Q3 2025 Hudbay Minerals Inc Earnings Call
Speaker #2: Good morning , ladies and gentlemen . Thank you for standing by . Welcome to the Hudbay . Third quarter , 2025 results conference call .
Speaker #2: At this time , all participants are in . Listen only mode . And following the presentation , we will conduct a and answer question session .
Speaker #2: To join the question queue , you may press star . Then one on your telephone keypad you need the assistance during conference call , you may operator by star .
Speaker #2: pressing Then zero . like to remind everyone that this I would call is being conference recorded today , November the 12th at 11 a.m.
Speaker #2: Time Eastern . I would now like to turn the conference over to Candace Brule Senior Vice President , Capital Markets and Corporate Affairs .
Speaker #2: Please go ahead .
Speaker #4: Thank you . Operator . Good morning , and welcome to Hudbay third Quarter 2025 Results Conference Call . Hudbay financial results this were issued morning and are available on our website at .
Speaker #4: A corresponding PowerPoint presentation is available in the Investor section of our website , and we encourage you to refer to it during this call .
Speaker #4: Our is presenter today Hudbay , President and Chief Peter Kukielski Officer . Accompanying the Q&A Peter for portion of the call will be Eugene Li , our chief Financial Officer , and Andre Lauzon , our chief operating officer .
Speaker #4: note Please that on today's call may comments made 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 .
Speaker #4: For further information on these risks and uncertainties , please consult the company's relevant filings on Kdr+ and Edgar . These documents are also available on our website .
Speaker #4: As a reminder , all amounts discussed on today's call are in US dollars unless otherwise noted . And now I'll pass the call over to Peter Kukielski .
Speaker #5: Thank you . Candace . Good morning everyone , and thank you for joining us for today's call . The third quarter was a quarter of resilience for Hudbay as we demonstrated company's the strong operating capabilities and the benefits of our diversified operating platform as we face mandatory wildfire evacuations in Manitoba and temporary operational interruptions in Peru .
Speaker #5: The agility of our teams and continued dedication to driving efficiencies and reliable performance helped to minimize the impacts to our operations . Due to these external events .
Speaker #5: This has allowed us to maintain the low end of our consolidated copper and gold production guidance ranges able to significantly and we have been consolidated cost guidance for the second time this year , which is truly the remarkable given circumstances .
Speaker #5: We continue to take steps to reduce long term debt while reinvesting in high return growth initiatives across the organization . We are delighted to have secured Mitsubishi as a premier long term partner for our Copper World project this quarter , enabling us to unlock significant copper value in our growth pipeline .
Speaker #5: This transaction further solidifies our financial strength and significantly reduces our share of future equity contributions development of Copper World for the . We look forward to continuing to work with Mitsubishi under this strategic partnership as we advance Copper World towards a sanctioned decision in 2026 and first production in 2029 .
Speaker #5: Hudbay is unique diversification in copper and gold , coupled with our relentless commitment to control cost , enables us to maintain industry leading margins and deliver strong and stable cash flows .
Speaker #5: Slide three provides an overview of our third quarter operational and financial performance . Our operations in Manitoba showed remarkable resilience against unprecedented wildfires .
Speaker #5: the Prioritizing safety of our people and communities the team navigated Peru , regional in social unrest and temporary interruptions to deliver gold productions far exceeding quarterly cadence expectations .
Speaker #5: And in British Columbia , our team made progress with SAG mill the conversion project , called the SAG two project , enhance to mill throughput and drive future cash flow generation .
Speaker #5: In light of temporary operational interruptions and production deferrals . diversified asset portfolio delivered consolidated copper production of 24,000 tonnes and Consolidated gold production of 54,000oz in the third quarter .
Speaker #5: Consolidated and copper production was lower than the second quarter , primarily due to the impact of the wildfire disruptions that persisted in northern Manitoba for a majority of the third quarter .
Speaker #5: As well as the temporary production interruption Peru in for nine days during the quarter . In addition , mill maintenance and increased processing lower grade stockpiles at Copper Mountain contributed to lower quarter quarter over production .
Speaker #5: Consolidated silver production was 730,000oz and zinc production was 548 tonnes . In the quarter . Adjusted EBITDA was $143 million in the third quarter , a decrease compared to the second quarter , primarily due to the temporary operational interruptions I mentioned , as well as sales lower volumes as a result of a delayed 20,000 dry metric copper ton concentrate shipments in Peru with high gold content valued at approximately $60 million .
Speaker #5: This shipment was expected to be sold at the end of September , but ocean swells at the port prevented it from being loaded and shipped until early October .
Speaker #5: Cash generated from operating activities was $114 million in the third quarter, and operating cash flow before change in non-cash working capital was adjusted net $70 million.
Speaker #5: earnings were per share in the third quarter , after adjusting for various non-cash items on a pre-tax basis , including a $322 million impairment reversal related to Copper World , a $15 million contingent payment received from a non-core asset sale and various mark to market adjustments during the third quarter .
Speaker #5: We continued to demonstrate industry leading cost performance with consolidated cash costs of $0.42 per pound and consolidated sustaining cash costs of $2.09 . These costs increased compared to the prior quarter , primarily as a result of lower gold byproduct credits in Manitoba offset by , partially strong gold production in Peru .
