Hudbay Minerals Inc. (TSX:HBM) (NYSE: HBM) released its first quarter 2024 financial results. All amounts are in U.S. dollars, unless otherwise noted. All production and cost amounts reflect the Copper Mountain mine on a 100% basis, with Hudbay owning a 75% interest in the mine.

“We delivered another consecutive quarter of strong operational and financial performance with steady free cash flow generation and further debt reduction,” said Peter Kukielski, President and Chief Executive Officer. “These results demonstrate the strength of our diversified operating base, with continued contributions from the high-grade Pampacancha deposit in Peru, better-than-planned gold production in Manitoba and benefits starting to be realized from operational stabilization efforts at the Copper Mountain mine in British Columbia. We are well on track to achieve all of our production and cost guidance metrics. Hudbay’s resilient operating platform offers leading exposure to copper and unique complementary exposure to gold, which together with our quality pipeline of growth assets, provide significant upside potential for further value creation at higher copper and gold prices.”

Delivered Strong First Quarter Operating and Financial Results; Production and Cost Guidance Affirmed

• Enhanced operating platform delivered consolidated copper production of 34,749 tonnes and stronger than expected gold production of 90,392 ounces in the first quarter.
• Solid operating performance was driven by continued high copper and gold grades at the Pampacancha deposit in Peru, continued high gold grades at Lalor and strong performance from the New Britannia mill in Manitoba, and the operational stabilization efforts at the Copper Mountain mine in British Columbia.
• Achieved revenue of $525.0 million and operating cash flow before change in non-cash working capital of $147.5 million in the first quarter of 2024.
• Affirmed full year 2024 consolidated copper production and cash cost guidance of 137,000 to 176,000 tonnes of copper at a cash cost of $1.05 to $1.25 per poundⁱ and sustaining cash cost of $2.00 to $2.45 per poundⁱ.
• Consolidated cash costⁱ and sustaining cash costⁱ per pound of copper produced, net of by-product creditsⁱ, in the first quarter of 2024, were $0.16 and $1.03, respectively, consistent with strong levels achieved in the fourth quarter of 2023.
• Peru operations benefited from continued contributions from the high-grade Pampacancha satellite pit, resulting in 24,576 tonnes of copper and 29,144 ounces of gold produced in the first quarter of 2024. Peru cash cost per pound of copper produced, net of by-product creditsⁱ, in the first quarter improved to $0.43, a 20% decrease compared to the fourth quarter of 2023.
• Manitoba operations produced 56,831 ounces of gold in the first quarter of 2024, exceeding management’s quarterly cadence expectations as New Britannia continues to operate well above nameplate capacity and budgeted throughput levels. Manitoba cash cost per ounce of gold produced, net of by-product creditsⁱ, was $736 during the first quarter of 2024 and well within guidance expectations.
• British Columbia operations produced 7,024 tonnes of copper at a cash cost per pound of copper produced, net of by-product creditsⁱ, of $3.49 in the first quarter. Operational stabilization plans continue to be advanced at the Copper Mountain mine.
• First quarter net earnings and earnings per share were $18.5 million and $0.05, respectively. After adjusting for a non-cash gain of $5.3 million related to a quarterly revaluation of the closed site environmental reclamation provision, a $12.8 million mark-to-market adjustment loss related to share-based compensation, gold prepayment liability and strategic gold and copper hedges and a $9.0 million write-down of property, plant and equipment (“PP&E”), among other items, first quarter adjusted earningsⁱ per share were $0.16.
• Cash and cash equivalents increased by $34.6 million to $284.4 million during the first quarter due to strong operating cash flows bolstered by higher copper and gold prices and sales volumes enabling a $43.5 million reduction in net debtⁱ during the quarter.

Operating Performance and Financial Discipline Driving Free Cash Flow and Deleveraging

• Unique copper and gold diversification provides exposure to higher copper and gold prices and attractive free cash flow generation.
• Executed on planned higher production levels and achieved continued operating and capital cost efficiencies to generate significant free cash flow in the first quarter.
• Realized strong margins by maintaining low consolidated cash cost of $0.16 per pound of copper in the first quarter while benefiting from higher copper prices, positioning the company for continued significant cash flow generation in a period of high commodity prices.
• Achieved adjusted EBITDAⁱ of $214.2 million in the first quarter and a trailing twelve month adjusted EBITDAⁱ of $760.5 million.
• Reduced net debtⁱ to $994.2 million during the first quarter, which, together with higher levels of adjusted EBITDAⁱ, further improved the company’s net debt to adjusted EBITDA ratioⁱ to 1.3x compared to 1.6x at the end of 2023.
• Continued deleveraging efforts with a $10 million repayment of the revolving credit facility balance in January 2024 and an additional $10 million repayment after quarter-end in May 2024.
• Increased cash and total liquidity by $45.2 million to $618.9 million as at March 31, 2024 compared to the end of 2023.

