Hudbay Minerals Inc. Aktie

Hello, and welcome to the 2026 Annual and Special Meeting of the Shareholders of Hudbay Minerals Inc. My name is David Smith, and I am the Chair of the Board of Hudbay. I would like to welcome all shareholders, employees and other rights holders and stakeholders that are attending our virtual shareholders' meeting today. Before we begin with the formal business of the meeting, I would like to briefly reflect on some of Hudbay's achievements in 2025. We delivered another year of record financial performance driven by our resilient operating platform. Through significant free cash flow generation, we further strengthened our balance sheet and reduced our debt levels, positioning Hudbay well as we advance toward a potential sanctioning decision at Copper World later in 2026.

Additionally, 2025 was the 11th consecutive year in which we achieved our annual consolidated copper production guidance and the fifth consecutive year in which we achieved our annual consolidated gold production guidance. In Arizona, we made substantial progress advancing our Copper World project. Following receipts of the final permits, we successfully completed a joint venture transaction with Mitsubishi Corporation in early 2026, as Mitsubishi acquired a 30% minority interest in the project for $600 million. We are very excited to have Mitsubishi as our partner for this project, and the completion of the joint venture transaction marks a significant milestone in derisking Copper World for Hudbay.

In Manitoba, we once again delivered consistent operating performance despite contending with serious wildfires and other weather-related challenges during the year. And most importantly, we did so safely. We also continue to prioritize strong relationships with local and indigenous communities in the areas in which we operate and are seeking ways to continue to grow our business in Manitoba. In British Columbia, we continue to advance our multiyear optimization plan at the Copper Mountain Mine and our second full year of operations post-acquisition, and we remain focused on positioning the asset for improved reliability and long-term performance.

In addition, in early 2026, we signed refreshed participation agreements with each of the lower and upper Similkameen bands and received the permit for our New Ingerbelle project. In Peru, our operations remained a strong contributor to our overall results. With the completion of mining at Pampacancha, consistent mill throughput and continued progress on key permitting initiatives. This was accomplished while safely managing temporary social unrest in the latter part of the year. Across our business, we remain focused on advancing our sustainability initiatives, and we are pleased to have published our 2025 annual report this morning. This report highlights many of our recent sustainability accomplishments and our commitment to setting the gold standard in everything we do.

We reduced our total recordable injury frequency for the fourth consecutive year. We made more than $16 million in community investments, and we made strides in advancing our greenhouse gas emissions reduction strategy. In March 2026, we also announced the proposed acquisition of Arizona Sonoran Copper Company, pursuant to which Hudbay agreed to acquire all of the issued and outstanding common shares of Arizona Sonoran that it does not already own. Last week, Arizona Sonoran security holders voted in favor of the transaction at a special meeting of shareholders, and the parties expect the transaction to close later in the second quarter. For Hudbay, the acquisition is expected to further enhance our long-term copper production profile and expand our U.S. growth pipeline.

These are only a few examples of our accomplishments and focus areas from the last year, and none of these would have been possible without the dedication and resilience of our people. I would like to take this opportunity to thank our employees for their continued contributions to Hudbay's success. I'm especially proud of the job done by our organization to keep our people and local communities safe. On behalf of the rest of our Board, before we commence with the formal portion of the meeting, I would like to express my sincere thanks to Steve Lang for his many years of dedicated service and contributions to Hudbay, including his long tenure as Chair of our Board. Steve has elected not to stand for reelection at today's meeting due to health reasons, and we wish Steve the very best.

Now let me introduce the members of the Hudbay Board, who, in addition to myself, are nominated for election at today's meeting. Peter Kukielski, our President and Chief Executive Officer; John Armstrong, Jeane Hull, Carin Knickel, George Lafond, Colin Osborne, Paula Rogers and Laura Tyler. Joining me today for the formal portion of the meeting is Peter Kukielski, our President and Chief Executive Officer, who will be available for the Q&A period at the end of the meeting; and Mark Haber, our Vice President, Legal and Corporate Secretary, who will act as Secretary of the meeting.

We will now start with the formal business of the meeting, which we will try to complete as quickly as possible. I've asked certain shareholders to move and second proposals we have on the agenda. After all the motions have been tabled, we will open the floor to discussion and questions on the motions. If a registered shareholder or proxy holder with a control number has a question related to one of the matters to be considered, I'd ask that they type it into the questions interface on Lumi. Mark will then raise these questions during the discussion period, and we will respond. The only questions that will be permitted prior to the discussion period will be those related to procedural matters. If you are not a registered shareholder or proxy holder with a control number and would like to ask the Board of Directors a question, applicable e-mail and mailing details are included in our management information circular for this meeting.

As mentioned in our management information circular, only registered shareholders and proxy holders who have registered for a control number are able to vote at this meeting. Voting will be open for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or to wait until discussion concludes on each resolution prior to casting your vote. Should you choose to do so, you will be able to change your vote on any resolution until voting is closed at the end of the formal portion of the meeting. Once the voting has closed, we will take a few minutes to tabulate a preliminary report. I now call the meeting to order. I will act as Chair of the meeting. I will ask Mark to act as Secretary of the meeting and Christopher de Lima of TSX Trust Company to act as scrutineer.

This year, Hudbay has continued to use notice and access to provide shareholders with access to materials for our annual and special meeting. Mark has advised me that the notice and access, notice and form of proxy have been forwarded to each registered shareholder and intermediary of record as of the record date of the meeting. All proxy-related materials are available electronically on our corporate website, on the website of our transfer agent, TSX Trust Company, and under the issuer profiles, SEDAR+ and EDGAR. Links to these materials are also available on Lumi's homepage for this meeting.

In addition, shareholders may obtain paper copies of the proxy-related materials by contacting our transfer agent, TSX Trust Company, according to the instructions provided in the notice and access notice. Mark has advised me that he has been provided with the scrutineer's report, which shows that there are 450 shareholders represented at the meeting or by proxy, holding in aggregate 276,024,905 common shares, representing approximately 70% of Hudbay's outstanding common shares. Accordingly, this meeting is duly called and properly constituted. I would ask Mark to attach the affidavit of mailing, copies of the meeting materials and the scrutineer's report to the minutes of the meeting. I do not plan to read the minutes of last year's meeting.

I do not plan to read the minutes of last year's meeting. Any shareholder who would like to review those minutes should contact Mark after the meeting. He can be reached by e-mail at [email protected]. The first item of business on our agenda is the presentation of financial statements of Hudbay for the year ended December 31, 2025, together with the related auditor's report. These were made available to shareholders through notice and access. Links to these materials are also available on Lumi's homepage for this meeting. These documents have been tabled and no further action is required.

We will now proceed with our second item of business, the election of directors. Voting through the Lumi web portal is now open on all resolutions. I would like to remind you that you will be able to change your vote until voting closes. We'll give you notice before this occurs. In addition to myself, the proposed nominees for election as directors of Hudbay are: Peter Kukielski, our President and Chief Executive Officer; John Armstrong, Jeane Hull, Carin Knickel, George Lafond, Colin Osborne, Paula [indiscernible] and Laura Tyler. If elected, we expect these nominees will hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. In light of our advanced notice bylaw, I declare -- I hereby declare the nominations closed.

In line with our corporate governance guidelines in the CBCA, each director nominee will be elected individually and is subject to the majority voting requirements under the CBCA. However, I'm advised that based on proxies received to date, each proposed nominee would receive a greater number of votes for his or her election than would be against his or her election, and none of the proposed nominees would be required to tender a resignation under the CBCA majority voting requirement. So unless a shareholder or proxy holder requests separate motions to elect the individual nominees, I propose that we proceed with a single motion. May I have a motion for the election of the 9 individuals nominated as directors?

I move to elect each of the 9 nominees as directors of Hudbay on the basis proposed.

I second the motion.

Thank you. Voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. The third item of business is the appointment of the auditor and the authorization of the Board of Directors upon the recommendation of the Audit Committee to fix the auditor's remuneration. It is proposed that Deloitte LLP be reappointed as the auditor of Hudbay until the next Annual Meeting of Shareholders or until its successor is duly appointed and the Board of Directors upon the recommendation of the Audit Committee, be authorized to fix their remuneration. May I have a motion on this matter, please?

I move that Deloitte LLP be reappointed as the auditor of Hudbay on the basis proposed.

I second the motion.

Thank you. In order to be approved, the motion must be passed by a majority of the votes cast. As mentioned before, voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. The final item of business is to consider and if thought advisable, to pass a nonbinding advisory resolution on executive compensation. The text of the resolution, which I don't plan to read, is set out in the management information circular. May I have a motion on this matter, please?

