Edited Transcript of HBM.TO earnings conference call or presentation 12-Aug-20 12:30pm GMT – Yahoo Finance

TORONTO Aug 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Hudbay Minerals Inc earnings conference call or presentation Wednesday, August 12, 2020 at 12:30:00pm GMT

Hudbay Minerals Inc. - Director of IR

Hudbay Minerals Inc. - Senior VP & COO

Hudbay Minerals Inc. - Senior VP of Corporate Development & Strategy

Hudbay Minerals Inc. - President, CEO & Director

Hudbay Minerals Inc. - Senior VP & CFO

Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals

* Oscar M. Cabrera

Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Mineral's Second Quarter 2020 Results Conference Call.

I would like to remind everyone that this conference call is being recorded today, August 12, 2020, at 8:30 a.m. Eastern Time.

I would now like to turn the conference over to Candace Brl, Director of Investor Relations. Please go ahead.

Candace Brl, Hudbay Minerals Inc. - Director of IR [2]

Thank you, operator. Good morning, and welcome to Hudbay's 2020 Second Quarter Results Conference Call. Hudbay's financial results were issued yesterday and are available on our website at http://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 Steve Douglas, our recently appointed Senior Vice President and Chief Financial Officer; Cashel Marr, our Senior Vice President and Chief Operating Officer; and Eugene Lei, our Senior Vice President, Corporate Development and Strategy.

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 U.S. dollars, unless otherwise noted.

And now I'll pass the call over to Peter Kukielski. Peter?

Thank you, Candace. Good morning, everyone, and thank you for joining us. I'd like to start off by saying that I hope everyone has been able to stay safe and healthy as this public health crisis has evolved over the past several months. We, too, have been closely monitoring the rapidly changing environment while continuing to execute on our business response plan to minimize the overall impact of the pandemic on our operations. We remain focused on the health and safety of our employees, their families and the communities in which we are closely tied while engaging with local stakeholders and public health authorities to ensure the effective implementation of our response to pandemic.

Today, I will touch on the highlights of our second quarter financial and operating results, along with updated guidance for our Peru operations. I will also explain how the recent 1901 upgraded resource estimate fits into our plans for advancing the third phase of our Snow Lake gold strategy and I will provide an update on the progress of the New Britannia mill refurbishment and the time lines to first production expected in 12 months.

But before we jump into all of that, I'd like to take a moment to thank Eugene for stepping into the role of interim CFO, while we advanced our search for a permanent CFO. And I'm pleased to introduce Steve Douglas, who was appointed to the role effective June 30. For those who have not met or spoken to Steve before, he is highly regarded by the Street and brings over 25 years of resource industry and senior finance leadership experience to our team. Over the last several weeks, Eugene and Steve have worked closely together to continue to execute our financial objectives, and I have been impressed with how smoothly the transition has been. I've said it many times before, Hudbay has a disproportionately talented team for a company of our size, and I have no doubt that Steve will bolster our team. Welcome, Steve.

Now beginning on Slide 3. Hudbay's second quarter results were boosted from another solid operating quarter in Manitoba, even with strict adherence to COVID protocols that have been implemented. I would like to thank the Manitoba team for their strong efforts in achieving these outstanding milestones while adapting to this challenging external environment. We saw strong production and cost performance in Manitoba, with an increase in production of precious metals and zinc over the first quarter, driven by record gold production from increasing Lalor gold grades and record gold recoveries at Stall. Copper production declined by 27% from the first quarter due to the temporary suspension of Constancia until mid-May. However, consolidated copper equivalent production only declined by 12%, as a result of higher precious metals and zinc production in the quarter. Consolidated cash cost, net of by-product credits, was $0.64 per pound of copper, a 47% improvement over the first quarter. Given the significant reduction in Constancia production in the second quarter, this measure is more heavily impacted by Manitoba production which contains meaningful zinc and gold by-product revenue components. Consolidated all-in sustaining cash costs also improved from the first quarter to $2.26 per pound of copper driven by the same factors affecting cash costs, along with reduced sustaining CapEx in Peru from the temporary suspension.

Operating cash flow before change in noncash working capital was $30 million in the quarter, reflecting a decrease of $12 million compared to the first quarter. The decrease in operating cash flow is primarily the result of lower Constancia production and sales due to the temporary suspension. However, this decrease was partially offset by higher gold production and sales in Manitoba as well as higher realized gold prices. We have been planning for the introduction of adjusted metrics for several months, and we are pleased to have Steve support this change shortly after he joined. We believe these metrics will provide further transparency for readers into our financial performance after normalizing for one-off or noncash adjustments.