Continued Execution of Growth Initiatives to Further Enhance Copper and Gold Exposure

• Post-acquisition plans to stabilize the Copper Mountain operations remain in progress, with a focus on mining fleet ramp-up activities, accelerated stripping and increasing mill reliability. Achieved better than planned copper recoveries of 83% in the first quarter, and stabilization benefits continued to be realized subsequent to quarter end with 83% copper recoveries and approximately 40,000 tonnes per day average mill throughput in the month of April.
• Constancia’s expected mine life extended by three years to 2041 as a result of mineral reserve conversion with the addition of a further mining phase at the Constancia pit.
• The New Britannia mill achieved record throughput levels, averaging 1,870 tonnes per day in the first quarter, exceeding its original design capacity of 1,500 tonnes per day due to the successful implementation of process improvement initiatives and effective preventative maintenance measures. Received permit to increase New Britannia throughput to 2,500 tonnes per day.
• Achieved copper recoveries of approximately 92% and gold recoveries of approximately 68% at the Stall mill in the first quarter of 2024 as the company continues to benefit from the Stall mill recovery improvement project, which was completed in 2023.
• The development of an access drift to the 1901 deposit in Snow Lake remains on track and on budget. 1901 is located within 1,000 metres of the existing underground ramp access to the Lalor mine. The drift is expected to reach mineralization in late-2024, which is intended to enable confirmation of the optimal mining method and conducting drilling to further evaluate the orebody and upgrade inferred gold resources to reserves.
• Progressing the three prerequisites plan (the “3-P plan”) for sanctioning Copper World with deleveraging advancing towards targeted levels and remaining key state permits expected in 2024.
• Drill permitting for highly prospective Maria Reyna and Caballito properties near Constancia continues to advance through the regulatory process with environmental impact assessment applications submitted for both properties in recent months.
• Largest annual exploration program in Snow Lake underway consisting of geophysical surveys and drill campaigns testing the newly acquired Cook Lake claims, former Rockcliff properties and near-mine exploration at Lalor.
• Advancing Flin Flon tailings reprocessing opportunities through metallurgical test work and early economic evaluation to potentially produce critical minerals and precious metals while reducing the environmental footprint.
• Entered into an option agreement with Marubeni Corporation relating to three exploration projects located near Hudbay’s existing Flin Flon processing facilities.

Summary of First Quarter Results

Consolidated copper production of 34,749 tonnes in the first quarter of 2024 declined from the strong levels achieved in the fourth quarter of 2023 but was in line with mine plan expectations. Consolidated gold production of 90,392 ounces in the first quarter exceeded expectations. First quarter production benefitted from the continued mining of high copper and gold grades at the Pampacancha deposit in Peru, continued high gold grades mined at Lalor and strong performance from the New Britannia mill in Manitoba, and the operational stabilization efforts at the Copper Mountain mine in British Columbia. Full year 2024 production guidance for all metals has been affirmed.

Industry-leading consolidated cash cost per pound of copper produced, net of by-product creditsⁱ, was $0.16 in the first quarter of 2024, consistent with the favourable levels achieved in the fourth quarter of 2023. This was primarily the result of continued high by-product credits, partially offset by higher mining costs and lower copper production. Consolidated sustaining cash cost per pound of copper produced, net of by-product creditsⁱ, was $1.03 in the first quarter of 2024 compared to $1.09 in the fourth quarter of 2023. This improvement was primarily due to lower sustaining capital expenditures. Full year 2024 consolidated cash cost, sustaining cash cost and capitalized expenditures guidance has been affirmed.

Cash generated from operating activities in the first quarter of 2024 of $139.7 million was lower than the fourth quarter of 2023 but better than anticipated, primarily because of strong gold sales volumes and higher realized copper prices, partially offset by a $30.1 million increase in cash taxes paid mainly in Peru. Operating cash flow before change in non-cash working capital of $147.5 million also exceeded expectations due to the same reasons.

