Title

Presentation

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. Fourth Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. I would like to remind everyone that, this conference call is being recorded today, February 24, 2023, at 8:30 A.M. Eastern Time. I will now turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.

Candace Brule: Thank you, operator. Good morning, and welcome to Hudbay’s 2022 Fourth Quarter Results Conference Call. Hudbay’s financial results were issued yesterday and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available, and we encourage you to refer to it during this call. Our presenter today is Peter Kukielski, Hudbay’s President and Chief Executive Officer; Accompanying Peter for the Q&A portion of the call will be Eugene Lee, our Senior Vice President and Chief Financial Officer; and André Lauzon, our Senior Vice President and Chief Operating Officer. Please note that comments made on today’s call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today.

For further information on these risks and uncertainties, please consult the company’s relevant filings on SEDAR and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today’s call are in US dollars unless otherwise noted. And now, I’ll pass the call over to Peter Kukielski.

Peter Kukielski: Thanks very much, Candace. Good morning, everyone, and thank you for joining us. 2022 was a year of dedication, discipline and delivery for Hudbay as we completed our first full year of New Britannia and Pampacancha operations transitioned our Manitoba operation with a new focus on Snow Lake managed through political uncertainty and logistical constraints in Peru and committed to further improving our already low carbon footprint. We were faced with a period of higher input prices and volatile copper prices, but we took measures to reduce our discretionary spending as part of our commitment to disciplined capital allocation and generating free cash flows. More than ever, we are focused on maintaining a strong safety culture in our workplace and continued alignment with our local communities.

In this presentation today, I will go into more detail about our achievements and challenges in 2022, touch on the operating and financial performance of the business and provide an overview of our production and cost outlook as we execute on our key strategic objectives for 2023. Starting on slide 3, we’re proud to have achieved our 2022 consolidated production guidance for all metals and consolidated cash costs and sustaining cash cost guidance in a difficult environment. This was due to the strong ramp-up of the New Britannia mill which successfully increased annual Snow Lake gold production by 46% in its first full year of operations. Similarly, in Peru, a full year of production at Pampacancha helped to bring copper and gold production each by approximately 15% year-over-year.

In Manitoba, 2022 has been a transition year as we closed our 777 mine and Flin Flon metallurgical complex after decades of steady operations. The Manitoba team continued to focus on integrating the Flin Flon employees and equipment into the Snow Lake operations in order to significantly reduce our reliance on higher cost contractors. We also completed confirmatory exploration drilling at our Flin Flon Tailings facility in 2022, which indicated higher grades than reported from our historical mill records. This facility holds in excess of 100 million tonnes of tailings that have been deposited over the span of 90 years. We plan to complete metallurgical test work on the Flin Flon Tails to assess the metallurgical recoveries. Furthermore, our Anderson Tailings facility in Snow Lake contains significant amounts of gold deposited over many decades.

Given our enhanced gold processing capacity in Snow Lake, we are in the early stages of evaluating a similar opportunity to reprocess the Anderson Tailings as well. Elsewhere in Snow Lake, the Lalor expansion beyond 4,650 tonnes per day is ongoing, and the store recovery improvement program is well advanced and on track for completion in early 2023. We also repaid 50% of the gold prepay facility that helped fund our new Britannia mill refurbishment. In Peru, we announced the signing of an exploration agreement with Uchucarcco community in August, providing access to the Maria Reyna and Caballito satellite properties located within trucking distance Constancia, and I’ll touch on these opportunities shortly. In early 2022, we completed an internal positive scoping study at Constantia Norte, highlighting an inferred mineral resource estimate of 6.5 million tonnes at 1.2% copper.

The study concluded that the two high-grade skarn lenses could be mined by underground methods starting in 2029 to supplement the open pit production. Later in the year, our team also completed an initial mineral resource estimate for Llaguen and identified a higher-grade core. Llaguen is 100% owned copper-molybdenum porphyry deposit located in the La Libertad region in Northwestern Peru near the city of Trujillo and within close proximity to existing infrastructure, water and power supply. More importantly, in Peru, we’re extremely proud of the team’s efforts in maintaining strong operations throughout the year despite operating in a challenging environment with heightened inflation recent vertical changes and logistical challenges. The team has been able to successfully navigate this environment, while maintaining steady operations and achieving our copper production guidance in 2022.

In the United States, we demonstrated the value at our copper world project with the release of the preliminary economic assessment in June. The PEA outlined a two-phase mine plan incorporating the newly discovered deposits along the East deposit, formerly known as Rosemont. Phase 1 reflects a 16-year stand-alone operation on private land with average annual copper production of approximately 86,000 tonnes at attractive cash costs of $1.15 per pound. Phase 1 generates robust economics with an after-tax net present value of $741 million at a 10% discount rate and an internal rate of return of 17% using a copper price of $3.50. Phase 2 at Copper World expands mining activities on to federal land and extends the mine life to 44 years with average annual copper production of approximately 100,000 tonnes.

The projected after-tax NPV of the second phase at the time of sanction would be $2.8 billion, which demonstrates the significant upside opportunity, the second phase brings to the project. After the completion of our PEA for Copper World, we initiated the state-level permitting process and received the first of the state permits, the mined land reclamation plan in 2022. We completed the technical work to support the pre-feasibility study for Copper World, which I’ll touch on in more detail later in the presentation. And in late 2022, as part of our disciplined financial planning, we announced three specific prerequisites including specific financial leverage targets that would need to be achieved prior to making an investment decision in Copper world.

