Hudbay Minerals Inc. (HBM) Earnings Call Transcript & Summary

Hello, and welcome to the 2022 Hudbay Minerals Inc. Annual and Special Meeting of Shareholders. Please note that this meeting is being recorded. [Operator Instructions] It is my pleasure to now turn the meeting over to Chair of the Board of Directors of Hudbay, Stephen Lang. Mr. Lang, the floor is yours.

Thank you. Good afternoon, ladies and gentlemen, and welcome to the 2022 Annual and Special Meeting of Shareholders of Hudbay Minerals Inc. My name is Stephen Lang, and I am Chair of the Board of Directors of Hudbay. I would like to welcome all shareholders, employees and other stakeholders that are attending our virtual shareholders' meeting via the live webcast. This is our third annual -- our third virtual shareholders' meeting that will follow the same form as the last 2 years. Please note that there may be slight delays when different speakers begin or as we respond to questions. Before we would begin, I would like to briefly reflect on some of Hudbay's achievements in 2021, which was a pivotal year for the company. In Manitoba, we finished the refurbishment of the New Britannia gold mill ahead of schedule with first gold production in August of last year. And in Peru, we received permits and entered into land use agreements early in the year, which allowed us to achieve first production at our Pampacancha satellite deposit in April. These brownfield investments are expected to substantially increase our copper and gold production over the next few years. In addition, we made significant strides at our Copper World project in Arizona and are nearing completion of a positive preliminary economic assessment that contemplates the development of Copper World in conjunction with an alternative plan for Rosemont deposit. None of these achievements would have been possible without the dedicated efforts of our employees during the year in which we again had to navigate the challenges presented by COVID. I'd like to take this opportunity to thank all of our employees for their efforts. I would also like to take the opportunity to introduce our new director nominee, George E. Lafond, who is with us today on the webcast. George is an experienced social and business development adviser with expertise in working with federal and provincial governments to advance opportunities to First Nations. As a member of the Muskeg Lake Cree Nation, we expect George will bring unique insights to the Board as Hudbay -- as we look to further engage with our First Nations stakeholders. Let me introduce the current members of the Hudbay Board, who are on the webcast today with us: Carol Banducci; Igor Gonzales; Richard Howes; Sarah Kavanagh; Carin Knickel; Peter Kukielski, who is also our President and Chief Executive Officer; Daniel Muñiz; Colin Osborne; and David Smith. Also with us is Patrick Donnelly, our Vice President and General Counsel, who will act as secretary of the meeting. We will start the formal part of the meeting, which we will try to complete as quickly as possible. I've asked certain shareholders to move and second the proposals we have on the agenda. After all of the motions have been tabled, we will open the floor to the discussion and questions on the motion. If any registered shareholder or proxy holder with a control number has question related to one of the matters to be considered, I'd ask they type the question into the interface on Lumi. Patrick will then raise these questions during the discussion period and we will respond. The only questions that will be permitted prior to the discussion period will be those related to procedural matters. If you are not a registered shareholder or a proxy holder with a control number and would like to ask the Board of Directors a question, e-mail and mailing instructions are included in our circular. As mentioned in our management information circular, only registered shareholders and proxy holders who have registered for a control number are able to vote at the meeting. Voting will be open on all resolutions at the same time. We will allow you to choose to vote on each resolution immediately or wait until the discussion concludes on each resolution prior to casting your vote. Should you choose to do so, you will be able to change your vote on any resolution until the voting is closed to the formal portion of the meeting. Once the voting has closed, we will take a few minutes to tabulate a preliminary report. During this time, Peter will make a brief presentation discussing Hudbay's operation and strategic outlook. Peter will then address any questions on the presentation after the conclusion of the formal portion of the meeting. And I will now call the meeting to order. I will act as chair of the meeting. I will ask Patrick to act as secretary of the meeting and Christopher de Lima, TSX Trust Company, to access the scrutineer. This year, Hudbay has continued to use the notice and access to provide shareholders with access to the material for our annual and special meeting. Patrick has advised me that the notice and access notice and formal proxy has been forwarded to each registered shareholder and intermediary of record on the record date for the meeting. Notice and access is an environmentally friendly and cost-effective way to provide shareholders with electronic access to the management information circular and other proxy-related materials instead of mailing paper copies. All of the proxy-related materials are available electronically on our corporate website, on the website of our transfer agent, TSX Trust Company, and under our profile on SEDAR and EDGAR. Links to these materials are also available on the Lumi homepage for this meeting. In addition, shareholders may obtain paper copies of the proxy-related materials by contacting our transfer agent, TSX Trust Company, according to the instructions in the notice and access notice. Patrick has advised me -- has been provided with the scrutineer's report, which shows that there are 279 shareholders represented at the meeting or by proxy holding in aggregate 194,862,071 shares or 74.41% of the outstanding common shares. Accordingly, this meeting is duly called and properly constituted. I ask Patrick to attach the affidavit of mailing, copies of the meeting materials and the scrutineers' report to the minutes of the meeting. I do not intend to read the notice of last year's meeting. Any shareholder who would like to review those minutes should contact Patrick after meetings. He can be reached by e-mail at [email protected]. The first item of business on our agenda is the presentation of the financial statements of Hudbay for the year ended December 31, 2021 and 2020, with the related auditor's report. These materials are made available to shareholders through access and notice. Links to the materials are also available on the Lumi homepage for this meeting. These documents have been tabled and no further action is required. We would now proceed with our next item of business, the election of directors. Voting through the Lumi web portal is now open on all resolutions. I would like to remind you that you will be able to change your vote until voting closes. We will give you notice before this occurs. In addition to myself, the proposed nominees for election as directors of Hudbay are: Peter Kukielski, Carol Banducci, Igor Gonzales, Richard Howes, Sarah Kavanagh, Carin Knickel, George Lafond and Daniel Muñiz, Colin Osborne and David Smith. If elected, we expect that these nominees will hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. In light of our advanced notice bylaw, I declare the nominations closed. As contemplated by our corporate governance guidelines, we intend to apply our policy regarding majority voting on an individual basis with respect to each of the proposed nominees in today's election of directors. As described in the management information circular, in order to be approved, each director must be elected by a majority of the votes cast. However, I am advised that based on the proxies received today, each proposed nominee would receive a greater numbers for his or her election and would be withheld for his or her election and none of the proposed nominees would be required to tender his or her resignation under this policy. Unless a shareholder or proxy holder requests separate motions to elect the individual nominees, I propose that we proceed with a single motion. Do I have a motion for the election of the 11 individuals nominated as directors?

