Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Incorporated Q3 2018 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, November 1, 2018 Eastern Time. I will now turn the conference over to Ms. Carla Nawrocki. Please go ahead, ma'am.

Thank you, operator. Good morning and welcome to Hudbay's 2018 third quarter results conference call. Hudbay's financial results were issued yesterday and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is also available and we encourage you to refer to it during this call. Our presenter today is Alan Hair, Hudbay's President and Chief Executive Officer. Accompanying Alan for the Q&A portion of the call will be David Bryson, our Senior Vice President and Chief Financial Officer and Cashel Meagher, our Senior Vice President and Chief Operating Officer. Please note that comments made on today's call may contain forward-looking information and this information, by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in US dollars unless otherwise noted. And now, I'll pass the call over to Alan Hair.

Thanks, Carla. Good morning, everyone. Firstly, I wanted to note that our requisition for a missing of Hudbay’s common shareholders has been submitted by a shareholder for the purpose of considering an advisory resolution with respect to certain potential transactions. As per our October the 23rd press release, Hudbay’s board will respond in due course. The purpose of this call is to discuss our quarterly results. So when we get to the Q&A portion of the call, I'd be happy to take questions on those results. In the third quarter, we executed well against our strategic priorities and delivered strong financial results, as we continued to focus on developing and operating our portfolio of high quality assets in mining friendly jurisdictions. In particular, at Constancia, we generated record mill throughput and record copper recoveries for the mine as a result of our continued optimization efforts. In Manitoba, we delivered solid results and believe the optimal processing scenario for the Lalor gold and copper gold zones is to refurbish the new Botania [ph] mill. And at Rosemont, pending the receipt of the Section 404 Water Permit from the Army Corps of Engineers, we are positioned to finalize the financing plans for the project and move the project into construction. Consistent with Hudbay’s strategy of optimizing its current operations and evaluating and pursuing complementary growth opportunities, we also enhance the transaction to acquire 100% of Mason Resources. This acquisition provides us with ownership of a deposit in a mining friendly jurisdiction that is similar in scale to Constancia and Rosemont at a cost of $50 million, a third of our 2018 exploration budget. It will be strongly accretive to resources per share at a minimal cost and is an excellent example of how our experienced corporate development team is driving value creation…

[Operator Instructions] And we will hear first from Orest Wowkodaw.

Hi good morning. Wanted to get a little bit more color on the operational performance improvement at Constancia and specifically the -- both the grade and the recovery, maybe, we could start with the recovery, 85%, I mean that's a big step up from what we've seen historically, how sustainable do you think that is moving forward and do you think that's going to be volatile or could we -- is that going to be jumping around a fair amount as we move into the next couple of quarters.

Orest, I think it's fair to say that the recovery will be variable, depending on the particular ore types we’re treating. So I think you can see some variation from quarter to quarter. What we are confident with though is that I mean, for example, for this year, we're heading towards the basic recovery in the technical report and I think we're confident of those recovery numbers going forward. But there will certainly be quarter to quarter variation depending on ore type, zinc content and things that affect recoveries.

So was there something special about the Q3 ore mix that took the recoveries that high.

Certainly, I think there might have been more hype in Q3, but there are other factors that come into play. We are getting a better handle on managing blending from a recovery perspective. So there's many more movement too from stockpile, but we're also implementing a number of meteorological improvement initiatives, so as to say, we're confident on achieving and perhaps even exceeding ultimately the recovery stated in the technical report.

Okay. And then how about the grade? I mean, we saw an expected pickup in copper grade, whereas your guidance in the tech report was indicating a continued decline. Is that just a one-off here in Q3 and should we anticipate that grade to fall close to back around the 0.40 mark moving forward or you can just -- is there some changes going on in the mine plan?

It’s obviously short term optimization of the mine plan. I mean I think you see the grades may be drop back slightly in Q4, but I think overall, we’d expect 2018 to be slightly higher than the technical report number, we’ll obviously provide 2019 guidance earlier in the new year.

And our next question comes from Lawson Winder.

So just sticking with Constancia, I just wanted to inquire about the surface right negotiations, so maybe just from a couple of points of view. So in terms of last quarter where you noted that negotiations were -- you were also pleased then, and they were more economic in nature, maybe just update us on what's happened since the last call till today in terms of whether -- what sort of boxes you've checked that leads you to conclude that you're still pleased? And then also maybe just help us think of this in terms of how many parties are still involved so who's left to sort of get on board before you can wrap this up. Thank you.

Okay, well at this point, the fact that -- I think I mentioned that we negotiated a large number of these agreements in our time in Peru. We’re rapidly approaching eight years in the country now and have been successful in achieving the desired end result in all our various community negotiations and we don't see the negotiations with Pampacancha being any different. Things have slowed down slightly right now, because we've just gone through a period of municipal elections last month and community elections this month, but we remain confident given the status of the dialog to date that we will get an agreement in place. As I mentioned in the script, we’re also looking -- bigger picture, we’ve consolidated the land position to the Northwest of Constancia what we believe is very prospective area. In fact, we coveted that background even before we acquired Constancia. We were finally able to get over the line earlier this year and that will involve negotiations with another four different communities from the one we're talking to around Pampacancha. We've actually already been successful to get exploration access on one of the targets. But, I mean, we look at our overall community relations in the broader picture and we’re very mindful of what we do for one community would be potentially replicated for others.

