TORONTO, ON--(Marketwired - January 17, 2017) - Hudbay Minerals Inc. ("Hudbay" or the "company") (TSX: HBM) (NYSE: HBM) today released its production and operating cost guidance along with its capital and exploration expenditure forecasts for 2017. All amounts are in US dollars, unless otherwise noted.
Summary:
- Copper and precious metals production from the Constancia mine in Peru exceeded 2016 guidance and production of all key metals at the Manitoba Business Unit was within 2016 guidance ranges.
- Production of zinc in concentrate in 2017 is forecast to increase by approximately 25% compared to 2016 production, primarily due to the ongoing ramp-up of the Lalor mine and the re-sequencing of the mine plan at 777 to mine stopes containing higher zinc grades and take advantage of favourable expected zinc prices1.
- Production of copper and precious metals contained in concentrate in 2017 is forecast to decrease by 17% and 5%, respectively, compared to 2016 production, primarily due to lower copper grades at Constancia, as per the recently released technical report, as well as lower ore production and copper grades at the 777 mine due to the age of the mine and the emphasis on higher value zinc ore production in the new mine plan.
- Sustaining capital expenditures are expected to be $185 million in 2017. In addition, growth capital expenditures of $40 million on the Lalor paste backfill plant, $25 million on the development of the high-grade Pampacancha deposit near Constancia and $20 million on the advancement of the Rosemont project are expected in 2017.
| Contained Metal in Concentrate1 | 2017 Guidance | 2016 Production | 2016 Guidance | |||||
| Manitoba2 | ||||||||
| Copper | (tonnes) | 32,500 - 42,500 | 41,059 | 40,000 - 50,000 | ||||
| Zinc | (tonnes) | 125,000 - 150,000 | 110,582 | 100,000 - 125,000 | ||||
| Precious Metals3 | (oz) | 90,000 - 110,000 | 102,242 | 95,000 - 115,000 | ||||
| Peru | ||||||||
| Copper | (tonnes) | 100,000 - 115,000 | 133,432 | 110,000 - 130,000 | ||||
| Precious Metals3 | (oz) | 55,000 - 65,000 | 65,709 | 50,000 - 65,000 | ||||
| Total | ||||||||
| Copper | (tonnes) | 132,500 - 157,500 | 174,491 | 150,000 - 180,000 | ||||
| Zinc | (tonnes) | 125,000 - 150,000 | 110,582 | 100,000 - 125,000 | ||||
| Precious Metals3 | (oz) | 145,000 - 175,000 | 167,951 | 145,000 - 180,000 | ||||
| 1 Metal reported in concentrate is prior to refining losses or deductions associated with smelter terms. |
| 2 Includes 100% of Reed mine production; Hudbay owns a 70% interest in the Reed mine. |
| 3 Precious metals production includes gold and silver production on a gold-equivalent basis. Silver converted to gold at a ratio of 70:1. |
Copper, zinc and precious metals production in 2016 met or exceeded guidance ranges in both Manitoba and Peru and increased over 2015 levels by 18%, 7% and 20%, respectively, due mainly to a full year of commercial production at the Constancia mine and the ongoing ramp up of Lalor production.
In 2017, production of zinc contained in concentrate is forecast to increase by approximately 25% compared to 2016 production, reflecting the continued ramp up of Lalor ore production and the re-sequencing of the mine plan at 777 to prioritize stopes containing higher zinc grades in order to take advantage of favourable expected zinc prices. Copper and precious metal production in 2017 is expected to decline by 17% and 5%, respectively, from 2016 levels due to lower copper grades at Constancia, as per the recently released 43-101 technical report, as well as reduced mining rates and lower copper grades at the 777 mine2. Declining production at the 777 mine reflects more challenging operating conditions as the mine ages. Lower expected copper grades at the 777 mine are due to the re-sequencing of the mine plan to prioritize stopes containing higher zinc grades and is expected to result in improved overall economics per tonne at 777.
Capital Expenditure Guidance
| 2017 Capital Expenditure Guidance1 | Millions | |
| Sustaining Capital | ||
| Manitoba | 65 | |
| Peru | 120 | |
| Total Sustaining Capital | 185 | |
| Growth Capital | ||
| Manitoba | 40 | |
| Peru | 25 | |
| Arizona2 | 20 | |
| Total Growth Capital | 85 | |
| Capitalized Exploration | 2 | |
| Total Capital Expenditure | 272 |
| 1 Excludes capitalized interest. |
| 2 Capitalized spending. |
Peru's planned sustaining capital expenditures in 2017 include approximately $52 million of expenditures related to the tailings management facility and approximately $15 million of capitalized stripping costs. Expenditures on the tailings management facility are expected to decline substantially after 2017.
