Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. Q4 2018 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, February 20, 2019 at 10 AM Eastern Time. I will now turn the conference over to Candace Brule, Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning and welcome to Hudbay's 2018 fourth quarter results conference call. Hudbay's financial results were issued yesterday and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is also available and we encourage you to refer to it during this call. Our presenter today is Alan Hair, Hudbay's President and Chief Executive Officer. Accompanying Alan for the Q&A portion of the call will be David Bryson, our Senior Vice President and Chief Financial Officer and Cashel Meagher, our Senior Vice President and 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 and 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 Alan Hair. Alan?

Thanks, Candace. Good morning, everyone. I’d like to begin today’s call with a quick outline of the items I’ll be discussing this morning. I’ll start with an overview of our corporate achievements in 2018 and consolidated financial results. I’ll then review each operating business units speaking to the 2018 performance, development milestones and regional growth potential along with highlights from our 2019 operations guide. I’ll spend a few minutes reiterating the elements of our growth strategy and will conclude the presentation with a summary of our near-term catalysts. I wanted to note that the shareholder has put forth [indiscernible] at our annual general meeting and recently released further details about the claims against Hudbay. Our Board expects to provide a [frozen] response in due course. The purpose of today’s call is to discuss our quarterly results and business outlook. So when we get to the Q&A portion of the call, I’d be happy to take any questions on our business. Reflecting back in the 2018 year, I’m very pleased with the work completed in each of our operating business units to utilize process improvements to drive additional efficiencies in our operations. In Peru, our continuous improvement initiatives in the processing plant resulted in record mill throughput in 2018, record copper recoveries and high utilization of the moly plant. As a result Peru copper moly production is better than expected. In Manitoba we overcame the operating challenges we had in the first half of the year and through ongoing operational and maintenance improvements to Stall mill record throughputs in 2018. Also the Lalor mine is on track to achieve 4,500 tonnes per day after the commissioning of the paste backfill plant and improved availability of skilled labor in the second half of 2018. As a result of the business these operational…

Thank you. [Operator Instructions] And we'll take our first question from Orest Wowkodaw from Scotiabank.

Hi, good morning. Cash and or I was hoping we can get a bit more color on what's going on with the mine plan Constancia. And specifically, I mean when I look at the tech report issued last year, 2018 Constancia was supposed to do a grade of 0.42. And it looks like you came in at 0.48, so much better than expected. How should we think about 2019 and the tech reports basically showing I think 0.43. How much upside is there to that number and what's driving it?

As Orest, I think we've explained before part of the difference is just changes in the short-term mine plan compared to the long term mine plan that the 43-101 was based on. This has been partly driven or mainly driven by a better understanding of the impacts of impurities like zinc and lead on copper recoveries. And last year saw quite a movement on material tune from stockpile to help that -- that's a blend, those zinc levels and so that they don’t didn’t have an impact on recovery or concentrate quality. Within that there's also some other minor changes related to be used mine waste for tailing some construction and dependent on the material properties of about waste we sometimes have to switch mining areas as well. So, those factors we believe are the main things contributing to the difference in grade and at this stage for 2019 we're just sticking with what's in technical report.

So, are you getting a positive grade bias anymore from the original block model or is there all other factors?

At this point, we'd say that any bias is within what we the normal statistical range. So, where when it's not leading us to look at any revision currently.

Okay. Thank you, very much.

And next we'll go to Matthew Fields of Bank of America Merrill Lynch.

Hi, everyone. I want to touch on something I read in the MD&A which was that you altered your stream agreement with Silver Wheaton. Can you give us first at a high level kind of why Silver Wheaton felt the need to change that agreement with you or was it you felt the need to change it with them, how do that come about?

We just we worked with Silver Wheaton and Precious Metals. I mean, obviously we'd be the long relationship with them and we worked just to make some improvements on the simple operability of the agreement.

No. it says you now have the option to take cash or shares for the deposit. Why would you take Silver Wheaton shares to fund CapEx rather than the cash?

I'll let David work through some of the details.