During the second quarter, we've adjusted for temporary suspension costs in Peru and the reversal of a portion of the Peru inventory write-down from the first quarter, amongst other items. Adjusted net loss was $0.15 per share, and adjusted EBITDA was $49 million. The strong performance from the Manitoba operations during the quarter helped offset the reduced contribution from the Peru operations, resulting in minimal change in the quarter-over-quarter adjusted earnings and only a slight decrease in adjusted EBITDA.

We exited the quarter with $391 million in cash and equivalents and continue to take prudent steps to manage our balance sheet. In the second quarter, we entered into discussions with the syndicate of banks in our revolving credit facilities to restructure the facilities in order to provide enhanced financial flexibility during the development of the New Britannia and Pampacancha projects. Each of the banks in the syndicate received credit approval to amend the facilities on the proposed terms and the transaction is expected to close shortly. As a result of the amendment, total available borrowings under the credit facilities were rightsized to $400 million to reflect Hudbay's anticipated business requirements until June 2022 when the credit facilities mature. However, it is important to note that we do not intend to draw down these facilities for the purposes of achieving our business plans. We also revised the maintenance covenants to a net debt-to-EBITDA ratio of less than 5.25% and an interest coverage ratio of greater than 2.50 until the end of 2021, which provides additional financial flexibility.

The Manitoba business unit had solid operating performance across the mines, mills and zinc plant during the second quarter, as shown on Slide 4. In response to the COVID-19 pandemic, Hudbay has worked collaboratively with its health and safety committees and the local health authorities to continue to keep employees and communities safe by implementing a number of layered workplace controls. As a result, the second quarter Manitoba operating results were largely unaffected by the pandemic, and we are on track to achieve annual production and cost guidance. Manitoba achieved higher production results in all metals quarter-over-quarter. The enhanced precious metal production was driven by higher gold and silver grade at Lalor as a result of prioritizing resources within the higher value portions of the base metal lenses. Development in the gold rich Lens 25 and 27 advanced ahead of schedule, and production from these areas is expected ahead of the New Britannia mill restart as Lalor transitions to a gold mine. The 777 mines saw higher ore grades during the second quarter, which were expected and consistent with stope sequencing outlined in the mine plan, including the mining of higher grade copper stopes during the quarter. Combined mine, mill and G&A unit operating costs in Manitoba were slightly higher than the first quarter, but in line with expected annual guidance ranges.

Slide 5 outlines the enhanced performance we've seen at the Stall mill as a result of our focus on continuous improvement. The throughput of the mill has steadily increased over the last several years, and in the first half of 2020, we've seen an 11% increase in throughput to average 3,900 tonnes per day. This is a result of improved maintenance programs, which have increased plant availability run time to an impressive 95%, up from 91% in 2019. The Stall mill also have achieved record gold productions in the second quarter, increasing to 62.3% compared to 52.5% in the same period last year. This is due to improved maintenance programs, higher gold head grades, improved plant stability due to grade control and the processing of ore with intrinsically higher recoverable gold content.

Turning to our Peru operations on Slide 6. After an 8-week temporary mine suspension, we successfully achieved the efficient restart of operations at Constancia in mid-May with increased government supported COVID-19 health and safety protocols in place. The mine achieved normal mill throughput levels on May 18, within 48 hours after restart, and continued at these levels for the remainder of the second quarter. The initial 6 weeks following the restart focused on milling activities while processing stockpile ore. This was followed by a ramp-up of mining activities commencing in the last week of June with a full ramp-up to normal levels in early July. Production results from Constancia were lower than the first quarter as a result of the temporary suspension and processing of stockpile ore following the restart of operations during the quarter.

Despite milling activities being suspended for 8 weeks, the care and maintenance activities performed and the proactive mine restart planning during the shutdown facilitated an efficient ramp up and steady performance of the mill after ramp up. Over the period when the mill was fully operational during the quarter, average daily throughput was above 95,000 tonnes per day. Milled copper grades in the second quarter were flat compared to the first quarter, but the characteristics of the stockpile ore that was processed negatively impacted copper recoveries. Combined unit operating costs in the second quarter was 17% lower than the first quarter, primarily due to lower operating costs as a result of constrained activity during the temporary suspension and significantly reduced mining costs during the quarter. We also deferred a second quarter plant maintenance shutdown from May to the third quarter as a result of proactive plant maintenance completed during the 8-week temporary suspension.