Speaker #5: While we have reaffirmed our consolidated full year production guidance for all primary metals , and we are anticipating strong production in the fourth we now quarter , expect consolidated full year copper and gold production to be near the end of the guidance ranges .
Speaker #5: We believe our ability to maintain our initial production guidance in the face of the recent operational interruptions is remarkable , and I am extremely proud of the team .
Speaker #5: With the strong cost , performance at all , our year to operations date and increased exposure to gold byproduct credits . We have further improved our full year consolidated cash cost guidance of range to a $0.15 to $0.35 per pound of from the previously reduced of range $0.65 to $0.85 per pound copper .
Speaker #5: We are also improving our consolidated sustaining cash cost guidance range to $1.85 to $2.25 per pound of copper, from the original guidance range of $2.25 to $2.65 per pound.
Speaker #5: Along with these , operating cost improvements , we are also expecting total capital be expenditures to $35 million lower than the guidance original , primarily due to deferring certain expenditures to 2026 .
Speaker #5: This includes $15 million in reduced sustaining capital expenditures as a result of the temporary operational interruptions and $20 million in lower growth capital expenditures that have been deferred to 2026 .
Speaker #5: Turning to slide four . We continue to further reduce debt during the quarter despite lower consolidated free cash flows . Our Peru and Manitoba operations generated positive free cash flow in the quarter , despite the temporary production interruptions .
Speaker #5: This was offset by our continued investment in optimizing our British Columbia operations with the planned stripping activities . Consolidated free cash flow would have been positive if the excess copper concentrate inventory in Peru was sold at the end of September .
Speaker #5: To continue our prudent balance sheet management , we repurchased and retired $13.2 million of senior unsecured notes through open market purchases at a discount to par .
Speaker #5: During the third quarter . Following the quarter end , we repurchased and retired an additional $20 million in senior unsecured notes , reducing our total principal debt levels to $1 billion since the beginning of 2024 .
Speaker #5: We have reduced total debt and gold prepay liabilities by approximately $330 million . We ended the quarter with total liquidity of $1.04 billion , including $611 million in cash and cash equivalents .
Speaker #5: And undrawn availability of $425 million under the revolving credit facilities . As of September 30th , our net debt to EBITDA ratio was 0.5 times .
Speaker #5: We expect liquidity to be further enhanced upon closing of the Copper World Joint Venture transaction , which is to anticipated close in late 2025 or early 2026 .
Speaker #5: Our strengthened balance sheet will allow us to continue to prudently reinvest in our portfolio of attractive, high-return brownfield and greenfield opportunities to drive production, growth, and long-term value creation.
Speaker #5: Taking a look at our Peru operations on slide five , we delivered steady operating performance despite facing temporary interruptions due to social unrest .
Speaker #5: The produced 18,000 tonnes of copper and 26,000oz of gold during the third quarter , as well as 577,000oz of silver and 195 tonnes of molybdenum countrywide protests that began early in the third quarter temporarily impacted the transportation routes , leading to limitations of supplies and concentrate transportation .
Speaker #5: To manage through these limitations, we adjusted mine sequencing to prioritize Pampa Concha mining activities and blend stockpile ore in the middle feed.
Speaker #5: In late September, the social unrest escalated across Peru. Along with other mines in the southern mining corridor, our Constancia mine was impacted by local protests and illegal blockades.
Speaker #5: The safety of all our personnel is our top priority , so we suspended operations on September 22nd as a precaution . During the temporary downtime , the team performed preventative maintenance at the mill and on certain mining equipment .
Speaker #5: Since the restart of mining activities on October , the third and milling activities on October the 5th , the Constancia operations have I normalized .
Speaker #5: am extremely proud of our resilient team in Peru and the way they continue to navigate the dynamic environment . Quarterly copper production was lower than the prior quarter , primarily due to lower oil milled as a result of this temporary operational shutdown .
Speaker #5: While gold production was higher due to stronger head grades from a larger contribution of the mill feed coming from Pampa Concha . The fourth quarter is expected to be the strongest copper and gold production quarter this year in Peru .
Speaker #5: Production . In the month of October totaled approximately 9000 tonnes of copper and 17,000oz of gold , reflecting optimal mill or feed . With continued strong or contribution from pampaqucha and lower stockpiled oil being processed .
Speaker #5: We remain on track to achieve full year copper production guidance in Peru , while gold production is now expected to be above the top end of the 2020 guidance range .
Speaker #5: Mill throughput averaged approximately 76,000 tonnes per day in the third quarter, lower than the second quarter due to lower ore mined and a temporary operational shutdown.
Speaker #5: Milled copper grades decreased by 9% compared to the second quarter as a result of the stockpiled ore feed , partially offset by higher grades from Concha Pampa milled gold grades significantly increased , with portion of all feed from a higher Pampa Cancha , where the gold grades are meaningfully higher than in the other .
Speaker #5: Ore sources . Mill recoveries of copper were impacted by the nature of stockpile feed , while gold and silver recoveries were in line with metallurgical models .
Speaker #5: The road blockades along the transportation route reopened midway through the quarter , allowing us to reduce site concentrate inventory and levels replenish supplies .
