Hudbay Minerals Inc (HBM) 2024 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Hudbay Minerals Inc. second-quarter 2024 results conference call.

(Operator Instructions) I would like to remind everyone that this conference call is being recorded today August 13, 2024 at 11:00 AM, Eastern time.

I will now turn the conference over to Candace Brule Lake, Vice President, Investor Relations.

Please go ahead.

Thank you, operator.

Good morning, and welcome to Hudbay's 2024 second quarter results conference call.

Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available on the Investors section of our website, 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 Chief Financial Officer; and Andre Lauzon, our 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+ in 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.

Thank you Candace.

Good morning, everyone, and thank you for joining us.

In the second quarter, our operations continued to execute on plan, which has positioned us well to achieve our 2024 annual production guidance.

The operations also demonstrated strong cost control, which together with our exposure to higher gold by-product credits, has allowed us to improve our 2024 consolidated cash cost guidance.

Our strong and diversified operating base continues to generate free cash flow from efficient performance in Peru in Manitoba and in British, Columbia, we continue to execute on our stabilization initiatives and planned stripping program to unlock higher copper grades.

We have transformed our balance sheet and are now in the best position we have ever been in to advance our many growth initiatives, which will unlock significant upside potential in our pipeline and further enhance our copper and gold exposure.

We will go into more detail on our second quarter operating and financial performance throughout today's presentation, along with providing an update on many of the exciting growth initiatives underway.

Slide 3 summarizes the financial performance in the second quarter.

We achieved consolidated copper production of 29,000 tonnes and consolidated gold production of 59,000 ounces in the quarter.

This was in line with our quarterly production cadence expectations for 2024 as we executed the planned stripping programs in both Peru and British Columbia this quarter.

We are well positioned to achieve stronger production in the second half of 2024 in accordance with the mine production profile and have reaffirmed 2024 consolidated production guidance for all metals.

As you are now halfway through the year, we can give a bit more color on where we expect to be within the ranges.

Consolidated copper production is likely to be below the midpoint of the guidance range, while consolidated gold production is expected to be above the midpoint of the guidance range.

This is primarily a result of lower than expected grades and timing impacts from heavy rains in Peru earlier this year as well as the transition period at Copper Mountain as we execute the stabilization plans.

Manitoba's robust operating performance, primarily driven by continued outperformance at the New Britannia mill and higher than expected grades has led us to expect stronger gold production for 2024.

Consolidated cash costs were $1.14 per pound of copper in the second quarter.

This continued strong cost performance has allowed us to improve our 2024 consolidated cash cost guidance to a range of $0.9 to $1.10 per pound.

This compares to our previous guidance range of $1.5 to $1.25 per pound.

The improved guidance reflects the stronger outlook expected in the second half of 2024 and the benefits of complementary gold exposure, and we have reaffirmed all other 2024 guidance metrics.

Operating cash flow before change in noncash working capital of $122 million was lower than the first quarter as a result of the planned lower production levels, partially offset by higher realized metal prices and continued strong cost performance.

This quarter was also impacted by copper sales volumes in Peru and Zinc sales volumes in Manitoba due to timing of shipments.

We also saw elevated taxes from mining taxes that are calculated based on taxable mining profits in each jurisdiction.

Cash flows benefited from effective working capital management, which resulted in cash generated from operating activities of $139 million, remaining unchanged from the first quarter.

Adjusted EBITDA of $145 million in the quarter was lower than the first quarter due to the same reasons affecting operating cash flow.

However, trailing 12 months adjusted EBITDA was $824 million, a substantial increase from $407 million a year ago.

Adjusted earnings per share attributable to owners was nil in the second quarter.

After deducting sustaining capital expenditures and cash lease and community payments, we generated approximately $30 million in free cash flow this quarter.

This continues our quarterly trend of generating positive free cash flow and over the last 12 months, we have generated nearly $400 million in free cash flow.

Turning to slide 4.