I would like to commend our Constancia team who have done a tremendous job ramping up operations while adhering to enhanced health and safety protocols in an extremely challenging COVID-19 environment in Peru. As you are aware, in response to the uncertainty around the ongoing pandemic and the resulting temporary suspension of operations at Constancia earlier this year, we suspended our previously issued 2020 guidance for Peru operations.

Following the full resumption of Constancia mining and milling operations, we are now in a position to be able to issue updated 2020 guidance for Peru. The situation in Peru, however, remains fluid. The state of emergency first declared by the government in response to the COVID-19 pandemic on March 15 has since been extended to August 31, and there remains a risk of further disruptions to mining operations. We are actively monitoring the situation and any potential future impact on Constancia's operations. The updated annual production and operating cost guidance, along with capital and exploration expenditure forecasts are presented in the table on Slide 7.

The updated Peru guidance assumes we are able to continue to safely operate for the remainder of the year while adhering to all existing health protocols required by the Peruvian government. Our Manitoba operations are on track to achieve the guidance ranges, and therefore, the guidance remains unchanged from previously disclosed expectations. The revised production guidance for Peru reflects a reduction of approximately 15,000 to 20,000 tonnes of copper and 20,000 ounces of precious metals compared to the original guidance. This reduction reflects the lost production during the 8-week temporary suspension at Constancia in addition to revised mine plans for the remainder of the year and the resulting deferral of some higher-grade ore into 2021. Precious Metals production also reflects the revised expected Pampacancha production start date of early 2021 compared to the second half of 2020 previously. This is due to the COVID-19 related government declared state of emergency in Peru and the resulting impact on the Consulta Previa consultation process. Peru's sustaining capital of $80 million reflects the deferral of approximately $20 million into 2021 due to the resequencing of capital activities such as tailings and capitalized stripping. The revised unit cost guidance for Peru reflect lower mining costs during the gradual ramp-up of mining activities in the quarter. There was no change to exploration guidance. Peru's growth capital of $70 million includes initial expenditures for developing the Pampacancha deposit and acquiring surface rights from the local community, but excludes the costs associated with recognizing the current uses of the land by certain community members. We have made significant progress with these individual land user agreements and have approximately 2/3 completed to date with the remaining agreements expected to be completed during the third quarter of 2020. Similarly, we have also made progress with the land clearing activities, and approximately 1/3 of the land has been vacated and turned over to Hudbay.

As discussed last quarter, we have demonstrated significant value in our Snow Lake gold business through executing Phase I and Phase 2 of our Snow Lake gold strategy, as highlighted on Slide 8. Phase I was announced in February of 2019 after several years of detailed drilling and economic trade-off studies, which resulted in a 65% increase in gold reserves at Lalor and determined that the refurbishment of the New Britannia gold mill was the optimal processing solution for Lalor's gold ore. It was through this first phase that we repositioned Lalor as a gold mine with previous -- with Precious Metals contributing a majority of the life of mine revenues. We then spent the next 12 months optimizing Lalor's mine plan, drilling the in mine exploration targets and conducting advanced engineering studies on the regional deposits, WIM and 3 Zone. And in March of 2020, we unveiled the second phase of our Snow Lake gold strategy, which further increased the gold reserves by 35% to 2.2 million ounces, increased Lalor's life of mine gold production by 41% and extended the mine life of the Snow Lake operations to 18 years.

Slide 8 also highlights the third phase of our Snow Lake gold strategy focused on further expansion potential, and I'll touch on this in a few moments.

Slide 9 demonstrates that 2020 has been the year of executing our Snow Lake gold strategy. After releasing the enhanced second phase of our plan, we were able to unlock the value of future gold ounces through the recent gold prepaid transaction. This transaction fully funded the New Britannia refurbishment costs and positioned us well for continuing to execute on our plan. In preparation for the restart of the New Britannia mills, in the first half of 2020, we commenced underground development and early mining of the gold zone. Gold production from Lalor is expected to be 74,000 ounces in 2020 and 102,000 ounces in 2021. In 2022, upon completion of the New Britannia mill refurbishment, average annual gold production from Lalor is expected to increase to over 150,000 ounces at cash costs and sustaining cash costs net of by-product credits of approximately $480 and $655 per ounce, respectively, during the first 8 years. We believe there is potential to further increase the annual production and extend mine life through several upside opportunities, as summarized on Slide 9.