Similarly, adjusted EBITDAⁱ of $214.2 million in the first quarter of 2024 benefited from the solid operating performance outlined above and remained comparable to the strong levels achieved in recent quarters, including $274.4 million in the fourth quarter and $190.7 million in the third quarter of 2023.

Net earnings and earnings per share in the first quarter of 2024 were $18.5 million and $0.05, respectively, compared to net earnings and earnings per share of $33.5 million and $0.10, respectively in the fourth quarter of 2023. Adjusted net earningsⁱ and adjusted net earnings per shareⁱ in the first quarter of 2024 were $57.6 million and $0.16 per share, after adjusting for a $5.3 million non-cash gain related to the quarterly revaluation of the environmental reclamation provision at the closed sites, a $12.8 million mark-to-market revaluation loss related to share-based compensation expense, a revaluation of the gold prepayment liability and a revaluation of the company’s strategic gold and copper hedges, and a $9.0 million write-down of PP&E, among other items.

As at March 31, 2024, total liquidity increased to $618.9 million, including $284.4 million in cash and cash equivalents as well as undrawn availability of $334.5 million under the company’s revolving credit facilities. Net debt declined by $43.5 million during the quarter to $994.2 million as at March 31, 2024. Based on expected free cash flow generation beyond the first quarter of 2024, the company continues to make progress on the deleveraging targets as outlined in the 3-P plan for sanctioning Copper World.

Peru Operations Review

During the first quarter of 2024, the Peru operations produced 24,576 tonnes of copper, 29,144 ounces of gold, 639,718 ounces of silver and 397 tonnes of molybdenum. While high grade copper and gold ore continued to be mined from Pampacancha in the first quarter of 2024, the mill processed less Pampacancha ore than in the fourth quarter of 2023, which resulted in lower copper, gold and silver production, in line with mine plan expectations. The company is on track to achieve its 2024 production guidance for all metals in Peru.

The Constancia operations benefited from strong mill throughput, averaging 89,000 tonnes per day in the first quarter. Mill ore feed has reverted to the typical blend of approximately one-third from Pampacancha and two-thirds from Constancia, which is expected to continue throughout 2024. The operations benefited from strong cost performance, achieving lower unit operating costs, cash cost and sustaining cash cost compared to the fourth quarter of 2023. Cash cost also benefited from higher gold sales volumes in the first quarter of 2024.

Total ore mined in the first quarter of 2024 decreased by 27% compared to the fourth quarter of 2023, and was in line with the mine plan, which included supplemental ore feed from stockpiles during the quarter as the company advances pit stripping activities. Ore mined from Pampacancha during the first quarter was 2.2 million tonnes at average grades of 0.56% copper and 0.32 grams per tonne gold.

Ore milled during the first quarter of 2024 was 2% higher than the fourth quarter of 2023 mainly due to the treatment of softer ore from stockpiles. Milled copper and gold grades decreased in the first quarter of 2024 compared to the fourth quarter of 2023 as a result of a normalized blending of ore feed from Pampacancha, as described above. Recoveries of copper, gold and silver during the first quarter of 2024 were 84.9%, 73.4% and 70.7%, respectively, and were in line with metallurgical models.

Combined mine, mill and G&A unit operating costsⁱ in the first quarter were $10.92 per tonne, 11% lower than the fourth quarter of 2023 primarily due to lower milling costs and higher ore throughput.

Cash cost per pound of copper produced, net of by-product creditsⁱ, in the first quarter of 2024 was $0.43, a 20% improvement over the favourable levels achieved in the fourth quarter of 2023 primarily due to higher by-product credits, lower milling costs, lower treatment and refining costs and lower freight costs, partially offset by higher copper production. Cash cost for the quarter was below the low end of the 2024 guidance range primarily due to high gold by-product credits, and it is expected to increase during the remainder of 2024 with full year cash cost expected to be within the 2024 guidance range.

Sustaining cash cost per pound of copper produced, net of by-product creditsⁱ, for the first quarter of 2024 was $1.06, a 12% improvement over the fourth quarter of 2023 primarily due to the same factors affecting cash cost.

The collective bargaining agreement with the labour union representing a portion of the Constancia workforce expired in November 2023, and Hudbay continues to negotiate the terms of a new agreement with the union.

In March 2024, the Peruvian Ministry of Energy and Mines indicated an intention to make regulatory changes to allow mining companies to increase their permitted mill throughput levels by up to 10%. The company is monitoring the status of this proposed regulation and evaluating the potential to increase future production at Constancia.