I move that the nonbinding advisory resolution accepting Hudbay's approach to executive compensation be approved.

I second the motion.

Thank you. In order to be approved, the motion must be passed by a majority of the votes cast. As mentioned before, voting on this resolution is open via Lumi for all shareholders and proxy holders registered to vote. Is there any other formal business that may be properly -- that may properly be brought before the meeting? As there is no other formal business, voting will be closing shortly. For those of you who have not voted on all the resolutions, please do so now. We would now like to open the floor to discussion regarding the business of motions. Mark, have we received any questions or comments concerning the motions before us today?

Hi, Dave, we have not received any questions.

Voting on all matters is now closed. Final tabulation of the voting results will be provided by TSX Trust after the meeting and will be posted on our website and SEDAR+. However, as a preliminary matter, I can share with you that with respect to the election of directors, the motion has been approved. I declare John Armstrong, Jeane Hull, Carin Knickel, Peter Kukielski, George Lafond, Colin Osborne, Paula Rogers, myself and Laura Tyler, duly elected directors of Hudbay Minerals Inc. With respect to the appointment of our auditor, the motion has been approved. With respect to the nonbinding advisory resolution on executive compensation, the motion has been approved. That concludes the formal business of the meeting. May I please have a motion to terminate the formal portion of the meeting, following which we'll have an opportunity for investor questions.

I so move.

I second the motion.

Thank you. Unless there are any objections, I declare the 2026 Annual and Special Meeting of Shareholders of Hudbay Minerals Inc. to be concluded. If shareholders have any questions for myself or Peter, they should raise them now. Please type in your questions in the Lumi Q&A where indicated. We will allow approximately 30 seconds for any questions to be raised.

Dave, I confirm that there are no questions, and you can proceed with concluding the meeting.

Thank you, Mark. This concludes our meeting. I want to thank everyone for joining us today.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals, Inc. First Quarter 2026 Results Conference Call.

[Operator Instructions]

I would like to remind everyone that this conference call is being recorded on May 1, 2026 at 11:00 a.m. Eastern Time. I would now like to turn the conference over to Candace Brule, Senior Vice President, Capital Markets and Corporate Affairs. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's First Quarter 2026 Results Conference Call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, 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 Eugene Lei, our Chief Financial Officer; and Andre Lauzon, our 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 U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski.

Thank you, Candace. Good morning, everyone, and thank you for joining us on today's call. We've had a great start to the year, achieving several key operational, financial and growth milestones. Hudbay delivered another quarter of record revenue, record adjusted EBITDA and record adjusted earnings in the first quarter. This was driven by steady operating performance, our focus on cost control and the continued benefit from margin expansion with our unique mix of copper and gold exposure.

Our leading operating cost performance resulted in record low consolidated cash costs in the first quarter, which contributed to continued strong free cash flow generation. With the strong performance in the quarter, all our operations are on track to achieve 2026 production and cost guidance. Building on our commitment to prudent balance sheet management, we ended the quarter with over $1 billion in cash and cash equivalents, benefiting from $420 million received from Mitsubishi for their initial cash contribution on closing of the Copper World joint venture transaction in January. Our enhanced financial flexibility has positioned us well to continue advancing the development of Copper World, reinvest in high-return opportunities at each of our operations and derisk the Cactus project upon completion of the acquisition of Arizona Sonoran to deliver attractive growth and maximize long-term risk-adjusted returns at each of our operations for stakeholders.

Slide 3 provides an overview of our first quarter operational and financial performance. The first quarter demonstrated strong operating performance with higher mill throughput across the 3 operations compared to the previous quarter delivering consolidated copper production of 28,000 tonnes and consolidated gold production of 62,000 ounces. We achieved record quarterly revenues of $757 million and record adjusted EBITDA of $422 million in the first quarter.

Cash generated from operating activities was $211 million, remaining relatively consistent with the fourth quarter as a result of favorable changes in noncash working capital. First quarter adjusted net earnings was a record of $159 million or $0.40 per share, reflecting higher realized metal prices and strong cost control across the operations, resulting in higher gross profit margins.

During the first quarter, we continued to demonstrate the industry-leading cost performance, delivering record low consolidated cash costs of negative $1.80 per pound of copper and sustaining cash costs of $0. This incredible cost performance was partially driven by higher gold byproduct credits, reflecting the benefits of Hudbay's unique commodity diversification.

Turning to Slide 4. Hudbay has delivered several quarters of significant free cash flow generation as a result of steady operating performance, expanding margins from strong copper and gold exposure and our cost control efforts. With our enhanced balance sheet and diversified free cash flow generation, we are well positioned to fund our attractive growth pipeline. Our cost control efforts are focused on navigating emerging external cost pressures such as higher fuel prices and short-term labor challenges. We have not experienced any disruption to fuel availability and have been able to mitigate the cost pressures through initiatives to further improve throughput and enhance operating efficiencies.

We are well insulated from external cost pressures due to our diversified platform with significant byproduct credits from gold production and the polymetallic nature of our ore deposits. While most of our revenues continue to be derived from copper, revenue from gold represents a meaningful portion of total revenues with 39% of gross revenues from gold in the first quarter. After accounting for our sustaining capital investments, but before growth investments, we generated $102 million in free cash flow during the quarter bringing our trailing 12-month free cash flow generation to approximately $400 million. As mentioned earlier, we ended the first quarter with over $1 billion in cash and cash equivalents and as of March 31, our total liquidity was $1.4 billion.

Our net debt at the end of the quarter was nearly $0, bringing our net debt-to-EBITDA ratio to its lowest point in more than a decade. Consistent with our prudent balance sheet management and focus on cost of capital, following the quarter, we repaid our outstanding 2026 senior unsecured notes on maturity on April 1. We used a combination of cash on hand and a $272 million draw on our low-cost revolving credit facilities. After giving effect to this repayment, Hudbay's total liquidity decreased by $473 million to $957 million. This continues to provide us with significant financial flexibility as we advance Copper World towards a sanctioning decision later this year.

Turning to Slide 5. The Peru operations continued to demonstrate steady operating performance with production and costs in line with expectations. The operations produced 21,000 tonnes of copper, 9,000 ounces of gold, 530,000 ounces of silver and 380 tonnes of Molybdenum during the first quarter. Production of copper and gold were lower than the fourth quarter due to the depletion of the higher grade Pampacancha ore in late 2025. Mill throughput levels averaged approximately 90,700 tonnes per day in the first quarter of 2026, achieving a new quarterly record. The team's efforts to increase mill throughput aligned with the Peru Ministry of Energy and Mines regulatory change to allow mining companies to operate up to 10% above permitted levels.

On March 6, Hudbay received a permit approval to increase annual mill throughput capacity to 31.1 million tonnes from 29.9 million tonnes, setting a new base for the 10% permitted allowance. We continue to advance the installation of pebble crushers later this year to further increase mill throughput rates in the second half of 2026, and we are on track to achieve 2026 production guidance for all metals in Peru.

First quarter cash costs in Peru was $0.70 per pound of copper, a 23% increase compared to the fourth quarter due to lower byproduct credits, offset by lower profit sharing, lower power costs and lower treatment and refining charges. Cash costs in the quarter outperformed the low end of the annual guidance range as a result of strong operating cost performance and temporarily higher gold byproduct sales from Pampacancha despite emerging external cost pressures.

We are well positioned to achieve the full year cost guidance range in Peru. During the quarter, Constancia was recognized as the safest open pit operation in Peru during the National Mining Safety contest for our performance in 2025. This reflects our company's unwavering commitment to safety and validates Constancia's compliance with the highest operational safety and regulatory standards.

Moving to our Manitoba operations on Slide 6. The first quarter demonstrated strong operational agility in mitigating lower equipment utilization and labor availability at the Lalor mine while continuing to prioritize gold ore feed for the new Britannia mill. This strategy has successfully maintained strong gold production in the first quarter, supported by higher mill recoveries compared to the fourth quarter of 2025. Our Manitoba operations produced 48,000 ounces of gold, 250,000 tonnes of copper, 5,000 tonnes of zinc and 213,000 ounces of silver in the quarter.

Production of gold was higher than in the fourth quarter due to higher gold recoveries and higher mill throughput while all other metals were lower primarily due to lower grades. Production in the second half of 2026 is expected to be higher than the first half of 2026 due to grade sequencing and higher ore output from Lalor. With solid operating results in the first quarter, we are on track to achieve 2026 production guidance for all metals in Manitoba. The Lalor mine hoisted an average of 3,900 tonnes of ore per day in the first quarter strategically prioritizing gold zones to secure optimal feed for the New Britannia mill. Total ore mined was lower in the prior quarter because of lower effective utilization of equipment due to reduced workforce availability.