Our strong free cash flow generation, combined with the proceeds of the successful equity offering we completed in May have enabled us to further improve our balance sheet.

During the quarter, we took several prudent measures to further progress against our deleveraging targets by paying down more than $150 million in debt and gold prepay liabilities.

The oversubscribed and upsized $400 million equity offering added $386 million of net proceeds to our cash balance.

In addition to broadening our investor base and bringing many cross-border long-term investors to our shareholder register.

We used some of these funds to repay the full outstanding balance of $90 million on our senior secured credit facilities.

We also repurchased and retired $34 million of senior unsecured notes during the quarter, and we completed an additional three months of gold deliveries under the gold prepay agreement, reducing the liability by $24 million and progressing us towards fully repaying the gold prepay facility by the end of August.

As a result of continued cash flow generation and these deleveraging efforts, we have reduced net debt by more than $550 million over the past 12 months.

And as of June 30, our net debt is $632 million.

This brings our net debt to adjusted EBITDA ratio to 0.8 times compared to 1.6 times at the end of 2023 and 2.9 times a year ago.

The improved balance sheet flexibility and accelerated debt reduction, significantly advances our progress as part of our 3P plan for sanctioning Copper weld and resulted in the successful achievement of the targeted 1.2 times net leverage ratio well ahead of schedule.

Subsequent to the quarter deleveraging efforts continued in July and August with an additional $48 million of open market purchases of our senior unsecured notes at a discount.

Moving to slide 5.

Our Peru operations produced 19,000 tonnes of copper, 11,000 ounces of gold, 450,000 ounces of silver and approximately 400 tonnes of molybdenum in the quarter.

We continue to be on track to achieve our 2024 production guidance for all metals in Peru.

Total ore mined in the second quarter increased by 38% compared to the prior quarter and was in line with the mine plan.

As part of the mine plan to unlock the next mining phase in the Pampacancha pit.

The team is well advanced in executing the stripping program that will continue until September.

It is intended to unlock higher copper and gold grades at the Peru operations in the fourth quarter of 2024.

The Constancia mill continues to perform well, averaging throughput of 87,000 tonnes per day in the first half of the year.

Ore milled in the second quarter was slightly lower than the prior quarter due to the semi-annual mill maintenance shutdown.

All milled included supplemental ore feed from stockpiles during the quarter as the team advances pit stripping activities.

Milled, copper and gold grades decreased in the second quarter due to lower amounts of high-grade ore from Pampacancha.

In addition to lower grades from processing stockpiled ore.

Recoveries continued to be in line with our metallurgical models.

Peru's cash costs were $1.78, up from the exceptionally low first quarter, primarily due to the lower planned production planned mill maintenance and byproduct credits.

Full year cash costs are expected to be within the 2024 guidance range, reflecting a stronger production profile in the second half of the year.

During the quarter, the Peruvian Ministry of Energy and Mines approved a regulatory change to allow mining companies in Peru to increase throughput by up to 10% above permitted levels.

Based on this flexibility, we are evaluating the potential for increasing future production at Constancia as early as 2026, which could partially offset the grade declines after the completion of mining at Pampacancha in late 2025.

Our exploration activity surrounding the marina and cover retail properties near Constancia continue to focus on permitting and drill preparation.

As part of the drill permitting process, environmental impact assessment applications or EIAs were submitted for the marina property in November 2023 and for the Caballito property in April 2024.

The EIA from mari arena was approved by the government in June 2024 in the cabin heater application continues to make progress through the permitting process.

This represents one of several steps in the drill permitting process which is expected to take approximately 12 months to complete after the EIAs are approved.

Moving on to our Manitoba business, as summarized on slide 6, we saw another quarter of strong operating performance.

The Snow Lake operations maintained steady production results while overcoming some challenges in the quarter, including forest fires and temporary production interruptions at the Lor mine.

The Manitoba team's resilience and dedication ensured that the operations continued to function effectively and efficiently while achieving our quarterly production targets.

