Have a $15.50 target. GLTA
HUDBAY MINERALS INC. Sales And Earnings Miss But Cost Guidance Improved
Our Take: Slight Negative
Hudbay Q2/24 operational results were essentially in line with our
expectations, as better-than-expected cash costs offset a slight miss on
copper production, and gold results were directly in line with our estimate.
However, sales were delayed and drove an earnings miss.
We expect the stock to be weaker at market open on the earnings miss,
but to trade better through the day as the miss was primarily a sales lag
and cost guidance was improved. Hudbay reaffirmed its 2024 production
guidance ranges and reduced its copper cost guidance ranges to $0.90–
$1.10/lb from $1.05–$1.25, in line with our estimate of $0.93/lb. Hudbay
continues to de-lever its balance sheet and made accelerated debt
repayments in Q2. There were no significant updates on Copper World
permits, but the aquifer and air permits remain on track for receipt in late
2024. We expect this update can be a positive upcoming catalyst.
On our estimates, and at spot prices, Hudbay has a strong FCF yield of
10.6% in 2024E compared to the peer average of 2.5%. A conference call is
scheduled for 11a.m. ET; to join the call, dial: +1 416 764 8650.
Key Points
Financial Results. Adjusted EBITDA of $145M was below consensus at
$168M and CIBCe of $178M. Adjusted EPS of $0.00 was again below
consensus at $0.06 and our $0.05 estimate, with the main contributor a sales
miss – copper sales of 25.8kt were below our 30.2kt estimate.
Operational Results. In Peru, copper production of 19.2kt and gold
production of 10.7koz were below our 21.2kt and 12.8koz estimates. Peru
cash costs of $1.78/lb were slightly higher than our $1.68/lb estimate. In
Manitoba, gold production of 43.5koz was slightly above CIBCe of 41.2koz.
The New Britannia mill achieved 1,850tpd (now permitted to 2,500tpd),
ahead of our 1,800tpd estimate. Manitoba cash costs of $771/oz were better
than our $846/oz estimate. In BC, copper production was slightly worse Q/Q
and 6.7kt was below our 7.5kt estimate.
Production Guidance No Change, Costs Better. Hudbay reaffirmed its
2024 production guidance ranges but noted the copper production should be
below the midpoint and gold production should be above the midpoint.
Consolidated cash cost guidance is improved to $0.90–$1.10/lb (from $1.05–
$1.25/lb) and compares well to our $0.93/lb estimate.
Net Debt Progress. Through Q2/24 and after equity financing of $402.5M,
net debt was reduced by $363M to $631M and is now 0.8x EBITDA, down
from 1.3x as at Q1/24 and 1.6x at 2023 year end.