This was offset by successfully onboarding nearly 80 new employees as recruitment and upskilling of employees are underway to increase proficiency of front-line employees. The new Britannia mill averaged approximately 2,000 tonnes per day in the first quarter and benefited from continuous improvement initiatives to unlock future throughput capacity.

Gold recoveries of 90% of the new Britannia mill reflects ongoing optimization efforts. Similarly, the Stall mill achieved improved gold recoveries of 73% in the first quarter, reflecting process optimization and enhanced gold recovery initiatives. The 1901 deposit delivered 11,000 tonnes of development ore in the first quarter. The team continues to advance haulage and exploration drifts to further delineate the orebody and support ongoing infrastructure projects. Looking ahead, we plan to prioritize exploration, definition drilling orebody access and establish critical infrastructure at 1901 in preparation for full production in 2027.

Manitoba gold cash cost in the first quarter were $408 per ounce, outperforming the low end of the guidance range. We are well positioned to achieve our 2026 cash cost guidance range. In British Columbia, we continue to focus on advancing our multiyear optimization plans achieving significant milestones in both mining productivity and project permitting in the first quarter and remain on track to deliver the benefits of the stripping program and unlock higher grade ore later this year.

As shown on Slide 7, Copper Mountain produced 4,800 tonnes of copper, 5,200 ounces of gold and 43,000 ounces of silver in the first quarter, in line with our guidance and planned mine sequencing. Production was supported by a higher mill throughput, offset by lower grades compared to the fourth quarter. We remain on track to achieve our 2026 production guidance expectations for all metals in British Columbia with higher production expected in the second half of the year as mill improvements take effect. Mining activities reached a record total material movement of over 25 million tonnes in the first quarter, driven by an optimized mining sequence in the main pit and increased contributions from the North pit.

This ramp-up was supported by the successful commissioning of a new production loader in January. To further bolster the equipment fleet and add to this momentum, a new shovel has been recently commissioned. Milling throughput benefited from the completion of the second SAG mill and the mill optimization initiatives implemented in late 2025, resulting in increased mill throughput in the first quarter of 2026. The second SAG mill achieved increased throughput in the quarter and averaged 10,000 tonnes per day in March. The primary SAG mill continues to operate under a reduced load and is being rigorously monitored prior to the head replacement scheduled for late June and into July.

The mill remains on track to achieve its permitted capacity of 50,000 tonnes per day in the second half of 2026. British Columbia cash costs were lower than the prior quarter delivering cash cost of $2.41 per pound of copper as a result of higher gold byproduct credits and resolving the unplanned maintenance downtime issues experienced in the prior quarter. First quarter cash costs were within the guidance range and despite emerging external cost pressures, we remain on track to achieve 2026 cash cost guidance in British Columbia. During the quarter, the New Ingerbelle project reached a major milestone in February with the receipt of the Mines Act and the Environmental Management Act amended permits from provincial regulators. The New Ingerbelle project supports continued copper production, increased gold production and further mine-life extensions.

The project is designed to access higher-grade mineralization while improving operational efficiency with a stripping ratio approximately 3x lower than current mining areas. With these permit approvals, we are advancing critical infrastructure required for the expansion. This includes the construction of an access road, a bridge across the Similkameen River and the development of an East haul road link to New Ingerbelle with existing operations. A large drill program was initiated during the first quarter at New Ingerbelle to improve resource definition and expansion. We are pleased to receive the news this week that the BC government has added the New Ingerbelle project to the province's list of priority resource projects.

This list highlights the acceleration of major projects that strengthens economic growth, support resource development and create jobs and long-term value.

Turning to Slide 8. We announced our annual mineral reserve and resource update, along with an improved 3-year production outlook during the quarter. We extended Snow Lake's mine life by 4 years to 2041, maintained Constancia's mine life to 2040 and extended Copper Mountain's mine life by 2 years to 2045. Consolidated copper production is expected to average 147,000 tonnes per year over the next 3 years representing a 24% increase from 2025. This growth is driven by higher expected copper production in British Columbia from the mill throughput ramp-up in the second half of 2026, higher grades in British Columbia in 2027 from the completion of the accelerated stripping program and higher expected mill throughput in Peru starting in the second half of 2026.

Consolidated gold production is expected to average 243,000 ounces per year over the next 3 years, reflecting continued strong production in Manitoba and the expected contribution from New Ingerbelle in British Columbia starting in 2028. We have already made significant progress in advancing many of our corporate and strategic objectives so far this year and we anticipate many more key catalysts to come from our portfolio of long-life assets in Tier 1 jurisdictions as shown on Slide 9. Our prudent balance sheet management, strong financial flexibility, significant free cash flow generation from strong exposure to higher copper and gold prices and continued margin expansion has positioned us to be able to advance generational growth investments across the portfolio.

In Peru, we delivered higher mill throughput in the second half of the year as we complete the installation of 2 pebble crushers, which will grow copper production in 2027 and 2028. We also continue to progress exploration plans in Peru, including at the Maria Reyna and Caballito properties to provide long-term growth potential at Constancia. In Manitoba, we continue to advance optimization initiatives and exploration efforts to demonstrate an enhanced production profile and expanded mine life. Exploration activities are underway at the 1901 deposit as we advance towards production in 2027 and an expanded exploration program at Talbot is focused on upgrading mineral resources to reserves and expanding the deposit footprint at depth.

In British Columbia, we expect to continue to see operational improvements in the second half of the year as we complete our optimization initiatives and advance this operation towards its cash flow inflection point later this year. Following the receipt of the New Ingerbelle permits earlier this year, we have commenced construction of critical infrastructure for the development of the deposit to access the higher-grade mineralization and drive further cash flow growth starting in 2028. We have also launched the largest exploration program at New Ingerbelle to further increase mine life extension potential.

On Slide 10, during the first quarter, we made significant steps towards enhancing our United States copper growth pipeline. At Copper world, as I mentioned earlier, we announced the closing of the Mitsubishi joint venture transaction establishing a long-term strategic relationship with a premier partner. The initial $420 million in cash proceeds will be used to directly fund the remaining pre-sanctioning costs and the initial project development costs following a sanctioning decision later this year.

The feasibility activities at Copper World are well underway with the DFS progressing above 85% completion at the end of March and remaining on track for completion in mid-2026. In March, we announced the acquisition of Arizona Sonoran, establishing a major copper hub in Southern Arizona with the addition of the Cactus Project [indiscernible] existing Arizona business. This transaction further strengthens our position as a premier Americas-focused copper company enhances our U.S. growth pipeline and create significant operational efficiencies and regional synergies with the stage development of Copper World and Cactus. The transaction has received strong shareholder support and is expected to close in the second quarter of 2026.

We have also commenced pre-feasibility study activities at our Mason copper project in Nevada. We expect the study to be completed in 2027. While Mason isn't expected to come into production until after Copper World and Cactus, its larger production base will position it as the third largest copper mine in the U.S. As we continue to advance all of these attractive growth initiatives across the portfolio, we remain committed to prudently allocating capital to the highest risk-adjusted return opportunities to deliver significant value for stakeholders.

Concluding on Slide 11, our focus on demonstrating continued operational excellence while prudently advancing our many organic growth opportunities will deliver significant copper production growth. Over the next 3 years, we expect to increase production by 24% through attractive brownfield investments while continuing to advance our attractive U.S. pipeline to meaningfully expand annual copper production levels.

By the end of the decade, we expect to increase our annual copper production by more than 70% to approximately 250,000 tonnes with Copper World. And with the staged development of Cactus and Mason to follow, we have a pathway to 500,000 tonnes of copper by the middle of the next decade. The most compelling part of this industry-leading copper growth profile is that our growth assets are low risk, low capital intensity projects located in some of the best mining jurisdictions in the world, and we have the team, the balance sheet and strong financial plan to deliver this pipeline.

This is largely driven by a diversified operating platform with significant exposure to complementary gold and our expanding margins. I have no doubt that our continued focus on delivery and execution will continue to drive significant value for all our stakeholders. And with that, we are pleased to take your questions.

[Operator Instructions]

Our first question is from Ralph Profiti with Stifel Financial.

Peter and Eugene, there's been a lot of work being done at Copper World on long-lead items ahead of the definitive feasibility study. And I'm just wondering have you set a goal for how much of the revised budget by the time sanctioning does come will, say, be locked in, contracted and committed? I'm just trying to get a sense of how much work can be done ahead of time to manage inflationary pressures.