Finally, we have been rationalizing our non-core asset portfolio and divested our 100% interest in the Lordsburg property in New Mexico, which was applied through the Mason acquisition in 2018. And we completed the sale of our equity interest in Fireweed metals, which we received in 2018 in exchange for the sale of our Tom and Jason properties in the Yukon. Turning to Slide 4. We started to see the benefits from our recent brownfield investments through increased production and cash flows in our 2022 results. Fourth quarter consolidated copper production increased by 20% from the third quarter, primarily due to higher copper grades in Peru, consolidated gold production was slightly higher than the third quarter due to higher gold grades in Peru, which were partially offset by lower Lalor gold grades in Manitoba.

As I mentioned, we achieved full year consolidated production guidance for all metals. Annual copper and gold production was on the lower end of the guidance range, primarily due to lower than planned grades in the fourth quarter in Peru as we implemented short-term mine plan changes to mitigate the risks associated with logistical and supply chain disruptions. Consolidated copper cash costs increased from the third quarter levels as a result of lower precious metal sales volumes and continued inflationary cost pressures, partially offset by higher copper production. Sustaining cash costs also increased from the third quarter due to the same reasons affecting cash costs and higher capitalized exploration, slightly offset by lower sustaining capital expenditures.

Operating cash flow before changes in non-cash working capital was $109 million during the fourth quarter, reflecting an increase of $27 million compared to the third quarter Fourth quarter adjusted EBITDA was $125 million compared to $99 million in the third quarter. Results were higher than the prior quarter due to higher copper sales volumes and higher copper, gold and molybdenum prices but partially offset by the temporary buildup of unsold inventory in Peru. In light of the environment in the second half of 2022, with increasing input prices and decline in copper prices, we delivered $30 million in discretionary cost reductions across the business through lower growth capital and exploration expenditures. We exited the year with $226 million in cash and equivalents as well as undrawn availability of nearly $350 million under our revolving credit facilities.

On Slide 5, we summarize our Peru operating results. During the quarter, we produced 27,000 tonnes of copper and 21,000 ounces of gold at 21% and 64% increase, respectively, over the third quarter. These production increases were due to higher grades and recoveries, and the fourth quarter was a record quarter for gold production in Peru. Full year copper production increased by 15% year-over-year to 89,000 tonnes, achieving the annual guidance. Full year gold production increased by 16% year-over-year to over 58,000 ounces but fell short of 2022 guidance. This was due to a short-term change in the mine plan where we prioritize the processing of lower grade stockpiles and shorter haulage distances of ore from the Constancia pit. This allowed us to reduce our fuel consumption and keep the mill at steady production during a period of nationwide social unrest and road blockades following the change in Peru’s political leadership in early December.

Despite these changes, total ore mined during the fourth quarter increased by 7% and total ore mined was slightly higher than the pre-quarter. Unit operating costs in the fourth quarter were 4% higher than the third quarter primarily due to higher mining costs and continued inflationary pressures. Full year unit costs were 19% higher than 2021 due to a higher strip ratio higher mining costs and inflationary pressures on fuel, consumables and energy costs, partially offset by higher ore milled. Peru’s cash cost in the fourth quarter declined by 20% to $1.34 per pound compared to the third quarter due to higher copper production and higher by-product credits resulting from higher grades. Sustaining cash costs decreased by 15% quarter-over-quarter, primarily due to the same factors affecting cash costs and lower sustaining capital expenditures, partially offset by higher capitalized exploration.

While we were successful in completing two port shipments in December, inventory of approximately 25,000 metric tonnes of copper concentrate was unsold at the end of the quarter due to nationwide blockades. Given that, we have been able to continue to operate our concentrate inventories at site reached a peak of approximately 47,000 tonnes in mid-February. We were able to complete three concentrate port shipments in January and regular transportation of concentrate has resumed since mid-February. We expect to return to normal concentrate inventory levels in the next several months. As an additional prudent measure intended to ensure a positive cash flow generation and continued financial discipline, we expect to extend our existing quotational period hedging program to cover approximately 13,000 tonnes of contained copper in the unsold concentrate inventory to lock in current copper prices.

Moving to the next slide on Manitoba. Gold, zinc and silver production declined during the fourth quarter compared to last quarter, primarily as a result of lower grades at Lalor in line with the mine plan. Copper production was slightly higher than last quarter. Full year 2022 production in Manitoba was impacted by the planned closure of 777 in June, resulting in a decrease in copper, zinc and silver production while annual gold production increased by 13% as New Britannia ramped up to full production. Full year production of all metals in Manitoba achieved the 2022 annual guidance ranges. All in mind that Lalor increased by 6% in the fourth quarter compared to the third quarter, mainly due to the higher production initiatives and the integration of the Flin Flon employees and equipment partially offset by a planned maintenance program at the mine.

We continue to advance several key initiatives to support higher production levels at Lalor, including building longhole inventory, improving stope fragmentation, optimizing the development drift size and focusing on shaft availability improvements to enable more ore to be hoisted to surface, while reducing inefficient trucking of ore via the ramp. The combined Snow Lake Mills processed 5% less ore in the fourth quarter due to the employee transition and planned maintenance. The New Britannia Mill continued to achieve consistent production, averaging 1,530 tonnes per day in the fourth quarter. Combined unit operating costs in the fourth quarter were relatively in line with the third quarter Full year combined unit operating costs increased by 27% compared to 2021, reflecting the stand-alone higher cost structure of Snow Lake after the closure of the 777 mine and the Flin Flon operations in mid-2022.