Matt, it's something that's similar to what we had in the Constancia stream agreement with Wheaton, something that they had requested and we were willing to accommodate. There is a mechanism that's included in that that allows us to liquidate the shares on an orderly basis at the same price that's used on in a number of shares issued. And so, what happened when we received the Constancia stream payment is we were able to realize cash proceeds from those shares that was sort of within 1% of the face value. And so, we don’t expect it to expose us to any market risk.

There's no lockup period?

Correct.

And then lastly, it's said that now you are providing apparent guarantee to Rosemont's obligations. Two questions on that. One, is that like the uptick financing loans to your Korean partners in the stream obligation, any other debt at the project level that we're kind of now thinking about that maybe wasn’t in the plan before?

I'm not sure, would you restate that?

Yes. So, you're going to Hudbay the corporate issue where we now offer a guarantee to Rosemont's obligations. What debt is at Rosemont proforma for this financing that we're going to be thinking about that you are now going to guarantee?

At present, there is no debt at Rosemont obviously.

Right.

But we and are currently anticipating a financing for Rosemont. That's very similar to what we did for Constancia, the Constancia uptick financing was secured at the project level with a corporate guarantee and to the extent that we do an uptick or cost over right in that financing at the Rosemont level. We'd expect the same structure.

And then lastly, I'm sorry for all the questions. But will Rosemont be a guarantor for the existing Hudbay debt now, now that you're guaranteeing it?

No, there isn’t express carve out for that.

Okay. Thanks for that, that's it from me. Thank you.

Okay.

And next we'll go to Ralph Profiti with Eight Capital.

Thanks for taking my question. Just a quick one on the Lalor gold zone versus the base metal zone, Alan. When we think about issues like ground conditions and mining methods and even tailings deposition. Were there any differences that stood out in the study? What I'm getting at is that $92 a ton mining cost consistent across all zones and lenders?

Sorry, you're a bit faint there, could you repeat the question?

Yes, sorry about that. It's my questions on Lalor gold versus the base metal zone, and when we think about mining methods tailings the position, I did mean some of the ground conditions, are there any differences that stood out in the study on the gold zone versus the base metal zone. And what I'm getting at is whether or not we're going to see a pretty even distribution of that $92 a ton mining cost?

I think given that the golds coming from a variety of different zones within the mine, I think it's the -- that average should be a good average.

Okay. And is there any issues, Alan, with regards to tailings that position as you get further and further away or you mean into the gold and the copper gold zones?

No. the project predicates using the think Anderson tailings facility.

Okay.

And obviously with a significant proportion of tails gone come back on the ground as paste.

I understand, okay. Thanks for the clarity.

All right. And next we'll go to Matthew Murphy with Barclays.

Hi. Another question on Lalor. Just trying to square the cash unit cash costs with the unit operating costs. I know the unit cash cost include G&A, the unit operating cost down. I'm just wondering what kind of unit G&A you're assuming beyond the closure of 777 that would be attributable to Lalor?

So, what we're anticipating is obviously once the Flin Flon facilities sort of -- mine lines that we would see a significant reduction in G&A as we rationalize around the lake. And so, that reduction is reflected in the sustaining cash costs and cash costs that are set out in the press release.

Okay. And the other element being offsite cost. I'm assuming that those cash cost include kind of market treatment charges et cetera?

Correct.

Okay, thank you.

All right. Next we'll go to George Topping with Industrial Alliance.

Great, thanks. Hello, everyone. Alan, are you planning to do any update or provide more information on the 777 cleanup cost that Flin Flon in this matter?

Well, we're actually working through you know all aspects of the Flin Flon closure planning. We basically announced 777 looks as if it will close in the end of 2021 currently and there's a number of studies in play to see what's the best way to maximize the value of those assets. So, the current thought is that we put the Flin Flon concentrator in tailings facility in some form of care and maintenance. If you look at new Botania and new Botania we acquired in 2015 where it been on current maintenance since 2005. We're going to bring it into operation close to probably some 20 years after was putting care and maintenance. These assets was associated tailings facilities, and already permitted obviously very value and provide optionality for developing future deposits that wouldn't necessarily support the capital associated with that level of infrastructure. So, in terms of what form the current maintenance might take in terms of what the ongoing carrying cost, George, we're still we got some of the detail working through, there's always a trade-off between what level of care and maintenance you go with and ultimate restart cost, so that's a trade-off has to be completed.