We are examining the potential to further optimize both the Stall and New Britannia mills, which could create additional value for the regional deposits we have in Snow Lake, such as the 1901 Deposit. At the Stall mill, we are initiating studies to examine the potential to increase gold and copper recoveries and will also be completing studies to potentially expand the New Britannia mill capacity beyond the current planned 1,500 tonnes per day. We expect to complete these economic studies in the first half of 2021 as we execute the third phase of our Snow Lake gold strategy.

Slide 10 highlights the progress we've made at the New Britannia mill over the last few months. Detailed engineering is currently approximately 90% complete, procurement is 65% complete, and construction activities are approximately 25% complete to date. On the procurement side, we have placed orders for 100% of the long lead items and we are pleased to say that there hasn't been any impact on the supply chain due to COVID-19. Construction of the pipeline between the New Britannia and Stall mills continues as planned. We broke ground at the New Britannia site with the start of construction for the new copper flotation building in May. Also, repairs to the New Britannia mill building are underway and this includes items such as repairs to the carbon in leach tanks, demolition of stairs and cladding and placement of the grounding grid for the electric building. Refurbishment activities are on track to be completed within 12 months, in August 2021 with plant commissioning and ramp up expected during the second half of 2021.

We are also pleased to report that through our expertise in project development and the advancement of the detailed engineering work, we have identified the potential to produce gold from the New Britannia mill earlier than expected in 2021. The team is exploring this early gold opportunity, and we expect to provide an update in the third quarter. The significant gold exposure from Hudbay's Snow Lake gold build business offers investors an attractive balance between growing gold cash flows and a stable low-cost copper business through the other key assets in our portfolio.

On Slide 11, we sensitized the expected annual cash flows or gross margin from Snow Lake gold at various gold prices. For example, at a gold price of $1,600, Snow Lake gold is expected to generate approximately $200 million in annual gross margin, and this would increase to over $240 million at the current spot gold price of approximately $1,900. Given that Lalor is located in one of the best mining jurisdictions and there's a high-quality, low-cost asset already in production, there remains a significant opportunity to unlock further value for Snow Lake gold within Hudbay. Lalor is not unlike other polymetallic mines in Canada, where the BMS deposit is characterized by base metal zones that are mined in the early years, followed by higher value gold zones that transform the mine into a primary gold asset. We are excited about this value potential, and we believe as we continue to execute our Snow Lake gold strategy, we will create value for all of our stakeholders. This quarter, we also announced an updated resource estimate for the 1901 Deposit, which was discovered in February of 2019 and is located near the Lalor mine in Snow Lake. This resource update was planned as part of Phase III of our Snow Lake gold strategy. This past winter, we completed a drill program to upgrade the classification of a significant portion of the previously reported 2019 inferred resources and to define an initial inferred resource estimate for the gold mineralization that had been intersected near the 2 zinc rich lenses. You will recall that 1901 is located halfway between the former Chisel North mine and the Lalor mine, and it is less than 1,000 meters away from an active underground ramp as outlined on Slide 12.

It is within 15 kilometers trucking distance of both the Stall and New Britannia processing facilities, and the property is 100% owned by us, free of any royalties or streams. The mineralization is similar to Lalor with zinc rich VMS lenses containing high-grade gold lenses and indication of a copper-gold rich feeder zone. The updated measured and indicated resources for the base metal zone are shown in the table on Slide 12 and are equivalent to 100% of initial tonnage in the 2019 inferred resource estimate. The zinc grade is 12% lower, but the gold grade in base metal zone has more than doubled.

The 2020 drilling program was successful in defining an initial inferred resource estimate for the gold zone of 500,000 tonnes at 6.8 grams per tonne gold. Total gold resources have significantly increased with 120,000 -- 122,000 ounces in measured and indicated and 137,000 ounces in inferred compared to a total of 58,000 ounces previously, which continues to demonstrate the gold potential of the Snow Lake camp. The methodology we use to estimate the 1901 mineral resources is identical to the approach we use for the Lalor mine, which constrains the resource within a stope optimization envelope. This conservative approach to resource estimation is expected to lead to a higher mineral resource to reserve conversion factor. There remain opportunities for extension and additional conversion of mineral resource estimates at the 1901 Deposit. We are actively pursuing engineering activities to develop a robust economic mine plan for 1901 that could supplement the production from Lalor to take advantage of the future full processing capabilities of our mills in the Snow Lake region. We expect to complete a pre-feasibility study on 1901 in the first half of 2021.