Manitoba’s gold cash costs were $922 per ounce in the fourth quarter, higher than the third quarter, primarily due to lower byproduct credits and lower gold production. However, full year 2022 cash costs were $297 per ounce, which was impressively below the low end of the annual guidance range. Slide seven illustrates the growth in copper and gold production on the back of the $250 million in brownfields investments we delivered in early 2022. 2023 is expected to be another year of meaningful growth, with consolidated copper production expected to increase by 10% and consolidated gold production is expected to increase by 30% compared to 2022. Consolidated copper and gold production is expected to further grow in 2024 as a result of continued higher grades at Pampacancha and several gold production enhancements in Snow Lake.

This is expected to lead to increasing EBITDA and cash flows, and we believe our high-quality pipeline of attractive development and exploration opportunities will further add to this growth in the medium to long term. Slide eight highlights the details behind the 2023 consolidated production growth. In Peru, the mine plan adjustments we saw in the fourth quarter continued into early 2023 to ensure steady operation of the plants during the regional logistical challenges. This is expected to result in more ore being mined from Constancia and less from the Pampacancha pit in early part of the year. Despite these changes and a period of higher stripping at Pampacancha, 2023 production is expected to be 103,500 tonnes of copper and 95,500 ounces of gold, representing year-over-year increases of 16% and 64%, respectively.

In Manitoba, 2023 gold production is expected to increase by 18% to 190,000 ounces due to higher gold grades and a 10% increase in ore throughput at the Lalor mine. The 2023 mine plan at Lalor reflects higher production from the gold and copper gold zones, as those zones are expected to be prioritized over the base metal zones. It also reflects a 10% increase in throughput at the New Britannia mill, as the mill has been consistently achieving the levels above nameplate capacity. These mine plan enhancements result in 2023 gold production level being consistent with the most recent mine plan for Snow Lake, but without the full ramp-up to 5,300 tonnes per day, as we focus on maximizing the value per tonne of ore at Lalor. Year-over-year, zinc production is expected to decline by 42%, primarily due to the recent closure of the 777 mine.

We expect to release 2024 and 2025 guidance next month, with our annual mineral reserve and resource update. We expect our 2024 production guidance to be similar to the previously issued guidance, reflecting a further increase in copper production in Peru and gold production in Manitoba. More importantly, we now expect mining activities at the Pampacancha deposit to continue into the first half of 2025, which is expected to increase copper and gold production in 2025 beyond the levels shown in the most recent technical report. Slide nine summarizes our cost guidance for 2023. Total expenditures are expected to decline by approximately $65 million compared to last year due to lower discretionary growth capital and exploration spending in 2023.

Peru’s sustaining capital expenditures are expected to increase year-over-year, but remain in line with the most recent technical report. The higher level of sustaining capital is due to an increase in heavy civil works for the completion of a tailings dam raise in 2023. Manitoba’s sustaining CapEx is expected to be lowered in 2022, due to lower equipment spending at Lalor and in the mills after the Snow Lake transition and ramp-up period in 2022. Total growth capital of $55 million in 2023 includes $10 million for mill recovery improvement initiatives in Peru and $15 million for the completion of the store mill recovery improvement project in Manitoba. We have also allocated $30 million to growth spending in Arizona as we advance permitting economic studies and site works at Copper World in 2023.

Total exploration expenditures of $30 million in 2023 are 61% lower than 2022 levels, due to our focus on discretionary spending reductions. Our planned exploration activities this year are focused on areas with high potential for new discovery and mineral reserve and resource expansion. These initiatives include permitting and grill preparation for the Maria Reyna and Caballito properties near Constantia, a limited drill program at Pampacancha to evaluate the potential to add an incremental mining phase at depth and the winter drill program in Snow Lake focused on testing the deep extension at Lalor. Copper cash costs in Peru are expected to decline by 26% in 2023 versus 2022, primarily due to higher gold by-product credits and higher copper production.

Gold cash costs in Manitoba are expected to increase in 2023 compared to last year as a result of the transition to our primary gold operation with lower byproduct credits after the closure of the 777 mine in June 2022. Consolidated copper cash costs in 2023 are expected to decline by 30% compared to 2022 levels due to the increase in copper production and higher gold byproduct credits from the increase in annual gold production. Consolidated sustaining cash costs in 2023 are expected to be 18% lower than 2022 levels due to the same factors affecting consolidated cash costs, partially offset by slightly higher sustaining capital expenditures. Part of the discretionary spending reductions relate to deferred spending at our Copper World project.

The reduced year-over-year spending at Arizona reflects our focus on project derisking activities including the completion of a prefeasibility study, state-level permitting and plans for bulk sampling program in 2023, as shown on slide 10. The majority of the technical work and expenditures related to the prefeasibility study for Phase 1 of Copper World are now complete. The prefeasibility study is expected to support the conversion of the mineral resources to reserves and optimize the layout and sequencing of the processing facilities. Prefeasibility level engineering the main processing facility was completed by year end, together with geotechnical and hydrogeological site investigation activities. Metallurgical test work continued into 2023 and the results are being analyzed as part of concentrate reaching trade-off evaluations.