I move to elect each of the 11 nominees as directors of Hudbay on the basis proposed.

Thank you. Voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. The third item of business is the appointment of the auditor and the authorization of the Board of Directors upon the recommendation of the Audit Committee to fix the auditor's remuneration and propose that Deloitte LLP be reappointed as the auditor of Hudbay until the next Annual Meeting of Shareholders or until its successor is duly appointed by the Board of Directors upon the recommendation of the Audit Committee be authorized to fix their remuneration. May I have a motion on this matter, please?

I move that Deloitte LLP be reappointed as the auditor of Hudbay on the basis proposed.

I second the motion.

Thank you. In order to be approved, the motion must be passed by a majority of the votes cast. As mentioned before, voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. The final item of business to consider, and if thought advisable, to pass a nonbinding advisory resolution on executive compensation. The text of the resolution, which I don't plan to read, is set out in the management information circular. May I have a motion on this matter, please?

I move that the nonbinding advisory resolution accepting Hudbay's approach to executive compensation be approved.

I second the motion.

Thank you. In order to be approved, the motion must be passed by a majority of the votes cast. As mentioned before, voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. Is there any other formal business that may be properly brought before the meeting? As there is no other formal business, voting will be closing shortly. For those of you who have not voted on all of the resolutions, please do so now. We would like to open the floor to discussion regarding the business of the motion. Patrick, have you received any comments or questions concerning the motions before us today?

No, Steve, we have not.

Voting on all matters is now closed. I will ask Peter to provide some brief remarks on the business.