Speaker #5: However , as I mentioned earlier , ocean swells at the port late in the quarter impacted sales volumes with the 20 000 tonne copper concentrate shipment being deferred to early October .
Speaker #5: Cash costs were $1.30 per pound during the third quarter , decreasing from the prior quarter with higher gold byproduct credits and lower plant maintenance costs .
Speaker #5: As planned , with cash costs continuing to outperform the lower end of the cash cost guidance range . are We reaffirming our full year cash guidance cost in Peru .
Speaker #5: Moving to our Manitoba operations on slide I want to first thank the regional operating team for all their efforts in safeguarding the company's assets and completing an efficient , orderly resumption of operations .
Speaker #5: I can't imagine what our employees are enduring during these unprecedented wildfires, and we will continue to do our part to support the rebuilding efforts in the communities and the provinces.
Speaker #5: And I will say again , how proud I am of the continued resilience demonstrated by our Manitoba team and the successful restart of operations in late August following the lifting of mandatory evacuation orders .
Speaker #5: The operations produced 22,000 oz of gold, 800 tons of copper, 500 tonnes of zinc, and 102,000 oz of silver in the third quarter, which is lower than the second quarter.
Speaker #5: Due to the wildfire, there was a two-month evacuation that deferred gold production. The business interruption insurance claim has been submitted to compensate for a portion of the wildfire-related downtime.
Speaker #5: Total ore mined at Lalor reduced by over 50% during the quarter due to the temporary operational interruption . increased Gold grades by 9% compared to the second quarter , while copper , zinc and silver grades were in line with the mine plan expectations consistent with our strategy of allocating more or feed to new Britannia to maximize gold recoveries .
Speaker #5: The Britannia mill achieved an average throughput of approximately 2,300 tonnes per day over the operating period in the quarter, and gold recoveries were a record 92%, reflecting the increase in gold grades.
Speaker #5: storm The experienced a greater throughput impact from the wildfire shutdown , as the Mine Lalor mining prioritized from the zones over gold metal base to ensure zones a consistent feed to the new Britannia mill .
Speaker #5: The team focused process on optimization and enhanced gold recovery initiatives , enabling record gold recoveries of Stal 73% at in the third quarter .
Speaker #5: Gold cash costs for the third quarter were $379 per ounce, decreasing compared to the second quarter, primarily due to higher byproduct credits and the recovery of gold products.
Speaker #5: As a secondary result of mill tank clean outs . While the Manitoba operations were previously tracking within the 2025 guidance despite the ranges , from impacts .
Speaker #5: As a secondary result of mill tank clean outs . While the Manitoba operations were previously tracking within the 2025 guidance despite the ranges , from impacts wildfire slightly guidance end of the expecting to be We are result of a long week power outage in range as a October from severe winter storms that further deferred gold production with year to date cash costs continuing to outperform the low end of the cash cost guidance range .
Speaker #5: We are reaffirming our full year guidance 2025 cash cost range in Manitoba . Given the strong cash cost performance to date in Manitoba will , Hudbay continue to prioritize primary gold production over zinc byproduct production in 2025 and full year zinc production is now expected to be below the low end of the guidance range .
Speaker #5: Looking at our British Columbia operations on slide seven, we continue to focus on advancing our optimization plans at the Copper Mountain Mine.
Speaker #5: includes This the ramp up of mining activities to optimize all feed to the plant and implementing site improvement initiatives that mirror Hudbay best in class operating practices .
Speaker #5: In the third British Columbia quarter , the operations produced 5.2 thousand tonnes of copper , for point 8000oz of gold and 51,000oz of silver .
Speaker #5: Production decreased compared to the prior quarter , primarily because of restricted mining efficiencies and lower higher grades as stripping continued waste . The waste stripping activities are part of the execution of the continued accelerated program , stripping higher intended to the into mine plan in bring 2027 .
Speaker #5: During the third we made quarter , significant progress on the mill Improvement project , key completing the initial phase of the SAG two mill conversion in July .
Speaker #5: ramp up subsequent The demonstrated positive contribution from SAG quarter , with two during the several days achieving 50,000 tonnes per day of mill throughput in September , the team continues to optimize the circuit as planned through the remainder of 2025 , with the final phase of the project involving the conversion of an interim feed arrangement to a permanent configuration .
Speaker #5: Construction remains on completion in December 2025 . In late September , the primary segment , which I will refer to as SAG one , required unplanned maintenance due to localized damage to the feed head .
Speaker #5: After completing the repairs in mid-October , SAG one restarted at a reduced rate under monitoring enhanced controls . SAG one throughput will continue to ramp up over the course of the fourth quarter , together with the completion of the final phase of the SAG two project , Hudbay throughput expects mill to ramp up towards 50,000 tonnes per day by mid 2026 .
Speaker #5: Total oil processed in the third quarter was 6% higher than the second quarter , reflecting the completion first of the phase of the SAG two project .
Speaker #5: Partially offset by planned and unplanned maintenance. During the third quarter, copper recoveries were 77% and gold recoveries were 59%, both lower than the prior quarter.
Speaker #5: Due to the processing of lower grade stockpile material , British Columbia cash costs were the $3.21 per pound in quarter , higher than the prior quarter , largely due to lower copper production and lower byproduct credits .