Second quarter production included 43,000 ounces of gold, 2,600 tonnes of copper, 8,000 tonnes of zinc and 210,000 ounces of silver.

As anticipated, quarterly production decreased compared to the exceptional results achieved in the first quarter, primarily due to a planned lower grade mining sequence in the quarter.

We remain well on track to achieve our 2024 production guidance for all metals in Manitoba.

Total ore mined in the second quarter was 5% lower than the first quarter, reflecting issues with the production hoist, gearbox and electrical faults on the hoist drives, which caused a 10-day stoppage in hoisting all.

The hoisting downtime was offset by value added activities, including underground or build up close to the shaft waste filling, increased maintenance, building long-hole inventory and trucking ore to surface.

Additionally, the team implemented stope design modifications that yielded positive results by improving marketing efficiency throughout the lifecycle of the stopes.

The New Britannia mill has been consistently exceeding performance expectations, achieving 1,650 tonnes per day in 2023, more than 1,850 tonnes per day in the first half of 2024 and a new monthly record of nearly 2,100 tonnes per day in June 2024.

The ongoing efforts to increase throughput are aligned with our strategy to maximize gold production by directing more gold for from Lalor to the New Britannia mill for higher recoveries.

Recoveries of gold and copper were 90% and 94% respectively in the second quarter.

The final payment under the gold prepay facility that financed the refurbishment of New Britannia is in August 2024, which will allow us to further enhance our exposure to higher gold production in Snow Lake with approximately 2 million ounces of contained gold in current mineral reserve estimates, another 1.4 million ounces of contained gold in inferred resources for New Britannia investment has unlocked significant value in Snow Lake.

This could be further enhanced by regional exploration upside and the current strong gold price environment.

In the first quarter of 2024, we received a permit to increase the production rate at New Britannia to 2,500 tonnes per day, which will provide the opportunity to process more Lalor ore at the New Britannia mill and create additional processing capacity for potential new regional discoveries in Snow Lake.

And to close off the Manitoba slide, gold cash cost was $771 per ounce in the second quarter and full year gold cash costs are expected to remain within the 2024 guidance range.

In British Columbia, we continue to focus on advancing our operational stabilization plans at our Copper Mountain Mine.

As seen on slide 7, BC produced 6,700 tonnes of copper, 4,500 ounces of gold and 77,000 ounces of silver.

Copper production was slightly lower than the first quarter, primarily a result of lower head grades from the processing of stockpiled ore to feed the mill.

While mining activities are focused on executing the planned stripping program, gold production was consistent with the first quarter.

We have reaffirmed our 2024 production guidance ranges for all metals in British Columbia.

The mill processed a total of 3.2 million tonnes of ore during the quarter with mill availability averaging 94%, while maintaining a stable throughput rate.

Copper recoveries in the quarter were 82.3%, consistent with the strong levels achieved in the first quarter, despite lower grades as the operations improved the regrind circuit constraints and we implemented the flotation operational strategy improvements.

Cash costs were $2.67 per pound of copper, 23% lower than the prior quarter.

Primarily due to lower mining costs as the prior quarter had high ore rehandling costs.

We anticipate costs to continue to decrease over time as we continue to implement our stabilization and optimization initiatives.

Full year cash costs are expected to be within the guidance range.

Slide 8 highlights the improvements we have seen at Copper Mountain through the continuation of our stabilization efforts since acquisition.

The key elements of our stabilization plans include executing a campaign of accelerated stripping to access higher grades and implementing several plant improvement initiatives to increase mill throughput and recoveries.

Year to date, performance has achieved the highest mill availability and highest copper recoveries in the last decade.

As a result, we are on track to realize the three year annual operating efficiencies target of $20 million, and we already achieved and exceeded the targeted $10 million in annualized corporate synergies earlier this year, Hudbay's three year accelerated stripping campaign commenced in early 2024 to mitigate the substantially reduced stripping that occurred over the four years prior to our acquisition.

