Good morning ladies and gentlemen and thank you for standing by. Welcome to Hudbay’s Q4 2014 conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session with instructions provided. If anyone has any difficulties hearing the conference, you may press star, zero for operator assistance at any time. I would like to remind everyone that today’s conference is being recorded today, Friday, February 20, 2015. I would now like to turn the presentation over to Ms. Jacquie Allison, Director of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to Hudbay’s 2014 Fourth Quarter Results conference call. Hudbay’s financial results were issued yesterday and are available on our website at www.hudbayminerals.com. A corresponding PowerPoint presentation is also available and we encourage you to refer to it during this call. Our presenter today is David Garofalo, Hudbay’s President and Chief Executive Officer. Accompanying David for the Q&A portion of the call will be David Bryson, our Senior Vice President and Chief Financial Officer; Alan Hair, our Senior Vice President and Chief Operating Officer; Brad Lantz, our Vice President, Business Development and Technical Services; Cashel Meagher, our Vice President of the South America Business Unit; Rob Winton, our Vice President of the Manitoba Business Unit; and Pat Merrin, our Vice President of the Arizona Business Unit. 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. Now I’ll pass the call over to David Garofalo. Dave?

Thanks, Jacquie. Good morning everyone. This past year was pivotal for Hudbay as we completed key milestones in our transition into the low-cost, high-quality copper and zinc producer we envisioned when we laid out our growth strategy nearly five years ago. We achieved our growth objectives last year and has positioned our business well for many years to come. We attained commercial production at our Lalor and Reed mines in 2014, which are now operating at steady state. Both projects were completed on time, under budget, and safely with only two lost time accidents over four years of construction. Because of Lalor’s higher throughput compared to last year, combined mine and mill unit costs per ton of ore in the Snow Lake area were 9% lower during 2014 compared to the prior year. In Flin Flon, while we were within the guided range, combined mine and mill unit costs per ton of ore were 10% higher year-over-year. Production from Flin Flon fell short of expectations for zinc and precious metals in part due to a two-week unscheduled shop outage at 777 during October, but as anticipated, as 777 ages we expect mining there to continue to be challenging as operational flexibility diminishes and as ground support requirements increase. We are pursuing initiatives such as mobile fleet renewal, which should contribute to improved reliability and more stable cost performance. At Constancia, copper concentrate production began as expected during the fourth quarter of 2014. This was achieved with an exemplary safety performance with approximately 21 million man hours worked with only one lost time accident during the entire year. Rosemont successfully integrated into the organization, already leveraging some of our best project people from Constancia and Lalor as we advanced the project the permitting and engineering. Looking ahead, in 2015 zinc, copper…

[Operator instructions] Your first question today will come from David Charles with Dundee Capital Markets. Please go ahead.

David, you may be on mute.

Sorry about that. I obviously wasn’t on mute the first time. Okay, Constancia ramp-up curve, you showed one at our visit to the mine last September. I’m just wondering as you see Constancia starting out, are you more or less in line with what you were expecting compared to that ramp-up curve that you showed us?

Hi David, it’s Alan Hair here. I think it’d be fair to say that we’ve been somewhat disappointed in terms of some of the mechanical and electrical issues we’ve faced since we showed you that ramp-up curve on the one hand, but on the other hand we’re very pleased with the metallurgical performance and the throughputs that we’ve been getting, so we’re still confident that we’re in line to hit commercial production in Q2 as we previously guided.

And when you talk about mechanical and electrical, these are issues that are just breakdowns or failures that there’s no real issue to fix--

No, there’s no fundamental flaws or systemic issues that we’re talking about, it’s just the usual stuff that happens through commissioning. So we’re happy, as I say, with the metallurgical performance of the plant so far.

Excellent. If I could ask another question, I’m just wondering, maybe David or Cashel or somebody, could you give me some color on exploration drilling, the current exploration drilling at Lalor and whether you’re doing anything on the exploration side in Peru?

Well David, I think Dave indicated in the notes that we’re doing the drilling on the copper-gold zone. I think we’ve completed five holes to date at Lalor, and right now we’re obviously focusing on the Constancia ramp-up, and just from a cash management perspective we’d be looking to hold off doing any significant exploration there until we’re up and running, so that will be in the latter half of the year.

Thank you. Your next question will come from Orest Wowkodaw with Scotiabank. Please go ahead.