Speaker #5: Fourth quarter production is expected to be impacted by a lower mill throughput from reduced levels SAG one in October , which , at together with a higher portion of all milled from low grade stockpiles year , this is expected to result full year in copper production in British Columbia to be below the low end of the guidance range .
Speaker #5: Cash costs continue to track well versus the guidance range, and therefore we are reaffirming full-year cash cost guidance in Columbia, British.
Speaker #5: Turning to slide eight . As I briefly in mentioned my remarks , opening our Copper World project Arizona in achieved a significant milestone this quarter with the announcement of 30% strategic joint venture with our .
Speaker #5: We value Mitsubishi's expertise as we work together to advance this high-quality copper project and unlock significant value for all stakeholders.
Speaker #5: We world class Mitsubishi's expertise as we work together to advance this high quality copper and project unlock significant value our for all stakeholders . strategic partnership validates This the long attractive term value of World Copper as a top tier copper asset and endorses the strong technical capabilities of Hudbay .
Speaker #5: Mitsubishi is acquiring its 30% stake for an initial contribution of $600 million. This deal will provide $420 million in cash once it closes and $180 million within 18 months of its closing.
Speaker #5: These proceeds will be used the remaining to fund feasibility study and pre-sanctions costs . In addition to project initial development costs for Copper World , Mitsubishi will also fund its pro of future capital contributions 30% share .
Speaker #5: This highly valuation is Hudbay , as it implies a significant premium to consensus net asset value for World Copper result of the JV proceeds and future capital contributions , Hudbay estimated share of the remaining capital been reduced to contributions have approximately $200 million , on based pre-feasibility study estimates .
Speaker #5: It also defers our first capital contribution to 2028 at the and earliest , significantly increases the levered IRR to Hudbay to approximately 90% .
Speaker #5: With recent achievement of our stated balance sheet targets , we have successfully completed elements the key of our prudent financing strategy as part of our we £0.03 plan , are very well positioned to build one of the next major copper mines in the United while States , continuing to maintain a strong balance sheet to reinvest in other growth opportunities across our portfolio while continuing to deliver Copper world feasibility activities underway are and we are on track for the completion of a definitive feasibility study in mid 2026 .
Speaker #5: We have accelerated detailed engineering , certain long lead items and other de-risking activities with the additional $20 million in growth capital expenditures announced in August , we continue to expect to make Copper World sanctioned decision in 2026 .
Speaker #5: As part of our long term growth pipeline . Slide nine summarizes the three fold strategy we are in Snow as part of the largest executing exploration program company's history .
Speaker #5: in the In Manitoba The . first objective is to execute Near-mine exploration at the Lalor and 1901 enhance near-term deposits to and production extend further mine life .
Speaker #5: completed the We development of the initial exploration drift at 1901 . Earlier this year , and the development of the is underway drift .
Speaker #5: Positive step out initial drilling from the exploration drift was achieved earlier this haulage and during the third quarter , some zinc was year development oil delivered for processing at activities at Over the next two years will focus on 1901 .
Speaker #5: exploration drilling definition , additional access and establishing critical full production . infrastructure for In Exploration activities 2027 . will also additional step out target drilling to potentially extend the ore body , as well as complete infill drilling to convert inferred mineral resources in the gold lenses to mineral reserves .
Speaker #5: The second strategic focus area is testing on regional satellite deposits within distance of the Snow Lake processing trucking infrastructure identify to potential additional feed to fully utilize the available processing capacity .
Speaker #5: With our Snow Lake land significant or we have an package , attractive portfolio of regional including the Rail Talbot Watts deposits , three zone and Pen two .
Speaker #5: deposits Whim . The advanced of these satellites is the Talbot most deposit , which I'll discuss further on the next slide . And the third strategic focus is on exploring our large land package for a new anchor potential deposit to significantly extend the mine life of our snow lake operations .
Speaker #5: We are conducting the largest geophysics program in our history in Snow Lake , consisting of 800km of ground electromagnetic surveys and an extensive airborne geophysics survey .
Speaker #5: In July , we commenced drilling exploration at the Talbot copper , zinc , gold deposit . Talbot is located within trucking distance of the Snow Lake processing making it facilities , an ideal deposit to potentially provide supplemental feed to our Stal mill .
Speaker #5: The current phase of the drilling program includes four drill rigs intended to complete ten holes by the end of the year . After completion of the initial three holes , we are pleased to see that the core logging has confirmed the continuity of the Copper gold Talbot mineralisation at depth , and look forward to receiving the full assay results this year later .
Speaker #5: drilling will determine This the future scope requirements for a pre-feasibility study , which we intend to initiate in 2026 . In January 2026 , we expect to kick off phase two of the Talbot Drilling program , focused on infill to support the drilling pre-feasibility study .
Speaker #5: Concluding on slide 11, this quarter demonstrated the benefits of a hub-based, diversified operating base. Our unique copper and gold exposure, along with our resilient operating capabilities.
Speaker #5: Our continued focus on cost control enables us to maintain industry leading margins and deliver and strong stable cash flows . Once Copper World is in production , we expect our annual copper production to grow by more than current levels .
Speaker #5: 50% from This will reinforce our position as one of the largest America's focused , pure play copper producers with a well balanced and geographically diversified portfolio of assets .