Total material move continued to ramp up in the quarter as a result of effective usage of the mining fleet.

As part of the fleet production ramp-up plan, we have successfully remobilized all 28 hole trucks and added five additional haul trucks this year to execute the accelerated stripping campaign at a lower cost and the contractor mining costs assumed in the technical report.

We have also deployed an additional seven and drill with these in place.

Total material moved is expected to continue to increase quarter over quarter as per the mine plan, which will further enhance operating efficiencies and lower unit operating costs.

Additionally, we are implementing plant improvement initiatives that mirror the successful processes at our other operations specifically, Constantia.

Initiatives that began early in the year are progressing on target, including reprogramming the mill expert system installation of advanced semi autogenous grinding control instrumentation, redesign of the SAG line of package and updated operational procedures intended to remove magnetite from the pebble stream.

The mill throughput performance has been limited by reduced reliability of the secondary crushing circuit, reaching average daily mill throughput of 35,500 tonnes per day in the second quarter.

During the quarter, several initiatives were advanced to address these issues and other identified constraints and improve throughput to targeted levels.

The benefits of the operational stabilization improvements are expected to continue to be realized throughout 2024 and result in stronger performance at Copper Mountain in the second half of the year.

We are also accelerating engineering studies to de-bottleneck and increase the nominal plant capacity to 50,000 tonnes per day earlier than was originally contemplated in the technical report.

Turning to slide 9.

Copperweld is the next greenfield copper development project in our growth pipeline offering significant copper exposure and highly attractive project economics.

Copperweld is one of the highest grade open pit copper projects in the Americas with proven and probable reserves of 385 million tonnes at 0.54% copper in Phase one.

There is roughly 60% of total contained copper remaining in the measured and indicated resources, excluding reserves, which provide significant upside potential for Phase two expansion and mine life extension beyond the initial 20 years.

The phase one pre-feasibility study released in September of 2023 demonstrated enhanced project economics and optimized flowsheet and a simplified permitting process with an extended mine life to 20 years, the project generates an NPV of $1.1 billion and an after-tax internal rate of return of 19% at a copper price of $3.75 per pound.

As we progress towards making the sanctioning decision, we will continue to be prudent with our financing plans for Copperweld by remaining focused on meeting all of the prerequisites outlined in our three P. plan that we released in late 2022.

As summarized on slide 10, the first key state permits required for Copperweld.

The mined land reclamation plan was initially approved by the Arizona State mine inspector in October 2021, and was subsequently amended and approved to reflect a larger private land project footprint in June 2022.

In late 2022, we submitted the applications for an Aquifer Protection permit and an air quality permit to the Arizona Department of Environmental Quality.

The public comment period for the Aquifer Protection permit was completed in the second quarter of 2024.

While a public comment period for the air quality permit commenced in July.

Hudbay continues to expect to receive these two outstanding state permits in the second half of 2024.

We anticipate launching the formal joint venture process after we secure our permits, we continue to see strong initial interest from potential joint venture partners as many industry participants are focused on increasing copper exposure as securing copper supply becomes a growing global concern.

Copper World will be a key contributor to the domestic US supply chain with our intention to produce Made in America copper cathode.

Slide 11 highlights some of the recent exploration results in Manitoba.

In 2024, we embarked on the largest annual Snow Lake exploration program in the company's history in the region with the goal of extending known mineralization near the Lalor deposit to further extend mine life as well as to find a new anchor deposit within trucking distance of the Snow Lake processing infrastructure the winter portion of the program includes the largest ground electromagnetic survey in Hudbay's history.

Last year, we acquired an expanded land package, including the complex claims and Rocklick properties and most of the newly acquired claims had been untested by modern deep geophysics.

During the second quarter, we completed a surface EM survey covering 25 square kilometers in the Cold Lake area to the north of lower surface EM surveys use cutting edge techniques that enable our team to detect conductive bodies at depths of over 1,000 meters below surface.

