Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals, Inc. Second Quarter 2024 Results Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] I would like to remind everyone that the conference call is being recorded today, August 13, 2024 at 11:00 AM. 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 2024 second 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 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+ and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski.

Thank you, Candace. Good morning, everyone, and thank you for joining us. In the second quarter, our operations continued to execute on plan, which has positioned us well to achieve our 2024 annual production guidance. The operations also demonstrated strong cost control, which together with our exposure to higher gold byproduct credits has allowed us to improve our 2024 consolidated cash cost guidance. Our strong and diversified operating base continues to generate free cash flow from efficient performance in Peru and Manitoba. And in British Columbia, we continue to execute on our stabilization initiatives and plan stripping program to unlock higher copper grades. We have transformed our balance sheet and are now in the best position we have ever been in to advance our many growth initiatives, which will unlock significant upside potential in our pipeline and further enhance our copper and gold exposure. We will go into more detail on our second quarter operating and financial performance throughout today's presentation, along with providing an update on many of the exciting growth initiatives underway. Slide 3 summarizes the financial performance in the second quarter. We achieved consolidated copper production of 29,000 tons and consolidated gold production of 59,000 ounces in the quarter. This was in line with our quarterly production cadence expectations for 2024 as we executed the planned stripping programs in both Peru and British Columbia this quarter. We are well-positioned to achieve stronger production in the second half of 2024 in accordance with the mine production profile and have reaffirmed 2024 consolidated production guidance for all metals. As we are now halfway through the year, we can give a bit more color on where we expect to be within the ranges. Consolidated copper production is likely to be below the midpoint of the guidance range, while consolidated gold…

[Operator Instructions] The first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Hi, good morning. A couple of questions, if I could. Firstly, your copper production for the year is obviously tracking below the midpoint of the guidance just based on the first half production. What kind of grade are you expecting in Peru in the second half of the year in terms to make that up?

Good morning, Orest, it's Peter. Thanks very much for the question. I think as we've previously said, the production cadence is such that it will be lower in the first half, especially in Q2, given the stripping that we're doing at Pampacancha, and we're doing some continuous dripping at Pampacancha in the second quarter. So overall, we expect the year to the contribution of Pampacancha to be roughly 1.3 to 2.3 of Constancia pit production over the course of the year. And the grades would be -- would match that. Andre, do you have any more detailed view with respect to what the average grade would be?

It varies by quarter in terms of, towards the end of Q3, we're really going to start to see it increase and then into Q4, but in that .4-ish to .557 range or something in that over the two. But increasing definitely towards into Q4. Or what we've done is over this quarter and last is we've really opened up Pampacancha to be able to have exposure to some other benches that maybe -- might've been into 2025 when we're looking at those as possibilities to bring in Q4 to really finish off the year nice.

Sorry, just to clarify, are you saying that the Q3 average grade could be sort of similar to Q2 within, I guess, sets up a pretty monster Q4? Is that what you said?

It's a little bit higher. It's a little bit higher in Q3, closer to 0.35 to 0.4-ish or something in that range, right -- in that range. But it's definitely Q4 is where it really comes in. So, we're in a real strip mode right now, worse than the latter part of Q3 is almost start seeing the grades really starting to come in.

Okay, perfect. And just on Maria Reyna, if I understand you got the EIS permit to do drilling, does that mean you can now begin drilling immediately or are there other steps required before you can start drilling? Or if there are other steps that are required before we can start drilling. So, I think the EIA is certainly the first step, but typically what it would take is about another 12 months after award of the EIA to be able to actually start drilling.

Thank you.

You're welcome.

The next question comes from Ralph Profiti with Eight Capital. Please go ahead.

Thanks, operator. Good morning, Peter. It sounds like the next big capital allocation decision in Manitoba is going to be the new BRIT expansion to 2,500 tons a day. Can you talk a little bit about sort of what that looks like in terms of timing and how much of that is dependent on things like exploration success, finding that anchor deposit, perhaps bringing 1901 into it, and what's that short-term outlook on the decision-making process there, please?