Hi, good morning. Just my question is really around Manitoba. We noticed the copper recoveries at the Snow Lake concentrator looked really weak, I guess with the refurbished concentrator. How quickly do you think those will kind of normalize? Second part of the question is where do things stand with the potential new Lalor concentrator? Should we consider that project effectively deferred indefinitely? Thank you.

Orest, on your first point, I think it’s fair to say that the guys are still optimizing the Snow Lake concentrator. Also, the copper recoveries are very dependent on the head grade. The copper numbers are really quite low at Lalor, and they’re really—in terms of the concentrator optimization, that really feeds into your second question. We’re still putting Snow Lake through its paces and understanding what it can or can’t do for us, and that’s given us a little bit more headroom to basically optimize the path going forward for Lalor and the options around the new concentrator and what it might look like. So basically, I think we’ll finalize our thought process there sometime later this year.

Okay, thank you.

Your next question will come from Brett Levy with Jefferies. Please go ahead.

Hey guys. When you say at Constancia, commercial production by the second quarter, you’re saying 60 or 65%. Obviously the target here is to get down to cash costs of about $1.25. Can you talk kind of where you expect to be on the cash cost basis kind of midyear when you reach commercial production, and then sort of what your target for cash costs are by year-end and then into 2016?

Hi Brett, it’s David Bryson. So our accounting definition of commercial production is three consecutive months where over those three months, we’ve averaged at least 60% of name plate and we expect to have completed those three months during the second quarter. In terms of cash costs, we haven’t specifically provided cash costs per pound of copper guidance. We’ve provided guidance per ton of material moving through Constancia. I think the numbers that you referenced, certainly we’d be expecting to get there once we hit our stride with Constancia as we exit the completion of commercial production. We’re not going to be at 100%, so we’re obviously going to work our way down towards those level as we reach full production in the second half of the year.

And full production, you really think is a number doable by 12/31/15?

Yes.

Okay, that’s what I wanted to know. Thanks, guys.

Your next question will come from Stefan Ioannou with Haywood Securities. Please go ahead.

Great, thanks guys. Just a little bit more on the exploration at Lalor. Looking at the section you have in your presentation for the release, is that drilling, is that in the gold zone or the copper-gold zone right now?

That drilling is in the copper-gold zone right now.

Okay, so you’re getting pretty down--you’re getting down deep? I’m just wondering, does the exploration ramp have to be sort of extended significantly more this year, say, to get to where some of those stars are on the picture?

Yes, and that’s part of the objective of the drill program, is to work out the best direction to take the further extension of the exploration drift.

Okay, great. Are there any plans in place formally right now for sort of doing a similar deep program at War Baby, or is that still something to be considered this year?

Well, War Baby is just wrapped into our overall 777 exploration, underground exploration program.

Okay, so you haven’t sort of committed any formal budget or number of holes or anything like that yet?

We are committed under the JV agreement to spend a certain dollar amount over the next couple years, and there is a program underway on War Baby currently.

Okay, so you are drilling there. Okay, great. Just one other question, just on the capex at Constancia. In the MD&A, it sort of looks like you’ve spent about $147 million there in Q4, and obviously some of that is capitalized operating cost because it’s not in commercial production yet. Just wondering, out of the 147, how much of that would actually be, quote-unquote, sort of initial capex that was spent in the quarter to finish off the project?

Yes, the project capital expenditures are actually done. The books are closed on that. We’ve spent the $1.7 billion, so everything we’re incurring from this point onwards is capitalized operating costs, which will be offset by revenues from our initial shipments of concentrates.

The only other big component, Stefan, in the capitalized Peru line would be capitalized interest on the bonds, as well as some of the equipment financing. That’d be in the probably 25 or $30 million dollar range for the quarter.

Okay, so bottom line, though, Constancia came in bang on budget, then, which is great to see.

Yes, the revised budget, yes.

Yes, yes exactly. Is there any sort of significant--I mean, obviously so Constancia is done. Just in terms of your--you talked about your liquidity for the year of 2015, but just in the next quarter or so, is there any major capex coming out of Constancia or Lalor?

We’ve got--Lalor is done, done and paid for. Constancia, we’ve got a little bit of accounts payable to bring down during the first quarter, but plenty of available liquidity to deal with that, I think sort of around 100, $150 million of accounts payable that we’ll bring down as we work through the quarter. Obviously some of that sort of gets tied to the completion of the commissioning process and our satisfaction with performance.