Thanks, Ralph. Great question. Look, we certainly will lock in a significant amount of their key equipment. So for example, we already have pricing on fleet, for example, with the opportunity to lock in fleet pricing right now. We have pricing from vendors for primary equipment that we are going to procure and we're ensuring that we have space in the production facilities right now. I would say, between the issue of the DFS and FID, we will lock in pricing on all of that equipment. But Andre, any comments you might have in addition.

Yes. I agree on the long lead end. And there are some also critical path items that we've been moving along. We started construction of our water line. We've taken some initial blast. We're pioneering our haul roads as we speak. And so those are already in our budget for the year. And -- but like Peter said, the big ones are already in place, ball mills, SAG mills, all those costing things are coming forward.

Ralph, if I could just add one more. You will recall that when we announced the joint venture transaction last August that we increased the budget in 2025 for long lead items. So we are -- we didn't just react to this today. We've been thinking about this for well over a year. So we've been placing orders. We've been thinking about getting ourselves ready for the FID decision well over a year in advance.

And maybe as a follow-up, a point of clarification, Peter, on the LSIB judicial review that this is a process that is actually sort of attracted to the regulatory government process itself that sits outside of sort of Hudbay and are you needing to have a legal strategy around this to preserve the 2028 timeline for New Ingerbelle?

Great question, Ralph. So in March this year, LSIB submitted an application for judicial review of the regulatory decision to grant the permit amendment. We remain very confident in the integrity and the robustness of that regulatory process that led to the issuance of the permit amendment. And we believe that the court will uphold the decision on that award. At the same time, we remain committed to working with the LSIB in a respectful and constructive manner to try to resolve their concerns through the mechanisms that were agreed to, by the parties in the participation agreement. So yes, the issue is not with us. It's with the government, and we have a constructive relationship with them and we'll ensure that we continue to drive that relationship.

The next question is from George Eadie with UBS.

Can I just ask a bit more following up on that question from Ralph? Just on the CapEx at Copper World, like Eugene. How much can you lock up in the next sort of 12 months or so in terms of dollars like are we talking 20% to 30% of the CapEx spend you can fix in the next sort of period? Is that a reasonable estimate? And I guess my question is, we've seen a zinc project nearby this week materially lift CapEx and will part of that is scope change, like how can we get a meaningful conviction that in 12 months that you guys can -- you guys can avoid that risk, I guess?

Lots of careful planning. And I think we've had a lot of time to think about this project over the years. And the feasibility study for this project was completed or a similar project was completed a decade ago. And so and we have a certain amount of equipment already in storage and obviously not subject to cost inflation. In terms of the actual percentage in dollars, I think we're still working on the final estimate in the DFS. We don't know that number yet. We have been very clear that we expect there to be some cost inflation and escalation related to the final CapEx number from the pre-feasibility number that was released 3 years ago.

As you know, there has been inflation. But that 3 years ago number was post, I'll call, the biggest wave of inflation post COVID. So we are not expecting a blow in terms of capital. We are 85% done at the feasibility study. We'll release that in -- likely in the third quarter, just midyear as expected with an FID to follow. We don't have any further clarity or any guidance on the actual guidance of the CapEx number at this moment.

I would add, George, it's Peter, that we're following an integrated project delivery system, which incorporates a bunch of the contractors and engineers in the overall project management structure. So the development of the estimates that we have will, in no small measure include their estimates of their own contributions. So the constructors and engineers we're using have actually participated in several of the projects that have been developed in the U.S. recently. And so they will have a window or a deep insight into the evolution of costs over the last couple of years in any case, and that will be reflected in the definitive feasibility study.

And to the original question around percentages, it's tough like Eugene said, but we do have insights in terms of the fleet. And if you recall from the pre-feasibility study, the fleet is 10% to 15% of the overall cost and those numbers that we're receiving are in line with our estimates. So that's a good sign to start.

You'll recall, this project is not -- is one of the lowest capital intensity projects in the copper space. And so it's not subject to some of the larger cost blows we've seen in the sector. It's not that altitude, actually 26 miles from Tucson. And so it's some of the inherent infrastructure challenges that have plagued some of the other builds do not apply to this project as much. And so we're confident that there will be a very robust economic case for this project as evidenced by Mitsubishi joining up at the PFS level a few months ago.

Okay. Yes. No, that's helpful. And then pivoting slightly in my line dropped for 2 minutes so I might have missed this, but at Cactus, when will we get an updated PFS with Hudbay sort of overlaid view and perspective post transaction closing? Could that be by year-end? Or is it still going to be sometime next year? And also what's the latest on the permit amendments too, please?

Sure. I'll take that as -- so the vote is still to come in a couple of weeks. We are quite excited about the project. We've met the teams. We're very, very pleased with the quality of the level of the teams that are currently working for Cactus and are excited for them to be part of the team. And I think the next step once the vote goes through is to sit with the teams and really regroup around, there's lots of synergies with Copper World. And our view of what we were thinking when we looked at the acquisition and getting their understanding as well. So that's going to go into next year.

It's not a year-end thing. I think realistically, it's gets into 2027, for sure. And in terms of the permitting, the teams are progressing with the permitting as site and they're having discussions locally with the county. So the permitting and the revisiting of that is on track and moving forward, and we're supportive of them in doing that. The synergies around looking at what does it look like Obviously, they are looking at fleet. We just come off of negotiating a large fleet for Copper World. They're not privy to that information once we go through that, I think there's lots of opportunities for Cactus when we look at it all together. But it's -- by the end of the year, I think it would be really rushed. I think it's definitely into next year for sure.

The next question is from Fahad Tariq with Jefferies.

Maybe just any color on input cost pressures or supply constraints that you're seeing. I don't think I saw anything in the presentation or in the press release. If you could just comment on that, that would be helpful.

I can take that. I assume Fahad, you're referring to the current fuel and fuel prices and the like. I think I just wanted to say that from a Hudbay standpoint, we're fairly well insulated by these emerging cost pressures. As you saw, we held costs very well in the first quarter. And while the prices for oil weren't yet -- were not yet elevated. Our operations are minimally affected. In Peru, about a $10 increase in the price of oil per barrel is about a $0.04 cash cost increase per pound of copper. In BC, given heavy stripping that we're doing, that's a little higher, it's about $0.10 per pound produced.

So if you think about oil today and if for example, current prices were to hold, oil is about 50% higher than our original budgeted amount for the year, and that would result in about a $45 million sort of hit to cash flow if oil prices were to persist at this level for the rest of the year -- for the whole year. But we have a natural hedge of gold in our portfolio that more than insulates that cost. And so gold is about 20% higher than what we budgeted for the year. And so the impact if these gold prices were to hold for the rest of the year, the impact of that would be close to $200 million. So in terms of the net effect of what we have with the gold that we produce in the portfolio is a natural hedge against, call it, larger cost inputs like oil. So we feel very well positioned.

And Fahad, I would also add that one of our primary cash flowing assets, which is Manitoba, is largely insulated from the effects of oil price since we use very, very little oil in Manitoba at all. We use -- most of our underground equipment is driven by -- is electrically driven or battery driven in any case.

Okay. Great. That's really clear. And then maybe just switching gears to kind of the growth profile. Can you remind us in terms of the sequencing between Cactus and potentially Copper World Phase 2? How you're thinking about that, assuming that those permits happen at some point and you have the -- your kind of beneficial situation of being able to select between the two?

Yes, for sure. I think that what makes absolute sense is that we progress Cactus in sequence with Copper World because there's a lot of synergies between the 2 projects. So as Andre mentioned, we would continue with the -- updating the pre-feasibility study of Cactus, move from that into definitive feasibility, get all the permits in place. So that once Copper World is in production, Phase 1, we would be able to move into the construction -- or face the construction of Cactus and bring that online subsequent to Copper World. Now Phase 2, we would not want to apply for permits until such time as Phase 1 is in operation because we don't want to get things mixed up. So if you imagine, it's going to take several years in order to get the permit for Phase 2, it makes absolute sense to progress Cactus and then Phase 2 would come in after Cactus came in.

And Cactus is a little different than Copper World. Copper World, the majority, a lot of CapEx is around building a facility and infrastructure. And -- but at Cactus, it's it's very much the inverse of that. It's more of a stripping exercise leading into building an SX-EW plant. And so very, very low risk in terms of the execution of moving material. It's just about the purchasing of the fleet and execution of the plan. So there is -- like Peter said, there's a timing element and -- but I think it almost naturally fits.

The next question is from Dalton Baretto with Canaccord Genuity.

Stage is staying on that whole sequencing theme between Copper World Phase 1 and Cactus. Just given what's been going on with sulfur and sulfuric acid pricing, demand for U.S.-made cathode and then just the timing of the sequencing, has anything changed in your thinking as it relates to the feasibility study around the Albion facility?