Manitoba Operations Review

The Manitoba operations produced 56,831 ounces of gold, 3,149 tonnes of copper, 8,798 tonnes of zinc and 219,823 ounces of silver during the first quarter of 2024. Production of gold in the first quarter was better than expected as a result of many operational improvement initiatives and record performance from the New Britannia mill, as described below. The company is on track to achieve its 2024 production guidance for all metals in Manitoba.

The strong production results in the first quarter of 2024 were partly attributed to the successful implementation of improvement initiatives at the Lalor mine that were completed in the second half of 2023 and in early 2024. Noteworthy improvements include high shaft availability, efficient ore hoisting, stope fragmentation reduction and mucking productivity enhancements. In 2024, the company’s primary focus entails implementing stope design modifications aimed at improving mucking efficiency throughout a stope’s lifecycle. The company also continues to focus on maintaining the quality of ore production with elevated metal grades through diligent efforts to minimize dilution and enhance ore recovery from stopes.

Total ore mined in Manitoba in the first quarter of 2024 was 9% higher than the fourth quarter of 2023. Grades for all metals reflect the successful execution of the company’s strategic mine plan that prioritizes gold and copper production with a focus on enhanced ore recovery. This resulted in the continued mining of higher gold and copper grade zones and robust grade control practices, including assaying and sampling of blastholes, which further improved ore quality. This also resulted in reduced mining from the zinc areas, lowering the overall zinc grade at Lalor in the first quarter of 2024, in line with the mine plan.

Consistent with the company strategy of allocating more Lalor ore feed to New Britannia, the New Britannia mill throughput averaged a record 1,870 tonnes per day in the first quarter of 2024, a 4% improvement over the previous record level achieved in the fourth quarter of 2023. Recoveries of gold, copper and silver in the first quarter of 2024 were 88.6%, 96.2% and 82.0%, respectively.

The Stall mill processed 4% less ore in the first quarter of 2024 than the fourth quarter of 2023, which is aligned with the strategy of allocating more Lalor ore feed to New Britannia, as noted above. With the completion of the Stall mill recovery improvement project in 2023, recoveries of gold, copper and silver in the first quarter of 2024 were consistent with the fourth quarter, achieving targeted gold recovery levels of approximately 68%.

Combined mine, mill and G&A unit operating costsⁱ in the first quarter of 2024 were C$235 per tonne, a small increase of 9% compared to the fourth quarter of 2023 due to higher mining costs as a result of lower capitalized development costs and longer haulage distances and higher milling costs at Stall associated with lower throughput.

Cash cost per ounce of gold produced, net of by-product creditsⁱ, in the first quarter of 2024 was $736, an increase compared to the uncharacteristically low fourth quarter of 2023 which benefitted from record gold production and higher by-product credits. However, the first quarter cash cost was well positioned at the lower end of the 2024 cash cost guidance range, and the company expects full year gold cash cost to remain within the 2024 guidance range.

Sustaining cash cost per ounce of gold produced, net of by-product creditsⁱ, in the first quarter of 2024 was $950, an increase compared to the fourth quarter of 2023 primarily due to the same factors affecting cash cost as well as lower sustaining capital costs during the quarter.

The New Britannia mill achieved record quarterly throughput of 1,870 tonnes per day in the first quarter due to ongoing improvement initiatives and effective preventative maintenance measures. Noteworthy enhancements in the elution circuit, which facilitates efficient carbon transfer and gold stripping, have bolstered gold recovery to doré. During the first quarter, Hudbay received a permit approval from the Manitoba Environment and Climate Change ministry (“MECC”) to increase the New Britannia mill production rate above nameplate capacity to 2,500 tonnes per day. This key approval aligns with the company’s long-term objectives to further increase gold production at the Snow Lake operations by directing more gold ore from Lalor to the New Britannia mill to achieve higher gold recoveries.

At the Anderson tailings facility, Hudbay successfully improved the tailings deposition process during the quarter, leveraging new equipment and procedural refinements, enabling optimized storage capacity and deferred dam construction capital to future years. To further optimize the storage capacity of the facility, a permit to conduct a subaerial tailings deposition trial study was submitted to MECC during the quarter.

British Columbia Operations Review

During the first quarter of 2024, the British Columbia operations produced 7,024 tonnes of copper, 4,417 ounces of gold and 88,376 ounces of silver. Production of copper and silver was lower than the fourth quarter of 2024 primarily as a result of lower head grades, partially offset by higher recoveries. Production of gold was higher than the fourth quarter of 2024 as a result of higher grades and higher recoveries. The company is on track to achieve 2024 production guidance for all metals in British Columbia.