Right. So, it's sufficed to say it's probably no large payments in the near-term but it's --.

We'd look to go ahead with the -- 777 for example; I mean, it's a standalone entity. So, that is about 2.5 million associating closing that. Then we have to make the decision how best to optimize the remaining process assets and that as I mentioned is part of some of the studies that are currently ongoing.

And just follow up on Constancia, I notice the unit cost guidance is quite a wide range? Why is the range so wide, between 790 to 970 dollars per ton?

Sure I think that's fairly consistent with our past practice of unit cost guidance where we really intend to make a significant change in the sort of the width of those ranges.

I see. Okay. Thank you.

And next we'll go to Greg Barnes with TD Securities.

Thank you. If I understand it rightly the tailings from New Britannia will be pumped over to the Stall Lake, is there enough capacity there to handle everything that you're talking about now with a new Lalor 9 plan?

The tails will actually be pumped to the – be combined with the tails of the Stall mill so that they can then be an integral part of the overall paste backfill system and so they either go back underground at the mine or they go to the Anderson -- which has got the ability to be expanded further.

And I assume that speeds up the permitting process for Newport as well?

It's certainly when we looked at the overall optimization approach and the various studies that we did that certainly makes life simpler. But also will be looking to filter the copper component of the material at the new brick facility -- so the new brick tails will go to Stall and Stall copper concentrate will go back to new brick just minimizing capital and maximizing the equipment that we've got.

Just a secondary question for David Bryson. Can you give us a sense of what you think is your weighted average cost of capital?

Greg, there's obviously a number of ways to measure that I think sort of the biggest driver is sort of the equity cost of capital and to the extent that we're looking at sort of requesting free cash flow generation from the business, we think of an 8% cost of capital on that equity. And then so to the extent that we're raising debt, I think when you look at the secondary levels on the high-yield bonds we have outstanding that's kind of 6.5% to 7.5% range obviously when we're looking at a required return on a new capital investment that needs to have a significant spread over our cost of capital in order to generate shareholder value at a high level that sort of what the key components would be.

Thank you.

And next we'll go to Stefan Ioannou with Cormark.

Thank you very much guys. Just curious a fair bit of sort of detail and focus on regional exploration around Snow Lake. Are there any plans to spend any money on sort of exploration closer to the Flin Flon areas or is it very Snow Lake focused this year?

No. We actually, last year we did a large airborne geophysical survey some 400,000 hectares to the region south of Flin Flon. That generated a number of targets than the nature of especially the terrain down there lends itself more to winter exploration and would actually drill in some of those targets this year as well.

Great. Thanks very much guys.

And next we'll go to Jackie Przybylowski with BMO.

Thanks very much. Actually my question is pretty similar to Stefan's. I was just wondering when we could expect to get some of the initial results back from some of the satellite deposits you have I guess around Snow Lake and also at basin, I know you're doing some work on it this year. Are we going to hear anything about it later this year?

Yes, we will certainly, given as I mentioned that we are currently drilling in both Flin Lake those results will come out in the ordinary course and Mason we'll be drilling there by the middle of the year hopefully and in the second half?

Sorry can you repeat that last part Alan, you cut off for a second there.

With Ann Mason we should be drilling by the middle of the year hopefully and certainly having some results for Q4 would be reasonable to expect.

Excellent. Thank you very much.

And next we'll go to Dalton Baretto with Canaccord.

Hi good morning guys, my first questions on Lalor, I'm searching for some context to round why the 4,500 ton per day scenario is your preferred alternative or a higher NPV than say a 6,000 ton per day scenario just given that you've got sufficient hosting and surface processing capacity?

It's more about the layout of the ore body and how you can sensibly address the infrastructure issues like ventilation and the likes.

So it's the incremental infrastructure spending underground basically?

Sorry, could you repeat that?

It has to do with the incremental cost of mining at a higher rate?

Yes. I think that would be a fair way of looking at it.