So great question. I think no, nothing has really changed, except that. So we continue -- the DFS is a continuation of -- it's exactly the same as the PFS pretty well. So what we could do is during the update of the PFS for Cactus, we could take a look at the sequencing or the timing for the development of the Albion facility, but it will be something that we look at as part of the Cactus pre-fees rather than the work that we're doing on Copper World right now.

Yes. And the build on that is the other project in Manitoba, where we're looking at getting the gold out of the [indiscernible] plant, we're progressing quite well with the studies on that. There's still more to go. But one of the byproducts there is also sulfur. So molten sulfur and sulfur products. And so there's lots of optionality in our portfolio to produce sulfur that would benefit the Cactus project, where ultimately, what you're trying to get is the asset for the heap leach. So whether it's advancing Albion, that's what you suggest, it could be about producing a lot more gold in Manitoba and doing the other, we'll evaluate all of those at the right time.

Understood. And then once the feasibility study drops midyear, outside of the financing package, what are some of the other gating items to get you to FID?

I guess the -- well, obviously, getting our partner on board, so the partner would have to -- but the partners are already on board in many respects, but they have their own internal approval process that we need to respect. And so there will be some time between the completion of definitive feasibility study and the final investment decision in respect of what our partner needs.

But they're actively working with us. We're meeting with them. They absolutely don't want to be a barrier. We're all aligned on rock in the box and meeting that first production. So they've been really great to work with, and...

And we don't see any need .We're already spending the money. The $420 million that they deposited in January in terms of that close. We're using that capital to advance the feasibility study, and that will be the first capital spent when we FID this project.

Yes. We don't see the FID being a barrier to the rock in the box and first production is all of the allowances that we've made and the critical path items that we're focusing on are keeping us on track.

Great. And maybe just finally, Peter, can you possibly comment on some of the political goings-on in Peru right now, whether that's translating at all into any form of social unrest?

No. I think the social landscape has been complicated since the unrest that we saw last year. And so I think with the federal elections that are underway right now, there may continue to be periods of heightened social unrest. I think most people are aware of that the general election was held on April 12. And that from the initial voting, there's not yet a clear result of who the second candidate is. First candidate, as everybody knows, is Keiko Fujimori. We think that by mid-month, it probably becomes evident to or becomes clear who the second candidate is. But frankly, in a way, federal elections don't really impact Hudbay as we've seen many, many different presidents since we started operations 10 years ago. And what's really been constant in those years has been a stable fiscal regime, which we don't expect to change.

So we've seen left wing presidents, right wing presidents and everyone in between. But what we always got to anchor our thinking to is that Peru is a leading copper production nation globally. And I think the new President will recognize the importance of mining to the country, and I think it will be business as usual for us. So we have no concerns with respect to the upcoming election. We don't think it will result in heightened unrest. I'm sure there will be spats of it, but we're well positioned to deal with it.

The next question is from Stefan Ioannou with Cormark Securities.

Maybe just following on the Peru theme. In the slide, you do mentioned sort of preparing for Maria Reyna and Caballito exploration. I sort of assume that, that's sort of more local sort of social considerations. Is there any update on when we might be able to put a drill rig in the ground there?

So there have -- Stefan, to be no changes to the remaining steps in the permitting process, which includes the government's consulta previa process with the local community and with the election underway, that process is delayed. There are community elections, which will be held later on in the year. And we think that once those elections have been held, then we'll move forward towards getting the permits. So for sure, the permits are delayed, they continue to be delayed, but we think we're sort of coming to the end of that period of delay as we move past the general election and the community elections and we probably see a little bit of movement towards the end of the year.

The next question is from Matthew Murphy with BMO.

Just wanted to ask one about the labor balance at Lalor. You mentioned a few times some challenges in Q1. And maybe you can elaborate a bit on what you're seeing and how you're addressing it?

Yes, sure. It's Andre. Yes, there has been some challenges. They're not new. Like we've gone through this before. So the team is actively working on it, but we've seen a little bit of a peak towards the end of Q1 and we're working through it right now. But some of the things the teams are working on. So obviously, we're bringing in more people into the organization, and that takes a little bit of time to train them. And so that's more of a medium-term sort of fix. But in the very, very short term, the team is looking at -- with the 1901, which I'm sure you're familiar with is the 1901 orebody, we've been developing ourselves, and we have a lot of skilled employees there. And so the teams working on contracts with a mining contractor.

So in an isolated area, it's a nice fit, and then we'll redeploy our resources into our shortfalls within the mine. And so there's a variety of things the teams we're working on. There's more than that. There are several of them. But those would be the main ones. And we got this in hand. It's something we've done before. It's just a blip, and we're working through it. So it's not something that we're really worried about. It's in hand.

And I think, Matt, what we were pretty straightforward on in the results release that we remain on track to achieve the annual production guidance ranges in Manitoba, regardless of any labor issues and ups and downs that we might see. The team has it well in hand.

And we'll still be within guidance with our cost guidance with those extra costs as well.

Next question is from Lawson Winder with Bank of America Securities.

Could I ask about capital return? And just in light of the recently revamped capital return framework and the stronger balance sheet and -- but also considering the growth capital needs and then considering the buyback renewal approval, could we consider the probability that Hudbay might be more active in the buyback in '26 as a higher probability than that in '25 when the buyback wasn't acted upon at all?

Lawson, I can take that question. I think we look at this holistically, and the capital allocation framework was meant to provide us beyond that 3-P plan, the way to sort of advance the company. And so we -- with the capital allocation framework, we're able to do 3 things: We're able to fund the development of Copper World; we're able to reduce debt; and we have a goal of sort of less than 1x net to EBITDA through the life -- through the build, we are able to fund generational investments in sort of the brownfield projects at each of our operating sites. And given the progress we've made on the balance sheet, we're able to consider for the first time, shareholder returns well ahead of what our goal was, was to be ready to be a meaningful dividend payer with the development of Copper World. We started thinking about that earlier this year with that capital allocation framework.

And the first step to that was increasing our dividend, and it was a nominal increase, but it was the first dividend increase we've had in our history. We think that, that is something that we'd like to ramp into if we have the opportunity and if these prices were to hold, and while we're able to make these generational investments in the company and also provide shareholder returns.

The NCIB was put in place as a good housekeeping as a tool for us to ensure to smooth out any volatility there is in the market as there is. And it's something that we want to be able to access at the right time. But there are -- we don't have -- we're not committing to do any share buybacks in terms of a set dollar amount at this time. We don't think that, that is the right way to set our capital allocation priorities particularly during this year of sanctioning Copper World. I think if we are -- if we have the opportunity to have excess capital at the end of the year, we can relook at the dividend and see if we can enhance that in any form as part of the whole capital allocation framework.

I think Lawson, I would also add to what Eugene says that we want to have all options available to us. But right now, the most important thing for us is delivery. And I'm confident that the culture of consistent operational and financial delivery that we're building will absolutely ensure that we really are the gold standard in the copper space, as we referred to in our release.

I noticed that, phrase. That was great. The One other follow-up I would like then on capital return is I'm not entirely clear on the potential spending at Mason. So you're advancing plans to initiate a pre-feasibility study. Can you remind us what you think you're going to spend in '26 on Mason? And then like could that change? Is there a range within which we could have a much higher, a much smaller number, depending on when you actually start that process in 2026.

We're starting that process and approximately $20 million is allocated to advancing Mason this year, and that will be expensed as it's not yet in the reserve.

And that's a fixed number?

There's not a lot.

There's not much we can increase that by in terms of moving ahead. We're starting the pre-fees, and that will take the better part of a year or two.

It's mostly studies, studies some drilling, some geotech hydrology.

The next question is from Pierre Vaillancourt with Haywood.

Peter or Andre, just following on the discussion with respect to sequencing in Arizona, do you feel comfortable giving like a date in terms of production start for Copper World, for Cactus, for Phase 2, just to give us a broad sense of what this is going to look like going out into the long term?

Pierre. Look, Copper World -- the actual targeted dates will be released with the DFS, but it's pretty well midyear 2029. So that would be, as Andre referred to rock in the box. And then Cactus would be sometime after that. As Andre said, Cactus really is it's more an earthmoving effort than anything else. So we've got to move rock. We've got to do some stripping. We've got to develop the heap leach piles and then there's a little bit of -- there's an SX/EW plant to build. So there could be concurrent activity on mining between the one and the other. But really, it remains to be seen during the PFS update, what that will look like and what the actual sequencing will be.

Yes. And we're not slowing down Cactus studies or anything like that. So we're going to move those forward as fast as we can. And depending on where we are with Copper World and metal prices and all that, that makes sense. Then we could -- like Peter said, we could start the stripping and like the stuff that we know that is very easy. And while we're doing some of the detailed engineering, but we want to keep that optionality open.

