Sag mill to increase throughput rates starting in the second half of 2025 and ramping up to 50000 tons per day in 2026.
Speaker Change: At Copperweld in Arizona, we anticipate spending a total of $90 million in growth capital in 2025.
Speaker Change: This includes $25 million of typical annual holding costs and roughly $65 million related to derisking activities and definitive feasibility studies to advance the project towards a sanctioning decision in 2026.
Speaker Change: 2025 exploration expenditures are expected to total $40 million in line with 2020 for exploration spending as we continue to execute our multiyear extensive geophysics and drilling program in snow Lake to extend mine life and explore for new discoveries.
Speaker Change: A portion of the Snow Lake exploration program is being funded by a premium critical minerals flow through financing.
Speaker Change: Moving to slide 13, Hebei has a proven track record of prudently allocating capital to generate the highest risk adjusted returns as we execute our growth strategy and advance our world class asset portfolio.
Speaker Change: As an example of this success, we completed a post project review of our capital investment in the New Britannia Mill refurbishment project.
Speaker Change: We acquired the new Britannia mill in 2015 for $12 million to potentially process high grade Lalor gold ores and allow us to achieve higher gold recoveries of approximately 90%.
Speaker Change: The refurbishment project construction had an initial capital cost of $115 million and an estimated IRR of 19% at the time of project sanction in early 2020.
Speaker Change: The initial investment was funded by a $115 million low cost gold prepay facility.
Speaker Change: The project construction was completed on time with mill ramp up and commissioning achieved in late 2021.
Speaker Change: The mill was refurbished with a nameplate design capacity of 1500 tonnes per day and has been consistently exceeding performance expectations, reaching record throughput levels of over 2000 tonnes per day in 2024.
Speaker Change: Project payback was achieved after two five years and in August we completed the final payment under the gold prepay facility, increasing our exposure to the current Hyatt gold price environment.
Speaker Change: After three years in operations. It is estimated that the IRR or for the new Britannia refurbishment project has increased to a remarkable 36% after adjusting for higher production rates stronger gold prices and higher capital and operating costs.
Speaker Change: In 2024, we received the permits to increase the production rates at new Britannia to 2500 tonnes per day.
Speaker Change: With over 2 million ounces of contained gold in current reserves and another one 4 million ounces of gold in the inferred resources, the new Britannia investments has the potential to generate even higher returns that could be further enhanced by regional exploration upside and the current strong gold price environment.
Speaker Change: We expect to replicate the success through our disciplined capital allocation approach when reinvesting in brownfield growth projects, such as our mill throughput improvement projects in British Columbia and Peru.
Speaker Change: And we expect to generate attractive returns and unlock significant value through our copperweld project, which is shown on slide 14.
Speaker Change: Copperweld is the most advanced Greenfield project in our portfolio and offer significant copper exposure at highly attractive project economics.
Speaker Change: Copperweld as a standalone operation requiring state and local permits and is expected to produce 85000 tons of copper per year over the initial 20 year mine life in the first phase the.
Speaker Change: The project generates an NPV of $1.1 billion and an after tax IRR of 19% at a copper price of $3.75 per pound.
Speaker Change: Copperweld as one of the highest grade open pit copper projects in the Americas with mineral reserves of 385 million tonnes at 0.54% copper as shown on slide 15.
Speaker Change: The world is expected to be the fourth largest copper producer in the United States and its cost base compares favorably to current operating mines.
Speaker Change: Once in production Copperweld is expected to be a meaningful copper producer in the U S domestic supply chain.
Speaker Change: The made in America copper cathode anticipates to be produced is expected to be sold entirely to domestic U S customers.
Speaker Change: Turning to slide 16, we have recently obtained all key permits needed for the development and operation of copper World.
Speaker Change: This includes the aquifer protection permit which was received in August and air quality permit which was received in early January.
Speaker Change: With copperweld, and a fully permitted and with our transformed balance sheet and significantly improved financial flexibility, we are well positioned to prudently advance copperweld in accordance with our three P plan.