Since completing the acquisition of Copper Mountain on June 20, 2023, Hudbay has been focused on advancing operational stabilization plans, including opening up the mine by adding additional mining faces and re-mobilizing idle haul trucks, optimizing the ore feed to the plant and implementing plant improvement initiatives that mirror Hudbay’s successful processes at Constancia. While the benefits of these stabilization plans are not expected to be fully realized until 2025, the company successfully increased the total tonnes moved and has seen stronger mill performance as demonstrated by higher mill availability and above-target copper recoveries of 83.4% in the first quarter of 2024, achieving the highest quarterly copper recoveries in the last decade. Stabilization benefits continued to be realized into April with 83% copper recoveries and approximately 40,000 tonnes per day average mill throughput, an increase of approximately 9% over throughput levels in the first quarter.

Hudbay has exceeded the targeted $10 million in annualized corporate synergies and is on track to realize the three-year annual operating efficiencies target.

Total ore mined at Copper Mountain in the first quarter of 2024 was 3.7 million tonnes, a 42% increase versus the fourth quarter of 2023. The mine operations team continues to implement a fleet production ramp up plan to remobilize idle capital equipment at the Copper Mountain site as part of the accelerated stripping program to access higher head grades. This plan entails remobilization of the mining truck fleet, deployment of an additional shovel, production drill and associated equipment. During the quarter, the company also advanced the delivery of five haul trucks to self-perform additional stripping activities over the next three years at a lower cost than the contractor mining approach that was contemplated in the technical report. As a result, total material moved is expected to continue to increase quarter over quarter in line with the mine plan.

The mill processed 3.2 million tonnes of ore during the first quarter of 2024, a 3% decrease versus the fourth quarter of 2023. Benefiting from stabilization and reliability initiatives within the comminution circuit, the average mill availability during the first quarter of 2024 increased by approximately 4% to 90.4%, compared to the fourth quarter of 2023, while maintaining a stable throughput rate. Mill throughput in the first quarter 2024 was impacted by reduced reliability of the crushing circuit, caused primarily by elevated levels of magnetite and scrap metal as mining progresses through areas of historical underground workings. During the quarter, a number of initiatives were advanced to address these issues and other identified constraints and improve throughput to targeted levels, with the benefits expected to be realized throughout the rest of 2024. These initiatives include reprogramming of the mill expert system, installation of advanced semi-autogenous grinding (SAG) control instrumentation, redesign of the SAG liner package and updated operational procedures intended to remove magnetite from the pebble stream.

Maintenance practices to improve mill availability continue to be a key pillar of the stabilization initiatives. The first quarter planned maintenance shutdown focused on achieving 100% compliance to planned execution. Future maintenance practice enhancements are planned for rollout over the second and third quarters of 2024, which entail the implementation of improved maintenance management processes and a change in the maintenance organizational structure. Work has begun to analyze the trade-off among the various alternatives to further enhance mill performance.

Milled copper grades during the first quarter of 2024 averaged 0.27%, lower than the fourth quarter of 2023 but higher than the reserve grade of 0.25%. Copper recoveries of 83.4% were higher than the fourth quarter of 2023 and higher than expectations for the first quarter due to relieving the regrind circuit constraint and implementing the flotation operational strategy improvements, including reagent selection and dose modification.

Work continues on the expert system that controls mill feed with implementation expected during the second quarter. Throughput in April increased to approximately 40,000 tonnes per day as the mill began realizing benefits from the recalibrated expert system, amongst other initiatives. The benefits of the operational stabilization improvements are expected to continue to be realized throughout 2024. The company is also accelerating engineering studies to debottleneck and increase the nominal plant capacity to 50,000 tonnes per day earlier than was contemplated in the technical report.

Combined mine, mill and G&A unit operating costs in the first quarter of 2024 were C$23.67 per tonne milled, 13% higher than the fourth quarter of 2023 primarily due to higher mining costs. Combined unit operating costs are expected to decrease over time as the company continues to implement its stabilization and optimization initiatives at Copper Mountain. As the hiring and training of additional haul truck drivers continues, the company expects to have a fully trained complement of truck drivers by July to support the larger mining fleet, which is expected to increase material moved and reduce unit operating costs.