Yes. That's why I was asking that just how much of an overlap? So if you start in mid-'29, do we maybe consider a startup at Cactus within 18 months, 24 months of that startup? Or do you need longer lead time?

Possible.

That's reasonable. Like there's pre-feasibility is like a year generally and feasibility is another year, right, if you add those on, and there's concurrent permitting updates that are going on. And so you layer all those on. But the one thing that we do know is you have to strip rock. And so at the right time, that costs money is just how is Copper World going, where we are at, the metal prices, if all those things are all lining up, and we know we have the permits in hand and then stripping is something that might make sense. But we're not slowing down anything with Cactus. We want to make sure everything is as fast as possible and then it just -- it's optionality for us.

And then in the other day, we have a unique portfolio. Like in the next 5 years, we could triple copper production, and that's a key part of it. And so I think having all that ready to go is something that we're all over.

Yes. And I guess in terms of Phase 2, that's pretty much open-ended, I guess, for Copper World just to [indiscernible].

Yes. Right.

I wouldn't say it's open ended. I think that we will apply for permits pretty quickly once Phase 1 is up and running. And then the question is what's the duration of the permitting, but then it certainly will take longer to permit Phase 2 than it will take to bring Cactus into production, but Phase 2 is not a massive effort.

And there's no surprises in Phase 1 when it comes out.

Yes.

And then finally, on the Ingerbelle, what are the implications of bringing Ingerbelle on in '28, again, from a production perspective?

More gold. Basically, it's more gold and mine life.

Yes, double the gold grade than what we're currently producing. And Yes. So there is some stripping that goes along with it as well, but it's very -- it's a great cash flow generator for us, particularly at these metal prices.

And there's 1/3 of the stripping, right?

The average gold production with New Ingerbelle has actually doubled from 20,000 ounces of gold per annum to about 40,000 ounces per annum. So it would be a very nice complement to the consistent copper production. And the mine life of New Ingerbelle is on a reserve basis today, 10 years. But as Peter highlighted in some of the remarks, we started drilling New Ingerbelle and we expect to convert a lot of the inferred so we're likely to see much close to pay double that mine life as we continue to and convert that resource.

This concludes the question-and-answer session. I'd like to turn the conference back over to Candace Brule for any closing remarks.

Thank you, operator, and thank you, everyone, for participating today. If you have any further questions, please feel free to reach out to our Investor Relations team. Thank you, and have a great day.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay and Arizona Sonoran conference call. [Operator Instructions]

I would like to remind everyone that this conference call is being recorded today, March 2, at 11:30 a.m. Eastern Time. I will now turn the conference over to Candace Brule, Senior Vice President, Capital Markets and Corporate Affairs at Hudbay. Please go ahead.

Thank you, operator. Good morning, and welcome to the conference call announcing Hudbay's acquisition of Arizona Sonoran. The news release announcing the transaction is available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available on the Investor Events section of our website, and we encourage you to refer to it during this call.

As shown on Slide 3, our presenters today are Peter Kukielski, Hudbay's President and Chief Executive Officer; and George Ogilvie, Arizona Sonoran's President and Chief Executive Officer. Accompanying Peter and George for the Q&A portion of the call will be Eugene Lei, Hudbay's Chief Financial Officer; Andre Lauzon, Hudbay's Chief Operating Officer; Nick Nikolakakis, Arizona Sonoran's Chief Financial Officer; and Bernie Loyer, Arizona Sonoran's Senior Vice President of Projects.

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 Hudbay's relevant filings on SEDAR+ and EDGAR and Arizona Sonoran's relevant filings on SEDAR+. 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.

Thank you, Candace. Good morning, everyone. We're super pleased to be here today announcing the acquisition of Arizona Sonoran, creating the third largest copper district in North America. This acquisition establishes a major copper hub in Southern Arizona with the addition of the Cactus project to our Arizona business, complementing our existing Copper World project. This transaction strategically positions Hudbay to become a leading supplier of domestic U.S. refined copper with the expected significant copper cathode production from both Copper World and Cactus.

Not only does this transaction bring together two highly complementary copper growth assets in Arizona, but it also further strengthens our position as a premier Americas-focused copper company with a pipeline of long-life, low-cost assets in Tier 1 jurisdictions. In this presentation today, George and I will discuss why this transaction is compelling for both companies and will position the Cactus project for long-term success.

Before we discuss the strategic rationale for the transaction, let me begin by reviewing the transaction terms on Slide 4. Hudbay will acquire all the issued and outstanding common shares of Arizona Sonoran not already owned by Hudbay. We currently own 20.8 million common shares, representing approximately 10% of the basic shares outstanding. Arizona Sonoran shareholders will receive 0.242 of Hudbay share for each Arizona Sonoran share. As of the last trading day on February 27, the offer represents a 30% premium based on the closing prices and a 36% premium based on a 20-day VWAP. The equity value of the transaction is approximately $1,480 million and the enterprise value to Hudbay net of our existing equity ownership is $1,278 million.

After the transaction is completed, existing Hudbay and Arizona Sonoran shareholders will own 89% and 11% of Hudbay, respectively. The Board of Directors of both companies have unanimously approved the transaction, and the deal is subject to Arizona Sonoran shareholder approvals and other customary approvals. We expect the transaction to close in the second quarter of 2026.

Hudbay has been executing a consistent and disciplined growth strategy for more than a decade and this has been a continued focus of mine since I became CEO 6 years ago. Over the past 3 years, the company enhanced its operating portfolio, significantly deleveraged the balance sheet and completed a financial transformation, which has enabled us to continue to strategically allocate capital across our portfolio while also looking for opportunities that meet our stringent acquisition criteria.

The acquisition of Arizona Sonoran is a highly compelling transaction that further enhances our high-quality copper growth platform in the United States. The Cactus project is a large-scale copper development asset in a mining jurisdiction that we know well.

Since making our initial strategic investment in January 2025, we have been very pleased with the progress that George and his team have made in derisking the project and unlocking value at Cactus. This transaction is on strategy for Hudbay, offering several strategic benefits, as shown on Slide 5. First, the pro forma company establishes the third largest copper district in North America with a major hub in Southern Arizona, creating a district scale. With the advancement of both Copper World and Cactus, Hudbay would become the second largest copper cathode producer in the United States.

Second, it strengthens our competitive advantage in the United States by expanding our strategic footprint positioning us as one of only a few operators capable of producing refined copper domestically to support the U.S. critical mineral supply chain. Third, it increases our exposure to a high-quality development asset that offers long life production at low costs in one of our top jurisdictions. High-quality copper assets are scarce globally, especially in good places.

Fourth, the acquisition is expected to unlock significant operating efficiencies and regional synergies through the creation of an Arizona operating hub. Fifth, with Hudbay's strong financial position, we are in an ideal position to continue to advance growth investments across the entire portfolio, including advancing the Cactus project following Copper World while continuing to maintain strong financial flexibility and an optimal balance sheet.

And finally, we believe there is significant opportunity to unlock long-term value for both sets of shareholders through leveraging our proven mine development and operating expertise to deliver industry-leading copper growth, maximize value and create sustainable returns for all stakeholders.

I'll now pass it over to George to provide an overview of the benefits of the transaction for Arizona Sonoran shareholders and provide further details on the Cactus project. George?

Thank you, Peter, and good morning, everyone. I'm very pleased to be here today with Peter and the team announcing this transaction. Starting on Slide 6. This is a highly attractive transaction and creates significant long-term value potential for Arizona Sonoran shareholders. The transaction provides our shareholders with immediate and significant premium of 30% to the last closing price and 36% to the 20-day VWAP. It delivers Arizona Sonoran shareholders compelling value today while preserving meaningful exposure to the long-term upside of Cactus.

Through ownership in Hudbay, our shareholders will gain immediate exposure to strong cash flow generation from a larger, diversified and well-capitalized operating platform of long-life producing assets in Tier 1 jurisdictions in the Americas. Shareholders will also gain exposure to Hudbay's strong pipeline of world-class copper growth projects including Copper World and Mason and continue to participate in the long-term value of Cactus.

Hudbay's strong balance sheet, proven track record in Arizona with Copper World and disciplined approach to project development meaningfully derisks the development of Cactus and positions it for long-term success as part of a new major copper hub in Arizona. I have extreme confidence in the Hudbay team and their ability to use their technical expertise to unlock the full potential at Cactus. Their success in permitting in Arizona as well as developing the operating large-scale copper projects will significantly reduce the financial dilution and execution risk for Cactus and its shareholders.