The prefeasibility study results are expected to be released by the end of the second quarter of 2023. The Copper World requires only state-level permits for Phase 1. Late last year we submitted applications for an Aquifer Protection Permit and an air quality permit to the Arizona Department of Environmental Quality known as the ADEQ. We have been working closely with the ADEQ and we expect to receive these two remaining permits in 2023. The other key state permit, the Mined Land Reclamation Plan was received in 2022. In January 2023, we received an approved right of way from the state land department with that will allow for infrastructure such as roads, pipelines and power lines to easily connect between the properties in our private land package.

Upon receipt of the state permits, we expect to conduct a bulk sampling program to continue to de-risk the project by testing grade continuity, variable cutoff effectiveness and metallurgical strategies. Additionally, we intend to initiate a minority joint venture partner process, which will allow the potential JV partner to participate in and help fund the definitive feasibility study activities in 2024. The opportunity to sanction Copper World is not expected until 2025 based on current estimated time lines and reflects a conservative approach to spending at Copper World over the next two years. The 3P plan for sanctioning Copper World that I mentioned earlier is laid out on this slide. This plan ensures Hudbay will be in the best position to move the project forward, with the lowest cost of capital and the highest risk-adjusted return on investment.

Turning to slide 11, our recently executed Surface Rights Agreement with the community over Chicago allows for exploration of the Maria Reyna and Caballito properties. Hudbay owns the mineral rights to these properties that are located within trucking distance of the Constancia processing facility, and we completed geophysical surveys in the area that indicate large-scale potential at these properties. Shortly after the community exploration agreement was completed, we commenced baseline environmental and archeological activities to advance the permitting process for property drilling in the future. A ground geophysical survey commenced in the fourth quarter, and will continue once the Peruvian social situation improved. Our geological team commenced surface investigation activities and field evidence confirms that both Caballito and Maria Reyna host sulfide and oxide rich copper mineralization in skarns, hydrothermal breccias and large porphyry intrusive bodies.

Similar to Pampacancha, Caballito was located about 5 kilometers from Constancia and includes an old open pit mine that was operated by Mitsui until the early 1990s. The US geological survey from 1990 estimated a total resource of 91 million tonnes as 2.3% copper for the open pit mine. Maria Reyna is approximately 10 kilometers from Constancia and artisanal mining activity is present in the high-grade areas. These small-scale miners report an average grade of between 2% and 6% copper in the ore. In Snow Lake, we commenced a winter drill program in January 2023, with four drill rigs testing the down-dip gold and copper extensions of the Lalor deposit. This is the first time we have completed step-out drilling in the deeper zones at Lalor since the initial discovery of the gold and copper gold zones in 2009 and 2010.

One additional drill rig is actively testing a target to the north of Lalor, which is another highly perspective location next to the main Lalor ore body that is thought to be offset by post mineralization faulting. The first phase of this program includes a total of 12 holes and over 20,000 meters of drilling followed by a combination of surface and borehole electromagnetic surveys. Based on the results from the first phase program, a follow-up drill program is planned for the winter of 2024. We are committed to operating in a manner that demonstrates our focus on the environment, and we are proud of our already low carbon footprint. With over 50% of our total energy consumption being from renewable resources, including nearly 100% renewable energy in Manitoba, we are leading emissions rankings amongst the peers as seen on slide 12.

We also aligned with the highest industry standards to ensure that we are on a par or ahead of industry expectations. We recognize we have a role in mitigating climate change and in December, we were pleased to announce our commitment to achieve net zero greenhouse gas emissions by 2050 and the adoption of an interim target of a 50% reduction in Scope 1 and Scope 2 emissions by 2030. We plan to be reporting on material Scope 3 emissions in the near term and continuing to be transparent with greenhouse gas performance data disclosure. Through our emissions reduction road map, we have identified multiple opportunities to achieve further reductions in emissions, including grid decarbonization in Peru, fleet and heating electrification and fuel switching in mobile equipment.

We have been reporting greenhouse gas emissions data and performance to the CDP climate questionnaire for more than 10 years. Our annual sustainability report maps our CDP responses to the task force on climate-related financial disclosures recommendations. We are also aligned with the Mining Association of Canada’s Towards Sustainable Mining or TSM protocols at all of our operations with the goal to maintain a strong score of an A or higher for all protocols. We truly believe that our ESG principles are the foundation of our business and are critical for our long-term success. Slide 13 summarizes our near-term cash flow growth in our high-quality organic copper pipeline. We believe that copper has the best long-term supply demand fundamentals in the sector as global copper mine supply will be unable to meet demand from global decarbonization initiatives.

We have the highest near-term copper production growth and the highest leverage to copper among our mid-tier base metals peers, and we have successfully increased our copper equivalent resources per share by more than three times over the past decade. For these reasons, we believe Hudbay is uniquely positioned to offer attractive copper production growth and long-term optionality for investors. To summarize, we acted to generate significant near-term cash flows. We also have a world-class organic growth pipeline offering medium to long-term copper production optionality. As you see through this presentation, we have several exciting brownfield and greenfield growth opportunities that we intend to advance with our 2023 key strategic objectives.

