Our
Business

At our Constancia mine in Peru, we had a strong year benefiting from the contribution of Pampacancha high-grade ore, driving higher production and reduced cash costs, and enabling significant cash flow generation. Additionally, we signed an agreement to source renewable energy that will dramatically reduce Hudbay’s carbon footprint beginning in 2026.

In Manitoba, our Snow Lake operations hit their stride with higher gold grades being mined at Lalor, the New Britannia mill operating above nameplate capacity and the Stall mill achieving higher copper and gold recoveries. We also expanded our prospective land package in the Snow Lake region by acquiring Rockcliff Metals Corp. and the Cook Lake properties. This opens the door for potential mineral expansion and mine life extension, creating substantial long-term value at our Snow Lake operations.

The acquisition of Copper Mountain, a long-life, open pit copper mine in British Columbia, was a significant addition to our portfolio, positioning Hudbay as Canada’s fourth-largest Canadian copper producer. We issued our first Copper Mountain technical report in December, outlining our base case mine plan following the acquisition. The report identifies numerous opportunities to enhance the mine’s production profile, reduce operating costs, and progress on process optimization.

In September, we published a pre-feasibility study for Phase I of the Copper World project that significantly enhanced the economics and de-risked the project through higher levels of engineering, a simplified project design, lower upfront capex and a longer mine life, all while requiring only state-level permits.

Culture drives companies. As part of our effort to build and support OneHudbay across all our businesses and activities, we developed and shared our purpose statement to help people, inside and outside Hudbay, better understand who we are, what motivates us and why we exist.

Peru

Late in 2022 and through to early 2023, following a change in the country’s political leadership, Peru experienced a period of social unrest that extended into the Cusco mining region, where Hudbay’s Constancia mine is located. Roads were blockaded, interrupting the flow of personnel, supplies and ore, and in one instance, protesters were near our property. Unlike some of our peers during this period, Hudbay was able to keep the Constancia mill in operation, thanks to the close relationships we enjoy with communities near our mine. Our ability to remain operational highlights the remarkable job that the team at Constancia has done in building relationships with our neighbours based on trust, respect and mutual benefit (see feature story).

This period of unrest did delay the positive contribution of higher grades from Pampacancha to the Constancia mill; however, in the third quarter, we began to see the positive impact from Pampacancha. This, with Lalor and Copper Mountain, helped to deliver record quarterly revenue and record quarterly consolidated gold production in the second half of 2023.

To continue our expansion efforts in Peru, we submitted a drill permit application for Maria Reyna in late 2023 and expect to submit a drill permit application for Caballito in the first half of 2024. At Constancia, we continue to optimize mine plans, including a recent drilling program on the west side of the reserve pit to identify additional mineralization, which led to an upgrade of the mineral resources to reserves. The long-term potential for the mine continues to ensure stability and prosperity for the Company and local community stakeholders.

In April 2023, taking a step that will deliver company-wide sustainability initiatives, Constancia signed a 10-year power purchase agreement with ENGIE, Energía Perú. Starting in 2026, ENGIE will provide the mine with access to a 100% renewable energy supply. This agreement will help to reduce Hudbay’s Scope 1 and Scope 2 emissions by 40% compared to our 2021 baseline and is a significant milestone on our journey to reducing our greenhouse gas emissions by 50% by 2030.

Manitoba

In three years, Hudbay will mark the 100th anniversary of our founding in 1927 and our origins in Flin Flon. Today, Manitoba remains an essential part of our story and long-term success. We enjoyed record gold production from our Snow Lake operations during 2023, driven by our investments in upgrading the New Britannia mill and focus on mining higher copper and gold grade zones at the Lalor mine. During the year, the New Britannia mill performed well above its nameplate capacity, and we look forward to continuing strong performance in the years ahead. In a similar step to enhance performance, we completed the first phase of the Stall mill recovery improvement project, which contributed to higher gold and copper recoveries.

We continue to pursue opportunities for creating stakeholder value within the region through continuous exploration efforts, innovation and driving operational efficiencies. This year, we consolidated our land package in Snow Lake through targeted acquisitions, expanding our claims by 250% to 2,690 square kilometres in the highly prospective Snow Lake Greenstone Belt. This consolidation opens the door to future exploration opportunities and the potential for significantly extending the mine life of our Snow Lake operations.

