TD updateEvent HBM reported Q4/21 adjusted EPS of $0.13, above TD at $0.09 but in line with consensus. Adjusted EBITDA of ~$180mm was ~6.5% above TD's forecast of ~ $169mm.
Impact: NEUTRAL Q4/21 consolidated contained copper production of 28,198t (copper sales: 24,959t) was ~13% above TD's forecast of ~24,861t. Consolidated C1 costs were $0.51/lb copper (TD: $0.80/lb) and AISC was $1.95/lb.
Consolidated gold production was 64,159ozs, 9.4% below TD's forecast of ~70,796ozs. The construction of a new copper flotation facility at the New Britannia mill was completed in October 2021; the mill achieved commercial production on November 30, 2021. The mill is expected to average 1,500tpd throughput in 2022 and full design throughput rates and recoveries are forecast to be achieved in Q2/22. 2022-2024 guidance broadly in line with expectations — Our 2022 consolidated production estimates are all within the guidance ranges provided by HBM, albeit our forecasts were slightly above the midpoint of guidance for copper, gold, and zinc.
Our operating-cost estimates are also within the guidance ranges. We have adjusted our forecasts to be closer to the midpoint of the guidance ranges for both production and operating costs. Similarly, production guidance ranges for 2023 and 2024 are generally in line with our expectations.
Capex for 2022 is projected at $340mm (TD at $345mm). 2022 capex is down from $407mm in 2021 and reflects lower growth capex in Manitoba, with the completion of the New Britannia Mill refurbishment. Growth capex in 2022 is $95mm ($165mm in 2021). 2022 total sustaining capital is down slightly to $220mm from $229mm in 2021. Capitalized exploration for 2022 is forecast at $25mm. With lower y/y capex and higher y/y production, we expect that HBM should generate ~$300mm of free cash flow in 2022 and a further ~$200mm in 2023. The company ended 2021 with $271mm in cash and ~$347mm available under its revolving credit facility. We expect that HBM should be well-positioned to advance the Copper World project by 2025; a PEA is expected to be completed on the project in H1/22. TD Investment
Conclusion We are maintaining our BUY recommendation and C$14.00 target price.