Our lower discretionary spending in 2023, together with lower year-over-year cash costs, will allow us to generate positive cash flow and advance our copper development pipeline with minimal capital. We will continue to de-risk Copper World with several project catalysts expected in 2023 as we prudently advance our 3D plan for Copper World sanctioning. In Snow Lake, it will be a year filled with several milestones as we execute the expansion and ramp-up of Lalor beyond 4,650 tonnes per day and complete the Stall mill recovery improvement program early in 2023. And we’ll conclude our drilling program to test the dip extensions at Lalor with the potential to expand gold mineral reserves and resources. In Peru, we will continue to progress Constantia’s leading efficiency metrics by applying smart technologies to continuously improve operating performance, including sensor-based ore sorting and milling flow sheet enhancements.

We also aim to further advance the Maria Reyna and Caballito satellite properties through exploration permitting. We will advance our climate change commitments by assessing opportunities that are aligned with global decarbonization goals. And finally, we will remain vigilant in evaluating growth opportunities that meet our stringent strategic criteria that will reflect sustainable value for the company and our stakeholders. And with that, we are please to take your questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from Fahad Tariq of Credit Suisse. Please go ahead.

Fahad Tariq: Hi, good morning. Thanks for taking my question. Peter, maybe just on the Peru protest situation. Can you talk a little bit more about, like, has the transportation of concentrate? Is it just completely normal now? And what about supplies getting to the mine? It sounds like it’s getting better? I’m just trying to understand, is it at normal levels now. Thanks.

Peter Kukielski: Good morning, and thanks very much for the question, Fahad. I think, look, the political situation in Peru is an interesting one, but it is one that our team has been able to respond to, I feel in a manner that are entirely consistent with my expectations of their performance so far. So to your point, yeah, concentrate transportation has certainly opened up in the last week or two, and we expect that it will continue along those lines. We think that the situation is starting to normalize, but it’s a little bit difficult to predict exactly how it will go. What I can say, though, is that we are closer to our communities than ever. And so we will experience ups and downs in the weeks and months ahead of us. But we have extremely strong support from our communities who have actually come out several times in order to moderate the activities of protesters who come in from the outside.

So that said, that’s a long answer to your question, but I do expect we’ll have ups and downs, but we will continue to be able to reduce the inventory that we have at site and progress shipments out of .

Fahad Tariq: Okay. That’s helpful. And then maybe just as a follow-up. So if you see over the next several weeks it’s kind of very back to normal in terms of getting supplies to the mine. Is it possible to re-check the mine plan to go back to what it was previously, i.e., more Pampacancha ore?

Peter Kukielski: It will take time. I’m sorry that I didn’t really address your question about getting supplied to the mines, but we have been able to consistently get supplies for the mine. The biggest issue has been fueled typically. And so we’ve adjusted the mine plan accordingly to be able to address any of the fuel bottlenecks. But to get back to the mine plan as planned in the short-term will be a little difficult, but perhaps I can ask André to elaborate on that a little bit?

André Lauzon: Sure, sure. So the amount of fuel that we’re getting into site as well as other consumables has been improving. So that’s been a positive trend. We were naturally in the previous mine plan going through a phase of stripping at Pampacancha in the first quarter. And with — in terms of managing fuel from the late December, early January and into February, we prioritized our fuel to keep the mill running and Pampacancha is significantly further than Constancia mill and the other one. So with things started, we started getting back to Pampacancha just this past week. So as we were seeing our fuel levels go up. But it’s probably a few mines, it is a few mines of stripping before we get back into the good grades again, so probably into the next quarter at this point. So there’s no magic scenario to get back and have it like the original plan is definitely going to — you see the grades coming up in Q2.

Fahad Tariq: And you just shift forward the plan that you would otherwise expect us to be operating against?

André Lauzon: Exactly, yeah.

Fahad Tariq: That’s helpful. Thank you.

Fahad Tariq: You’re welcome.

Operator: Our next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Orest Wowkodaw: Hi. Good morning. More questions are around the same lines, in terms of Peru and Constantia. Can you give us an idea on your updated guidance for 2023, what does that assume with respect to the amount of Pampacancha ore that’s going into the plant?

Peter Kukielski: I think, as André said, – I’m sorry morning Orest and thanks for the question. As André said, that the next quarter is going to be focused on, we’re doing a lot of pre-stripping there and we’ll be preferentially mining at Constantia. So I would say that we would push out in March, we would start to see the higher grades coming from Pampacancha again.

Orest Wowkodaw: And in terms of a volume number?

Peter Kukielski: I’m sorry, could you repeat that Orest?

Orest Wowkodaw: Sure. Yeah. In terms of a volume number, like, should we be anticipating that to the tons Milled from Pampacancha is sort of similar to 2022, or could it even be less than 2022?

Peter Kukielski: In terms of total metal, it’s — the year is back loaded, it’s about 60% of the metal coming off at the back end of the year. We’re not going to see much Pampacancha ore until. It’s offset by about three months. And with where we’re at now. So we’re just resuming it right now, so as we’re getting going. I don’t have an absolute number in front of me Orest, but it is a reduction of what we forecasted last year, but it’s comparable in terms of — I think we’re close to last year at this point.

Eugene Lee: Yeah. Hi Orest its Eugene here for just to add some clarity around the guidance range. Our guidance contemplates — the midpoint of our guidance range contemplates getting back into Pampacancha in March. And so if you think about the range of the possibilities from there, that’s probably the outcome that if you want to model that appropriately. That’s probably best way to do it.