In 2023, we pursued partnerships to reduce risk and extend the reach of our exploration efforts in the Flin Flon region. We recently signed an option agreement with Marubeni Corporation of Japan, which enables Marubeni to fund exploration efforts in looking for new, economically attractive mineral deposits within trucking distance of our existing processing facilities in Flin Flon. Our efforts in the Flin Flon region also included investigating ways to reduce the environmental impact and realize the economic potential of more than 100 million tonnes of tailings generated by more than 90 years of mining activity.

In addition to achieving record productivity, the Manitoba Business Unit hit a significant milestone with the launch of the “Home Safe Every Day” program (see feature story). This initiative, which has company-wide potential, aims to establish a proactive and self-sustaining safety culture at our Manitoba operations.

British Columbia

In June, we completed our acquisition of Copper Mountain Mining Corporation, and Hudbay became the indirect owner of 75% of the Copper Mountain mine. The addition of Copper Mountain, an open pit copper, gold and silver mine located near the town of Princeton in southern British Columbia, to our portfolio of operations further established Hudbay as a top-tier, Americas-focused copper mining company. Looking forward, we expect the Copper Mountain mine to be a significant contributor to our production profile for many years, delivering 45,000 tonnes of copper annually over the next 10 years.

The acquisition helps rebalance and diversify our portfolio, which is now founded upon three long-life mines and a range of development projects located in Canada, Peru and the United States, all mining-friendly jurisdictions. Working with the strong team at Copper Mountain, we are now positioned to draw upon our proven strengths in realizing operating efficiencies to transform Copper Mountain into a stable copper producer with an anticipated 21-year mine life.

Arizona and Nevada

In September, we published a Copper World pre-feasibility study (PFS) that indicated how we can leverage our experience to reduce risk and enhance the economics of the first phase of the project. Focusing on Phase I, which will require only state and local permits, the PFS extends Phase I mine life to 20 years with average annual copper production of 85,000 tonnes. We intend to continue taking a prudent approach to advancing Copper World and ensuring we meet all the conditions for project sanctioning established in our 3-P plan, including securing a joint venture partner.

Positive local sentiment for the project is clear with a November 2023 survey of Arizona voters. Conducted by the Tucson Metro Chamber and the Arizona Mining Association, the survey revealed a growing trend of increased support for copper mining, which includes support for Copper World. When provided with a thorough description of the project, a majority of voters voiced their support for Copper World, which is 28 miles south of Tucson.

Purpose and Sustainability

In addition to enjoying noteworthy progress in our operations over the year, we made significant advances concerning organization-wide priorities, including purpose, culture and sustainability. Our achievements included introducing our purpose statement (see feature story), which will support our OneHudbay culture and help people inside and outside of Hudbay understand our impact on the lives of those we touch and our contribution as a producer of essential metals that help the world address challenges like climate change. Throughout 2023, we continued to work on developing our equity, diversity and inclusion strategy because we recognize the benefits it creates and the value it delivers to all of our stakeholders.

On the sustainability front, we have made significant progress on the GHG reduction roadmap we introduced in 2021. In 2022, we publicly committed to achieving net zero GHG emissions at our operations by 2050. In 2023 (see feature story), each of our business units developed its own unique roadmap showing how it will contribute to achieving this objective. Their commitment will help ensure we reach our goal.

Looking Forward

A little over a decade ago, Hudbay had one operating business unit. Today, we are geographically diversified and have three active, long-life operations – Constancia, Snow Lake and Copper Mountain – in stable, mining-friendly jurisdictions, and a robust project pipeline with outstanding growth potential. Our portfolio is well balanced and better positioned to manage risk and realize opportunities. By embracing our purpose, Hudbay will be more diverse, more sustainable and, as a producer of essential metals, even more critical to global efforts to decarbonize and meet the challenge of climate change.

As we and our peers in the copper sector have long noted, new projects are not coming onstream at the required rate, and the copper supply will not meet demand needs. Hudbay is an outlier with three productive mines and an outstanding copper project pipeline. Together with our stakeholders, we are uniquely well positioned to realize the benefits of the strong long-term copper price environment.

Looking to the future, we are excited by the opportunities and focused on building a resilient, diversified copper company that will make a vital contribution to creating a more sustainable world.

 

Sincerely,

Peter Kukielski
President and Chief Executive Officer