Hudbay Minerals Q2 2025 Earnings Call Summary and Q&A Highlights: Strategic JV with Mitsubishi and Operational Resilience
Earnings Call
Aug 14
[Management View] Hudbay Minerals achieved its lowest leverage ratio in more than a decade in Q2 2025, supported by steady copper output, effective cost control, and disciplined capital allocation. The company announced a pivotal $600 million joint venture partnership with Mitsubishi Corporation for a 30% stake in the Copper World project, markedly reducing Hudbay’s capital exposure and accelerating project de-risking while establishing a baseline for higher project returns. Management confirmed all 2025 production and cost guidance across copper, gold, silver, and zinc, underscoring operational resilience despite external disruptions, notably Manitoba wildfires and logistical protests in Peru.
[Outlook] Management maintained full-year consolidated production targets for all metals across all regions. The company expects to achieve its 2025 production guidance in Manitoba and British Columbia, with cash costs outperforming the low end of the guidance range. Hudbay plans to continue advancing its Copper World project towards a sanctioned decision in 2026, with detailed engineering and derisking activities progressing this year.
[Financial Performance] Consolidated copper production totaled 30,000 tonnes in Q2 2025, driven by higher Peru production offsetting lower Manitoba output following the June wildfire-related suspension. Consolidated gold production totaled 56,000 ounces, lower than in the first quarter due to wildfire impacts in Manitoba. Silver production reached 815,000 ounces, and zinc production totaled 5,000 tonnes. Adjusted EBITDA reached $245 million, contributing to a record trailing twelve-month adjusted EBITDA of $996 million as of June 30, 2025. Net earnings were $0.30 per share (GAAP) in Q2 2025, and adjusted net earnings were $0.19 per share. Free cash flow totaled $88 million in Q2 2025, with over $400 million generated in the trailing twelve months.
[Q&A Highlights] Question 1: Will Mitsubishi be allowed commercial offtake in proportion to that 30%? Have you looked at the ability for commercial arrangements to place concentrates in U.S. smelters, or is there the possibility to either bring forward the concentrate leach facility or even expand it? Answer: Mitsubishi will have rights to 30% offtake, consistent with their ownership share. The placement of content remains to be seen as we haven't got into that level of detail. The Albion process is part of the prefeasibility study, and we plan to get it into operation as soon as possible. Bringing forward the concentrate lease for distillate is a possibility and will be studied in the feasibility study.
Question 2: When you look at the leverage ratio of the balance sheet and the cash flow generating power of Hudbay in the next few years, it reduces the project financing number to a relatively small number. Is there strategic special interest or cost of capital that Mitsubishi is bringing to the table? Answer: The JV proceeds plus the capital contributions from Mitsubishi contribute to over 50% of the capital. Using a light version of project-level financing at about one-third, Hudbay's equity contribution is only 15% of the capital. Project-level financing is available from various sources, both U.S.-based and potentially with our partner, to generate efficient returns and sustainably build the project.
Question 3: Has there been any discussion with the U.S. Administration about potentially moving forward with the Rosemont part sooner than phase two? And whether there might be some give and take on the permitting related to that now? Answer: We are completely focused on Phase one of Copper World, which is fully permitted and simple with a twenty-year mine life. There is no need to enter into discussions related to the next phase of Copper World at this point. The current federal environment is highly constructive, and we have bipartisan support for developing the overall project.
Question 4: The idea of moving forward the Albion process, if you do bring it forward, can we still assume that's not gonna be at the front end? Which would obviously increase the capital and the risk profile? Answer: We will take a look with our partner during feasibility of what the optimal timing for Albion is. At this point, we are not looking at increasing CapEx associated with Albion.
Question 5: Can you give us any sense of whether you're seeing any major cost inflation from the previous number? Answer: There will likely be modest increases to the initial CapEx at Copper World since the last figure published in the 2023 PFS. However, higher copper prices today and a bullish long-term view of future copper price given the supply-demand fundamentals will offset mild CapEx escalation.
Question 6: Are there any major scope changes in the feasibility study versus the other study? Are you looking at a bigger processing facility or anything like that? Answer: No major scope changes are foreseen in the current feasibility study. We have contemplated the idea of an expansion after we go into production, but that won't be part of the definitive feasibility study scope.
Question 7: Do you think this transaction raises any eyebrows in Washington? And do you need any approvals there? Answer: We do plan to file a Sofia brief, but it's not a requirement. This project enables the production of Made in America copper, creating jobs and aligning with the U.S. Administration's critical minerals intentions for national security and U.S. supply chain strengthening.
Question 8: Is there any reason for not bringing Albion to the front, considering the lack of smelting capacity in the U.S., potential tariffs on concentrate export, and social benefits? Answer: The optimal approach to developing this project will be studied in the feasibility study with our partner. At this point, Albion will be coming to production separately, but we will investigate it thoroughly.
Question 9: Can you walk through Manitoba in the third quarter? Will higher grades continue and potentially offset the continued shutdowns? Answer: Grades are consistent through the year, with no major variation. The fire situation is improving, and operations are expected to resume this month, meeting our guidance forecast for the end of the year.
Question 10: Are you having any discussions with the current U.S. Administration that could help with Copper World Phase two or Mason permitting? Answer: We are not having discussions related to Phase two right now. We view the current environment in the United States as highly constructive, which will stand phase two in good stead. The deal allows us to look at other opportunities in our portfolio, including Mason.
Question 11: How do we think about the order of funding sources for Copper World financing? Answer: The priority of funding is the first funding from the JV partner, followed by Wheaton Stream, project financing arranged at the time of sanctioning, and lastly, the seventy-thirty equity funding by Hudbay and Mitsubishi.
Question 12: Have you been able to do your exploration programs this summer? What is the outlook for drilling work in Manitoba and Peru? Answer: Exploration in Manitoba was interrupted by wildfires but will continue once conditions are safe. In Peru, exploration at Maria Reyna and Caballito will start once the consultant Previa process is completed. We have two drills currently operating at the Talbot deposit.
Question 13: On the intricacies of the matching contribution, is the $180 million covering Hudbay's costs within the project? Answer: The $180 million is straight into the JV, funding the first $600 million of project work.
Question 14: Does the mine sequencing impact in Q3 mean more stockpiles to be processed? Answer: We are processing more stockpile in the quarter but not slowing down Pampacancha, blending the two.
[Sentiment Analysis] Analysts expressed positive sentiment towards the strategic JV with Mitsubishi and the operational resilience demonstrated by Hudbay. Management maintained a confident and constructive tone, emphasizing the strong financial position and future growth prospects.
[Risks and Concerns] - Wildfire impacts in Manitoba and logistical protests in Peru pose operational risks. - Inflationary cost environment may lead to modest increases in initial CapEx at Copper World. - Potential delays in exploration programs due to external disruptions.
[Final Takeaway] Hudbay Minerals demonstrated strong operational resilience and financial performance in Q2 2025, achieving its lowest leverage ratio in over a decade. The strategic joint venture with Mitsubishi Corporation significantly reduces Hudbay’s capital exposure and accelerates project de-risking, establishing a baseline for higher project returns. Management reaffirmed full-year production and cost guidance across all metals, underscoring the company's ability to navigate external disruptions. The successful execution of Hudbay's strategic priorities positions the company well for future growth and value creation.
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