Cash cost and sustaining cash cost per pound of copper produced, net of by-product credits, in the first quarter of 2024 were $3.49 and $4.85, respectively. Cash cost for the quarter was above the upper end of the 2024 guidance range; however, it is expected to decline during the remainder of 2024 and the full year cash cost is expected to be within the 2024 guidance range.

Generating Free Cash Flow with Increased Production and Continued Financial Discipline

Hudbay delivered a third successive quarter of positive free cash flow during the first quarter of 2024 as the company executed its plan for higher copper and gold production from Pampacancha and higher gold production at Lalor, both driven by higher grades, throughput and recoveries. The company continues to expect to see strong production levels throughout 2024 from sustained higher grades in Peru and Manitoba, along with additional production from Copper Mountain.

During the first quarter, Hudbay completed $10 million in net repayments on its revolving credit facilities. The company also completed three additional months of deliveries under the gold forward sale and prepay agreement, further reducing the outstanding gold prepayment liability, and is scheduled to fully repay the gold prepay facility by August 2024. Despite these debt repayments and gold deliveries, the company increased its cash and cash equivalents to $284.4 million and reduced overall net debt to $994.2 million as at March 31, 2024, compared to $249.8 million and $1,037.7 million, respectively, as at December 31, 2023. The $43.5 million decline in net debt, together with higher levels of adjusted EBITDAⁱ in the first quarter, have improved Hudbay’s net debt to adjusted EBITDA ratioⁱ to 1.3x compared to 1.6x at the end of 2023. Subsequent to quarter-end, the company continued the deleveraging efforts with an additional $10 million repayment on the revolving credit facilities in May 2024.

During the first quarter, the company continued to exercise financial discipline and take steps to support free cash flow generation during the stabilization period at Copper Mountain. To this end, Hudbay entered into new forward sales contracts at Copper Mountain for a total of 3,600 tonnes of copper production over the twelve-month period from May 2024 to April 2025 at an average price of $3.97 per pound, as well as zero-cost collars for 3,000 tonnes of copper production over the twelve-month period from May 2024 to April 2025 at an average floor price of $4.00 per pound and an average cap price of $4.36 per pound. As at March 31, 2024, 15.9 million pounds of copper forwards and 19.8 million pounds of copper collars were outstanding, representing approximately 44% of 2024 production guidance levels for Copper Mountain. The company also entered into zero-cost collars for 36,000 ounces of gold production over the period from April to December 2024 at an average floor price of $2,088 per ounce and an average cap price of $2,458 per ounce.

Annual Reserve and Resource Update

Hudbay provided its annual mineral reserve and resource update on March 28, 2024. Current mineral reserve estimates at Constancia and Pampacancha total an aggregate of approximately 548 million tonnes at 0.27% copper with approximately 1.5 million tonnes of contained copper. The expected mine life of Constancia has been extended by three years to 2041 as a result of the successful conversion of mineral resources to mineral reserves with the addition of a further mining phase at the Constancia pit following positive geotechnical drilling studies in 2023. There remains potential for further reserve conversion and future mine life extensions at Constancia through an additional 172 million tonnes of measured and indicated resources at 0.22% copper and 37 million tonnes of inferred resources at 0.40% copper, in each case, exclusive of mineral reserves.

Current mineral reserve estimates in Snow Lake total 17 million tonnes with approximately 2 million ounces in contained gold, and the expected mine life of the Snow Lake operations has been maintained until 2038. The Snow Lake operations continue to achieve higher gold production levels due to the New Britannia mill operating well above design capacity, the recent completion of the Stall mill recovery improvement project in 2023 and the implementation of several optimization initiatives at the Lalor mine to improve the quality of ore production and minimize waste dilution. There remains another 1.4 million ounces of gold in inferred resources in Snow Lake that have the potential to maintain strong annual gold production levels beyond 2030 and further extend the mine life in Snow Lake. The company is advancing an access drift at the nearby 1901 deposit to enable infill drilling aimed at converting the inferred mineral resources in the gold lenses to mineral reserves.

Current mineral reserve estimates at the Copper Mountain mine total 367 million tonnes at 0.25% copper and 0.12 grams per tonne gold with approximately 900,000 tonnes of contained copper and 1.4 million ounces of contained gold. Hudbay acquired the Copper Mountain mine as part of the acquisition of Copper Mountain Mining Corporation in June 2023. The company holds a 75% interest in the Copper Mountain mine, while Mitsubishi Materials Corp. holds the remaining 25% interest. The current mineral reserve estimates support a 21-year mine life, as previously disclosed in Hudbay’s first National Instrument 43-101 technical report in respect of the Copper Mountain mine filed in December 2023 (the “Copper Mountain Technical Report”). There exists significant upside potential for reserve conversion and extending mine life beyond 21 years through an additional 140 million tonnes of measured and indicated resources at 0.21% copper and 0.10 grams per tonne gold and 370 million tonnes of inferred resources at 0.25% copper and 0.13 grams per tonne gold, in each case, exclusive of mineral reserves.