And our next question comes from Greg Barnes.

Alan, I'm not going to ask question strictly related to quarter, but with Rosemont and I appreciate it is your top priority and you -- I’m not going to do anything to jeopardize funding it, how long though can you keep it in that position, if the permitting process continues to take a longer say another 12 months and you still don't have a 404, will your attention start to shift elsewhere.

Certainly, the terms in process has maybe taken longer than we originally anticipated, but we are confident that that process is coming close to a conclusion. So I don't think that will be in the scenario that you outlined, Greg.

Just wanted to shift to Lalor. Particularly on the mining, when do you think you can start to mine the gold zone on a consistent basis and at what rate and what mining methods are you thinking about there?

As I indicated in the script Greg, I think we're looking to provide more detail in that in Q1. We’ve now got the direction like, we’re now moving on to the next phase to nail down some of those particulars.

And moving on, we have a question from Oscar Cabrera.

Alan, let me just get back to Constancia, I believe in your remarks, you said that you expected to have a solution on the Pampacancha land rights in the first quarter. When do you think you can start mining ore from the deposit there?

Just to be clear, Oscar, I said, we'd expect to get agreement in place in 2019. If -- there's a certain amount of lead time obviously, but if we get an agreement by, say Q2, we should be mining by Q4 or that’s our timeline.

Okay. Thanks for that. And so if -- assuming that that's the case that you start effectively mining in 2020, how should we think about or are there any stripping or anything else you have to do in the main pit, so how should we think about the combined unit operating cost, we had guidance of 750 to 920 this year per ton. Would the cost be around the same or would it increase?

Well, I think we’ll give a specific cost guidance going forward as we normally do. I mean, the technical report plays out both the material being mined from Constancia around from Pampacancha, so I think you can factor based off of those numbers.

Because I think we have talked about a reduction on your precious metals production, which is on a net byproduct credit, that affects the cost, but just I’m more curious in terms of, if you have to do anything in particular to the other pit so that you can just maintain cost or mining cost around where it is?

I think with our short term mine plan, we're always optimizing our operational performance, depending on exactly where we are within this plan and I referenced the fact there we’re now getting more experience in terms of our ability to blend the material better. So I think on a very broad bases though, just factor of the technical report numbers is all I can really suggest.

And then if I may on Manitoba, just I understand you're giving those numbers on the first quarter, but could you remind me more or less of the scope of the project. I believe we have talked about $400 million in CapEx and not a very long time to get production ramped up and in addition to that I'm assuming that you will remain processing zinc as you are now, so should we expect the combined mine and mill unit operating cost to remain similar to what 2018 guidance was?

I think Oscar, really you have to wait until next year, as I mentioned before, we can give a little bit more detail on those subjects.

Okay, well. And then lastly please if I may, you comment on skilled labor in Manitoba, is this something to be concerned with, you think that can put inflationary pressure to attract more people going forward.

It was a problem. I think we’re confident that we've addressed it now, applies both to managerial and technical skills as well as actual miners. We’ve had to adopt a more fly in fly out approach to stop Lalor from a senior management and technical position and we're currently employing more contract miners at Lalor. So yes there has been some additional costs associated with that, but those are included in our guidance numbers. Those steps have been taken Oscar, just to be clear, so we think that we've addressed those concerns that maybe led to the slight drop in performance in the middle of the year.

And we'll hear next from Stefan Ioannou.

Just I guess still in Manitoba, was there any tracking of ore from Lalor over to the Flin Flon concentrator during Q3? Is that kind of ramped up now?

No, there was -- I mean, it all depends on the Lalor mine outputs. Obviously, as we’ve said, the ramp ups have been delayed slightly and we don’t envisage trucking ore again going forward.

Okay. And I guess just looking forward now, obviously 777 had a relatively decent winding down in the grand scheme of things, what is sort of the outlook for Flin Flon concentrator as we get out to sort of that 2021 timeframe.

Well, in terms of outlook, I mean, our expectation is that when 777 closes, which should be by the end of 2021, our current plan will be to put the Flin Flon processing assets, the concentrator and tailings facility on care and maintenance to maintain the optionality either for additional ore discovery on our part or the part of others. I mean, it's a very valuable asset and the Manitoba government is obviously happy that we do that while we continue to operate Wim Manitoba, a good example is the new Botania mill, I mean, we acquired that back in 2015, it has been multiples since 2005, so both of assets, you don't want to lose.

Got it. And I'm not sure if you can comment, but obviously interesting to see the Ann Mason acquisition makes a sense from a long term point of view and some optionality. I'm not sure if you can comment, but obviously Manitoba’s copper did have an interest in Mason, with regard to sort of rumors regarding potential acquisitions in Chile, could it have been that there was some sort of confusion with regards to whether that Manitoba’s copper involvement related to assets in Chile versus something in Nevada?