Speaker #5: Our expected production will be weighted approximately one third in each of Canada . The States and United Peru , and the significant increase in copper production from Copper World will further enhance high based exposure to copper .
Speaker #5: With more than 70% of consolidated production and revenue expected to be derived from copper hubs . Existing strong operating in tier platform one mining jurisdictions and resilient Balance Sheet offers significant upside potential for further value creation at higher copper and gold prices .
Speaker #5: We will be able to prudently advance copper World while also being able to invest many other high return growth opportunities to unlock value across the portfolio and create meaningful value for all our stakeholders .
Speaker #5: And with that, we are pleased to take your questions.
Speaker #2: Thank you . Ladies and gentlemen . We will now begin the and answer question session . To join the question queue , you may press star then telephone one on your keypad .
Speaker #2: You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two.
Speaker #2: Our first question is from Lawson Winter with Bank of America Securities . ahead Please go .
Speaker #6: you very Thank much . Operator , and good morning , Peter . And hello , then Eugene and Andres . Nice to hear from you guys today .
Speaker #6: I wanted to ask first about Copper Mountain . So the the construction decision , can we expect that to occur in mid 2026 .
Speaker #6: And then just thinking about spending around copper copper world this year or in 2026 , do you expect any pre-construction spending that could occur in advance of the completion of the feasibility study and a construction decision ?
Speaker #6: Thank you .
Speaker #5: Lawson , and Morning , thanks for the question . So the first part of your question is , yes , we do expect expect to we do complete the feasibility study in mid 2026 .
Speaker #5: And we expect the construction decision in 2026 as well . One of the comments that we made during during my comments was that we did authorize an additional $20 million this year to get ahead of some of the .
Speaker #5: Long lead items in engineering items associated with the critical path of the project . We to expect be spending a fair amount of money .
Speaker #5: Pre-sanctions money . I guess you would call it in order to keep things moving and in order to make sure address the that we critical path properly .
Speaker #5: So yeah , the answer in your question for short , in short , absolutely . is We will spend on developing the project in conjunction with doing feasibility study .
Speaker #5: Now remember that we are following an integrated project development approach , which means that the engineers , constructors , etc. are all in an integrated team .
Speaker #5: And so we are able that way to advance elements of certain the project ahead of where there's others , risk . So 50% roughly engineering will be completed the end of before the feasibility study .
Speaker #5: But in some areas , as as much completed . So we are very much taking sort of a holistic approach to make sure that we address the critical path spend on the right and things , even before the FID decision .
Speaker #6: Okay . That's helpful . And then just a clarification . The 20 million , will some of that be in 25 ? Will that all be in 26 ?
Speaker #7: Hi . Eugene Lawson here . So the original budget for this year for for Copper World was $90 million . And we increased that to $110 million as part of that to decision to some long lead items .
Speaker #7: If you look at the slide that we that we show in terms of the total funding , there's approximately a $150 million in total spending from January the 1st , until 2025 and the sanctioning decision expected in mid 2026 .
Speaker #7: So you would , you know , from , from from the money that we've outlined , there's a total of $150 million . We expect to spend about 100 million of that this year .
Speaker #7: And about 50 remaining in the first half of 2026 to be in a position to sanction Copper World along the timelines that Peter outlined .
Speaker #6: Okay . Yeah , that's very helpful . Thanks for highlighting those those noise . I just hadn't noticed them yet . And then same question , but I just wanted to ask about CapEx .
Speaker #6: So you deferred 35 million of sustaining CapEx into original budget for 2026 . this year The was about So 365 . should we think about sustaining CapEx in 2026 as 365 plus the 35 from this year ?
Speaker #6: Or are there some other puts and takes that we should be considering ? And what are they ?
Speaker #8: It's Hi . So so Andrea . there is some of it like some some of the CapEx . There little is a carryover , but a lot of the CapEx , we're actually deferrals related to the wildfires .
Speaker #8: And in Manitoba and , and some of the tailings of the with some blockades in Peru . So , so those things are just kind of offset there's not .
Speaker #8: an And increase . It's just the mine plan is just continuing . So Manitoba restarted their operations and and ramp back up . But they're not developing at a rate that's higher than what they did historically .
Speaker #8: So it's just a sliding of a lot of...
Speaker #8: that . So
Speaker #7: to break that $35 million down for you , Lawson , is $15 million in sustaining deferrals and capital . But that's not additional capital .
Speaker #7: So you don't add it . You don't just add it to 2026 . As Andre mentioned . And and then of the remaining 35 , $20 million relates to growth projects that that that were deferred that are that will be deferred in 2026 .
Speaker #7: So that that's not new capital . Again , that's capital will just that just be not spent in 25 and spent in 2026 .
Speaker #6: Yeah , that's super helpful . And then just ultimately what I to get at is like a good baseline for , for sustaining CapEx for Then next year .
Speaker #6: be basically year's guidance this of 365 plus or minus a 5% . Like , that is that fair is ?
Speaker #7: We haven't finished all the budgeting for next year . But that's a that's a fair amount . I think every year there's a in Peru depending on the year it's whether a tailings there's dam raise or not .
Speaker #7: The the capital will fluctuate by , you between 20 and $30 million . And and in in Manitoba it's been fairly stable at this level .