Speaker Change: Once in production Copperweld is expected to increase our consolidated copper production by more than 50% from current levels.
Speaker Change: Our focus in 2025 will be on advancing feasibility studies with completion expected in the first half of 2026.
Speaker Change: Now that the permits have been received we have commenced a minority joint venture partner process. We have also expanded our team in the United States to build bench strength and to establish key leadership roles.
This includes the recent hiring of a highly qualified project director and a seasoned mining law expert both of whom have significant assets as we advanced copperweld towards a sanctioning decision in 2026.
Speaker Change: We have several exploration opportunities as part of our long term growth pipeline, including many high priority exploration targets in snow Lake as noted on slide 17.
Speaker Change: In 2024, we began the largest exploration program in the company's history in Snow Lake with the goal of extending known mineralization near the lull of deposit to further extend mine life as well as to find a new anchor deposit within tracking distance of the snow Lake processing infrastructure.
Speaker Change: To follow on this in 2025, we will be completing the largest geophysics programming hardbake history with plans to complete 800 kilometers of ground electromagnetic surveys and an extensive airborne geophysics survey.
Speaker Change: And Laura northwest follow up drilling in the second half of 2024 confirmed the potential for a new gold copper discovery located approximately 400 meters from the existing law underground infrastructure.
Speaker Change: Several new intersections have helped establish the geometry of this new discovery and we plan to continue to drill lalor northwest in 2025.
Speaker Change: At the regional rail property, which was acquired through the rock Cliff acquisition in 2023.
Speaker Change: The 'twenty 'twenty four program yielded new intersections of high grade copper gold mineralization.
Speaker Change: These results will be combined with historical drilling results to update the geological model and assess its economic potential.
Speaker Change: Recent step out drilling at the 19th one deposit from the underground exploration drift targeted down plunge extensions of the ore body.
Speaker Change: All five holes that were drilled beyond the known extent of the mineralization have intersected visible copper gold mineralization extensions.
Speaker Change: Additional drilling at 19 O. One is expected in 2025 to confirm and potentially extend the orebody geometry and to convert inferred mineral resources in the gold lenses to mineral reserves.
Speaker Change: Under the recent geophysical targets. He has a very strong deep anomaly located at Cook Blake North approximately six kilometers from la <unk>.
Speaker Change: Drilling at the Cook Lake both property is continuing throughout the winter season.
Speaker Change: We are pleased to have signed our first ever exploration agreement with a kitschy whopper Cree nation, reflecting our commitment to meaningful collaboration as we explore for new mineral resources in the snow Lake and central regions. Additionally.
Speaker Change: Additionally, insulin front, we continue to advance tailings reprocessing studies to recover critical minerals and precious metals, while creating environmental and social benefits for the region.
Speaker Change: And early economic study on the zinc plant tailings reprocessing opportunity has confirmed the potential for a technically viable reprocessing alternative so we have further engineering work underway.
Speaker Change: In Peru, our exploration activities surrounding the Maria Reyna and cover Utah properties near Constancia continues to focus on permitting and drill preparation.
Speaker Change: As part of the drill permitting process environmental impact assessment applications were approved by the government in June 2020 for Maria Reyna any September 'twenty 'twenty four for Cabot veto.
Speaker Change: We anticipate the drill permitting process to be completed in 2025 at which point, we will initiate an extensive 18 months drill program.
Speaker Change: Concluding on slide 18, Hebei is set up for another highly successful year in 2025.
Speaker Change: Core to our 2025 objectives is the continued focus on operating safely and sustainably aligning with our purpose to ensure that the company's activities have a positive impact on our people communities and the planet.
Speaker Change: We believe that copper has highly robust long term supply and demand fundamentals as global copper mine supply will be unable to meet growing copper demands.