Hudbay released updated three-year production guidance with its annual mineral reserve and resource update, as presented below. Consolidated copper production over the next three years is expected to average 153,000ⁱⁱ tonnes, representing an increase of 16% from 2023 levels. Consolidated gold production over the next three years is expected to average 272,500ⁱⁱ ounces, reflecting continued high annual gold production levels in Manitoba and a smoothing of Pampacancha high grade gold zones in Peru over the 2023 to 2025 period. Annual production at the Constancia operations is expected to average approximately 101,000ⁱⁱ tonnes of copper and 62,000ⁱⁱ ounces of gold over the next three years. Annual gold production from Snow Lake is expected to average approximately 185,000ⁱⁱ ounces over the next three years, in line with 2023 levels. Annual copper production at the British Columbia operations is expected to average approximately 41,000ⁱⁱ tonnes of copper over the next three years. British Columbia production guidance ranges in 2024 and 2025 are wider than typical ranges and coincide with the operation ramp up activities over the stabilization period. Copper production at the Copper Mountain mine is expected to increase by 32% in 2026 compared to 2024, reflecting operational improvements consistent with the Copper Mountain Technical Report.

Advancing Permitting at Copper World

The first key state permit required for Copper World, the Mined Land Reclamation Plan, was initially approved by the Arizona State Mine Inspector in October 2021 and was subsequently amended to reflect a larger private land project footprint. This approval was challenged in state court, but the challenge was dismissed in May 2023. In late 2022, Hudbay submitted the applications for an Aquifer Protection Permit and an Air Quality Permit to the Arizona Department of Environmental Quality. Hudbay continues to expect to receive these two outstanding state permits in 2024. Hudbay also received the floodplain use permit approval from Pima County in April 2024.

Copper World is one of the highest-grade open pit copper projects in the Americasⁱⁱⁱ with proven and probable mineral reserves of 385 million tonnes at 0.54% copper. There remains approximately 60% of the total copper contained in measured and indicated mineral resources (exclusive of mineral reserves), providing significant potential for Phase II expansion and mine life extension. In addition, the inferred mineral resource estimates are at a comparable copper grade and also provide significant upside potential.

Exploration Update

Progressing Maria Reyna and Caballito Exploration Permits

Hudbay controls a large, contiguous block of mineral rights with the potential to host mineral deposits in close proximity to the Constancia processing facility, including the past producing Caballito property and the highly prospective Maria Reyna property. The company commenced early exploration activities at Maria Reyna and Caballito after completing a surface rights exploration agreement with the community of Uchucarcco in August 2022. As part of the drill permitting process, environmental impact assessment applications were submitted for the Maria Reyna property in November 2023 and for the Caballito property in April 2024.

Executing Largest Snow Lake Exploration Program

The planned 2024 exploration program is Hudbay’s largest Snow Lake program in company history and consists of modern geophysical programs and multi-phased drilling campaigns:

• Modern geophysics program – A majority of the newly acquired Cook Lake and former Rockcliff claims have been untested by modern deep geophysics, which was the discovery method for the Lalor deposit. A large geophysics program is currently underway including surface electromagnetic surveys using cutting-edge techniques that enable the team to detect targets at depths of almost 1,000 metres below surface.
• Multi-phased drilling program – The results from the winter 2024 surface drill program near Lalor are being analyzed and the company is planning follow-up drill programs for the balance of 2024.

The goal of the 2024 exploration program is to test mineralized extensions of the Lalor deposit and to find a new anchor deposit within trucking distance of the Snow Lake processing infrastructure, which has the potential to extend the life of the Snow Lake operations beyond 2038.

Advancing Access to the 1901 Deposit

In the first quarter of 2024, the company commenced the development of a smaller profile drift from the existing Lalor ramp towards the 1901 deposit. The 1901 development and exploration drift is proceeding on schedule and on budget and is expected to reach the mineralization in late-2024, followed by planned definition drilling in 2025 intended to confirm the optimal mining method, evaluate the orebody geometry and continuity, and convert inferred mineral resources in the gold lenses to mineral reserves. In addition to the benefits of being able to cycle development rounds faster, the smaller profile drift has significantly reduced the cost per metre of advance by 33% compared to average 2023 development costs incurred at Lalor.