Orest Wowkodaw: Okay. Thank you very much.

Operator: Our next question comes from Greg Barnes with TD Securities. Please go ahead.

Greg Barnes: Yes. Thank you. Perhaps an easier way to think about it is you’ve shifted 15,000 tonnes of copper production from 2023 to 2025. Is that effectively what’s happened?

Eugene Lee: I would say, in general, that’s correct, Greg.

Greg Barnes: Okay. Around, Snow Lake and Lalor and the 5,300 tonnes a day, I’m not trying to understand quite what the goal there is now? I know you’re shifting towards more higher grade ore and putting more through new butane, but are you still planning to ramp up to 5,300 tonnes a day or not?

Eugene Lee: Yeah. I will let André provide a little bit more detail on that. But in essence, the 5,300 tonnes per day that we envisaged previously included utilizing the ramp to get a bunch of the ore up. We find that the costs associated with utilizing the ramp, actually squeeze the margins very significantly are a non-efficient use of our time and money. And so it is more cost effective to increase production through the shaft. The specific gravity of the gold ore is lower. So it means that you have to ship more volume up the shaft. Our efforts at the moment are really focused on enhancing production through the shaft, but we will still move towards 5,300 tonnes per day. André, do you care to explain on that?

André Lauzon: Sure. So Greg, we are committed to increasing production. So the plan for next year is about an 8% increase over last year’s production. The differential that Peter was speaking to is the gold ores are a little bit lighter. And so maintaining what we’re at right now at the plan, which is around 47% is already an 8% increase in volume movement. And so as we move forward into next year, like Peter said, it’s inefficient to halt the ramp. I think in January, we halt 18,000 tonnes, and it’s a two-hour round trip, and our scoops are waiting for the trucks to come back. And so we put a real heavy focus on getting more up the shaft. There’s a current bottleneck that we’re — it’s a short-term bottleneck that we’re working through right now.

While we don’t have a pressure underground at Lalor and we ran our month through grizzlies. And gold ore is harder, and so we’re working through a process to improve the grizzly design to have better flows through there. So if you can imagine, we’re shipping 18,000 tonnes up the hill, like two hours a trip going at one-hour and return ship from the stopes, we could easily double that production from 18 to 36 without increasing our fleet in the lake, which is aligned with increasing to that end goal of 5,300 tonnes per day. We’re hitting it on days right now. So we’re hitting it on multiple days for months, but working through some of those little nuances will help us get to that goal.

Greg Barnes: So how does this change, or does it change the production profile from Lalor? I’m still not entirely clear.

André Lauzon : So the production profile is continuing to ramp up through the course of this year. So by the end of the year, it’s probably in the range of 4,700 tonnes per day. At the same time, what we’re working on — and they’re complementary. So we’re also — we’re focused on cash, right? And so we’re working on improving our dilution at the same time and sending less waste to surface. And so obviously, that counters production, but improves cash. And so it’s — we’re trying to get better grades up from the mine and moving less waste, which is aligned with our greenhouse goals, while increasing throughput. We have all the people in place to produce more and right now, we’re working through — there’s about five different process improvement things that are complementing — to complement each other in terms of improving our development, getting the right drill inventory in place, as we’re increasing up to about 200,000 tonnes of broken or blastable material and removing that bottleneck at the grizzlies, which allows us to use our trucks and improve the productivity of the set.

So we’re working on all those. We’re — as we resolve those, we’ll have a better view on what is our final state. What will it be in the 53s or 52s? Is it 54? We’re working through that right now.

Greg Barnes: Okay. Okay. Thank you.

Operator: Our next question comes from Stefan Ioannou of Cormark Securities. Please go ahead.

Stefan Ioannou: Okay. Thanks guys. Just obviously great to see that you’re doing to start the exploration at Caballito and Maria Reyna. Can you just remind us what the — in terms of actually getting drills into the ground there, obviously, some permitting to be done there from an exploration point of view? Is that something that we could anticipate in 2024, or is it even longer winded than that?

Peter Kukielski: Hi, Stefan, thanks for that. Yes, I certainly do think that you could expect it in 2024. So where we are right now is we’ve sort of done the surface work that — or the environmental baseline work that’s require to submit applications for those permits. We are now — we’ve submitted those applications, we’re on the point of submitting those applications. The next thing that follows is the review of the applications by the government as well as the constancia premier process. So we expect to — I mean it takes time, but we expect to get those permits in roughly year. So certainly, we would expect that around about this time next year, we would be — we would have those permits. But in the meanwhile, other additional surface investigations continue.

Stefan Ioannou: Okay. Great. I’m assuming there’s still a fair bit of just sort of drill target definition to be done to really fine-tune that anyways?

Peter Kukielski: Yeah. We’ve done a fair amount of that already. We have — I mean, really, the focus on our side has really been to see do we do sort of a much bigger drill program focused on the entire property, or do we look for sort of focus on the smaller area that would act as a sort of a high-grade substitute or supplement to Pampacancha down the road. So those are the kind of things that we are reflecting on. But as far as definition is concerned, we’re pretty advanced.

Stefan Ioannou: Okay. Great. Great. And then maybe just a very question, I’m not sure how much you can actually say, but just in terms of one of the last slides you continue to evaluate and execute on growth opportunities. Looking outside the current portfolio, are you seeing a lot of opportunities that may compete with some of the internal organic growth that you’re doing right now, or is the focus really on sort of what you laid out in the presentation with the existing projects?