Speaker Change: HUD Bay's, leading copper development and exploration pipeline and low cost stable operating platform and tier one jurisdictions offers investors meaningful copper exposure complementary gold exposure and continued strong near term free cash flow generation.
Speaker Change: This together with our resilient balance sheet provides significant upside potential for additional value creation as we prudently advance on many high return copper growth opportunities.
Speaker Change: With that we are pleased to take your questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Joining the question here you May Press Star then one on your telephone keypad.
Speaker Change: Aratana knowledge and your request.
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Speaker Change: Today's first question comes from orders well, Qatar with Scotiabank. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: If we can get some more color on your 2025 production guidance in Peru.
Speaker Change: Been meaningfully reduced from the 25 guide you put out in March of last year.
Speaker Change: Can you give us some color in terms of what's driving that reduction.
Speaker Change: Papa Concha, but what exactly are you seeing there and are there any implications to 2026.
Speaker Change: Good morning. Thank you thanks for the question.
Speaker Change: As we mentioned with our last quarter results.
Speaker Change: Been experiencing more mining dilution and ore loss has been planned in one of the high grade areas that pump a country and we've since investigated quite a bit further.
Speaker Change: Our guidance for 2025 includes conservative resource to reserve conversion factors tested by very thorough reconciliation work in the 'twenty 'twenty four production results.
Speaker Change: Now. This so this is certainly limited as you suggested to 2022 pump a contract and specifically in 2025 only.
Speaker Change: On the gold production side, we accelerated some high grade benches from 'twenty to 'twenty five into 'twenty 'twenty, four which resulted in 'twenty 'twenty four gold production exceeding the top end of guidance levels and.
Speaker Change: And then in addition, our 2025 copper production is expected to be slightly lower than 2024 since the country is contributing a lower portion of ore feed.
Speaker Change: Approximately 25% of the old feed in 25 will be from Pampa contract compared to approximately one third in 2024.
Speaker Change: So that's that's really.
Speaker Change: What are the primary factors are.
Speaker Change: I'd also add even though you've not after that I kind of watch the markets reaction today.
Speaker Change: Our results and frankly, I'm pretty surprised because 2020 or was it outstanding year in 2025 will be another strong year of delivery with stable production and stable costs outstanding margins. So perhaps it's just a bad day in the market.
Speaker Change: But I think it's being driven by by what we've described in in Peru, specifically country Andre would you add anything.
Speaker Change: So I would.
Speaker Change: I'd say just to build on what you said is so when we went into Q4 as we started recognizing some of the challenges in the model, we signal being towards the low end.
Speaker Change: The guidance last year, and we deliver we delivered that with the updated model we have since revised the models to read to build and forecast into 'twenty.
Speaker Change: 2020 by then and so now.
Speaker Change: We're anticipating being at the midpoint, it's not.
Speaker Change: Like last year. So this is a.
Speaker Change: We're really prudent forecast going forward and.
Speaker Change: There may be a little upside on that as well.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Sorry, Harry on please.
Speaker Change: Well that's great. Thank you thanks for the color but.
Speaker Change: Triton, what the blended average grade for copper may be now.
Speaker Change: Nancy on 25, given the repayments.
Speaker Change: The blended average age of 25 is above three.
Speaker Change: Three one <unk> in that range.
Peter: Thanks Peter.
Speaker Change: Peter I do share your.
Speaker Change: Feelings in terms of the.
Speaker Change: Overreaction on the share price today, but clearly the guidance cut for 25 years.
Speaker Change: It's negative.
Got it thanks for that or if not you know I'd also stress that constancia is 90000 ton per year top of mind with extremely attractive cost and it carries on it at this.
Speaker Change: At least through the end of the decade and after that there's a massive upside offered by our exploration satellites.
Speaker Change: Within trucking distance of Constancia. So we remain very excited about the asset.
Speaker Change: If we're to building for the future is so the forecast for next year and incorporated in the guidance, we just discuss where some subtleties in the model per pop culture, I would say that our cost structure for Peru is year on year, we've been able to hold it flat almost the same.