Unlocking Value Through Flin Flon Tailings Reprocessing

Hudbay is advancing studies to evaluate the opportunity to reprocess Flin Flon tailings where more than 100 million tonnes of tailings have been deposited for over 90 years from the mill and the zinc plant. The studies are evaluating the potential to use the existing Flin Flon concentrator, which is currently on care and maintenance after the closure of the 777 mine in 2022, with flow sheet modifications to reprocess tailings to recover critical minerals and precious metals while creating environmental and social benefits for the region. The company is completing metallurgical test work and an early economic study to evaluate the tailings reprocessing opportunity.

The Flin Flon tailings facility contains materials generated from the metallurgical complex and confirmatory drilling has been conducted over the last several years:

• Mill tailings – Initial confirmatory drilling completed in 2022 indicated higher zinc, copper and silver grades than predicted from historical mill records while confirming the historical gold grade. In 2023, Hudbay advanced metallurgical test work and evaluated metallurgical technologies, including the signing of a test work co-operation agreement with Cobalt Blue Holdings (“COB”) examining the use of COB technology to treat Flin Flon mill tailings. Initial results from preliminary roasting test work were encouraging in converting more than 90% of pyrite into pyrrhotite and molten sulphur, and the project has been advanced to the next stage of testing.
• Zinc plant tailings – This section of the tailings facility was previously unable to be drilled in 2022 due to water levels from operations. The water levels have receded since the completion of operations in mid-2022, and in 2024, Hudbay completed an initial confirmatory drill program in this portion of the tailings facility with results pending.

A key benefit of tailings reprocessing is the potential to reduce the environmental footprint by removing acid-generating properties of the tailings, which would improve the environmental impacts through higher quality water in the tailings facility and reduce the need for long-term water treatment.

Marubeni Flin Flon Exploration Partnership

In March 2024, Hudbay entered into an option agreement (the “Marubeni Option Agreement”) with Marubeni Corporation, pursuant to which Hudbay has granted Marubeni’s wholly-owned Canadian subsidiary an option to acquire a 20% interest in three projects located within trucking distance of Hudbay’s existing processing facilities in the Flin Flon area. Pursuant to the Marubeni Option Agreement, the option holder must fund a minimum of C$12 million in exploration expenditures over a period of approximately five years in order to exercise its option. All three projects hold past producing mines that generated meaningful production with attractive grades of both base metals and precious metals. The properties remain highly prospective with potential for further discovery based on the attractive geological setting, limited historical deep drilling and promising geochemical and geophysical targets.

Upon successful completion of the option holder’s earn-in obligations and the exercise of the option, a joint venture will be formed to hold the selected projects with Hudbay, acting as operator, holding an 80% interest and Marubeni indirectly holding the remaining 20% interest.

Qualified Person and NI 43-101

The technical and scientific information in this news release related to the company’s material mineral projects has been approved by Olivier Tavchandjian, P. Geo, Senior Vice President, Exploration and Technical Services. Mr. Tavchandjian is a qualified person pursuant to National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).

For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources at Hudbay’s material mineral properties, as well as data verification procedures and a general discussion of the extent to which the estimates of scientific and technical information may be affected by any known environmental, permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please see the technical reports for the company’s material properties as filed by Hudbay on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov.

About Hudbay

Hudbay is a copper-focused mining company with three long-life operations and a world-class pipeline of copper growth projects in tier-one mining-friendly jurisdictions of Canada, Peru and the United States.

Hudbay’s operating portfolio includes the Constancia mine in Cusco (Peru), the Snow Lake operations in Manitoba (Canada) and the Copper Mountain mine in British Columbia (Canada). Copper is the primary metal produced by the company, which is complemented by meaningful gold production. Hudbay’s growth pipeline includes the Copper World project in Arizona (United States), the Mason project in Nevada (United States), the Llaguen project in La Libertad (Peru) and several expansion and exploration opportunities near its existing operations.

The value Hudbay creates and the impact it has is embodied in its purpose statement: “We care about our people, our communities and our planet. Hudbay provides the metals the world needs. We work sustainably, transform lives and create better futures for communities.” Hudbay’s mission is to create sustainable value and strong returns by leveraging its core strengths in community relations, focused exploration, mine development and efficient operations.