Speaker #7: And and in BC continuing the stabilization program , it's going to be at this level , while we're until , until the end of 26 , as we've kind of mentioned , on a three year plan basis .
Speaker #7: So I think your assumption is fairly your consistent .
Speaker #6: Okay . Thank you all I very much . it appreciate .
Speaker #9: Okay .
Speaker #2: next The question is from Ralph graffiti with Stifel Financial . Please go ahead .
Speaker #10: Thanks . Operator . Good morning . You know , Peter , the it's been sort of surmised that some of the issues in around Peru are informal mining and regulations therein .
Speaker #10: I'm just wondering , can you discuss a little bit about informal mining practices in and around Mario Arena and , you know , is this a significant issue that may need to be considered when we talk about consulta previa process ?
Speaker #5: Hi , Ralph , I it's a great question . Look , I there's actually been a fair amount of informal mining around Mario and Caballito for a long time since actually before since we acquired the mineral rights for the assets .
Speaker #5: I would say that informal the do miners not constitute a material impediment to our ability to get permits or go through the Consulta previo process , or get access to exploration .
Speaker #5: In fact , you know , a lot of the work that we've done with the community is to try to prepare the communities to be able to support us with drilling themselves .
Speaker #5: And it would make sense that it might be the informal miners who actually do some of the work for us . So . So in general , I would say that to answer your question , that informal miners are absolutely not an impediment to getting the consulta prévia done .
Speaker #5: It's just more complicated right now , given the social environment in Peru , a change of government , etc. , etc. to get the government to conduct the consulta process to get everybody together and to ultimately get the nod that the surface rights were acquired without coercion or like that anything I would .
Speaker #5: say about Peru What also is , is that . There's no difference today to the way it's been for the last 25 years , and the term that I would use to characterize it is stable instability .
Speaker #5: It's , you know , I've spoken many times about the time that I've spent in Peru with the pendulum swinging left and right and left and right .
Speaker #5: one thing that stays the And the same is or two things that stay the same and the environment , but also the fiscal bureaucracy and what's really important is that stable get bureaucracy to things done .
Speaker #5: But the timelines very are very , difficult to predict , especially now with elections coming up next year . And the equation of the informal miners , how that plays into the broader social environment .
Speaker #5: But I don't think there's any direct impact on the prior consultation process .
Speaker #8: were small There scale miners on Papa Concha prior to to our permitting and accessing it , and they are stakeholder and we successfully navigated that in the past .
Speaker #10: Great . Thank you for that . Clear understanding . That's it for my questions .
Speaker #5: Thank you Ralph .
Speaker #2: Next question is from Orest with Scotiabank . Please go ahead .
Speaker #11: Hi . Good morning . Maybe just shifting gears to Copper Mountain . The asset seems to be underperforming your expectations since you acquired it .
Speaker #11: Can you give us a sense of the sag mill issue ? That's that you disclosed here ? Most recently ? Is this to now going negatively impact 26 ?
Speaker #11: And I'm wondering if we should already start thinking about the low end of the Copper Mountain production guide for 26 based on this issue .
Speaker #5: Thanks . So the first thing that I would say is that I we are highly confident that Copper Mountain was the right asset to purchase .
Speaker #5: We believe strongly the skill that set that HUD brings to bear will ultimately be fully realized in value at Copper Mountain . Like we've said , it's a it's a three year optimization or stabilization .
Speaker #5: An optimization process with sort of two years into it. There's a good year to go, and there's a lot of work to be done, and there will be puts and takes.
Speaker #5: I think Andre always explained it as being , you you renovate a house , know , when you find a few things . When you pull the sheetrock off the walls , etc.
Speaker #5: but we'll get there . But Andre , maybe you can provide a little bit more color .
Speaker #8: Yeah , yeah , no , as you're saying there , it's thinking that TV show love it or list it and we love it .
Speaker #8: We we love it . And there's there and it is , it is very much a , you know , it's a journey .
Speaker #8: And it's a so I'll talk to the , to the event draws and to your specific question . But I would say if I start with is there's been tremendous progress throughout the course of the year that the team has done an excellent job navigating a whole number of , of challenges and opportunities .
Speaker #8: And in terms of ramping up the mine . And the mine was under there's smaller benches and they're stripped . And through a lot of it .
Speaker #8: And so the we've seen steady progress in that . We delivered SAG two ahead of schedule or on schedule back in July . And and ramping that up where , you know , initially when we envisioned this , we weren't even going to turn it on until the end of the year .
Speaker #8: So and it's proved to be know , , you fruitful around that optionality . As we we got into this , the SAG one incident , if you will , that that was described , Peter , in earlier on the in the discussion .
Speaker #8: And so . At what it appears to have happened with that that example is and we've done a lot of investigation . There's more investigation to is , understand it was a is just premature liner where and it's the same set of it and it wasn't wearing the same liners and as what we thought had previously .
Speaker #8: It's the same tonnage . And it appears that our operational excellence in terms of we we introduced something called a mill slicer to , to really run a real stable , efficient operation .
Speaker #8: And what we ended up seeing , which we didn't anticipate was a little bit more selective , where rather than wear throughout the liners and , and it caused that incident , we it caught us a little bit by surprise .