Speaker Change: With no increases.
Speaker Change: And that strong cost performance and production performance will carry forward post Papa content in the future.
Speaker Change: Thanks for the color.
Lawson Winder: Thank you and our next question comes from Lawson Winder with Bank of America Securities. Please go ahead.
Lawson Winder: Yes. Thank you very much operator, good morning, Peter.
Lawson Winder: I wanted to.
Lawson Winder: After that the couple of minority interest process and.
Lawson Winder: Thank you.
Lawson Winder: What kind of interest you're seeing is that corporate strategic more.
Speaker Change: Potentially financial investors sovereign wealth firm.
Lawson Winder: Or is it more of a traditional type of partners that we've seen with with off takers in that.
Speaker Change:
Speaker Change: In terms of early indications.
Speaker Change: Numbers look like and then and then finally, so you started the process what would be expected.
Speaker Change: Timing and completion.
Speaker Change: The sale process.
Speaker Change: Good morning. Thank you for that question. So the answer to the very simple answer to your question is all of the above.
Speaker Change: We've had very very strong interest problem as you put it the traditional investors trading houses and alike.
Speaker Change: We visited with several of our middle East and potential partners later last year.
Speaker Change: Very very strong interest from the Middle East. We've also had very very strong interest from strategics.
Speaker Change: And on top of that because we've had some interest from some financial advisers. So I would say the interest has been extremely strong we expect it to be a very competitive process.
Speaker Change: And to your question with respect to timeline, we think it'll take up the order of four to six months to complete.
Speaker Change: Yes.
Speaker Change: Okay, Great and then.
Speaker Change: The other thing that would be helpful to get a bit of an idea for what the.
Speaker Change: <unk> growth Capex Capex run rate when you think about.
Speaker Change: The four key assets, our operating regions of the business.
Speaker Change: If we already just.
Speaker Change: FX number in our model like an average for the next 10 years.
Speaker Change: And of course it correct.
Speaker Change: Pricing.
Speaker Change: <unk> by pricing levels.
Speaker Change: What kind of a good run rate.
Speaker Change: Good morning lesson so our.
Speaker Change: Sustaining capital guidance for this year is approximately $365 million is a little higher than last year and that includes a lot of stripping at NBC.
Speaker Change: Stained capital and they had told us in that $50 million to $60 million range per annum, Peru ranges between about 130 to 170.
Speaker Change: Depending on the tailings dam raise and won't be seen in that kind of $50 million range. So.
Speaker Change: We add all those numbers up that that's kind of in that $250 million to $300 million range on an annual basis.
Speaker Change: Okay. That's great. Thank you both of those responses very helpful.
Speaker Change: Thank you and our next question today comes from Dalton Barreto with Canaccord Genuity. Please go ahead.
Dalton Barreto: Thanks, Good morning, Peter and team.
Dalton Barreto: Peter I wanted to start by asking a couple of longer term questions. If you will like you mentioned that.
Dalton Barreto: Constancia is pretty robust until the end of the decade.
Speaker Change: Based on the mine plan.
Dalton Barreto: The carpet rates do drop off.
Dalton Barreto: After that if you start drilling the satellites. This year do you think.
Dalton Barreto: Maybe it would be ready for production by them.
Speaker Change: Morning Blossom.
You know so.
Speaker Change: So what I would say is first of all we as I said during the I've said in the past we combined the permitting processes will cover Utah and rearranged. So we'll obtain permitting for both of them at the same time and then we'll decide exactly what the process of all the sequence of our drilling will be it.
Speaker Change: It's going to be an 18 month training program. So.
Speaker Change: Once we have completed that drilling program will have a better idea of exactly what the high grade satellite. So whatever we're talking about are all going to be it will be targeted.
Speaker Change: I imagine that we will have a roughly similar timeline associated with permitting.
Speaker Change: Those operations. So it's unlikely that we would be in production before early 'twenty.