Peter Kukielski: Yeah. Look, I mean — so I think one of the things that I’ve been fairly consistent about is that I believe that we have an extremely skilled team when it comes to highly efficient operations and world-class development of projects. And we do feel that we can create value from both operating and development stage assets. We have this Tier 1 development portfolio and I’ve always said that we’d like to find a cash flowing operating assets that adds to our portfolio to diversify our business. But as I’ve also said, those opportunities are extremely scarce, but we all continue to look for them, and we’ll see what happens.

Stefan Ioannou: Yeah, yeah. Okay. Great. Well, thanks very much guys.

Operator: Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.

Lawson Winder: Thank you, operator. Good morning, Peter, Andre and Eugene, nice to hear from you all. On the Pampacancha mine plan change, could it possibly be taken as a positive in the sense that it smooths out the copper production profile longer term? And then there’s also the Constancia underground under consideration. What can you tell us about potential 2026 copper production from Peru? Could it now be similar in magnitude to 2025 as opposed to the drop-off in production that was contemplated in the last life of mine study?

Peter Kukielski: Good morning, Lawson. So first, thanks for the question. The first part of it is, yes, I think you can take that as a positive. The second part is that once Pampacancha is depleted, then you move into Constancia Norte. And I think that — so it maintains grades a bit, at least it maintains production. But it is — over time, it does start to decline. But to your point, is 2026, you should sort of see it continuing at a rate of about 100,000 tonnes per year.

Eugene Lee: So if I was to add to that, we’re also working on a number of other process improvement projects. So in our capital, you would have seen that we were deferring the pebble pressure — and one of them we been planning a trial early this quarter around rejecting pebbles from the mills, which are typically around 0.15 copper. And so we’re looking at a trial of using it like a variable cutoff where you increase the mine throughput, reject the pebbles and get a much higher grade through the plant. And so we’re looking at that test in the near future and that is an opportunity for us to try to maintain up in the 100,000 tonnes per year of copper €“ post-copper culture. As well, we’ve been seeing some successes with their ShovelSense, so in terms of selectively removing waste from the ore at the face.

And we’re — the results today have been looking promising. It’s still in the testing phase, and we’re looking to — we’ve put aside probably 50,000, 60,000 tonnes of material that we want to run through the mill and just to verify that degrade that we’re sorting are in line. But the combination of those two projects bode well for us to send better grade to the mill than what the current life of mine plan shows.

Lawson Winder: Okay. Thanks for that both of you. And then with the cash cost guidance. Would you be able to help us by providing what the cost per tonne assumptions are underlying those for both Peru and Manitoba, as you’ve provided in the past?

Eugene Lee: Hi, Lawson, it’s Eugene here. Yes, we’ve evolved in our cost guidance. And in prior years, you would notice that we provided operating unit cost guidance. And then last year, we added cash cost guidance in an effort to streamline the multitude of metrics that we guide to, we’ve reverted to kind of one metric per mine in terms of cost guidance. So cash cost per pound in Peru and cash cost per ounce of gold in Manitoba. The unit cost, we will continue to report in our financials on a quarterly basis. And they are roughly in line for 2023 as projected from where we’re trending. So approximately $12 a tonne in Peru and approximately CAD200 per tonne in Manitoba would be kind of a rough guide to where you get to. So similar levels, but we’re going to kind of stop in providing specific guidance for that while continuing to report.

Lawson Winder: Okay. Well, that right there is very helpful. Oh, sorry, go ahead.

Eugene Lee: We’ll note that the cash cost guidance for 2023 is lower than that in 2022. So I think the story would be that we’re producing more copper in Peru, more gold in Manitoba and at a lower cash cost, and that’s a testament to the team’s focus on cost efficiencies and despite the inflationary environment.

Lawson Winder: Yes. That’s fantastic. Thanks very much, Eugene and thank you, Peter and André.

Peter Kukielski: Welcome.

Operator: Our next question comes from Dalton Baretto of Canaccord. Please go ahead.

Dalton Baretto: Thanks. Good morning, Peter and team. I want to start with just clarifying a couple of things that I heard on the — earlier on the Q&A here. Andre, so is it your intention to get the 5,300 tonnes per day at Lalor at some point in time? And if so, when?

Peter Kukielski: Okay. Thanks for the question, Dalton. So the intention is to get to the right number. So we’re optimizing a variety of scenarios, and the goal is to make more cash out of Manitoba and so guided in terms of the capital for Manitoba. I think we’re spending about $75 million on capital development. A key focus that we’re working on in the next year is trying to reduce our development costs by almost 20%, which will go way to the bottom line and improve the economics for future projects. The mine itself, we have the labor in place to move the material. So that’s why we’re running at a little bit higher cost. And where we’re at right now is there are some bottlenecks that creeped up on us that we weren’t anticipating, particularly the fragmentation of the gold or the fragmentation isn’t bad by mining standards.

But because the ore is so hard when we’re putting it through the breakers, it’s causing delays on our trucks and the delays on the trucks are translating to delays in the stopes because we siloed our trucks. And so what ends up happening is right now, due to hauling it to surface to keep production going. And so we think probably within the next quarter or two, we’re going to be at a stage where we saw that bottleneck at the shaft and we’ll start to see improvements in terms of our overall throughput going up to mine at a lower cost. At the same time, we’re balancing off the development place to have the drill rooms and drill inventory. We had quite a turnover of people, if you will, over the last six months with the transition of people from Flin Flon to Snow Lake — and — as well within our management almost 50%.

