Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Hudbay Minerals' First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being broadcast live on the webcast and is being recorded today, May 14 at 11:00 AM Easter Time. I will now turn the conference over to Ms. Candace Brule, Vice President, Investor Relations. Thank you. Please go ahead.

Thank you, operator. Good morning and welcome to Hudbay's 2024 first quarter results conference call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events 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 Lei, our Chief Financial Officer, and Andre 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 Plus 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 thanks very much for joining us. In the first quarter, we delivered another consecutive quarter of strong operational and financial performance with steady free cash flow generation and continued debt reduction. This was largely a result of our unique copper and gold production diversification that provides meaningful exposure to higher copper and gold prices and attractive free cash flow generation. I'll go into more detail on our first quarter operating and financial achievements throughout today's presentation, along with providing an update on many of the exciting growth initiatives underway to further enhance our copper and gold exposure. Slide 3 summarizes the strong financial performance that we delivered in the first quarter. Consolidated copper production was 35,000 tonnes and consolidated gold production was 90,000 ounces in the first quarter. First quarter production demonstrated the strength of our diversified operating base with benefits from the continued mining of high copper and gold grades at the Pampacancha deposit in Peru, continued high gold grades at Lalor and strong performance from the New Britannia mill in Manitoba, as well as the operational stabilization efforts at the Copper Mountain Mine in British Columbia. We are well on track to achieve the production guidance metrics for all the remarkable $0.16 per pound of copper for the second quarter in a row. This was primarily the result of continued high by-product credits, partially offset by higher mining costs and lower copper production. Consolidated sustaining cash costs were equally impressive and decreased to $1.03 per pound in the quarter. Given this strong cost performance, we have affirmed our full year 2024 consolidated cost guidance, and we are pleased to see continued cost efficiencies being realized throughout the business, which is a testament to the outstanding team we have at Hudbay. Revenue…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Jackie Przybylowski from BMO. Please go ahead.

Hi. Good morning. Thanks for taking my question and congratulations on a really tremendous quarter. It's really great to see. I guess my question is just on Peru. You mentioned in the MD&A that the Peruvian government is considering expanding are an option I guess to expand and permits including potentially you get the content you can -- can you try it -- is that is that something that practically if you are able to extend your permits by 10% or so, is that something that would be within the mill's capacity to achieve that higher throughput? Or what would you guys need to do to get there? Thanks.

Thanks very much, Jackie. So the way that I would characterize it is there is a potential that this could increase future copper production at Constancia after the Pampacancha deposit is depleted in 2025 by achieving further economies of scale to offset lower grades. But I think what you got to remember is the regulation is currently a proposal and we'll continue to monitor its pro monitor its progress and the potential impacts on Constantia. Now that said, the team and I were in Peru couple of weeks ago and we met with the Minister of Energy and Mines, the Minister of Economy and Finance, the first Minister et cetera. And they intimated that the proposal is in highly advanced stages and is likely to be implemented very soon. That bet remains anecdotal. And specifically what it will allow us to do is uncertain at this point, but we certainly would be looking at options to actually increase production by supplementing the process facilities that we have in place if needed Andre, anything you…

Yes, sure. So that covers I guess what I'd say the permitting process and what you're looking at and so on in simple terms what they're proposing is to increase copper production in Peru is two authorizing within your existing permit permitted facilities opportunities for process improvement so existing crushers and infrastructure that you currently have. And so what we do have which is a benefit for us is we do have permitted pebble crushers that haven't been implemented and the reason why we haven't implemented in the past is because we are throttled on the throughput capacity. So the teams are looking actively and what are the levers if you will around what we can do within that framework to take advantage of that 10% reduction. It's still early days. It's still early days yet but we are running on days up to 94,000 tonnes per day. And so there they're making continuous improvements in the process. And so that we're quite optimistic that if this happens that will be an upside for us.