Manitoba growth capital of $40 million is allocated to the construction of a new paste backfill plant for the Lalor mine. The paste backfill plant is intended to reduce operating costs, increase mining rates and maximize ore recovery. Peru growth capital of $25 million is allocated to initial expenditures for developing the Pampacancha deposit, which is expected to begin ore production in late 2018. Arizona spending of $20 million on the Rosemont project is intended to support ongoing permitting efforts.
Exploration Guidance
During the recent downturn in metals prices, Hudbay's exploration activities have focused on drilling at the Lalor mine and acquiring grassroots exploration properties in Canada, Peru and Chile. Exploration spending of $10 million is conservatively budgeted for 2017, but additional funds may be committed to high-priority drilling targets depending on Hudbay's free cash flow generation during the year.
| 2017 Exploration Guidance | Millions | |
| Manitoba | 4 | |
| Peru | 2 | |
| Arizona | - | |
| Generative and Other | 4 | |
| Total Exploration Expenditures | 10 | |
| Capitalized Spending1 | (2) | |
| Total Exploration Expense | 8 |
| 1 Assumes $2 million of Manitoba expenditures will be capitalized. |
Senior Management Appointment
Hudbay has appointed Eugene Lei as Senior Vice President, Corporate Development and Strategy. In this role, Mr. Lei will be responsible for corporate strategy and optimizing Hudbay's portfolio of long life, low cost assets through acquisitions, divestitures, joint ventures and strategic partnerships. Mr. Lei has over 15 years of global mining investment banking and corporate development experience. Joining Hudbay in 2012 and leading the company's corporate development activities since 2014, Mr. Lei has progressed through several senior management roles and executive responsibilities.
Production and Unit Cost Guidance by Business Unit
| 2017 Production and Unit Cost Guidance By Business Unit | Manitoba Operations 777, Lalor and Reed2 | Peru Operations Constancia | Total | |||||
| Contained Metal in Concentrate Produced1 | ||||||||
| Copper | (tonnes) | 32,500 - 42,500 | 100,000 - 115,000 | 132,500 - 157,500 | ||||
| Zinc | (tonnes) | 125,000 - 150,000 | - | 125,000 - 150,000 | ||||
| Precious Metals | (oz)3 | 90,000 - 110,000 | 55,000 - 65,000 | 145,000 - 175,000 | ||||
| Combined Unit Operating Costs ($/tonne ore processed)4 | C$88 - 108 | US$7.2 - 8.8 | ||||||
| 1 Metal reported in concentrate is prior to refining losses or deductions associated with smelter terms. |
| 2 Includes 100% of Reed mine production; Hudbay owns a 70% interest in the Reed mine. |
| 3 Precious metals production includes gold and silver production on a gold-equivalent basis. Silver converted to gold at a ratio of 70:1. |
| 4 Reflects combined mine, mill and G&A costs per tonne of milled ore. Peru costs are presented in USD and reflect the deduction of expected capitalized stripping costs. Manitoba costs are presented in CAD and include the cost of ore purchased from the joint venture partner at the Reed mine. |
Combined unit costs for Manitoba are forecast to be higher than 2016 revised guidance of C$80-100/tonne, due mainly to reduced 777 ore production and the expected cessation of capitalized development in the second half of 2017 when the Reed mine will have less than one year of expected mine life remaining. Combined unit cost guidance for Peru in 2017 is in line with actual costs during the first nine months of 2016.
Metal production in any particular quarter may vary from the implied annual guidance rate based on variations in grades and recoveries due to the areas mined in that quarter, the timing of planned maintenance, and other factors. Mining and processing costs in any particular quarter can also vary from the annual guidance rate above based on a variety of factors including the scheduling of maintenance events and seasonal heating requirements, particularly in Manitoba.
| 2017 Production and Unit Cost Guidance Flin Flon Zinc Plant |
||||
| Zinc Metal Produced | (tonnes) | 95,000 - 115,000 | ||
| Unit Operating Costs1 | C$0.40 - $0.50/lb | |||
| 1 Forecast unit operating costs are calculated on the same basis as reported unit operating costs in Hudbay's quarterly and annual management's discussion and analysis. |
Hudbay's anticipated zinc concentrate production from the Manitoba Business Unit in 2017 is expected to result in full utilization of the Flin Flon zinc plant's processing capacity, with some zinc concentrate planned for sale to third parties.
About Hudbay
Hudbay (TSX: HBM) (NYSE: HBM) is an integrated mining company producing copper concentrate (containing copper, gold and silver) and zinc metal. With assets in North and South America, the company is focused on the discovery, production and marketing of base and precious metals. Directly and through its subsidiaries, Hudbay owns four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and a copper project in Arizona (United States). The company is governed by the Canada Business Corporations Act and its shares are listed under the symbol "HBM" on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima. Hudbay also has warrants listed under the symbol "HBM.WT" on the Toronto Stock Exchange and "HBM/WS" on the New York Stock Exchange. Further information about Hudbay can be found on www.hudbay.com.