Speaker Change: But I would say that you know.
Speaker Change: With the type of production to the levels of production that we have moving forward now as well as potential.
Speaker Change: The expansion of the mill infrastructure.
Speaker Change: To offset declining grades.
Speaker Change: We'll have a very clear line of sight to what those satellites will bring.
Speaker Change: There is a gap or a year or two between.
Speaker Change: What we're talking about so it's very difficult for me to say today with any sense of certainty.
Speaker Change: We you would bring a cover Utah, where Maria Reyna satellite into production by 2030.
Speaker Change: But I would say a roundabout in the NIM.
Speaker Change: In the next couple of years or something like that but there will always be a very clear line of sight to it which I think would addressed any market concerns, but not only that by then we'll have copperweld and production as well. So we'll already have added another 50% top production portfolio.
Okay. Thanks for that Peter just made.
Speaker Change: So I just wanted to add something built in there as well.
Speaker Change: So with the lottery so one of the things that we're going through this year theyre up renewing silver permits in Peru.
Speaker Change: And looking for some expansion in anticipation.
Speaker Change: Of the <unk> Murray arena deposits in.
Speaker Change: Although like Peter said, the timeline is going to be tied around 2030 with successful exploration there will be likely permitted in 28 or so to be able to increase throughput to a much higher level that we can accelerate.
Speaker Change: <unk> and bridge that gap. So we've been working on unplanned too to mitigate those who was lower agree in future years.
Speaker Change: And if we get Marina and caviar sooner, even better like so it will be permitted to go at a high level of production with that Super High grade and then.
Speaker Change: If it does slide a little bit we had the opportunity to accelerate his stature and produce more metal.
Speaker Change: Got it thanks for that Entre and then maybe switching gears to Manitoba.
Speaker Change: The Canadian dollar has been hammered.
Speaker Change: Just wondering how much exposure of the Manitoba business has to the Canadian dollar and what Youre doing to sort of lock in these rates.
Dalton Barreto: Good morning Dalton.
Dalton Barreto: Where were we budgeted conservatively for 135 copper obviously that was there.
Dalton Barreto: Today's spot prices slightly higher than that so a 10% change in the in the Canadian U S exchange rate is about a $60 million.
Dalton Barreto: Impact on cash flow and EBITDA and so that's a pretty significant increase in cash flows and that that affects both the PC business and the multiple business.
Got it. Thanks C. J, if I can just squeeze one last one and.
Dalton Barreto: Your balance sheet in very good shape right now you are still more than a year away from mass sanctioning copper world.
Speaker Change: Given the movement in the shares today and your valuation any thoughts on maybe buying back some shares.
Dalton Barreto: We're at Dalton TVN again.
Speaker Change: Yes.
Speaker Change: And we're in enviable position with our balance sheet, having lowered our leverage will turn over the course of 2024.
Speaker Change: Have some bonds that are more than a year away.
Speaker Change: From being due and we're always looking at opportunities too.
Speaker Change: Allocate capital.
Speaker Change: The highest risk adjusted returns.
Speaker Change: You'll see in our capital forecast this year that we have some investments in our business that we think are high return businesses.
Speaker Change: The practices that we've.
Speaker Change: Barked on including New Brit.
Speaker Change: We're over 35% return projects.
Speaker Change: As we look at it.
Speaker Change: Dividends and share buybacks will always be evaluate against those internal projects, but it's.
Speaker Change: As Peter mentioned, we are surprised with the overhang today in India and the share price. So it's always something we consider actively.
Speaker Change: As we allocate capital.
Speaker Change: Thanks, very much guys.
Speaker Change: Thank you and our next question comes from Anita Soni with CIBC World markets. Please go ahead.
Speaker Change: Good morning, Peter Eugene and Andre So a question for Andre on the dilution and ore losses.
Speaker Change: You give some color on what you think the source of the issue.