And then the next one is on Rosemont. Alan, you mentioned a number of times at the Army Corps in its final stages. So really two questions there. Number one when was the last time the Army Corps came back to you for other more information or more consultation?

It's basically just been a period now where we understand that the Army Corps had its interactions with – completed its interactions with both ourselves and other stakeholders. So that's why we believe that they're actually in the permit review phase.

And then, have you had any conversations with your Korean partners in terms of next steps moving forward and what the terms are on maybe buying back their stake if they choose to sell that sort of stuff?

Yes, well I mean, we're obviously in constant dialogue with them. I think it's reasonably well known that the Korean government has announced I think it was 18 months ago their intent to wind down [indiscernible] one of our partners there and so this business over a period of five years I think. So it wasn't exactly a great success for them and we're having discussions with the Koreans and we see that they could withdraw from the project but we've -- there's widespread interest in other people to come in JV with us, we are seen as a very popular partner and given the relative success of recent JV process these minority processes you've seen Anglo-American run a very successful process at [Kio Vaco], you've seen tech run a very successful – of two. That's like a successful process that’s on -- projects so we contemplate the Koreans exiting and bring them another partner maybe even for a larger stake. Rosemont is one of the best near shovel-ready projects out there. It's one of the few in our opinion that does provide acceptable rate at a long term called price of $3 so we think that there should be no problem attracting another partner to replace the Koreans.

Thank you. So you prefer outcome is still having a partner as opposed to consolidate in the project?

I think realistically part of the overall financing absent a real running crop pricing, I think that would be a prudent way to approach it.

Great. That's all for me guys. Thank you.

And next we'll go to Lawson Winder with Bank of America Merrill Lynch. Go ahead Lawson you maybe on mute. Your line is open. Lawson your line is open.

Thank you. Sorry about that guys. Yes, just on Constancia and the $45 million and growth CapEx that you guys have budgeted for this year. You mentioned that I mean that is dependent on receiving land access by the end of May of 2019. I'm just curious because assuming that land access is not received by mid 2019, where does that $45 million go and then alternatively assuming that we're received today for that $45 million go up. I am trying to get a sense of some flexibility around that, that growth CapEx. Thank you.

Yes. The main number is a bit of a red herring. I mean that's just what was in the current mine plan to treat. I think there was 4 million tonnes in the technical report. To access Pampacancha, we obviously need to complete the whole road finish some of the pit dewatering, do the initial pre-strip I mean if we didn't get access until later in a year we'd still be spending those dollars. If we get access earlier we'd be moving into the operating phase sooner. So I think really in terms of from a guidance perspective given that were confident that we'll access, have access to Pampacancha before the end of the year that's a reasonable number regardless of the exact timing. It's not that we still got the ability to mine Constancia it's not that we're not treating material.

No, of course. And then just in terms of the land access to discussion I think previously you guys have described it as being mostly economic in nature. Has anything changed or is that still the case?

Well, it's partly that. It's also, I mean there's a tendency to be it used to want to reopen some previous agreements and things. So it's a process that we've navigated I think very well in our time in Peru. I think as I mentioned frequently, I mean our community relations performance is second to none given that we're in a region that's our neighbors are [indiscernible] who both suffered from significantly worse community relation performance than we have and I think our approach has been good and we don't see any reason to change it especially as we now have another four communities we have to get initially exploration and hopefully exploitation agreements with through access what is really in our opinion some very-very prospective territory to the northwest of Constancia. So with all things with Hudbay when we look at in carrying out a strategy we've taken a very long term view and I think we've been consistent in growing the company and continue to take that long term view and really there's nothing particularly about the exact date of Pampacancha access it's anyway mission-critical. So we're continuing to do what we consider to be the right thing.

And then I think in your comment you already mentioned that you hope to also be drilling some of those other satellite deposits around Pampacancha and Constancia in 2019. Did I hear you correctly and if so I guess you have some sort of similar timeline for land access there as you do for?

We have an agreement with one community that covers, one complete target and part of a second target. So we'll certainly be planned to be drilling by, I would take -- we've got their land agreements we have to run through the drill permitting process. So it would be reasonable to expect us to be drilling there by Q4 of this year.