The new EM methodology is unique to high bay and will lead to an advanced understanding of the mineralization at depth previously undetectable.

This geophysics program resulted in the identification of a number of anomalies and prospective targets across the Snow Lake tenements, which are currently being tested.

They are located near the former Reed Anderson mines and in the vicinity of the bird and rail deposits that were acquired as part of the Ratcliffe transaction in 2025, we plan to conduct a similar size geophysical program to continue our mapping or the consolidated land package in the region.

With a 2024 summer drill program well underway.

The team currently has six drill rigs turning in Snow Lake, ramping up to eight drilling rigs in August the summer

The program is testing the new geophysical targets and completing follow-up drilling at potential regional satellite deposits and the new Lalor Northwest discovery, which I will discuss on the next slide.

Results from the summer drill program are expected in late 2024.

Additionally, drilling of a very strong deep anomaly at Cold Lake North will be tested in the coming weeks as part of the next phase of our 2024 exploration program.

Moving to slide 12 to 2024 winter drill program also included follow-up drilling at the lower or Northwest target.

In the second quarter, we received positive assay results, confirming the discovery of two mineralized zones located within 400 meters of the existing lower underground infrastructure.

The discovery hole in 2023 intersected two mineralized zones, including 4.8 meters at 2.97% copper, 2.92 grams per tonne gold and 8.3 grams per tonne of silver.

In 2024 a follow up hole intersected the same two mineralized zones, including 9.0 meters of 2.88% copper, 6.27 grams per tonne of gold and 88.9 grams per tonne of silver.

These promising results justify additional follow-up drilling that is being completed as part of the summer 2024 exploration program.

We have two drill rigs turning at Lalor.

Northwest and assays are expected to be received by the end of the year.

We will use the results to determine the potential size of Lalor Northwest and the potential for future underground exploration drift development from Lalor.

Lalor Northwest has a potential to add near term production growth at lower extend mine life and create additional value from the Snow Lake operations in Manitoba.

We are also continuing to advance the access drift at the 1901 deposit to enable infill drilling aimed at converting inferred mineral resources in the gold lenses to mineral reserves, which is shown on slide 13.

In the first quarter, we commenced the development of the smaller profile, lower cost drift from the existing low rents.

The 1901 drift is proceeding on plan and is expected to reach the mineralization in early 2025.

We then expect to conduct definition drilling intended to confirm the optimal mining method, evaluate the ore body geometry and continuity and convert inferred mineral resources in the gold lenses to mineral reserves

Pending positive results in the drilling programs.

The plan is to initiate a haulage drift and other related mining infrastructure in 2025 and 2026 in anticipation of full production from the 1901 deposit in 2027.

Additionally, in Flin Flon, we continue to advance tailings reprocessing studies to evaluate the potential to repurpose the existing Flin Flon concentrator to reprocess tailings reprocessing opportunity is expected to recover critical minerals and precious metals while creating environmental and social benefits for the region.

During the second quarter, we received results from the initial confirmatory drill program in the section of the tailings facility that was utilized by the zinc plant.

The results confirm grades of precious metals and critical minerals previously estimated from historical zinc plant records.

Our early economic study evaluating zinc plant tailings reprocessing has shown promising results that warrant further engineering work in the second half of 2024.

We are also planning a similar study with respect to the mill tailings Concluding on slide 14, Hudbay's leading copper development and exploration pipeline and low cost stable operating platform in Tier 1 jurisdictions offers investors meaningful copper exposure, complementary gold exposure and strong near term free cash flow generation.

We produced more than 150,000 tonnes of copper per year, which is further augmented by our complementary gold exposure that offers cash flow resiliency in volatile pricing environments.

We believe that copper has the best long-term supply and demand fundamentals in the sector as global copper mine supply will be unable to meet demands from global decarbonization initiatives and growing copper demand.

Hudbay's resilient operating platform offers significant upside potential for further value creation at higher copper and gold prices.