Speaker #8: They've repaired it . We've gone through in a very cautious , meticulous ramp up process . We're up to date ramping . We're we're almost at the level right now of where we were , call it the average of of , of prior to Q3 .
Speaker #8: So it's , it's a ramp up . there a bit of an impact to next year , a little . But but not not significant .
Speaker #8: And so the unknown is like the ramp up on for us SAG two on . The combined of SAG two and SAG one exceed our permit capacity for for Copper Mountain .
Speaker #8: And so , so we cautious were wording . You know , as you know , we're we're we're generally conservative operators and we want to deliver what we say .
Speaker #8: And so we're confident in the forecast that we put to the end of the year . And then we'll update more . We're going to know a lot more going into when we set guidance on next year .
Speaker #8: But so like we said , we're pretty confident on on hitting that by mid year up to that 50,000 tons a day .
Speaker #11: Good Okay . Thanks . luck .
Speaker #8: No luck needed . But but but it's been a lot of hard work . But I appreciate the kind words .
Speaker #2: The next question is from Marcio Faried with Goldman Sachs. Please go ahead.
Speaker #12: you . Thank One is one . So just on Pedro , obviously you've just the sequence in the third quarter towards the high grade trunk Pampa deposit .
Speaker #12: Just trying to minimize impacts from the from the Right . But interruptions . just trying to understand I mean , you mentioned on the release that October , the ramp up at Constancia has been quite well .
Speaker #12: to Just trying understand if you're confident that you can back on get track throughout the fourth quarter of the year at Constancia . Thank you .
Speaker #8: Yeah , sure . It's Andre . I'll take that . Take . The question is so absolutely confident , as you saw in the in the press release , you know , the the month of October as we disclosed , is the highest copper production for the year .
Speaker #8: You know , from we're into the high grade cycle , the team is , you know , done an excellent job . You know , I could imagine them running with never three shovels and producing at the levels that they have at Papa Concha .
Speaker #8: And , you know , thoroughly impressed by the team . And so Papa Concha is going at a very , very high rate .
Speaker #8: Could finish it potentially by the end of the year , which was the original plan , by the way . So the team is has basically caught up .
Speaker #8: And so that cadence is why we're seeing , you know , high , high copper grades through to the end of the year as well as the high gold .
Speaker #8: So as you know , Papa Concha has really contributed to us high end of exceeding the guidance on gold for for Peru .
Speaker #5: And it's it's Peter , as Andre says , we are highly confident in our ability to get the ball out of the park with Constancia for the remainder of the year .
Speaker #12: Great . Can I just follow up on Manitoba as well ? Obviously , gold grades has been quite strong . Just trying to understand if you can maintain a sustain that level at five grams per tonne .
Speaker #12: What is the mine plan look like for , for Manitoba ? Thank you .
Speaker #8: So I'll add in Peter , if I miss something . There is so so Manitoba like again resilience . The team . Unfortunately with the wildfires going into the year , we're on track to exceed gold .
Speaker #8: So I'll add in Peter , if I miss something . There is so so Manitoba like again resilience . The team . Unfortunately with the wildfires going into the year , we're on track to exceed gold . The high end of guidance , you know , and why that's you despite know , being down for two months .
Speaker #8: With the evacuations we're still in really really good shape . And the team has ramped up . We are in a in a high grade cycle right now .
Speaker #8: You know , I won't say the great because you'll project it to the end of the year . But we are in a very , very high , high grade cycle of both copper and gold right now .
Speaker #8: And and the mill is , is we you know , to that extent we have to slow down the bit because the grade was a little bit high .
Speaker #8: But overall, I am very confident in the grade to deliver by the end of the year and to meet our goal of consolidated guidance.
Speaker #8: As we said .
Speaker #5: But I monsieur , that the that would grade that mine plan is four and a half to average to the 4.6g per tonne , which is the for , for our mine plan .
Speaker #5: And , you know , we average those grades through the fourth expect to quarter and throughout 2026 . Yeah .
Speaker #12: Great . Thank you .
Speaker #5: .
Speaker #2: next question is from Martin Welcome The Poirier with Veritas Investment Research . Please go ahead .
Speaker #13: Hi . Thank you . Some of my questions have been answered . But in terms of the Q4 for BC , are you expecting to be lower than Q3 ?
Speaker #13: Because a couple of more moving parts , I think you have lower grade and the throughput . I think it should be higher because now you have the second mill .
Speaker #13: So I I'm just trying to understand that .
Speaker #8: Sure . I , I kind of answered the question . The reason why we're , we're , we're saying we're right at going to be at the , at the , at the low end of copper guidance is because it is we're dealing with that situation that I described on the ramp up .
Speaker #8: So that the incident that happened at the SAG one mill was right at the end of Q3 . So there will be there will compensating effects like SAG two is is compensating for SAG one .
Speaker #8: But the throughput is is built into that projection of of achieving that low end of copper guidance . . So
Speaker #7: On a consolidated .
Speaker #8: On a , on a consolidated basis . So , so that's why we're telegraphing that BC was going to be below the low end on , on its individual guidance is because of that incident .
Speaker #8: were Otherwise we we would have been in a good spot . So the ramp up is ongoing right now . We're we're quite pleasantly surprised and , pleased with the team .