Thanks so much for taking the questions Alan, I appreciate your time.

Thank you.

Thank you and next we will go to Oscar Cabrera with CIBC.

Thank you operator and good morning everyone. Alan, if we could just get back to the capital allocation question. If we were to assume copper price stayed close to $3 what would be the main driver to slowdown the part of the Rosemont project and would you still consider being the operator of the project?

I think as I mentioned in the first part of the call, one of our criteria Oscar is to be the operator. We don't – we've actually looked at structures that where we could still be a minority in an opportunity but be the operators away. It's really one of our key points when we look at things because we think that's where we bring the most -- we've had a proven record obviously of building mines and operating mine. So we don't necessarily – we see that as something that we don't necessarily really want to give up on. I think the question of it you exactly what the capital allocation plans for Rosemont looks like will depend on the timing and where the current price environment is. We're fortunate with Rosemont that the project CapEx is very light at the front end. So if we did get the permits reasonably soon even in a lower price environment we think we're well placed to move the project forward with an early works program. We remain very bullish on copper fundamentals in the long term and I think we should start to see those copper prices fundamentals start to kick it sometime this year and drag the cost – copper price back up about $3.

And based on David Bryson's comments on your cost of capital, it looks like there is still the preferred way to go. Can you just remind me what are the parameters that you're looking at just in terms of not exceeding net debt to EBITDA levels or any other metric that you are looking at?

Obviously our measure is very dependent what stage of the cycle we're at. So when you're in this of harvesting phase is going to be more like one-one and a half times debt to EBITDA when you're approaching the last few months of build-out obviously that numbers going to rise and more in the order of three times.

Three times. Thank you and then lastly looking at your slide 11, talking about the Constancia optimization project the five-year average production about 105,000 tonnes would that assumes that Pampacancha comes on stream in 2019 i.e. you know your mining Pampacancha in 2019. I just wonder what that would look like if Pampacancha is not mining in 2019 and 2020?

Pampacancha was only 4 million tonnes like I have said 1 million tonnes Oscar, so really it wouldn't make a great deal of difference to the copper production. As we indicate in the guidance it would save some production.

For 2019, would that be the case for 2020?

Well, we'd expect to be mining in Pampacancha for 2020.

Now I mean, when would you need to get the land right by if you expect mining 2020?

Well, I think it's about four or five months four month maybe of lead time for pre stripping and some of the infrastructure.

Thanks a lot.

Next we will go to Mark Llanes with Credit Suisse.

Hi thanks for taking my questions. Just a question on Constancia. Your guidance for -- 100 to 125 tonnes of copper does that include potential for positive -- at Constancia?

No I mean we're assuming the rates are as per the technical report.

And I noticed, your recoveries are little bit lower -- just slightly down from I believe in Q3, do you expect to maintain at the 84% - 85% for the rest of the year?

Yes I would, as we’ve indicated and we expect the coverage to vary from quarter to quarter and that will be the case through 2019. As I mentioned, we’re trying to control blending as best as we can. The numbers do vary depending on what particular two levels are. The main focus consists of a number of different ore types so combination of those and levels will impact the recovery. In all aspects, I think what we've been advising people is, is just use the numbers in the technical report. I mean, we might harvest some hopes that we can actually do better than that once we completed some further optimization work but right now the technical report provides a good base case for recoveries. We achieved what we’ve stated for 2018 right on money and like to continue that way.

Thank you very much.

Next, we'll go to Brian Lalli with Barclays.

Hey guys thanks for taking me in. I will be brief. Most of my questions have been asked. David, just curious if your thoughts around the Rosemont funding has changed at all? Obviously given a lot of permitting timeline you generated more cash, you also have some growth projects lined up. So just be interested to hear your thinking about the funding requirements relative to potential high-yield issuance?

Brian, I think as Alan mentioned once we have Rosemont permits we’re going -- value like all of the options are available to us based on the market conditions, offer prices at the time. We obviously appreciate that we have access to the high yield markets. Pricing back to more favorable levels compared to where it was a quarter or so ago. But we'll also look at other options that we talked about low priced hedging of our production period and as Alan mentioned that obviously we think that looking at joint venture partnership options are an important element of arranging a prudent financing plan for Rosemont.