Thanks, Ralph. Thanks for the question. Look, I wouldn't characterize new BRIT expansion as a major capital allocation decision. We continue to investigate and implement high return throughput enhancements that require low capital outlay. And I think that the continuation of our efforts to achieve operational excellence that we've seen over the last couple of years. So progressively, we'll ratchet up the production. I think we -- in the last month we exceeded 2,000 tons a day. But, Andre, maybe you could provide a little bit of light on exactly what the capital, the nature of the capital decisions is. But I don't think that there is – it's not a – it's not substantial at all.

Yes, that's correct. They're all very, very small capital projects for subtle improvements. I'll give you some examples. We've been seeing some wear on our cyanide destruction tanks. Similar to what we were doing, you put that tailings product through our base plant and what we see are these -- we're running at very high rates through the mill and then you have some of these outages. So subtle things like changing the liners on those tanks are very minor, some minor pump upgrades, some closures around thickeners where we see delays. They're all very subtle improvements because on a daily basis we are at quite high levels, above -- you can see peak rates up to 2,400 times per day as it is right now. And so, as Peter said, it's mostly through process improvement and they're all sub like $10 million. It's not in total, like they're not very big expenditures.

Okay, okay. Thanks for that. That's helpful. In British Columbia, just wondering if you guys have set targets or KPIs on where you want to be at year-end with regards to throughput and recoveries. Just kind of looking to benchmark some of the stripping work that you're doing and how the cadence looks going into 2025.

Sure. So I think that there's two parts to the question. It's a good question. So on the stripping, we're running pretty much right now at a flat cost. We finally ramped up our workforce. We've done the purchase and lease of the equipment, the refurbishment of drills and shovels. And so we're just in the month of August right now, we're basically at our full complement with fleet and people. And so over the past few months, we were seeing some of the incurring of those costs, although the movement hasn't been quite there. And so like what we're looking at from where we were coming out of Q2 to where we are there now is in the Q2 range, we were about probably 200,000 tons per day. We are ramping up in August up to somewhere around 250,000 tons per day and continuing out through the rest of the year. So the material movement is increasing, but other than consumables like fuel and some explosives, most of that cost is fixed. So our unit cost per material move will be going down as we go forward. So not a major increase in capital per se, it's just using the equipment and the investments we had with the -- the truck drivers and [indiscernible] and up and trained. In terms of the mill throughput, so we're really proud of the work of the team. They've done an excellent job like mill availability is really high. I think it's in the 94% or so range at the moment, which is getting very close to Constancia, which is top -- world class. And so, the mill is running really, really well. And what we're dealing with is the feed size. So it's really stabilizing. We're averaging 35,000 to 40,000 tons per…

That's great. Good progress. Thanks Andre and Peter.

The next question comes from Lawson Winder with BOA Securities. Please go ahead.

Hi. Thanks very much, Operator. Thank you for the call today, gentlemen, and for the update. Could I ask on M&A and ask you to describe how you might view your current posture on potential acquisitions? And whether the -- whether Hudbay is currently actively evaluating opportunities?

Thanks, Lawson. Look, I think that, as I've previously said, I think that Hudbay has an extremely skilled team when it comes to highly efficient operations and world-class development projects, and we feel we can create value from both operating and development stage assets. So our strategy hasn't changed and will continue to be disciplined as we evaluate assets that fit our stringent strategic and financial criteria. And as you know, copper assets are scarce and we would only pursue opportunities that are accretive and that create value for our shareholders. But that said, I think that, again, you're aware that those assets are extremely scarce. And it took us a long time to sort of land on Copper Mountain. We continue to scour the marketplace for assets, and we haven't landed on anything right now that meets our criteria, but we continue to seek those opportunities.

And is it the case that your criteria remains Western countries, and has there been any change to the criteria at this point, particularly in light of how much more substantial Hudbay is in terms of a copper producer?