Okay, great. Sorry - just one last question, just with the increased revolver. Are you still thinking about any offtake on the rest of Constancia, or--I guess about 20% is taken for right now, but is that still something that’s in your back pocket or is that sort of off the table?

We’re not planning on doing any additional offtake linked to financing. We’re continuing to execute on the Constancia marketing strategy. We have a couple of additional long-term contracts with smelter customers that are substantially complete, and they’re not really material just given that it’s not particularly complicated to sell clean concentrate like this, so we’re not announcing them as we enter into them. But that’s proceeding well.

Okay, great. Thanks very much, guys.

Your next question will come from Gary Lampard with Canaccord Genuity. Please go ahead.

Thank you, and good morning everyone. I have two questions. The first one is on some cash flow issues at Constancia for the first half of the year, and then the second one is on that revolving credit facility; but the cash flow first. I just want to run through my assumptions here and ask you if they’re correct or not. So for this year for Constancia, the sustaining capex is $180 million, and if you could tell us how much of that is first half of year versus second half, that would be useful. Then the capital accruals, you’ve just told us are 100 to $150 million to be paid in the first half of the year. There’s also probably VAT refunds, and I’m hoping you can give us an estimate of what we can expect from that, and then also an update on your expectation of working capital requirements, obviously some of that has already been spent in Q4, but what your expectation is for working capital requirements at Constancia for the first half of this year.

Sure. In terms of sustaining capex, I think we’d expect that reasonably evenly spread over the course of the year. On the working capital associated with ramp-up, what I’ve talked about in the past is a range of 50 to $100 million, where the range is really driven by the terms of the long-term contracts that we have with customers. What we’re actually seeing is that the contracts that we’ve been entering into for most of the volume have relatively prompt payment terms, more like trader terms versus what we had originally been assuming, so I think that that might end up being more in the 50 to $75 million range, and probably not getting up to 75 until we get full-on production with Constancia later this year and start to feather in those conventional smelter contracts. So as noted in the disclosure, we did draw down on the Constancia credit facility in February. That’s providing us with funding to cover some of those costs, and we still have additional availability under that. But with the cash that we had, the credit facilities as well as this upsize with the revolver, we’re very comfortable and not expecting to need to draw on our corporate revolver in order to get us through minimum liquidity this year.

Okay, and the other part of that question was the VAT refunds we can expect in the first half of this year.

Right. So we had early recovery applications outstanding for about $50 million, and we’re pretty confident in being able to get that back in the first half of the year. Then in addition to that, we’ve got VAT that was not subject to the early recovery program that’s also been re-classed to current portion as we reach production. We’ll start recovering the early recovery amounts there as well, so—and that should be obviously a little more back-end loaded as we work through the year, but should be another 80 to $100 million there.

Okay, thank you. My second question, the revolver, the U.S. $250 million revolver, can you tell us what the covenant restrictions on the use of that debt might be?

Sure. So what we did with the revolver, it was really geared to what was a single-mine operation in Manitoba. The revolver is secured against the Manitoba assets and looks to Manitoba for the credit. We went back to the lender group and explained that now that we’ve invested $500 million in two new mines in Manitoba that are both at steady state, that we thought it was appropriate to make some changes. So we upsized to 250, we eliminated a borrowing base limitation that was tied to receivables and inventory, so that’s gone now. We still have a tangible net worth covenant that was in the revolver, but that still has ample room. We’d have to have a pretty catastrophic write-down on one of our assets in order to run any risk with the tangible net worth. The other new covenant is a rather structured debt-to-EBITDA test. The debt in the formula is really only the draws under the revolver itself. It does not look to any debt elsewhere in the capital structure, and the EBITDA in the denominator is Manitoba-only EBITDA. So Manitoba EBITDA for the 12 months ended December 31, 2014 was about $90 million, and the test is three times, so we comfortable covered the $250 million of availability. As we look forward, even at current metal prices, we’d expect Manitoba EBITDA to grow from there as we get full-year results from both Lalor and Reed. We’ve even stress tested those EBITDA numbers down to $2 copper, in that sort of scenario. We’re still quite comfortable that we can have full availability under the revolver.

All right, that’s great. Thanks very much. That’s all from me.

Thanks.

Your next question comes from Alex Terentiew with Raymond James. Please go ahead.

Hey, good morning guys. I’ve just got a couple questions here on the Manitoba operating costs. 777 last quarter was about $61 a ton, quite a bit higher than we normally see there. I know you note due to higher cement costs, additional--the cost to rehabilitate stopes and production volumes. Should we see some of those costs kind of slowly drift down into 2015, so I guess is there a chance that costs in the early part of the year still could be above the mid-40s that we’re used to seeing?

