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

Good morning, and welcome to the 2025 Annual and Special Meeting of Shareholders of Hudbay Minerals Inc. My name is Dave Smith, and I am the 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 today. This virtual shareholders' meeting will follow the same format as past years. Please note that there may be slight delays when different speakers begin or as we respond to questions. Before we begin with the formal business of the meeting, I would like to briefly reflect on some of Hudbay's achievements in 2024, which was another pivotal year of growth for the company. We transformed our balance sheet in 2024 through strong cash flow generation and the completion of our USD 400 million equity offering and the team delivered impressive operating and financial results from our enhanced operating platform. We also positioned ourselves well for the long-term growth through the continued advancement of our Copper World Project in Arizona. We made great strides at Copper World with the receipt of our Aquifer Protection Permit and the air quality permit meaning that we are now on receipt of all major state level permits required for the development, construction and operation of Copper World. We also commenced a minority joint venture process for the project earlier this year. In Manitoba, we had another excellent year of production, highlighted by record annual gold production and surpassing a total of 1 million ounces of gold produced in Snow Lake. We also advanced our continuous improvement initiatives at the Lalor mine and our Stall and New Britannia mills and executed our largest ever exploration program in Snow Lake. In BC 2024 marked our first full year of Copper Mountain operations post acquisition. We continue to advance our stabilization and optimization initiatives, and we implemented plans to increase mill reliability and performance. Recently, we also completed a transaction to consolidate 100% ownership in the Copper Mountain mine, which increases our exposure to this high-quality copper asset. In Peru, we continue to benefit from strong and consistent mill throughput and took important steps towards the advancement of the permitting process at Maria Reyna and Caballito. I'm proud to say that across the organization, we continue to prioritize strong relationship with indigenous and other local communities and defined opportunities to share the economic and social benefits that our operations bring to each region. These are only a few examples of our accomplishments in 2024, and none of these would have been possible without the dedicated efforts of our people. I'd like to take this opportunity to thank all of our people for their important contributions to Hudbay's success. On behalf of the rest of our Board, I would also like to take this opportunity to thank Carol Banducci and Igor Gonzales for their years of dedicated service and contributions to Hudbay. We wish both Carol and Igor the very best. I'd also like to thank Steve Lang for his leadership as Hudbay's Chair over the past 5 years. I'm very pleased that Steve is continuing on as an independent director and I am also excited to welcome John Armstrong as the new Director nominee at today's meeting. Let me now introduce the members of the Hudbay Board who, in addition to myself, are nominated for election at today's meeting Peter Kukielski, our President and Chief Executive Officer; John Armstrong, Jeane Hull, Carin Knickel, George Lafond, Steve Lang, Colin Osborne and Paula Rogers. Also with us today is Mark Haber, our Vice President, Legal and Corporate Secretary, who will act as Secretary of the meeting. We will now start with the formal business of the meeting, which we will try to complete as quickly as possible. I've asked certain shareholders to move and second the proposals that we have on the agenda. After all the motions have been tabled, we will open the floor to discussion and questions on the motions. If a registered shareholder or proxy holder with a control number has a question related to one of the matters to be considered, 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 would be permitted prior to the discussion period will be those relating 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 applicable e-mail and mailing details are included in our management information circular for this meeting. 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 this meeting. Voting will be opened for all resolutions at this time. This 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 voting is closed at the end of the formal portion of the meeting. Once the voting is closed, we will take a few minutes to tabulate a preliminary report. During the tabulation period, Peter Kukielski will make a brief presentation. Peter 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 Chair of the meeting. I will ask Mark to act as Secretary of the meeting; and Christopher De Lima of TSX Trust Company to act as scrutineer. This year, Hudbay has continued to use notice and access to provide shareholders with access to materials for our annual and special meeting. Mark has advised me that notice and access notice and formal proxy have been forwarded to each registered shareholder and an intermediary of record as of the record date for this 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. 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 issuer profiles on SEDAR+ and EDGAR. Links to these materials are also available on Lumi's 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 provided in the notice and access notice. Mark has advised me that he has been provided with the scrutineers' report, which shows that there are 391 shareholders represented at the meeting or by proxy, holding in aggregate 284,608,378 common shares representing approximately 72.05% 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 scrutineers' report to the minutes of the meeting. I do not plan to read the minutes of last year's meeting. Any shareholder who would like to review those minutes should contact Mark after the meeting. 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, 2024, together with the related auditor's report. These were made available to shareholders through notice and access. Links to these materials are also available on Lumi's homepage for this meeting. These documents have been tabled and no further action is required. We will now proceed with our second item of business, the election of directors. Voting through 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, John Armstrong, Jeane Hull, Carin Knickel, George Lafond, Steve Lang, Colin Osborne and Paula Rogers. 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 hereby declare the nominations closed. In line with our corporate governance guidelines and the Canadian Business Corporations Act, we intend to apply the CBCA rule regarding majority voting on an individual basis with respect to each of the proposed nominee in today's election of directors. However, I'm advised that based on proxies received to date, each proposed nominee would receive a greater number of votes for his or her election that would be against from his or her election. And none of the proposed nominees would be required to tender his or her resignation under the CBCA majority voting requirement. So unless a shareholder or proxy holder requests separate motions to elect the individual nominees, I propose that we proceed with a single motion. May I have a motion for the election of the 9 individuals nominated as directors.