Speaker Change: Or is I'm just wondering if there was a suggestion Mister car model or if it's something that's happening from the mining side.
Speaker Change: Of the operation.
Speaker Change: Okay.
Speaker Change: Thanks for the question. So so as we're going through actually with all of our operations. We were continually updating their models, it's something that we do every every quarter end.
Speaker Change: In all cases monthly looking at reconciliation factors in this case here.
Speaker Change: It does appear to be more juice statistical because it didn't affect the goal, but we had positive reconciliation on the goal then there was just slight more variability on the on the copper.
Speaker Change: But those those were corrected and we projected in the fourth quarter, we updated with their models in the fourth quarter or so so those are all the best estimates that we have going forward into 2025.
Speaker Change: So we're very confident that.
Speaker Change: <unk>, the midpoint or better.
Speaker Change: And what kind of I mean, what did you use for your <unk> three and <unk>.
Speaker Change: Our Q4, so all of our models ordinary Creek.
Speaker Change: Alright, great.
Speaker Change: And then how.
Speaker Change: How much of what was the cutting factored the use for the 2025 and how many times did that impact in 2025.
Speaker Change: So again, sorry could you repeat I didn't catch the question.
Speaker Change: Can you reduce the grade in 2025, so I'm just trying to get an understanding of how much how much in terms of tonnage was impacted by <unk>.
Speaker Change: <unk>, great and what did you like how much did you reduce it by.
Speaker Change: Doctor like 10 percenter.
Speaker Change: 15%.
Speaker Change: So we can we could probably take it offline, it's pretty detailed but what I'd say is at its very focused to Papa concept Papa conscious only about a third of the production.
Speaker Change: And what we have right now is a resource model that has a lot of information with blast holes and new information that makes it a.
Speaker Change: It's the best model going forward. So it's not about cutting it we have a lot more information now.
Speaker Change: Okay and then.
Speaker Change: And my last question would be how much pop accounts or what its done in 2026.
Speaker Change: Zero, there's no word in public conscious done in 'twenty six yes, we're done this year.
Speaker Change: Alright, that's it from my questions. Thank you very much.
Speaker Change: Thank you and our next question comes from Peru.
Speaker Change: Raymond James Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thank you operator, and good morning, everyone.
Speaker Change: So just a couple of questions from the presentation here. The first one just on copper world Peter in your slide there you can talk about you know what a made in America strategy producing copper cathode.
Speaker Change: Wanted to revisit that because I know in the past there's been some discussion about whether you actually end up going all the way in making the cathode or whether you just produce a concentrate and I think that there was a capex trade off related to that decision. So have you now committed that youre going to kind of go down the path of producing cathode in country or.
Speaker Change: That's still something that's up for debate.
Speaker Change: One FERC so.
Speaker Change: Easy answer to your question is yes, we are committed to it. It's you know it is certainly is a key component of the pre feasibility study and it will be a key component of the feasibility study going forward, we think that the opportunity to produce made in the United States. Our copper cathode is is very very attractive.
Speaker Change: Actually given some of the geopolitical.
Speaker Change: Disconnects that were seeing in the environment now and I think is very very supportive of building our business in the United States.
Speaker Change: I mean of course, we will we'll take a hard look at the technologies that we're going to use that we spoke of in planning to to continue to use the albion process, but remember that it's a project that's funded out of cash flow and approximately you have for a while there operator.
Speaker Change: Okay. Thanks for that and maybe just earlier in the conference call. You you made a reference to add Manitoba running above permitted capacity and there was an allowance from the government can you provide some more detail on the allowance from the government and how long you expect that to persist.
Speaker Change: So first I think that you, you're you're mixing up our Peru, and Manitoba, Peru, where we haven't got allowance and the government to exceed production permitted capacity by 10%.
Speaker Change: I'll answer on the Manitoba societies, we received the permits to increase production at new Britannia to 2500 tonnes per day.
Speaker Change: And you know as we mentioned in the materials, we should be producing at over.