Thanks very much, Andre and Peter. And maybe just as a follow question I attended the presentation by the Peruvian Minister at PDAC in March and there was some talk there about streamlining permitting in general. I know your exploration projects in Peru have been I've been very thoroughly going through the permitting process. Do you have any color or any optimism on weather? Were there streamlining of the permitting process for you? Variation projects might be kind of forthcoming as well?

I think Jackie so yes, I'm optimistic that that is the case that we all of the ministers of whom we met in Peru were keen to confirm that they're working hard to do that. That said, it remains to be seen what the bureaucracy can actually achieve. So the key elements really are the middle of the EIA, and after that, there are a couple of other permits that need to be granted, like archeological permits and water use permits, but the primary permit required subsequent to EIA approval is Consulta Previa, and Consulta Previa kind of dwarfs the others. So we suspect that we'll be able to conduct the things like archeological permits and the water use permits in parallel, potentially with Consulta Previa, but the total duration we estimate right now is 12 to 18 months. We're hopeful that the 18 gets reduced to 12 or so.

That's great. Thank you very much for taking my questions, and congrats again.

Thank you.

Thank you. And your next question comes from the line of Orest Wowkodaw. Please go ahead.

Hi. Good morning. It's nice to see the free cash flow generation continue here in the quarter. My question has to do with costs. We saw very low costs per ton in Peru this quarter of just below $11 a ton. I mean, that's probably the lowest number we've seen in quite some time. Is that sustainable, and can you talk about some of the drivers there? And then, conversely, the cost per ton in Manitoba, Canadian $2.35, were among the highest we've seen in quite some time. Just wondering if we should, or can we anticipate costs to ease there for the rest of the year? Thanks.

Sure. Sure. So, I'll take yours. So, I'll start with the cost in Peru. So, the team has done an excellent job on cost conservation and looking for opportunities to reduce. And the forecast to the end of year is pretty much in line with what you're seeing and within our budget ranges, maybe even towards the lower end, like you're seeing this quarter. So, there's nothing unusual about this quarter, it's just good operating practice, good cost control, and they did overcome challenges with flooding and water, and that, while they did that. So, we're really proud of the efforts of the team there. In terms of Manitoba, so the Manitoba one, if you look at it at face value, there's some increases at stall and overall a little bit in the mine, but it's part of the strategy. And so, what we trialed in the quarter was with increased opportunity to put more ore through, our productivity improvements are really taking hold. We've trialed putting some higher base metal feed, if you will from stall that would normally go through stall through New Britannia at better recoveries, and we were successful at that. So we're putting stuff from the lower cost mill or ore feeds through the higher cost mill, but we're generating a lot more cash by producing more gold ounces. And so, at face value, the costs look a little bit higher than what they were, but it's all part of the strategy to make more cash, and so, you saw the results in the gold for the quarter.

Okay. Just to clarify. So in Peru, we should then, I think what I'm hearing you say, we should expect cost of production to increase for the rest of the year in order to get closer to your guidance range?

It will be within the bottom to mid-range of the guidance, yes.

Okay. Thank you.

Thank you. And your next question comes from the line of Ralph Profiti from Eight Capital. Please go ahead.

Thanks, operator. Good morning, everyone. Peter, do you have a handle on the issue related to these elevated magnetite levels at Copper Mountain? It seems to be impacting the front end of the plant as opposed to the back end of the plant when we look at the success you've seen on copper recovery. Just wondering, what's the mitigation plan look like and just trying to get a sense of how important this issue is?