And with that, we are pleased to take your questions.

Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session.

(Operator Instructions)

Orest Wowkodaw, Scotiabank.

Hi, good morning.

A couple of questions if I could.

Firstly, your copper production for the year is obviously tracking below the midpoint of the guidance, just based on the first half production, what kind of grade are you expecting in Peru in the second half of the year and to make that up?

Orest, it's Peter.

Thanks very much for the question.

I think as we've previously said, the production cadence is such that it will be lower in the first half, especially in Q2, given the stripping that we're doing at Pampacancha and reducing continued stripping at Pampacancha in the second quarter.

So overall, we expect the year to the contribution of Pampacancha to be roughly one-third to two-thirds of Constancia pit production over the course of the year and the grades would be -- would match that.

Andre, do you have any more detailed view with respect to what the average grade would be?

It varies by quarter in terms of towards the end of Q3, we're really going to start to see that increase and then into Q4.

But in the 0.4 to 0.55 -- 0.57 range or something in that from that over the to, but increasing definitely towards into Q4.

Where's where we've done is over this quarter and last is we've really opened up Pampacancha to be able to have exposure to some other benches that maybe might have been into 2025.

And we're looking at those as possibilities to bring in Q4 to really finish off the year nice.

Sorry, just to clarify, are you saying that the Q3 average grade could be sort of similar to Q2 within, I guess, sets up a pretty Monster Q4.

Is that what you said?

It's a little bit higher.

It's a little bit higher in Q3 closer to 0.35 to 0.4-ish or something in that range, right in that range.

But it's definitely Q4 is where it really comes in.

So it's a we're in a real strip mode right now or in the latter part of Q3 is when we'll start seeing the grades really starting to come in.

Okay, perfect.

That's just on Maria Reiner.

If I understand you got the EIS permit to do drilling, does that mean you can now begin drilling immediately or are there other steps required before you can start drilling?

There are other steps that are required before we can start drilling.

So I think that the EIA is certainly the first step.

But typically what it would take us about another 12 months after would be EIA to be able to actually start drilling.

Thank you.

You're welcome.

Ralph Profiti, Eight Capital.

Thanks, operator.

Good morning Peter, it sounds like the next big capital allocation decision in Manitoba is going to be the new bread.

So expansion to 2,500 tonnes a day.

Can you talk a little bit about sort of what that looks like in terms of timing and how much of that is dependent on things like exploration success, finding that anchor deposit perhaps spring 1901 into it?

And what's that short term outlook on the decision process there please.

Thanks, Ralph, thanks for the question.

The guy, I don't I wouldn't characterize new branch expansion as a major capital allocation decisions.

We continue to investigate and implement high-return throughput enhancements that require low capital outlay.

And I think that the continuation of our efforts to achieve operational excellence that we've seen over the last couple of years, so progressively will ratchet up that production.

I think we announced in the last month we exceeded 2000 tonnes a day.

But Andre, maybe you could provide a little bit of light on exactly what the careful nature of the capital decisions is, but I don't think that is not a -- it not substantial at all.

Yes, that's correct Is there they're all very, very small capital projects for subtle improvements.

I'll give you some examples of we've been seeing somewhere on our cyanide destruction tanks of that, similar to what we are doing is we you put that tailings product through our paste plant.

And what we see are these and we're running at very high rates through the mill and then you have some of these outages.

And so subtle things like changing the liners on those tanks.

There are very minor, some minor pump upgrades.

Some closures around thickeners are receipt delays and that they're all very, very subtle improvements because on a daily basis, we are running at quite high levels or above.

You can see peak rates up to 2,400 tonnes per day as it is right now.

And so as Peter says, it's mostly through process improvement and that they're all sub like $10 million.

It's not in total like they're not very big expenditures.

Okay.

Okay.

Thanks for that.

That's helpful.

In British Columbia, just wondering if you guys have set targets, are KPI's on where you want to be at year end with regards to throughput and recoveries, just kind of looking to benchmark some of the stripping work that you're doing and how cadence looks up going into 2025?