Got it. That's all for me. Thanks for the time guys.

Next we will go to Sean Wondrack with Deutsche Bank.

Hi there. Most of my questions have been answered. Just one more follow-up here though. Should you not find a partner for Rosemont and received the requisite approvals would you continue to develop the asset on your own in the near term while try to find a partner and could that potentially impact your three terms net leverage ceiling, would there be any risk that you could possibly go through that? Thank you.

As I mentioned earlier the Rosemont capital spend profile is weighted to the years two and three. So to initiate an early works program we’re only talking consistent with the overall project schedule. We're only talking in the region of up just under $150 million so that's well within our capability. We see given that people have approached us to partner with Rosemont, we think and based on as I mentioned the recent experience with some of the other projects such as -- QB2 we actually don't really see a particular issue with getting a JV partner and potentially maybe even get one for a slightly larger buy-in than the Koreans currently have. And so as I mentioned I mean Rosemont people are well aware it does provide a greater than 15% rate of return along our price of $3. There's not many projects out there that have those sort of economics. So it is a valued asset in the marketplace.

Thank you.

And next we'll go to John Tumazos.

Thank you for taking my question. Congratulations on Ann Mason deal. In some other commodities there's also acquisition opportunities, last year Glencore bought some coal properties at three four times EBITDA and coal price rose subsequently. Recently iron ore properties were not too popular and now Anglo gold and [New Mon] and Barek are selling a bunch of gold mines many of whom are built and running. Would you consider departing from copper and considering other commodities there's a lot of companies that want to buy copper mines some of these other things go begging?

I'd say John, a fundamental part of our strategy I mean, we stay, we’re geographically focused in finding friendly low risk environments in the Americas and we are geologically focused really on most of the jurisdictions are in – the focus is really on copper. Obviously Manitoba tends to be by its nature poly metallic and we wouldn't necessarily, a significant part of our portfolio remains zinc and precious metals. But really our focus, strategic focus and positioning is copper mining company.

Thank you.

[Operator Instructions] Next we'll go to a follow-up question from George Topping with Industrial Alliance.

Thank you. Alan then it's a scope to expedite the exploitation of the Lalor gold, so this gold price rather continues and what's on the critical path there, is it the processing side or the access development?

It's actually will be the permitting timeline that really dictates the critical path George. We would always look to expedite a project, I mean that's just in a nature. So if once we've advanced the engineering further there's potential to maybe tighten up the schedule but right now we're just guiding to push production early 2022.

So the permitting is ongoing at the same time because the engineering work is taking about a year almost?

Correct, yes that's it.

Good. I will follow up later. Thank you.

Thanks George.

Next we have a follow-up from Matthew Fields with the Bank of America Merrill Lynch.

Hi everyone, understanding that when you get the permit you'll get for Rosemont sort of evaluate on your options on the debt markets bonds loans what-have-you. Just can you give us a quantum of, an idea of the quantum of debt at the various levels whether it's – if it's almost two billion to fund the whole project how much is going to be at the Rosemont level and how much is going to be at the parent level roughly in general terms?

That I think it's really going to be a function of circumstances and so what I don't think that we'd want to sort of guide to a particular amount of debt at the project level. We talked about a couple hundred million dollars of equipment financing. We'd expect to put in place a cost overrun facility. But beyond that we're going to sort of stay within some of the debt EBITDA parameters that Alan talked about. We're going to make sure that the overall package is prudent and doesn't expose us to undue pressure sort of whenever copper goes into the next down cycle as this business inevitably does but we'll evaluate that when the time comes.

You've said before it's about a billion one sort of funded by you and maybe 800 million or so from these collection of other sources is that still sort of the scale that we're thinking about?

It depends on sort of the joint venture partnership that we might put in place.

Thanks very much.

And that does conclude today's question-and-answer session and I’d like to turn the call back over to Candace Brule for any additional or closing remarks.

Thank you operator and thank you everyone for participating. Please feel free to reach out to our Investor Relations team if you have any further questions.

And that does conclude today's conference. We thank you for your participation. You may now disconnect.