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

Good morning, and welcome to the Special Meeting of Shareholders of Hudbay Minerals Inc. My name is Peter Kukielski, and I'm the President and CEO of Hudbay. I'd like to welcome all of the shareholders, employees and other stakeholders that are attending our virtual shareholders meeting today via live webcast. This meeting will follow the same format as other recent Hudbay shareholder meetings. Please note that there may be slight delays when different speakers begin or as we respond to questions. Before we get started with the formal part of the meeting, as you're aware, Hudbay recently entered into an arrangement agreement with Copper Mountain Mining Corporation on April 13, 2023, whereby Hudbay has agreed to acquire all of the issued and outstanding common shares of Copper Mountain pursuant to a court approved plan of arrangement. This proposed transaction remains subject to certain approvals, including the approvals of a simple majority of the votes cast by Hudbay shareholders at today's meeting. On behalf of the rest of the Hudbay management team and the Hudbay Board, I would like to express our continued belief that this opportunity will be transformative for both Hudbay and Copper Mountain shareholders and is an exciting next step in our journey as we continue to remain focused on disciplined capital allocation to achieve our strategic objectives. Also with us today on the webcast is Mark Haber, our Executive Director, Legal and Corporate Secretary. Mark will act as Secretary of the meeting. We will now start with 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 proposal. After the motion has been tabled, we will open the floor to discussion and questions. If a registered shareholder or proxy holder with a control number has a question related to the meeting, I'd ask that they type it into the questions interface on Lumi. Mark 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 relating to procedural matters. As mentioned in our joint management information circular dated May 15, 2023, only registered shareholders and proxy holders who have registered for a control number are able to vote at this meeting. Once the voting has closed, we will take a few minutes to tabulate a preliminary report. During this time, I will make a brief presentation, and I will then address any questions on the presentation after the conclusion of the formal portion of the meeting. I now call the meeting to order. I will act as the Chair of the meeting. I will ask Mark to act as Secretary of the meeting; and Steve Nguyen of TSX Trust Company to act as scrutineer. Mark has advised me that all of the meeting materials, including the joint management information circular, are available electronically on our corporate website and under our company profile on SEDAR and EDGAR. Links to these materials are also available on Lumi's homepage for this meeting. In addition, shareholders have received paper copies of the meeting materials by mail in advance of this meeting. Mark has advised me that he has been provided with the scrutineer's report, which shows that there are 182 shareholders represented at the meeting or by proxy, holding in aggregate 174,160,906 common shares, representing approximately 66.46% of the outstanding common shares. Accordingly, this meeting is duly called and properly constituted. I would ask Mark to attach the affidavit of mailing, copies of the meeting materials and the scrutineer's report to the minutes of the meeting. The main item of business on our agenda for this meeting is the resolution to be passed by Hudbay's shareholders in connection with the proposed transaction with Copper Mountain. Before we proceed with the motion, voting through the Lumi web portal is now open. I would like to remind you that you will be able to change your voting until voting closes. We will give you notice before this occurs. As further described in the joint management information circular, Hudbay shareholders are being asked today to approve the issuance by Hudbay of the common shares required to be issued pursuant to or in connection with the plan of arrangement under Part 9, Division 5 of the Business Corporations Act, British Columbia in accordance with the terms of the arrangement agreement dated April 30, 2023, between Hudbay and Copper Mountain. The full text of the resolution is found in Appendix A of the joint management information circular. As further context from this resolution, pursuant to the TSX company manual, Hudbay is required to obtain [ order ] approval since the proposed transaction is an acquisition where the number of securities issued or issuable in payment of the purchase price for the acquisition exceeds 25% of Hudbay's issued and outstanding common shares on a non-diluted basis. May I have a motion for the issuance by Hudbay of the common shares required to be issued pursuant to or in connection with the proposed transaction, the full text of which is found in Appendix A of the joint management information circular?

I move that the issuance by Hudbay of such common shares be approved 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 now open via Lumi for all shareholders and proxy holders registered to vote. Is there any other formal business that may properly be 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 the resolution, please do so now. We would now like to open the floor for discussion. Mark, have we received any questions or comments concerning the motion before us today?

We have not received any questions, Peter. [Voting]

Voting is now closed. I will now provide some brief remarks. Please note that certain comments made during this presentation may contain forward-looking information, and please consult our relevant filings on SEDAR and EDGAR for more information. Next slide, please. I thought I'd take a few minutes to highlight what this acquisition means for Hudbay and our shareholders. This combination with Copper Mountain creates a premier Americas-focused copper producer, and Hudbay will become the third largest copper producer in Canada. The combined company will have a balanced asset base across the mining-friendly jurisdictions of Canada, Peru and the United States. The pro forma net asset value is estimated to be 54% from North America and 46% from South America on a street consensus basis. This transaction meets our stringent acquisition criteria and create significant shareholder value. It enables us to drive scale, diversify our operations, enhance our copper exposure, extract value through optimizing costs and deleverage our balance sheet while unlocking significant annual efficiencies and synergies to create value and drive shareholder returns. Next slide, please. At Hudbay, we believe one of our core competencies is operating efficiency. With the similarities between the Constancia and Copper Mountain Mines, we see many opportunities to unlock value and optimize operations. We anticipate approximately $30 million of annual operating efficiencies and corporate synergies, applying our knowledge and operational expertise as demonstrated by our leading low-cost Constancia operations to the Copper Mountain Mine will enable us to drive productivity and reduce operating costs. Once the transaction closes, our initial focus will be on the first phase of integration. We will work to stabilize operations at the Copper Mountain Mine to get to consistent production levels and work to realize the current operations potential, including improving flexibility at the mine, opening several additional mining faces and focusing on enhancing equipment availability. Hudbay expects to publish a technical report for Copper Mountain in the fourth quarter of 2023, which will provide our mine plan expectations in more detail. Next slide, please. I'll leave you with a look into our pro forma portfolio of assets. All of our properties are located in mining-friendly jurisdictions with established mining rule of law, and our growing production profile and low-cost position are expected to generate significant near-term cash flow growth. The Copper Mountain Mine adds to our copper production profile and rebalances our production focus to copper while maintaining complementary exposure to gold. The pro forma company will be a 150,000 tonne copper producer and a 300,000 ounce gold producer. And our enviable pipeline of copper growth opportunities has the potential to add more than 200,000 tonnes of copper to our longer-term production profile. The addition of Copper Mountain enhances our ability to pursue these value-enhancing growth opportunities to create sustainable long-term value for shareholders, and the combined company has the potential for evaluation re-rating from the benefits of being a larger scale, more diversified and more liquid copper producer. And with that, I'll continue with the voting process. After the formal portion of the meeting has concluded, I'll be pleased to take your questions. Now back to the formal part of the meeting. Final tabulation and voting results will be provided by TSX Trust after the meeting and will be posted on our website, SEDAR and EDGAR. However, as a preliminary matter, I can share with you that the motion to issue the common shares required to be issued by Hudbay pursuant to or in connection with the plan of arrangement for the proposed transaction has been approved. Ladies and gentlemen, that concludes the formal business of the meeting. May I please have a motion to terminate the formal portion of the meeting, followed by 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 today's special meeting of shareholders of Hudbay Minerals Inc. to be concluded. If shareholders have any questions, they should raise them now. Please type in your questions in the Lumi Q&A where indicated. We will allow approximately 30 seconds for any questions to be raised.

Peter, I confirm we have not received any questions.

Thank you. This concludes our meeting. Thank you for joining us, and have a great day.