Sure. I'll take that one as well, its Andre. So I was up at site last week and I actually saw the site. So what the challenge is, is the pebble pressure as it -- the pebbles get rejected from the sag mill, there's a magnet on there to identify tramp or balls of metal that came out of the SAG mill. And when you put high magnetite through, the main is can't discern between the steel balls and the magnetite. And so by default, so you don't damage the pebble crusher. They were – we're surging the pebbles back into the segment, which reduced throughput. And so, over the course of April, where you saw the increased throughput, what we did as a trial is we just rejected the pebbles. So at the -- so while we worked for technologies to trying to separate out, what's magnetite versus the steel balls that are coming out, we just discarded the pebbles. We're storing them in a safe spot for the future longer term. So we're seeing the benefit of it through -- increased throughput capacity by doing that in the short-term, longer term some capital projects that we're looking at that will increase our throughput through the mills will allow us to just recirculate those pebbles back into the pilot have come run as mine feed and not a surge into the mill pebbles. And so we believe, we've got it under control right now. We're looking at technologies we said too separate or differentiate between magnetite and steel, but those problems will ultimately be solved like early next year with some improvements that we're planning in the mill.

Got it. And Peter, I wanted to come back to the issue of the 10% potential permitted capacity increase at Constancia. Just wondering what special considerations outside of the plant that you may need to consider things like power purchase agreement, things like trucking and logistics, things like tailings. Outside of the plant, are there anything that you're going to be paying closer attention to when you think about sort of the cost benefit analysis?

Hey, Ralph. That's a great question. I think that you know, we also used to the need to be a resilient operation in Peru that we plan for these type of things in advance in any case. So, we have sort of surge requirements for various aspects of our operation activities there. I think there will be nothing exceptional for us. I don't think there'll be any additional logistics requirements. We have ample trucking capacity. We've increased our concentrate storage capacity. Frankly, I don't see any particular requirements arising out of this.

Understood. Thanks.

Well, those are worked out, yes.

Thanks again.

You're welcome.

Thank you. And your next question comes from the line of Greg Barnes from TD Securities. Please go ahead.

Yes. Thank you. Andre, question on Copper Mountain, you saw a step change in April both on mill throughput and mill availability. What happened in April? And is this sustainable?

Yes. Thanks. Great question, thanks for that Greg. So, one of the -- there's an analogy whatever, our hand metallurgists, it uses -- it's like boiling water, you put a lot of energy into it and then eventually the bubble start coming up. We've been putting a lot of energy and effort into the mill and all of a sudden you start to see the benefits coming through. The mill reliability in terms of -- so, it's a measure that we've been -- it's a new measure we've been tracking and it measures the percent downtime due to unplanned events. For the quarter, we were about 96.4% and months the months from January were 94%, February we were at 96.4% and in March we had 98.4% reliability. And so, month-to-month we're seeing that reliability. The big step change that happened in terms of throughput, it was the implementation of the optimization of the expert system. So the expert system is what controls the SAG mill feed and throughput. And so we have a three-part system: one controls the speed of the mill, one monitors the density, and one is the tonnage. And in prior days, only one of them was used, which was the tonnage we put. In the month of April, we turned on all three. So we are running the expert system with all three parameters. And so, that where the operators were more in a monitoring mode rather than dialing up the individual components, so we're seeing the benefits of that going through in addition to like the prior question about the rejection of pebbles. So our intention is to continue as we're in high mega type scenarios right now to reject them until we have some capital projects come in early next year that will solve the overall throughput.

Fantastic progress. And a question for you Eugene, on gold hedging. Obviously, you've done a little bit I think it's about 15% hedged on calls for the balance of the year. Do you intend to do more of that?

Thanks, Greg. And no, not at this time. I think we do some modest hedging to a Copper Mountain to protect some cash flows as prudent financial management during this stabilization period. Given the volatility, we've seen in prices, in prior years, it was sort of as a prudent measure to keep yourself free cash flow positive. In general, our strategy is to provide or the investors with the increasing exposure to both copper and gold and buy prudently managing our cash flow to one acquire Copper Mountain and stabilize it, we think we're giving investors a kind of more exposure to that. So at this time, given where prices are I think we're comfortable to let it with collars we have. If we see sort of a decline, we may want to ensure that we underwrite some of that. But given the strong copper and gold prices today, we don't – I don't feel the need to add additional hedges at this time. I'm sorry but let it ride.