I move to elect each of the 9 nominees as directors of Hudbay on the basis proposed.

I second the motion.

Thank you. The 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. It is proposed 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 is 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 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 all of the resolutions, please do so. We would now like to open the floor to discussion regarding the business of the motions. Mark, have we received any questions or comments concerning the motions before us today.

Dave, I confirm there are no questions.

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

Thank you, Dave. Good morning, everyone, and thank you for taking the time to attend our Annual General Meeting. Following on Dave's remarks, I wanted to take a few minutes to comment on the successful year we had in 2024 that continued into the first quarter of 2025. As you all know, we are a diversified mid-tier copper producer with approximately 55% of our revenues derived from copper and 35% from gold. This unique copper and gold diversification provides portfolio resiliency and together with our strong operating cost control has allowed us to achieve industry-leading margins across the business and generate significant free cash flow. In 2024, we achieved record revenues of more than $2 billion and record free cash flow generation of more than $350 million, enabling us to reduce our net debt by over $500 million. In the first quarter of 2025, we exceeded quarterly production cadence expectations, delivering the seventh consecutive quarter of meaningful free cash flow and industry-leading cost performance. Across our business units, we took many strides in operating efficiency, driving cost controls, enhancing production levels and progressing our pipeline of growth initiatives. Peru continued to deliver steady copper production with mill throughput improvements. Manitoba's record gold production showcases the team's impressive cost control and continuous efforts to maximize returns and our BC operation continues to advance its optimization effort to set us up for future production and cash flow generation. In Arizona, we are now fully permitted at Copper World which once in production will increase our long-term copper production by more than 50%. Across the business, we are executing our plan to continue to increase exposure to copper and unlock significant value for all of our stakeholders. We believe that copper has the best long-term supply and demand fundamentals in the sector as global copper mine supply will be unable to meet demand from the global energy transition and AI technology needs. We currently produce more than 130,000 tonnes of copper per year, which is further augmented by more than 250,000 ounces of gold per year offering commodity diversification and cash flow resiliency in volatile pricing environments. For every 10% increase in annual copper price, operating cash flows are expected to increase by an additional $100 million and a similar 10% increase in annual gold price adds $56 million to operating cash flows. Our fortified balance sheet and robust free cash flow generation will allow us to continue to prudently reinvest in our portfolio of attractive, high-return brownfield and greenfield opportunities to drive near-term and long-term production growth. And our portfolio also generates the highest increase in net asset value with rising copper prices amongst our peers. With our 3 low-cost stable operations in Tier 1 jurisdictions, unique copper growth pipeline and commitment to our people, our communities and our planet we have never been in a stronger position to execute on our vision. Thank you all so much for attending today. I'll now hand it back over to Dave. Over to you, Dave.

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 directors, the motion has been approved. I declare John Armstrong, Jeane Hull, Carin Knickel, Peter Kukielski; George Lafond, Stephen Lang, Colin Osborne, Paula Rogers 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 nonbinding advisory resolution on executive compensation, the motion has been approved. That concludes the formal business of the meeting. May I please have a motion to terminate the formal portion of the meeting, following which we'll have an opportunity for investor questions.

I so move.

I second the motion.

Thank you. Unless there are any objections, I declare the 2025 Annual and Special Meeting of Shareholders of Hudbay Minerals Inc. to be concluded. If shareholders have any questions for myself or Peter, 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.

Dave and Peter, I confirm no questions were raised during the period.

This concludes our meeting. Thank you for joining us today. Please stay safe and well.