Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. [Operator Instructions] I would like to remind everyone that, this conference call is being recorded today, May 9th, 2023, at 8:30 A.M. Eastern Time. I will now turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's 2023 first 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 available in the investors Event section of our website, and we encourage you to refer to it during this call. Our presenter today is Peter Kukielski, Hudbay's President and Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lee, our Chief Financial Officer; and André Lauzon, our 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 Peter Kukielski.

Thank you, Candace. Good morning everyone and thank you for joining us. In today's presentation, I'll discuss our first quarter results, touch on the operating and financial performance of the business, and provide some insight into strategic initiatives and corporate achievements. As I've said before, I truly believe one of Hudbay's greatest strengths is our disproportionately talented team for a company of our size. To complement this team, we brought in Warren Flannery as Vice President, Business Planning & Reclamation. His experience will be a welcome addition to our organization to enhance our capital planning and operation strategy as well as inflammation and management of non-producing facilities. In the quarter, we promoted Javier Del Rio to Senior Vice President, South America and USA and Olivier Tavchandjian to Senior Vice President, Exploration and Technical Services. These team members will be instrumental in continuing to drive our strategic initiatives. In the first quarter, we took some meaningful steps to position the business deliver sustainable cash flow through disciplined capital allocation and to expand our copper production profile. We continue to focus on our commitment to maintain a strong culture of safety and commitment to our local communities, while improving our low-carbon footprint. The team successfully navigated the recent Peru logistical interruptions to achieve a very strong start towards meeting our full year operating cost guidance at Constancia. And we are executing debottlenecking initiatives to increase the output from our Lalor mine in Snow Lake. We took several prudent measures this quarter to improve our free cash flow for 2023 and we remain focused on being disciplined with capital allocation as we continue to derisk our Copper World project in Arizona. We also seized an opportunity to diversify our operating portfolio and expand our copper production scale with the recently announced agreements to…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Orest Wowkodaw of Scotiabank. Please go ahead.

Hi, good morning. Peter, I'm curious on your earlier comments about diluting the exposure to Peru through the Copper Mountain acquisition, I think you mentioned the number of your non-Peru exposure now would be about 55% at NAV. When I think forward here in terms of the next couple of years, certainly probably the biggest upside to our NAV estimates, it could be the exploration potential around Constance with Maria Reyna, Caballito. Wouldn't that actually sort of reverse the Copper Mountain advantage? And I'm just curious if you if you have a target in mind in terms of where you'd like to get that Peru exposure knowing that you're going to have a potential upside with the exploration in Peru?

Good morning, Orest. Thank you for that thoughtful question. So, you're absolutely right, so we have -- we are reducing exposure through increasing exposure in North America. That doesn't mean that we like Peru any less. Frankly, I think you've heard me say many, many times before I believe, I believe in Peru for the last two and a half decades. Peru tends to go through these ups and downs and cycles in social unrest or whatever you want to call it. But I am convinced that Peru is a good place to be. Constantia has, I believe, one of the best operating workforces in the top mine in the world and it's something that we need to lever going forward. Now, you're correct, once we establish exactly what it is, that we have at Maria Reyna and Caballito, it certainly does have the potential to change that distribution. But also remember that at some point, we will develop the Copper World project, which sort of tends to adjust that further. But we kind of -- we're not targeting any residual distribution. We just think that the current initiative with Copper World raises the company to a better place. But I am convinced that Caballito and Maria Reyna will be operations in the near-term. That will significantly improve Hudbay's access to copper and production profile. Since you've asked the question, I probably take the opportunity to say that we've been really happy with turn of events in Peru. It looks like President Boluarte is doing a really good job of stabilizing the environment. It looks like she has appointed a qualified cabinet and it looks like we are enjoying a period of, I would say, relative quiet and I expect this to proceed for some time. We certainly are having no issues with proceeding with the bureaucracy with our initiatives towards getting our exploration permits for Caballito and Maria Reyna. So, the quick answer is yes, we are readjusting our distribution geographically in the short-term. But over the long-term, together with Maria Reyna and Caballito, as well as Copper World, we sort of expect to maintain roughly the same distribution.

Thanks Peter. As a quick follow-up, do you see more opportunities like Copper Mountain out there if that potentially Hudbay could take advantage of?

We always continue to look for those opportunities, Orest. And we've always said that they're hard to come by because of our pretty firm and disciplined approach to acquisitions. If there is something out there, we certainly would be interested in it. But the focus on priority number one right now is to combine Copper World into the portfolio -- I'm sorry, Copper Mountain into the portfolio, and then we'll think about what might be next.

Thank you very much.

[Operator Instructions] Our next question comes from Ralph Profiti of Eight Capital. Please go ahead.

Thanks operator. Thanks for taking my question. Peter, I want to come back to the move to 100% renewables at Constancia. And just wondering what exactly are those renewable sources starting in 2026. Is this capacity currently installed? And maybe give us a little bit of flavor on how much power currently accounts for the Constantia cost structure and whether or not we can see some potential savings there?

Good morning Ralph. Thanks for that question. So, as far as exactly how ENGIE's energy assets are configured, I don't know the answer to that offhand. It certainly -- I mean, we negotiated this agreement over a long period of time viewing a highly competitive bidding process. And the team in Peru serves me that we will have 100% renewable source of electricity. But my understanding is that it is almost all hydro and wind.