Thanks, Eugene.

Thank you. [Operator Instructions] Your next question comes from the line of Dalton Baretto from Canaccord. Please go ahead.

Thanks, operator. Good morning, Peter and team. I've got a couple of questions, as it relates to the of the 3P plan, given what's happening in the current – in the copper market currently? I guess my first question is how are you guys thinking about a hurdle rate for Copper World, given the movement in the copper price.

Hi, Dalton. 3P plan is a thoughtful plan that kind of looks throughout the cycle and the basis of that potential sanction decision on rate of return part was 15% IRR, a minimum of that at base prices. And when we put out that study, that was 350 copper and certainly that PFS that we released last year achieves that. Obviously, at today's higher prices that we're going to see in the IRRs, if they were to hold during the period a build and through first production at those levels IRRs north of 20. And so certainly, that's one element of the plan that I think is clear on track and indeed the current prices have allowed us to achieve deleveraging faster than originally planned and we're very pleased with that result. As I think Peter mentioned, over $200 million of net debt reduction in the last three quarters, since the acquisition of Copper Mountain. And now we're at 1.3 times net debt to EBITDA. So from a financial standpoint, we're getting towards that. I don't think we – there's nothing to relax on the hurdle rate for investment and in Copper World, we think it's still prudent to have those strong IRRs that there's significant work need to be done on planning and the feasibility study still. So the production and we know the project is a great project. As Peter mentioned, it's the highest grade undeveloped copper deposit in the Americas at the reserve stage and consequently it has a very high returns. And that's a project – that's a project that had been once invest in.

Thanks, Eugene. So then given everything you just said, I guess my second question is do you still want or need to do a deal on the project and then part B I guess is would you consider doing a deal ahead of the permits just to kind of take advantage of current market conditions?

Again, we're sticking with the plan here, and the plan is to get the permits and get a partner, given the attractiveness of the project. We expect that to there's lots of -- there's certainly lots of interest. I don't think front running the permits with a partner today in today's and sort of hot environment is the right thing to do from a prudent planning basis. We're going to evaluate once we have the permits and how we move the project forward to create the most value for shareholders. And potentially that partnership. But we're not -- I don't think you get the sustained highest value by doing this in front of the permits to try to get a quick win here. We want to look at this over the long term in terms of what's best for the company in terms of the percentage we sell, the valuation of the project and also, as I think Peter highlighted in his remarks, the optionality of Phase 2, given the improved permitting environment, and there's a lot of value there by just sticking with the plan here and executing.

I think, I'd add, Dalton that there is occasional debate amongst the management team about the options. but we typically land back at where Eugene -- that's the scenario Eugene has described, but we'll continue to debate this going forward.

And so then maybe one last one, if I can squeeze it in. As you look at Copper World, and you think about buy versus build in the current environment. Can you talk a little bit about how Copper World compares to market valuations on a per ton of copper basis?

I'll kick off by saying that if you look at capital intensity, copper, Copper World is -- has a capital intensity of sub $16,000 an annual ton. So in comparison, Copper Mountain cost us about $12,000 annual a ton. But when you look at projects that others are building may cost $20,000 to $30,000 to $40,000 per annual ton. So if you could acquire it – if we could acquire something like the Copper Mountain at $10,000 or $12,000 an annual ton, of course, we'd be happy to do it, but it's bit of a unicorn. So we continue to try to find. But the ease of implementation of Copper World is extremely attractive, I believe and it makes that the capital intensity, which stacks up very well against our peer projects, highly, highly attractive. So in the absence of good acquisitions to buy, this is the way to go. And we've demonstrated in the past that we're good at this. And so we're excited to do it. Nothing from Peter -- Peter.

Well. Thanks, very much, guys. That's all for me. Congratulations.

Thanks, Dalton.

Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to Ms. 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. Have a good day.

Ladies and gentlemen, this concludes the conference call for today. You can now disconnect your lines.