All I can really say Stefan is that we have maintained the position that we don't comment on speculation and so I just -- I'm not going to provide any comment.

And our next question comes from Mark Llanes.

Just to go back on Constancia, recoveries increased to 85% from 79% in Q2. I know, Alan, you mentioned your mind to it, are you re-implementing improvements such as the [indiscernible] are you still trying to pursue those and how much more of an uptick in recovery can we expect if there is any in the next couple of quarters.

Well, some of the steps we’re taking might see some results in the next couple of quarters, like the installation for example. Some of those other things are longer term, but I mean all I can point to is we should come in around the predicted recovery that was in the technical report for this year. So, I mean, there is quarter to quarter variation and we -- that’s just the reality of this business. So you’re going to see that both in Constancia and Manitoba, potentially improve upon them with some of the additional work that we're doing. But it's too early to make any predictions at this stage. And I would emphasize there will be quarter to quarter variation, so wouldn’t necessarily the recoveries to be designed this quarter as they were last quarter.

Okay. And just a follow up question on the Mason acquisition, your team guided to 50 million in exploration guidance at the beginning of the year, does the acquisition included in that 50 million or is that separate?

Separate, but we haven’t necessarily allocated all our exploration dollars this year, some of it will be covered off by that exploration budget.

And we’ll hear next from [indiscernible]

[indiscernible] from Stifel. On slide 19, I was hoping you could discuss the 1.1 billion of capital that is required for Rosemont, how you guys are thinking about funding that and whether there's a maximum amount of debt that you guys are comfortable with having on the balance sheet.

I think we've been fairly clear that when it comes to fund the exact structure of -- the exact capital structure when we come to fund Rosemont will depend on the timing and the market conditions at the time. Obviously, we've seen even in these months, quite a significant swing, copper prices. So it was highest 330 back in June, which is obviously a far better -- would have been a good environment to hedge. They’ve obviously pulled back a bit again, but depending on the timing in Rosemont, and a high copper price environment we've spoken with the potential of hedging some of our current production to lock in operating cash flows, we take a look on what the debt market was at the time, what other capital requirements within the business were. So I just think that we're happy that we've got lots of tools in our tool box to finance Rosemont depending on circumstances. So that's all I can really say at this point.

And is there a maximum debt balance that you are comfortable with.

We do have, when we do our financial planning, we do stress test of potential low metal price environment and we get certain parameters with which we want to remain within. As I said in the script, I mean, we have been disciplined and I think we've acquired even more discipline since 2016, but even in 2016, as a point we didn't issue the stressed equity, we didn't have to take on additional debt, we didn't have to hedge, we didn’t have to stream and we didn't have to sell assets and we were one of the few companies in this space that didn't have to take any of those actions and that would be our plan going forward is to keep the balance sheet protected enough that we don't have to make any of those highly destructive – take any of those value destructive actions.

Okay. And then depending on the timeline of Rosemont and Mason, you envision a scenario where those two major projects could be developed concurrently or do you envision doing them consecutively.

No. I mean, we look at Ann Mason as an advanced exploration project at this stage. I mean, we want to get boots in the ground there, do additional exploration, potentially see if we can bring some high grade deposits to bear, which can prove the economics. Otherwise, it's going to have to see a longer term, higher longer term copper price to send it into production. The advantages of acquiring at this stage is that we haven’t inherited any real baggage. It gives us a chance to define the deposit correctly from a geometallurgical perspective allows us to design the throughput rate that we would consider optimal and doesn't commit us to, we can go down the promising route appropriately and not be committed to anything suboptimal, which you sometimes get when you take over a project that's further advanced. So I’d say Ann Mason is like -- in our mind, it’s something that happens after Rosemont is up and running.

[Operator Instructions] We'll hear next from Brian [indiscernible]

I guess most of my questions have been asked and I apologize if I missed this. Just operationally, it looks like on a copper basis, you’re trending kind of above even the high end of your current guidance, is there anything notable in 4Q that we should think about in terms of maybe getting just to the high end of the guidance relative to your performance for the first nine months?

I think we’ve already mentioned that we expect the head grade maybe to, we certainly don't expect the same level as we saw in Q3 and as with Q2, these is a maintenance shutdown taking place this month. It might not be quite so large as Q2 shut down, but we will be done for a number of days.

Got it. Okay. That's helpful. And then maybe just following up on the previous question around the balance sheet. I guess in the absence of a permitting decision, is the plan to still just continue to build the cash balance and at some point, when you do make that financing decision, maybe you just have a bigger amount of cash that you can sort of deploy proactively towards that future 1.9 billion?

That's correct and ours share is 1.1 billion currently, but yes, we believe that Rosemont’s close enough in the horizon, that's the most prudent use of the cash in hand.

And with no other questions in the queue, I’d now like to turn the conference back to Carla Nawrocki for any additional or closing remarks.

Thank you, operator and thank you everyone for participating. Please feel free to reach out to our Investor Relations team if you have any further questions.

And so that does conclude our call. We would like to thank everyone for your participation. You may now disconnect.