Well Alex, you’ve got to remember, always in Manitoba you’ve got the additional impact of--the seasonal effect of propane usage and things, so winter costs are typically higher anyway. But yes, obviously as the production ramps up, on a unit cost basis 777 will improve, but there’s still going to be pressure and costs around things like the increased use of paste going forward, just given the nature of the mine plan now and the high requirements for paste backfill.

Okay. I guess maybe a similar question on Reed. Last quarter--oh sorry, Q3 I guess, 58; this quarter, 75. Both quarters, you noted that they’re in line with your expectations, so I’m just--but that’s quite a wide gap, so I’m just wondering what you guys are budgeting for that mine, what are your expectations.

I’ll maybe throw that one over to Rob Winton.

Well, the Reed story as far as that is concerned is really a capital and operating development kind of a conversation, and how GME gets applied to both is the fourth quarter had a higher component of operating development, which pushed the operating costs to a higher level as compared to Q4 of 2013. So that was really the driver behind those unit costs. Reed is performing quite well as far as their ability to control and maintain costs.

Okay, great. I guess on the opposite side, Lalor had a pretty good quarter, down to $75, so quite a notable improvement. Is that something you guys think you can sustain going forward?

I think Lalor will improve as we go forward as Lalor ramps up production. We’re still not at that high level production that Lalor is capable of and is designed to, and throughout the year of 2015 we will reach the higher levels and costs will then fall in line with our expectations.

Okay, great. Thanks.

Ladies and gentlemen, if there’s any additional questions at this time, you may press the star followed by the one on your touchtone phone. As a reminder, if you are using a speakerphone, please lift the handset before pressing the keys. Once again, ladies and gentlemen, if there’s any additional questions, please press star, one at this time. Your next question will come from Matt Murphy with UBS. Please go ahead.

Morning. Just wondering on Rosemont, is there any change to your expectations on permits going forward, in particular the Forest Service and the 404 permit?

I think it’s fair to say that there’s no change to our expectations.

That’s easy. Okay, thanks.

Thanks, Matt.

Your next question will come from Oscar Cabrera with Bank of America Merrill Lynch. Please go ahead.

Thanks, Operator. Good morning everyone. If I may follow up on that, Dave, when you were talking about your strategy and capital structure, how should we think about the development of Rosemont in the current commodity price environment, i.e., if copper prices were to recover in the second half of this year and then, say, about $3, when can we expect development capital for Rosemont to surface?

Yes, just to remind you, Oscar, as you know, a chunk of the capital actually would be coming from Silver Wheaton and our joint venture partners, KORES and LG, for the development. We had assumed about $1.5 billion for the capital program on this project in our initial valuation when we acquired Augusta, so of that $1.5 billion we’d have to come up with about $900 million and our streaming and joint venture partners would come up with the rest of the capital in that scenario. So we wouldn’t really be funding Rosemont significantly until a good six months or so into the construction program, so you can assume what you like in terms of construction timelines, but that’s obviously contingent on the timing of the permitting. But we feel quite confident, even in a $2.50 to $2.60 copper price environment, we can fund Rosemont internally from cash flow and available debt capacity. So I think we were less inclined to be concerned--unless copper prices on a spot basis have significantly deteriorated, it’s really not going to change our development plans for the project because we’re still using $3 long-term copper for investment decisions, and we feel quite confident that’s fundamentally supported.

Okay, that helps, because that was going to be the follow-up question. In terms of prioritizing increasing the dividend versus starting construction at Rosemont, I guess you’d look at the latter as opposed to the former if things go well over the next couple years.

Yes, look, we’d like to find a balance between increasing dividends and investing back in the business. That was in a $3 copper environment. In a $2.50, $2.60 copper price environment, the dividend might have to be put off for a little bit longer, but if it recovers to $3, I think we can find a good balance.

Great. Thank you very much.

Thank you. Your next question is a follow-up from Orest Wowkodaw with Scotiabank. Please go ahead.

Actually, my question has been asked. Thank you.

Thanks, Orest.

Thank you. We have no further questions at this time. I’ll turn the call back over to David Garofalo for any closing comments.

That’s it, Operator. Thank you everybody for your time and attention, and if you have any other questions, please don’t hesitate to call us directly.