So it’s quite a significant training exercise. And so they’re very skilled miners, the ones that are development miners for sure. And so all of those processes are going on. And so it will be towards the end of the year that you start seeing it. Firstly, I said on the previous call, we’re definitely hitting them on days — we’ve seen days over 6,000 tonnes per day. And the key is we have to get that reliably and balanced their process. It will be towards the end of this year and probably into the next to get to that peak level, if you will. But it’s a combination of — it’s not just chasing times as we’re chasing value and cash. And so at the same time, while we’re asking for more, we’re asking them to blast last to just mine the good stuff, the higher grade gold and avoid dilution and save on our tailings cost and milling costs in the lake.

So it’s a balanced conversation. We’ll have a better view on that as we go into the next quarters.

Eugene Lee: Dalton, you understood that

Dalton Baretto: Yes

A €“ Peter Kukielski: Little bit to that. You’ll notice that our plan for this year results in an increase in the gold production guidance versus last year or this was planned last year, and that’s due to some of these efficiencies that Andre talks about we’re going to be running New Britannia now above 1,600 tonnes per day, which is above nameplate. And so optimizing the infrastructure we have to maximize €“ the both production at the lowest cost — maybe to reference a question that Orest asked earlier today, I wanted to clarify that we will be — a plan is to mine Pampacancha and increased tonnage to Pampacancha this year even in this base case. It’ll be about somewhere around 50% to 60% more ore mined at Pampacancha in 2023 than in 2022, even with the delays that we’ve noted due to logistics.

Dalton Baretto: Thanks. That’s helpful. But just to — kind of put a pin in lower then. So it sounds like you’re focusing on the goal at the expense of copper, zinc and overall tonnes. At what point in time do you — is that sustainable, first of all, at what point in time do you think you’ll come up with the right answer.

A €“ Peter Kukielski: So the answer is €“ sustainable. The current resource base is more gold than base metals. So in terms of the balance — and right now, that’s why we’re doing the all grade recovery improvement program around getting better gold recoveries and copper recoveries because today, we’re producing more gold ore than what New Brit can handle even though I think in January, we peak close to 1,800 tonnes per day in terms of throughput at New Britannia. So we’re trying to push the limit there, but the challenge that we’re facing now is we have a surplus of gold ore relative to base metals. So it’s not a sustainability question. But in terms of the overall, as we drive and increase our unit rates, and bring our development costs down, it makes it easier to develop some of those base metal orders, because we have less margin than the gold.

Dalton Baretto: Okay. Thanks. And then, one more clarification on the mine Constancia. Peter, I thought I heard you say that kind of post 2025 postpone Concho , you’re going to move into Constancia Norte and keep the production level reasonably stagnant at 100,000 tonnes. But I thought Constancia Norte wasn’t going to come online until 2029, just wondering, if you could square that away from you.

Peter Kukielski: So the 2029 one would be underground, but we would be going into Constancia Norte into ’23 — open pit part of even 2026.

Dalton Baretto: Thank you. And then maybe just one last one for me. I just want to switch gears to top the world. And the PFS that you’re going to publish by the end of Q2. I’m just wondering, have you guys decided on what your base case flow sheet is going to be? Is it going to be the same as the PEA? We talked in the past about maybe a modular approach. Just wondering, what you’re going to present as your base case.

Peter Kukielski: Yes. So right now, we’ve completed all the engineering for all the cost estimates for a variety of different treatment scenarios, whether it’s shipping Skarn, whether it’s the Albian or some different pressure leaches. And so with all the costs in place and the engineering completed, right now, we’re going through the optimization of what makes the most sense. So, we’re holding in on what is the right number for us from a capital for the financials and the like. So we don’t have that answer right yet, and that’s the optimization process that we’re going through feeding into getting it by the end of Q2.

Eugene Lee: And Dalton, to be sure that we are highly focused on minimizing the CapEx and maximizing simplicity, I think that we mentioned to you previously that there is the ability to modularize some of this stuff. So the question really is, I think your question is probably aimed more at the sulfide leaching process and whether we’re likely to implement that. So we’re taking a hard look at that because there’s a lot of value potentially in it. And then the question remains is, if we do it, to what extent do we do it, and we’re working out, we’re working with all of those things at the moment.

Dalton Baretto: Thanks, Peter. And then maybe just one more on Copper World. On the site visit, we talked about the opportunity to maybe bring phase to you forward, given your understanding of what the permitting requires. Are you devoting any resources or any capital right now towards fast tracking that side of things?

Peter Kukielski: No, we are not. We just believe that there is massive optionality there because, like I said, I think, in my remarks that there’s $2.8 billion of NPV available to us upon a decision or upon sanction. But we are dedicating absolutely zero time and effort and expense on that right now, we’re so focused solely on Phase 1.

Dalton Baretto: Great. That’s all from me guys. Thank you

Peter Kukielski: Thank you.

Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Candace Brule for any closing remarks.

Candace Brule: Thank you, operator, and thank you, everyone, for participating today. If you have any further questions, feel free to reach out to our Investor Relations team. Thank you, and have a great day.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.