Speaker #8: On how quickly they're ramping up . But there is an impact in the quarter . And that's why we're we're telegraphing to to the low end of copper guidance .
Speaker #8: Consolidated .
Speaker #13: Yeah , I , I understand that , but you expect you to higher or be lower than Q3 .
Speaker #8: Or like like it's it's so we are running SAG to in in Q3 . So and and so and sag SAG one was running at its typical capacity .
Speaker #8: It's not running at full capacity right now . It's it's still we're in the ramp up mode . And so it's not it's going to be close but it's it's probably a little a little bit less .
Speaker #8: But the grade is in this quarter is is a different than in Q3 . I'd say the grade compensates for it because we were mining a lot of low grade stockpiling in Q3 .
Speaker #8: And and we are seeing a bit higher grades than , than normal right now . So they kind of balance each other off .
Speaker #8: It's it's not our strongest one from BC , you know . And that's why we telegraphed it to the bottom to the bottom
Speaker #13: Thank you .
Speaker #13: That's very end . Great . helpful .
Speaker #2: The next question is Fahad from Tariq from Jefferies . Please go ahead .
Speaker #14: Hi . Thanks for taking my question . Just coming back to Pampaqucha in the fourth quarter . How should we be thinking about mining rates ?
Speaker #14: Like is it going to be similar levels to the third quarter ? That was my understanding from the answer to the previous question .
Speaker #5: Yes .
Speaker #8: Yes .
Speaker #5: Yes .
Speaker #8: That's fair .
Speaker #14: That's fair . Okay . And then the remaining feed , should we assume that the Constancia pit is the remainder versus being stockpiles in the fourth quarter ?
Speaker #8: We're back mining in Constanza . So it's a mixture of the two . Whatever makes the most sense . But yes , we're back .
Speaker #8: It constitutes for the remainder.
Speaker #14: Okay , great . And then just unrelated , but switching gears to Manitoba , can you just let us know how much you expect to receive from the insurance claim related to the wildfires ?
Speaker #7: It's a bit premature to to give you a number , but as you know , we have we have good coverage that covers both property and business interruption and business interruption has a 30 day standard deductible .
Speaker #7: So we're really grateful that there wasn't any significant damage on a property basis . And given our proactive defenses , defense activities . And so we're we submitted a claim and we'll we'll we'll give you we'll get you a number kind of in 2026 .
Speaker #7: But a bit premature to give you an exact number today .
Speaker #14: Okay . Fair enough . Thank you .
Speaker #2: Once again any analyst who has a question can press star . Then one . The next question is from Stefan Ioana with Cormark Securities .
Speaker #2: Please go ahead .
Speaker #15: Yeah . Thanks very much . Maybe a tough one to answer , but just , you know , when we think about growth in the next steps for hudbay , for should we just assume in the near term , all hands on deck are going to be focused solely on on copper World ?
Speaker #15: Or should we start to think about maybe more news or thought or consideration given to other projects or assets the in company's portfolio ?
Speaker #5: Morning , Stefan . Thanks for the question . I so so the one thing that we've tried to make very , very clear is with having retired the CP plan now , having procured the joint venture partner for Copper World , we are now in an extremely strong position to be able to fully fund World Copper , as well as to continue to pursue high return , low risk brownfields production improvement projects across the portfolio .
Speaker #5: So I think what you'll see is that we talk today a little bit about the exploration efforts that are underway with advancing 1901, etc.
Speaker #5: , etc. we've got the the pebble crushing circuit in Peru next year . A bunch of these things . So so I think you can be assured that we will continue to invest in the portfolio as well as to to continue pushing Copper World .
Speaker #5: Remember , Copper World is one single integrated team and we are a decentralized organization with different business units who will continue to pursue their other projects .
Speaker #5: Remember, Copper World is one single integrated team, and we are a decentralized organization with different business units that will continue to pursue their other projects.
Speaker #7: Stefan Yeah , , if I could add to that , you know , we're in a really enviable position with our strong balance sheet and cash balance where we're we're going to be able to build Copper World with very little capital to till 2028 .
Speaker #7: We're going to be able to build Copper World , reduce our leverage Delever and allocate capital to other business units so that we're able to reinvest in building up additional production capacity and in Manitoba , in BC , in in Peru and advance even Mason .
Speaker #7: So I think it's really enviable position where coming out of the decade , we will have built copper world , have lower debt and invested in in all the other areas and built up our entire business .
Speaker #7: And that was the benefit of this bringing in joint venture partner to fund , you know , an the significant portion of the copper world Cup , Copper World Capital was because we saw so much opportunity within our portfolio to invest to grow the other the other parts of the business as well .
Speaker #7: And it's pretty exciting . And and for us to be in this position , to be able to to do that .
Speaker #15: Okay . Great , great . That's very helpful . Thanks very much , guys .
Speaker #5: Welcome .
Speaker #2: This concludes the question and answer session . I'd like to turn the conference back over to Candace Brule . For any closing remarks .
Speaker #4: you . Thank Operator . you , And thank everyone for joining today . us have If you any further questions , feel free to out to our reach Investor Relations team .
Speaker #4: Thanks and have a great day .
Speaker #2: Ladies and gentlemen , this concludes the conference call for today . You may now disconnect lines . Thank you for your participating and have a pleasant day .