Sure.

So I think that's -- there's two parts to the questions.

Good questions.

So on the stripping where we were running free rate pretty much right now it up, call it a flat costs.

We finally, we've ramped up our workforce.

We've done the purchase of and lease of the equipment, the refurbishment of drills and shovels.

And so we're just in the month of August right now, we're basically at our full complement with fleet and people.

And so over the past few months, we are seeing some of the incurring of those costs, although the movement hasn't been quite there.

And so like what we're looking at from where we were coming out of Q2 to where we are there now is in the Q2 range, we are about probably 200,000 tonnes per day were for ramping up in August, up to somewhere around 250,000 tonnes per day and continuing out through the rest of the year.

So the material movement is increasing, but other than consumables, likes fuel and some explosives, most of that cost is fixed.

So our unit cost per material move will be going down as we go forward.

So not a major increase in capital per se is just the using the equipment and the investments we had with the Setra seats, the truck drivers and seats and an up and trained.

In terms of the mill throughput.

So we're really proud of the work of the team.

They've done an excellent job like mill availability is really high.

It's I think it's in the 94 or so percent range at the moment, which is very close to Constantia, which is top world-class.

And so the mill is running really, really well.

And what we're dealing with is the feed side so it's really stabilizing.

We're averaging 35,000 to 40,000 tonnes per day, and that's heavily driven by the feed size that goes to the Mountain, which goes through a secondary crusher.

And so by the end of the year, with the projects that we have in place, I think there's one or two more tweaks.

I think that the team is planning around new liners coming in in November, some ball sizing changes and some improvements to the called the AIA.

It's a, call it a mill slicer and to optimize the how the sales work with the grinding circuit.

And so the combination of those, we think will probably be around 41,000 tonnes per day and something in that range with all those going in towards the end of the year.

And then what we're working on right now is a series of capital projects.

So to get us to that next level.

I think in the MD&A we talk about going to 50,000 tonnes a day, much sooner than we are anticipating as the teams are proceeding right now at feasibility level two capital projects that we hope to bring towards the Board later this year for approval to really make that step change.

And that'll be the call it the milestone change for Copper Mountain Mine.

The costs are really been reducing recoveries or are doing really well.

It's running really well, and we just need that little uptick to that, that I'll bring it to -- it will really drive the profitability.

That's great.

Good progress.

Thanks, Andre.

Peter.

Lawson Winder, BOA Securities.

Hi, thanks very much, operator, thank you for the call today, gentlemen and for the update.

Could I ask on M&A and ask you to describe how you might view your current posture on potential acquisitions and whether the -- whether had base currently actively evaluating opportunities?

Thanks, Lawson.

Look, I think that, as I've previously said, I think that Hudbay has an extremely skilled team when it comes to highly efficient operations and world-class development projects.

And we feel we can create value from both operating and development-stage assets.

So our strategy hasn't changed and we'll continue to be disciplined as we evaluate assets that fit our stringent strategic and financial criteria.

And, copper assets are scarce and we would only pursue opportunities that are accretive and create value for our shareholders.

But that said, I think that again, you're aware that those assets are extremely scarce and it took us a long time to sort of land on Copper Mountain.

We continue to scour the marketplace for assets and we haven't landed on anything right now that meets our criteria that we continue to seek those opportunities.

And is it the case that your criteria remains Western countries?

And is there been any change to the criteria at this point, particularly in light of how much more substantial Hudbay has in terms of a copper producer?

Yeah, we still sort of we focused on Tier 1 mining jurisdictions very much, so the Americas in majority but you know, in the past we have actually looked to Europe and others -- other investment grade jurisdictions.

Okay, thanks for that.

And then could I also ask him.

Just in follow up to the public comment period for the air quality -- sorry, the aquifer permit, I think is the one that completed in Q2.