The northern and eastern part of the deposit remain open. As shown on Slide 13, we have also identified additional exploration drill targets located between the 1901 and Lalor deposits that remain to be tested. In addition, recent drilling has identified several high-grade copper gold zones that have not been included in the current resource estimates due to limited drilling density.

Looking at the many mines we've discovered and operated in the Flin Flon and Snow Lake camps, we have a strong track record of significantly expanding the reserves of these VMS deposits, as shown on Slide 14. The 1901 Deposit is exhibiting the same characteristics as Lalor, and we will continue exploring this deposit with another drill program planned for early next year. And as our history suggests, this should translate to increased production and increased mine life for the Snow Lake operations.

I'll conclude today's presentation with an overview of the low risk, high-return strategic priorities we expect to deliver in the next 12 to 18 months as summarized on Slides 15 and 16. We've touched on a number of these catalysts today, such as the New Britannia mill refurbishment milestones, a new gold zone and upgraded resource estimates at the 1901 Deposit, the Stall mill recovery improvement program and the potential to expand the New Britannia mill beyond 1,500 tonnes per day. As mentioned earlier, we are making significant progress on Pampacancha and anticipate mining early in the new year, which is expected to significantly increase cash flow from Constancia due to higher copper and gold grades. We also expect to advance exploration activities on our regional properties near Constancia. After reaching an exploration agreement with the Quehuincha community in early 2019 and subsequently completing the Consulta Previa process, we are on track to commence our planned drill program in the fall of 2020 to test a high-grade skarn target on the Quehuincha North property. The follow-up drilling program on the previously disclosed Constancia North intersections continues to test a possible extension of copper porphyry and high-grade skarn mineralization occurring within 300 meters of the edge of the current Constancia pit. We expect to have the results from this drilling program in the third quarter of 2020. The Rosemont appeal process continues to move forward. In June, we filed our initial brief alongside the U.S. government with the Ninth Circuit Court of Appeals in relation to the July 2019 district court decision. Both Hudbay and the U.S. government emphasized that current law broadly authorizes mining-related activities such as ore processing and tailing storage to be conducted on open forest service lands. The district court's determination that the forest services mining regulations do not apply to mining activities unless those activities are conducted entirely on valid mining trains is contrary to plain language reading of the general mining law. It also contradicts forest service regulations, which explicitly allow for mining-related activity to occur on land, not covered by any mining claim. It is expected that a decision at the Ninth Circuit Court of Appeals will be made before the end of 2021.

And lastly, we continue our infill exploration program at Lalor to convert additional resources to reserves in addition to testing areas of potential extension at Lalor. We expect to provide an updated mineral reserve and resource statement for Lalor with our annual plan -- with our annual update in March of 2021. We have made significant progress advancing our various organic growth initiatives and we believe we are well positioned to deliver on a number of near-term and longer-term catalysts. We knew 2020 was a year of investment at Hudbay, and these high-return investments will pay off next year as we increase cash flows and create value for all of our shareholders.

And with that, I'm now happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Fahad Tariq of Crdit Suisse.

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Fahad Tariq, Crdit Suisse AG, Research Division - Research Analyst [2]

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Maybe first on Manitoba. You mentioned that there is potential to produce gold from New Britannia before 2021. I'm just trying to figure out what's the upside from the 100,000 ounces base case next year? Like how much more could it be versus that?

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Peter Gerald Jan Kukielski, Hudbay Minerals Inc. - President, CEO & Director [3]

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Tariq, thanks very much for the question. It's a good question. So we're not really yet to provide numbers on that. We are advancing the work pretty significantly, and we expect to have a lot more information on this next quarter. But Cashel, do you want to provide any other insight?

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Cashel Aran Meagher, Hudbay Minerals Inc. - Senior VP & COO [4]

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Yes. So I think the way to look at it is the New Britannia mill itself is a refurbishment, whereas the copper flotation building is a new build, and we saw the opportunity to advance in the schedule, the completing of the refurbishment, which would allow us to mill some of our higher grade gold zone 25 in advance of the completion of the copper floatation building. And so as you can imagine, with that opportunity, we need to change the sequencing of what we might be mining next year to be able to deliver zone 25 earlier. While it's pretty developed, the stope sequencing would be that. So in the next quarter, we hope to be able to give a more direct answer of what we had previously disclosed as 2021 ounces produced at Manitoba. It will be increased, and we'll be able to give you that in the next quarter the amount it will increase.