Yes, we still sort of -- we focused on Tier 1 mining jurisdictions very much. So the Americas in majority, but in the past we have actually looked to Europe and other investment-grade jurisdictions.

Okay. Thanks for that. And then could I also ask, just in follow-up to the public comment period for the air quality --, sorry, the Aquifer Permit, I think, is the one that completed in Q2. Was there anything in those public comments that might have updated your view on kind of the social license outlook for Copper World. Were there any sort of strong arguments against the project or would you describe the comments as fairly supportive?

In general, it's fair to say that the comments were fairly supportive. In fact, there were a massive number of comments that were received in support of the project which of course were received by the Arizona Department of Environmental Quality. As always, there will be positive and negative, but our view is that the process, we're sort of moving inexorably towards approval of that permit during the course of the remainder of the year.

Okay, great. Thank you so much for the update today.

[Operator Instructions] The next question comes from Dalton Baretto with Canaccord. Please go ahead.

Thanks. Good morning, Peter and team. Maybe I'll start by staying on the Copper World permits here. Peter, with the election coming up in November, I realize these permits are state-level permits, but do you see any sort of delays to the process at all?

Not at this point, Dalton. The reason why I say that, I mean, we are very, very confident that we will secure the permits by the end of the year, subject to -- perhaps what I'm trying to say is that if the Arizona Department of Environmental Quality has questions that need to be resolved and they require a little bit of time in which to do that, of course we would cooperate with them. But we have a strong commitment by the ADEQ to complete their work by the end of the year. I don’t think that this permitting process relies one bid on the political landscape in the United States at the moment. It is very, very much a state-driven process. We are deeply engaged with the ADEQ, and it's a very, very constructive relationship. So we expect that those permits will be granted by the end of the year. That said, if there was a request by the states in order that would bolster the robustness of those permits, then of course, we would collaborate with them. But there are no signs that -- that'll be the case. We're pretty confident we get them this year.

Thanks, Peter. And then as a related question, and I think I asked you this in the last call in a very different copper price environment and a copper sentiment environment, but are you still planning on waiting for the permits to execute on the, kick off the JV process or have you loosened on that stance?

It's actually a really interesting question, Dalton, I think that we are in a much better financial condition, in the context of Eugene's 3-P plan. We have met the prerequisites for that 3-P plan from a financial perspective. We still do expect to initiate a minority JV partner process after we receive the state-level permits, and we expect that process to be robust based on the track record that we have and based on the initial indications that we have from potential partners with whom we're engaging. So, very much, there's no change in plan. We think that it's the right thing to do. And we continue to look for a long-term partner who's bullish on the copper price and looking to grow their copper exposure. And all signs point towards that being very robust.

Great. Thanks, Peter. And then maybe I can ask you one sort of big picture question, if I may. You're mining Pampacancha now, you're generating free cash flow, the Peru sort of political issues are well behind you, you've cleaned up the balance sheet. And yet on my numbers, you still trade a fairly substantial discount to peers. And I'm just wondering if I could ask, A, why do you guys think that is? And number two, how does that play into your strategic thinking going forward? Thanks.

Thanks Dalton. Look, I think that a big piece of that is investors in the market are waiting for the outcomes of the Copper World permitting process. I think that's number one. I think there's a little bit of a, let's wait and see with respect to Maria Reyna and Caballito and we're moving sort of inexorably towards receipt of those permits as well. But as was the case of Pampacancha, the things permitting takes time in Peru. And so I think those things build into some of the valuation delta. But from a financial or balance sheet perspective, from a jurisdictional risk perspective, I think all of that has gone away. Perhaps Eugene, you might comment further if you have other thoughts.

No, I think we are encouraged by the investor interest that has been in Hudbay through this, particularly through this year and our oversubscribed equity offering and valuations improved and they see the opportunity to get exposure to our increasing cash flows and the catalyst that Peter has outlined and we look forward to making them a lot of money.

Great. Thanks for your thoughts, guys.

Welcome.

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, feel free to reach out to our Investor Relations team. Thanks, 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.