In addition, shareholders will benefit from Hudbay's enhanced capital markets profile, gaining access to higher trading liquidity with dual New York Stock Exchange and TSX listings, a consistent dividend and ownership in a company with increased market presence. Hudbay is the third largest New York's stock exchange listed copper company complementary with the growth projects as are located in the U.S.

The Cactus project on Slide 7 is a long-life, low-cost copper development project located in a prolific mining jurisdiction in Southern Arizona. Cactus is a large high-grade copper porphyry deposit located on private land, which derisks permitting and land status. We are fully permitted under the 2021 preliminary economic assessment and permit amendments are well underway for the latest 2025 prefeasibility study or PFS for short.

Reserves at Cactus include 465 million tonnes at a grade of 0.52% copper, supporting a 22-year mine life. Based on our PFS and using a copper price of $4.25 per pound, the project has a net present value after tax of $2.3 billion, and an after-tax internal rate of return of just under 23%. The project envisions a sample operation with conventional open pit mine and the heap leach and SX/EW facility to produce made in America copper cathode. It is a brownfield site with key infrastructure already in place which, together with the high-grade copper makes the upfront capital intensity attractive. The site has access to water with water rights secured to the year 2017, power lines are already available on the property and nearby access to major road and rail lines makes the property easily accessible.

I believe one of the attributes that attracted Hudbay to Cactus as the strong social license we've developed in Pinal County with an 87% favorable rating to bring the mine back into production. Hudbay recognizes our team's expertise and our strong relationship with local stakeholders as we advance Cactus through permitting and towards development to deliver Made in America copper for the U.S. supply chain.

I'd like to take this opportunity to thank our whole team at ASCU for their tremendous efforts in advancing the Cactus project and creating lasting benefits for all stakeholders. I strongly believe the full potential at Cactus will be realized as part of this larger diversified great company.

I'll now hand it back to Peter.

Thanks, George. As shown on Slide 8, the pro forma company will have a strong presence across Tier 1 jurisdictions in the Americas with operating and development assets in Canada, the United States and Peru. Today, Hudbay produces roughly 140,000 tonnes of copper and 250,000 ounces of gold from 3 long-life operating mines. Each of these operations have significant brownfield growth potential through mill expansion and exploration opportunities.

With the addition of the Cactus project, we will have an industry-leading brownfield and greenfield copper portfolio with 3 highly attractive copper development projects in the United States. These U.S. copper projects have the potential to grow our copper production to nearly 500,000 tonnes of copper per year.

The Constancia copper mine in Peru is a 17-year mine life open pit operation with annual production of approximately 85,000 tonnes of copper. Located adjacent to Constancia, our highly prospective Maria Reyna and Caballito exploration targets have the potential to provide additional sources of high-grade ore and further extend the production profile in mine life.

In Manitoba, where we have been operating for 99 years, today, we have the Snow Lake gold operations that produce approximately 200,000 ounces per year. The operations have a current 13-year mine life based on reserves, but offers significant potential for resource conversion and mine life extension through upgrading our large inferred resources and advancing extensive exploration activities on our prolific land package.

In British Columbia, we have made significant progress on our 3-year optimization plan following the acquisition of the Copper Mountain Mine in 2023. Our optimization efforts have successfully increased the mining rates to execute an accelerated stripping program to unlock higher grades and implement mill improvement initiatives to ramp up towards higher throughput rates. We are on track to increase production from this mine to more than 45,000 tonnes of copper annually.

In the United States, we have the Copper World project in Arizona, a top-tier fully permitted copper development asset that has a 20-year mine life on private land and is currently advancing through definitive feasibility studies with a sanctioning decision anticipated later this year. We also have the earlier stage Mason copper project in Nevada, which has a 27-year mine life and attractive project economics.

With the addition of Cactus to our portfolio, Hudbay will now own 3 of the best copper development projects in the United States, further advancing our pipeline of long-life, low-cost assets in Tier 1 jurisdictions.

Diving further into the strategic and financial rationale. The acquisition of Cactus will transform Hudbay's Arizona business into the third largest copper district in North America, as shown on Slide 10. This reinforces Hudbay's position as a premier copper growth company with the potential for meaningful U.S. domestic production and positions us as one of only a few operators capable of producing refined copper domestically to support the U.S. critical mineral supply chain.

The combination of Copper World with Cactus in Arizona will enable comprehensive regional knowledge to be applied across both projects as we work to advance development. As you can see on Slide 11, Cactus and Copper World are located approximately 150 kilometers apart and are connected via highways and rail lines that would enable local operating synergies and scale.

The staged development of the 2 projects will allow us to utilize the full potential of our Arizona technical team by advancing Copper World through definitive feasibility studies and towards a sanctioning decision this year while focusing on integrating Cactus into our Arizona business, advancing permitting activities and positioning the project for a future feasibility study.

With Cactus expected to come into production after Copper World, we will be able to leverage our skilled team at Copper World and our comprehensive regional knowledge to apply to the future development of Cactus. This will include replicating our Copper World development and permitting success at Cactus, redeploying our trained Copper World construction team to Cactus and realizing project efficiencies and cost savings.

Slide 12 shows that relative to other copper producers, Hudbay will have the highest exposure to North America and the United States with this acquisition, providing shareholders with industry-leading exposure to top mining jurisdictions and an attractive geopolitical risk profile. In addition, we would be one of a few copper companies with 100% exposure to the Americas. We value the advantages of operating in top regions with established rule of law, stable tax regimes, access to skilled labor and efficient infrastructure.

With the addition of the Cactus project to our existing Arizona business with Copper World, Hudbay will become the second largest copper cathode producer in the United States, as noted on Slide 13. As mentioned earlier, Hudbay will be one of only a few operators capable of producing refined copper domestically to support the U.S. critical mineral supply chain.

Slide 14 showcases the complementary attributes of the Copper World and Cactus projects. The pro forma Arizona business will comprise two of the highest grade and the lowest cost open pit copper assets in the United States. Hudbay has a proven track record of prudent capital allocation with the successful development of Constancia in 2014 and the optimization of the Copper Mountain Mine, which is planned to be completed this year. All of Hudbay's projects have been completed on time and with strong capital cost control, as shown on Slide 15.

Cactus remains consistent with our capital allocation strategy and together with Copper World, represents the next generation of low capital intensity copper development projects.

Turning to Slide 16. We see significant operational efficiencies and regional synergies with the acquisition of Arizona Sonoran. By creating an Arizona operating hub, we will enable strong industrial logic through a centralized local head office for the permitting and development activities of all our Arizona projects. We will benefit from sharing technical and support functions with the integration of the highly skilled Cactus technical team.

Arizona Sonoran has done a fantastic job with community relations and progress in Cactus to this point, so we expect there will be many crossover benefits of integrating our local teams. We anticipate the timing of Cactus feasibility studies and development will complement Copper World's time line, potentially enabling us to strategically redeploy the Copper World construction team to Cactus.

From an operating perspective, we anticipate there will be potential future optimization around the Albion plant and the production of sulfuric acid for use at Cactus. We also believe the regional purchasing power for procurement, tax structure and pooling tax losses would create further efficiencies.

At a corporate level, we anticipate to realize synergies of between $5 million and $10 million through reduced G&A, corporate cost efficiencies and enhanced commercial terms.

Turning to Slide 17. Hudbay is in a very strong financial position as a result of stable free cash flow generation and successful deleveraging efforts over the past few years. This, together with our strong leverage to higher copper and gold prices, has enabled us to achieve the optimal capital structure to prudently invest across our portfolio of assets. In 2025, we achieved record EBITDA at over $1 billion and record free cash flow generation at nearly $400 million. We recently closed a minority joint venture transaction with Mitsubishi Corporation at Copper World. And today, we have over $990 million in cash and cash equivalents. Our net leverage ratio of 0x positions us as one of the lowest in the peer group.

We are well positioned to build the next generation of major copper mines in the United States and establish the second largest U.S. copper cathode district with the advancement of both Copper World and Cactus, while continuing to maintain a strong balance sheet and reinvesting in other growth opportunities across our portfolio.

As I mentioned earlier, we are a proven mine developer and operator, which is summarized on Slide 18. Hudbay has a technical and operational expertise to realize the full potential of the Cactus project. Across our operations, we have demonstrated success in creating value through exploration, best-in-class mine development and operational efficiencies and continuous optimization while maintaining our commitment to sustainability and environmental stewardship. We have extended mine life in Manitoba and Peru through exploration and new major discoveries, and we are on the pathway to replicate that exploration success at all 3 of our operations.

Our team has delivered best-in-class mine development projects and brownfield expansion projects. Our Constancia project has been recognized as one of the best mine builds over the last cycle and its mill ramp-up set a new gold standard.