Speaker Change: In the last quarter at over 2000 tonnes per day.
Speaker Change: Okay. Thanks for that clarification, Yeah, I think I misheard you on that one and then just the last one there just a question.
Speaker Change: Related to <unk> question on potential buyback.
Speaker Change: Part of the reason why your balance sheet.
Speaker Change: Has strengthened is related to the equity issuance that you did earlier in 2024.
Speaker Change: So I'm just wondering.
Speaker Change: At this point you know what I imagine that part of strengthening the balance sheet was to get ready for copper world. So at this point.
Speaker Change: It's safe to assume that kind of a share buyback would kind of be off the table given part of the range was to get to get ready for a copper world coming potentially in 2020 for starting the construction in 'twenty 'twenty six.
Speaker Change: I'll, let Jim give you a broader answer to it but in essence it is unlikely that Pete.
Speaker Change: Would do a share buyback in the wake of issuing equity Eugene anything you would add to that.
Speaker Change: Part of a broader strategy you pointed the equity issue was to pre fund the.
Speaker Change: Stabilization optimization work in British Columbia, and that's underway that's going to be spent this year in 2025 and also put the balance sheet in a position to.
Speaker Change: Two.
Speaker Change: Potentially sanctioned copper World project.
Speaker Change: In the first half of 2026, and I think we're really well on track on that.
Speaker Change: We always look at.
Speaker Change: Opportunities, both internally and externally to.
Speaker Change: Generate returns for our shareholders and we will.
Speaker Change: We need to monitor the situation, but as Peter mentioned, where it's.
It's not we don't take this lightly and that kind of a one quarter decision. This is where we're building a resilient balance sheet to be able to reinvest and generate superior returns over a sustainable time for our shareholders.
Speaker Change: We're in a really good pathway to do that I think we have the lowest leverage among our peers.
Speaker Change: Reduce deaths.
Speaker Change: Mentally and our capital structure, and we have a lot of financial flexibility going forward in terms of the refi of the bonds and the sanction of cop world in the context of <unk>.
Speaker Change: All the capital allocation opportunities that we have.
Speaker Change: With the goal of ultimately being stable.
Speaker Change: I'm dividend payers correct.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you and our next question comes from Pierre Vaillancourt with Haywood.
Speaker Change: Please go ahead.
Pierre Vaillancourt: Thanks, I was wondering if you could elaborate on the on the tax expense this quarter and what implications are for future quarters.
Speaker Change: Hi, Peter and yes, there was an elevated tax expense in 2024 due to the differences in mining tax versus income tax.
Pierre Vaillancourt: Particularly given the strong production.
Pierre Vaillancourt: In Peru, and the higher gold price as well as well as that strong production in Manitoba.
Pierre Vaillancourt: Was elevated in 2024, it will unlikely.
Pierre Vaillancourt: Ah remain elevated in 2025 as these prices prevail, but normalizes.
Pierre Vaillancourt: As pop contract exhausted in Peru and.
Pierre Vaillancourt: Anders.
Pierre Vaillancourt: As we think Oscar pools in Peru as of a year ago.
Speaker Change: Okay. Thanks also if I may.
Speaker Change: Wondering if you could give us a sense.
Speaker Change: With with Pampa cannot share.
Speaker Change: Finishing this year, what with the longer term profile for Constancia in general is in the context of the.
Speaker Change: The mill expansion, so it's going to I mean, it's down relative to what guidance was previously.
Speaker Change: Probably go down again in 'twenty, six Havent set where do you achieve steady state.
Speaker Change: In the context of.
Speaker Change: Our planned mill expansion until of course.
Kevin: Kevin <unk>, who ran that comes on.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Great.
Speaker Change: It's a that's a pretty layered question.
Speaker Change: We're going to give a lot more clarity on the future year's guidance coming up.
Speaker Change: Yes.
Speaker Change: In March with our reserve and resource Declaration, So we'll be able to give you a lot more color on.