Ralph, its Eugene Lei here. If I could add, we get certain green certificates for this energy, and the contract starts in January 2026. So, I think it's a 720 gigawatt hours a year of these renewable energy credits that -- and we consume about 710. So, slightly in excess with what the contract is for and it begins in 2026, as I mentioned.

Great. That's helpful for context. Appreciate that. If I can ask a follow-up, Peter, it's been a while since we've heard about the tailings reprocessing opportunity. And I understand that you're looking at some metallurgical testing. Can you talk a little bit about the differing metallurgical techniques and technologies that you're looking at? And where does that stand on bringing that forward and perhaps seeing some value there as you're thinking about and prioritizing perhaps other bigger, larger-scale projects?

So, I'll have the first kick at the answer of that, Ralph, and I'll ask André to maybe provide a little bit more color. But we continue to conduct metallurgical test programs and you evaluate metallurgical technologies to assess the processing viability of the tails, which, of course, if positive will lead to a future mineral resource estimate. But that said, we've also identified the opportunity to reprice the Anderson tailings in Snow Lake given the significant amount of gold that's been deposited there over many, many decades. And also given the close proximity to existing producing infrastructure at Stall and New Britannia and the fact that production from Snow Lake is unstreamed, so we may also consider tailings reprocessing opportunities in Snow Lake as future phases of our Stall mill recovery projects permit. But with respect to exactly what you asked with respect to technologies in Flin Flon, perhaps André can provide a little bit of color there. André Lauzon: Sure. Thanks Ralph. So, I'll start with the easier one and less complicated in Snow Lake. So, we're looking at it as well in the Snow Lake operation. And the technology that we're looking at is very similar to what we have at New Britannia with some slight modifications to be able to deal with some base metals that are in the tails. So, our historical tailings in Snow Lake have a mixture of copper, zinc, and gold at lower recoveries than we would like today. So, what we've done in Snow Lake was put in place a cyanide process and the process that we would have to do to treat the tails would be managing with something similar to what they call the [Indiscernible] type circuit, managing the base metals first before striking gold. In Flin Flon, it's a little different. And it has both similar copper and zinc and gold. The zinc is much finer grain. And the process that we're looking at right now is how to extract the elemental sulfur from the tails. And there's a variety of metallurgical technologies that we're testing right now, and it's still very early days.

Understood. Thanks for all the answers. I appreciate it. Thank you.

You're welcome.

Our next question comes from Farooq Hamed of Raymond James. Please go ahead.

Hi, good morning. I was just looking at a couple of the corporate actions that you've taken in the quarter, specifically pushing back your gold prepay payments and then the hedging of some of your copper in the second half of the year. And so it looks like you're protecting your cash flows in the second half of the year. And I was just wondering if you could give some insight as to why you're taking these extraordinary measures to either protect or marshal your cash in the back half of the year. Is there something in the plan for the back half of the year that maybe is not as well understood?

Hi Farooq its Eugene here. Thanks for the question. There are really measures taken to ensure that we have strong free cash flow generation throughout the year. And maybe the first measure was the deferral of the gold prepay. We started -- we did that in February, and we deferred eight monthly payments of gold. And that was in a period where there was some Peru uncertainty, as Peter highlighted, and we want to ensure that we got access to a monthly cash flow basis. Obviously, having the gold price move up since we've made that deferral has helped the cost of it. The cost of it was roughly 3%, which is a lot cheaper than we'll call it, a normalized cost of capital. And with the gold price increase that we've experienced, the cost of that deferral is actually close to zero at the moment. So, I think it was an effective way of cashflow management for the year. As we indicated with our guidance, the production of copper for Peru is back-end weighted. That's about 60% in the second half. And so as we look forward to this year, much of that production is going to be in the second half. And given the volatility in the markets that we've seen year-to-date already, we want to make sure that we could be opportunistic to ensure that we were going to get that free cash flow at the end of the year. So, I think you'll see a floor of $3.95 and a ceiling of $4.28 or 10% of that production. It's done on a monthly basis. And so that just ensures some smoothing of prices and again locks in some certainty. I think that $3.90 floor is probably the highest floor that you've seen in the cost of colors that our peers have done. So, I think it's just an opportunity for us to manage through what we expect to be a strong cash flow generation period for the company so that we meet our deleveraging targets that we outlined earlier this year.

So thanks for that Eugene. So, I'm just wondering, like you said, the back half of the year is supposed to be stronger. You're supposed to have better operating performance in the back half of the year, so you think you'd naturally have better cash flow to begin with. I don't think that there's any major capital program in the back half of the year that I can think of. So I'm just trying to understand why you're wanting to protect those cash flows. Is there -- I mean most operators when they're just operating normally, they won't put in a hedge program like that. So, I'm just trying to understand what specifically was the reason that you identified the back half of the year is something that you wanted to protect the cash flows?

It wasn't any capital program that we expect embark on. As you saw with our guidance, annual guidance, we're reducing discretionary spend this year to target free cash flow. And I think it's with those targets to make sure that we come out on the back of the year with lower net debt to EBITDA and a stronger cash balance as we go into 2024 and any decisions that we had to make with respect to Copper World and 2025 and beyond. So, just ensuring that we get that. So, instead of maybe the back half of the year, if the prices are weaker, that we lose out on that cash flow generation. So, just laying us laying a little bit of protection for us to ensure strong free cash flow generation. No spending significant increase that we haven't unplanned.

Okay. Thanks. That’s helpful.

[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Candace Brule for any closing remarks.

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.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.