Was there anything in those public comments that might have updated your view on kind of the social license outlook for copper world.

Were there any sort of strong arguments against the project or would you describe the comments as fairly supportive?

In general, it's fair to say that the comments are fairly supportive, in fact, or a massive number of comments that we received in support of the project, which of course, were received by the Arizona Department of Environmental Quality.

As always, there will be positive and negative, but our view is that the process we sort of moving inexorably towards approval of that permit during the course of the remainder of the year.

Okay, great.

Thank you so much for the update today.

(Operator Instructions) Dalton Baretto, Canaccord.

Thanks.

Good morning, Peter and team.

Maybe I'll start by staying on the Copper World permits here, Peter, with the election coming up in November, I realized permits are state level permits, but do you see any sort of delays to the processor at all?

Not at this point.

Ultimately, the reason why I say that, I mean, I'm we are very, very confident that we will secure the permits by the end of the year subject to perhaps what I'm trying to say -- What I want to say is that if the Arizona Department of Environmental Quality as questions that need to be resolved and they require a little bit of time in which to do that, of course, we would cooperate with them, but we have a strong commitment by the ADEQ to complete their work by the end of the year.

I don't think that this permitting process relies one bit on the political landscape in the United States at the moment.

It is very, very much a state driven process.

We are deeply engaged with the ADEQ and it's a very, very constructive relationship.

So we expect that those permits will be granted by the end of the year.

That said, if there was a request by the state in order that would bolster the robustness of those permits.

Then of course, we would collaborate with them, but there are no signs of that, but that will be the case.

We're pretty confident we get them this year.

Thanks, Peter.

And then as a related question, and I think I asked you this on the last call in a very different copper price environment and a copper sentiment environment.

But are you still planning on waiting for the permits to execute on the kick off the JV process or have you loosened on that stance?

It's actually a really interesting question, Dalton.

I think that we are in much better financial condition.

In the context of your 3P plan, we have met the prerequisites for that 3P plan on a -- from a financial perspective.

We still do expect to initiate a minority JV partner process after we receive the state level permits.

And we expect that process to be robust based on the track record that we have and based on the initial indications that we have from potential partners with whom we are engaging.

So very much there's no change in plan.

We think that it's the right thing to do.

And we continue to look for a long-term partner who is bullish on the copper price and looking to grow there copper exposure and is all science point towards that being very robust.

Great.

Thanks, Peter.

And then maybe I can ask you one sort of big picture question, if I may.

You're mining Pampacancha now you're generating free cash flow, the Peru sort of political issues are well behind you.

You've cleaned up the balance sheet and yet on mine average, you still trade a fairly substantial discount to peers.

And I'm just wondering if I could ask a why do you guys think that is?

And number two, how does that play into your strategic thinking going forward?

Thanks.

Thanks, Dalton.

Look, I think that a big piece of that is investors in the market waiting for the outcomes of the Copperweld permitting process.

I think that's number one, I think there's a little bit of a -- let's wait and see with respect to Marina and (inaudible) and removing sort of inexorably towards receipt of those permits as well.

But as you know, as was the case of Pampacancha, I think permitting takes time in Peru.

And so I think those things built into some of the valuation delta, but from a financial or balance sheet perspective, from a jurisdictional risk perspective, I think all of that has gone away.

Perhaps, Eugene, you might comment further if you have other thoughts?

No, I think again, we are encouraged by the investor interest that has been in Hudbay through this, particularly through this year and our oversubscribed equity offering and valuations improved and they see the opportunity to get exposure to our increasing cash flows and the catalysts that Peter has outlined, and we look forward to making them a lot of money.

Great.

Thanks for your thoughts, guys.

Welcome.

This concludes the question-and-answer session.

I would like to turn the conference back over to Candace Brule for any closing remarks.

Thank you, operator, and thank you, everyone, for joining us today.

If you have any further questions, feel free to reach out to our Investor Relations team.

Thanks and have a great day.

This concludes today's conference call.

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