Speaker Change: On that coming up but it but there are a sequence of a production improvements that we're doing like right now we're doing.
Speaker Change: And it's not really baked into the bike guidance or budget as we're doing pelo rejections successfully right now we're seeing some improvements in grade and throughput.
Speaker Change: We're planning to implement.
Speaker Change: Towards the end of this year's Pebble Crushers, we don't know we might see some production this year, but it's probably going to the benefits will go into 2026 and pending on the combined of those we may expand that as well because we know were playing only to install one pebble crusher, but we have the opportunity and the permits will be in place to put up the floor.
Speaker Change: And so there's all of those baked in and then like I mentioned earlier about mod for permit up update that's going to be a significant production increase that could happen after 2028 and so.
Speaker Change: We will signal some of that is like you say all of that in the three year guidance coming up in March.
Speaker Change: But is that is that going to be.
Speaker Change: Total rejection I mean does that is that significant enough to matter do you think Mike.
Speaker Change: It does so and so one of the challenges is the hardness and so so just and it's not every day that you know when we we have good good throughput is as we're seeing but some days and are on our permit is on an annual basis and so we're seeing days up as high as 100000 tons per day.
Speaker Change: And the 10% improvement that.
Speaker Change: We're talking about is about a 94000 tonnes per day over our permitted level. So we are seeing.
Speaker Change: Some significant improvements as we're going through this and and we're in where were linked to be relatively hard ore.
Speaker Change: So we're quite pleased with the work that the team's doing there continually.
Speaker Change: Improvements in the mill and improving recovery and so so we're going to take some of those into that into the guidance and as we get further improvements it will get better than what you would you see overtime.
Speaker Change: But is it is it safe to assume a greater constancia will be maintained.
Speaker Change: Or is there any.
Speaker Change: So the so the grade doesn't has improved with pellet rejections. So generally the pebbles are hard and lower grade and we do see a slight improvement in grade as that goes through as well too, but it's too early to quantify.
Speaker Change: Okay. Thanks, Andre Thank you chip.
Speaker Change: Thank you and our next question comes from Stefan <unk> with <unk> Securities. Please go ahead.
Speaker Change: Yes. Thanks very much just was curious if you could just any comment on the strategy of the recent 10, Arizona's center and it doesn't have that kind of fits into the plan going forward in the portfolio.
Speaker Change: Sure Hi, Stephen how are you.
Speaker Change: Thanks, very much for the question I.
Speaker Change: I think that.
Speaker Change: We manage a portfolio of junior mining company investments.
Speaker Change: Several years.
Speaker Change: We look for investment opportunities that fit our strategic criteria.
Speaker Change: You all know that copper is scarce and we're always looking for ways to prudently increase our corporate exposure.
Speaker Change: Arizona, Sonora and has a copper project in Arizona, which is of course, an important region for us without Copperweld project located in southern Arizona.
Speaker Change: So the strategic investment in <unk>.
Speaker Change: Arizona and Oregon.
Speaker Change: Increases our copper exposure in what we consider to be a top mining jurisdiction.
Speaker Change: It provides them with some funding to Derisk the project and it supports further copper mining in Arizona, and we as shareholders together with Rio Tinto, we like the team.
Speaker Change: We like their asset.
Speaker Change: And so.
Speaker Change: So it's just something that we've put into the portfolio.
Speaker Change: Okay, Great. That's helpful. Thanks very much.
Speaker Change: Thank you. Thank you.
Speaker Change: Showing no further questions at this time, so I'd like to conclude the question and answer session I'll turn the conference back over to Candace Brule for any closing remarks.
Candace Brule: Thank you operator, and thank you everyone for joining us today. If you have any further questions. Please feel free to reach out to our Investor Relations team. Thank you and have a great day.
Candace Brule: Thank you. This concludes today's conference call. We thank you all for attending you may now disconnect your lines and have a wonderful day.
Candace Brule: Okay.
Candace Brule: [music].