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Fahad Tariq, Crdit Suisse AG, Research Division - Research Analyst [5]

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Okay. And maybe just switching gears to Peru. At Constancia, my understanding is there's no positive COVID indicators right now, but Peru, unfortunately, seems to be a bit of a hotspot for COVID. And even among some of your mining peers, there's been some outbreaks. So I'm wondering if you -- if the government were to impose further restrictions that -- and Constancia have to shut down again, what are levels of stockpiles? And how do the stockpile grades compared to the fresh ore?

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Peter Gerald Jan Kukielski, Hudbay Minerals Inc. - President, CEO & Director [6]

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Tariq, I'm not sure how much worse it's going to get in Peru. Peru, as you know, is pretty bad right now. And we have very, very, very strong proportions in place in order to prevent the pandemic from coming to the mine. I think you're aware that we hotel all of our personnel in either Cusco and Arequipa and we tested for COVID during a period of quarantine so that it doesn't get up to the mine. And this is quite consistent with the requirements of the Peruvian government. We feel that it is likely that we will not -- we will not experience another shutdown. If we do, it will likely be in similar form to the previous one because we would stop milling at that stage if we are required to shut down. But the stockpiles are a little bit higher in zinc and lead, which is effectively what constraints or reduces the recoveries that we experienced. But of course, those stockpiles are limited. Cashel, do you want to cover further on that?

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Cashel Aran Meagher, Hudbay Minerals Inc. - Senior VP & COO [7]

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I think that covers most of it, Peter. Maybe I'd add that those precautions we have with COVID to date have worked extremely well. In fact, we increased our workforce over the last couple of weeks to accommodate some shutdown maintenance work, and that was completed successfully. And we now sort of have a system whereby the workers themselves are on-site for longer shift rotations. And so we've mitigated a lot of this. A lot of our peers too also have done this. It took a while to be able to manage to this current sort of new normal. We call it a new normal, and we're operating under those parameters.

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Operator [8]

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Our next question comes from Orest Wowkodaw of Scotiabank.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [9]

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In February, you issued multiyear guidance, and I'm just curious, at the time you had issued 2021 production guidance for Constancia of 80,000 to 100,000 tonnes copper and 85,000 to 100,000 ounces of total Precious Metals. I'm just wondering how that may have changed with some of the delays at Pampacancha pushing to the first quarter of '21, I guess, partially offset by some of the higher-grade material from this year being pushed from the main pit into '21. Are those guidance ranges still valid?

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Peter Gerald Jan Kukielski, Hudbay Minerals Inc. - President, CEO & Director [10]

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Orest, thanks for the question. I would suggest that they still are because -- so effectively, what we're doing is we're just pushing out the plan by a couple of months. We did mine -- we did use a bunch of stockpiled material which is why you've seen lower recoveries during the quarter. But I would suggest that because the Pampacancha ore is of lower-grade initially, we should essentially just be pushing it out a couple of months.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [11]

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Okay. That's great. And then just curious on Manitoba. I mean with gold continuing to run up, maybe except for yesterday, does that in any way change your thinking strategically in terms of potentially monetizing Manitoba, whether just perhaps some thought of advancing that strategic move?

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Peter Gerald Jan Kukielski, Hudbay Minerals Inc. - President, CEO & Director [12]

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Orest, always a good question. Look, we're very much a business in transition, and we're in execution mode right now. And our focus is 100% on executing our Snow Lake gold strategy by delivering New Britannia on time and on budget, which we think generates significant value for us and for our shareholders. The investments in the [New Brit] generates a 25% after tax IRR at 1,500 gold. So we just think that's the right thing to do, stay focused on that, absolutely focused on that and then deliver on it and we will maximize value by doing that and we'll worry about what we do with the (inaudible) at a later point.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [13]

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Okay. And then just finally, I've noticed your environmental provisions in terms of liability on the balance sheet has increased materially again this quarter. Is that -- the year-to-date increase, is that purely a function of just lower discount rates? I'm just curious what's going on there and how much of that is Manitoba?

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Edited Transcript of HBM.TO earnings conference call or presentation 12-Aug-20 12:30pm GMT - Yahoo Finance