Thank you, Steve. Good afternoon, everyone, and thank you for taking the time to attend our AGM today. I thought I'd take a few minutes to provide a brief overview of our business and an update on our many exciting growth initiatives at Hudbay. As you all know, we are a diversified mid-tier copper producer with approximately 60% of our revenues derived from copper and approximately 25% from gold. Our growing production profile and low-cost position is expected to generate significant near-term cash flow growth. In addition to near-term production growth from our existing operations, we have what I consider to be an enviable organic pipeline, which is expected to generate meaningful growth in the medium to long term. Next slide, please. [indiscernible] of our business. We are committed to operate in a manner that demonstrates our focus on the environment. We are favorably positioned in the first and second quartile on greenhouse gas emissions, benchmarking curves and rank in the top 3 of all diversified and copper mining companies in terms of emissions intensity. We are proud to have 40% local community employment at our Constancia mine in Peru and 15% indigenous employment at our Manitoba operations. We also [indiscernible] practice standards and 55% of our board members belong to diverse groups. A large part of achieving our ESG goals at Hudbay is to ensure proper oversight of the business risks and objectives and that our disclosure is clear and transparent. The data in our sustainability report is mapped to the Global Reporting Initiative, the SASB metals and mining industry standard and the TCFD. Additionally, we provide disclosure through the CDP climate, water and forest questionnaires. And lastly, we are proud to be ranked with a AA rating in the top 10% of all mining companies that are assessed by MSCI. Next slide, please. At Hudbay, we recognize the tremendous opportunity that we and the mining industry have to positively contribute locally and globally to a more sustainable world. We have proven capabilities in all stages of the mining life cycle. And we are focused on achieving our sustainability targets while creating value through the prudent allocation of risk-adjusted capital. More specifically, our objectives this year include: unlocking value in Arizona through advancing Copper World and identifying potential synergies with Rosemont; executing the third phase of our Snow Lake gold strategy by preparing for the ramp-up to 5,300 tonnes per day at Lalor and initiating the Stall mill recovery improvement program; transitioning the 777 mine through orderly closure; progressing smart technologies to continuously improve operating efficiencies at Constancia; enhancing our ESG objectives through the introduction of new greenhouse gas emissions reduction targets; continuing to conduct targeted brownfield and greenfield exploration programs in our regions; and remaining vigilant in evaluating growth opportunities that meet our stringent strategic criteria that will create value for all of our stakeholders. Next slide, please. Hudbay offers leading near-term free cash flow growth and significant copper resource optionality through our high-quality organic pipeline. We believe that copper has the best long-term supply-demand fundamentals in the industry as the global copper mine supply will be unable to meet demand from global decarbonization initiatives. We have the highest near-term free cash flow growth and the highest leverage to copper among our mid-tier base metal peers. And we have successfully increased our copper equivalent resources per share by more than 180% over the past decade. For these reasons, we believe Hudbay is uniquely positioned to offer attractive copper production growth and long-term optionality for our stakeholders. Again, thank you all for attending today. I'll now hand back to Steve.

Thank you, Peter. Final tabulation of the voting results will be provided by TSX Trust after the meeting and will be posted on our website and SEDAR. However, as a preliminary matter, I can share with you that with respect to the election of the directors, the motion has been approved. I declare Carol Banducci, Igor Gonzales, Richard Howes, Sarah Kavanagh, Carin Knickel, Peter Kukielski, George Lafond, Daniel Muñiz, Colin Osborne, David Smith and myself duly elected directors of Hudbay Minerals Inc. With respect to the appointment of our auditor, the motion has been approved. With respect to the advisory resolution on executive compensation, the motion has been approved. Ladies and gentlemen, that concludes the formal business of the meeting. May I have a motion to terminate the formal portion of the meeting, following which we will have an opportunity for investor questions?

I so move.

I second the motion.

Thank you. Unless there are any objections, I declare that the Annual and Special Meeting of the Shareholders of Hudbay Minerals to be concluded. If shareholders have any questions for myself or Peter, they should raise them now. [Operator Instructions] We will allow approximately 30 seconds for any questions to be raised.

Steve, it's Patrick, there are no questions.

In that case, this concludes our meeting. Thank you very much for joining us today. Please stay safe and well.