I am particularly proud of our culture of continuous improvement and operational excellence. Constancia is one of the most cost-efficient and consistent copper mines in South America and our Snow Lake operations are one of the lowest cost gold mines in Canada. This has been largely driven by our ability to operate well above nameplate capacity while never losing sight of maintaining the stronger safety performance.

We expect to leverage this proven technical and operating expertise at Cactus to continue to derisk permitting, advanced project feasibility and progress the project towards development after Copper World creating significant long-term value for all stakeholders.

Concluding on Slide 19, this transaction significantly increases our long-term copper production profile, provides further attractive geographic diversification while leveraging our complementary gold exposure. The acquisition of Arizona Sonoran will be accretive to key Hudbay per share metrics including increasing net asset value per share and bolstering copper reserves and resources per share.

Hudbay's consolidated copper production has outsized growth driven by our pipeline of U.S. assets. The key focus area for Hudbay in 2026 is on advancing our valuable U.S. pipeline. We are on track to complete our Copper World feasibility study in mid-2026, with the sanctioning decision expected later this year and first production in 2029. We will continue to derisk Cactus' permitting activities and advance feasibility work to stage this project after Copper World. We also intend to initiate prefeasibility studies at Mason.

Our U.S. pipeline has the potential to meaningfully expand our current annual copper production levels of approximately 140,000 tonnes to nearly 500,000 tonnes of copper in the long term. Together with the advancement of Copper World, this transaction creates one of the most significant copper districts in North America and reinforces Hudbay's position as a premier copper growth company while preserving financial flexibility and delivering long-term value for shareholders.

And with that, we're pleased to take your questions.

[Operator Instructions] Your first question comes from Dalton Baretto with Canaccord Genuity.

George, I guess my first couple of questions are for you. Why now? Why not wait until the permits were amended? Why not wait until the fees is done?

Thank you, Dalton. We found the terms of the offer from Hudbay to be attractive. As noted earlier, the consideration delivers a meaningful premium to Arizona Sonoran's current share price, which is at an all-time high and exceeds all brokers 12 months targeted prices. We're confident that Hudbay will be able to leverage its mine building experience and financial capacity to unlock additional value at Cactus. The share consideration provides Arizona Sonoran shareholders the opportunity to participate in the future of Cactus while also gaining exposure to Hudbay's high-quality, diversified asset portfolio, notably alongside Copper World.

The consolidated production profile will create the third largest copper district in North America. As we are working on the feasibility study and nearing a project financing decision, we think now is the right time for Cactus to be owned by an experienced mine builder and operator lowering risk to Arizona Sonoran shareholders as a single asset development stage company.

Dalton, maybe I could add to what George says before you continue -- so before you continue with the next question, I think from Hudbay perspective, we really believe that this is an ideal time recognizing the significant progress that's been made at the Cactus project. And our goal of refining the project to ensure the maximum long-term value. And doing so now ensures that we can establish the final design before Cactus advances to sanctioning. We're also at a point where our operating platform continues to demonstrate exceptional resilience and to deliver record production and financial results.

So with our prudent financial management, that's significantly deleveraged the balance sheet and positioned the company with strong financial flexibility to pursue the next leg of growth. This is further supported by the recent contribution of $600 million from Mitsubishi Corporation with Copper World, which reduced our remaining equity contribution to some $200 million. So with Copper World definitive feasibility studies nearing completion in the middle of the year, we're on track for project sanctioning in 2026. As I said a little bit earlier, so we feel now is the right time to leverage the team's capabilities and add our next growth projects. It just makes a lot of sense. So we have a say in how this project progresses before the Arizona team progresses it to the next stage. And we're fully, fully aligned on that.

And then, Peter, maybe if I could just stay with you. Can you just speak to some of the regulatory approvals that will be required and whether U.S. asset transacting will matter, given that you're both Canadian companies?

No, there's no issue. The only thing is that -- first of all, it's exactly the same as Copper World. I mean, we would probably apply for a CFIUS review, but that's kind of normal course. But otherwise, permitting regime is exactly the same as Copper World.

The next question comes from George Eadie with UBS.

Maybe for you, Eugene. Can I ask about funding for this? Can you talk through where Cactus' funding will be. And would you consider strains across the other portfolio? Or are you comfortable with essentially project financing the vast majority of Cactus?

Thanks, George. Maybe first off, I want to make the comment that there's no impact on Copper World sanctioning or development. So this doesn't impact that financing or funding or sanctioning decision. Secondly, I would say that this comes with about $100 million of cash. Arizona has raised some cash. And our intention here, as Peter outlined, is to take this through pre-feasibility study and permitting over the next 2 years before the feasibility study. So the cash spend here for the next 2 years is only about $30 million a year.

So with that staged development time line that we've outlined, I think this ideally fits in our funding structure. We have a peer-leading balance sheet with strong free cash flows and lots of financing flexibility. So once this project is at the feasibility stage, we would then put in a prudent funding plan as we did with Copper World. And we'll look for non-dilutive ways to create value, and we think there's lots of opportunity here.

We think there's going to be strong cash flow generation in this kind of intervening period, and then we'll monitor the market to see what opportunities are there. I never say never, but I would prefer not to do a streaming deal on this transaction. We don't think we need to, particularly at this time. And we would look at potentially if we were looking at non-dilutive ways potentially partnering this in the future once the feasibility study was complete and we reevaluated our financial situation. But this stages perfectly with our Copper World development decision and our funding is not impacted at all with this transaction.

Yes. Great. That's very detailed. Break fee, what -- can you tell us maybe roughly the quantum of that and the circumstances? I'm assuming it's another offer coming into Arizona given the no shut cause, but just any color there, please?

I think you can assume that the break fees are standard for a transaction of this size, and they'll be in the disclosure materials when they're published.

The next question comes from Lawson Winder with Bank of America Securities.

If I could ask you a question on timing of assets now. So with Copper World, I mean, you've been clear that later this year, we'll be getting a sanctioning decision one way or another. What -- and then first production in 2029, when do you then see first production in -- from Cactus? And then when do you see first production from Mason? What's kind of the stagger of those projects coming to first production now?

Thanks, Lawson. That's a lot of questions, but they're quite simple. Look, first, what I'd say is these 2 assets. So I mean, Copper World and Cactus are highly complementary for many reasons, including the ability to optimally sequence each project from a derisking perspective. So Copper World is nearing completion of the DFS, and we're on track for a sanction decision later this year. That means we'll be able to transition our engineering team to Cactus to analyze and update the 2025 PFS for Cactus. And while we are developing Copper World, we'll advance Cactus through final permitting and definitive feasibility studies to be ready to bring Cactus into production after Copper World is in production in, as you say, 2029. I mean we've built a tremendous team in Arizona, which complements George's Arizona Sonoran team. And together, we're looking forward to unlocking value at Cactus through continued derisking and advancing towards production.

But what I'd say is it's too early to say precisely when we would bring Cactus into production. It will depend on the status of progressing the updated pre-feasibility study and permit amendments. Therefore, it will follow Copper World, as you say. And when the final permits and feasibility studies are advanced, at that point, we'll consider how best to develop Cactus to create the optimal value or maximum value. But remember that Cactus is a conventional open pit and heap leach SX/EW operation that's relatively straightforward in terms of project design, which should simplify development time lines.

So now if I go back to your question, I've sort of given -- I've said we don't know exactly, but I would say we're going to bring Copper World into production in 2029. Construction period for Cactus is approximately a couple of years. Obviously, we could start with the stripping activities a little bit earlier. So consider that, and that sort of tells you when Cactus could come into production. Mason, of course, is moving into pre-feasibility now. We won't complete the pre-feasibility study until late next year, and then we need to push it through a NEPA permitting process. So it really won't be ready for a construction decision until sometime in the early '30s. So the staging works beautifully. I think we'll bring Copper World into production. Not too long after that, we'll bring Cactus into production and a little bit later, we'll bring Mason into production, and we'll have, I think, the best operating portfolio in the copper space in the United States.

And then just a question somewhat related to the permitting process and just considering the fact that -- and I think this question is maybe best answered by George, but Peter, I'd love to hear your view on it as well. Copper was added to the USGS critical mineral last year. George, was your team having any conversations with any U.S. agency with respect to the permitting time line and how that might be accelerated as a result of copper being a critical mineral?

Well, I can tell you that we were having conversations with various U.S. government agencies given copper is a critical mineral. So we were well advanced with those. And I think given that Hudbay now is going to be accessing this asset, there's certainly an opportunity for Hudbay to explore those opportunities as well.

And I would add to what George has said. So both projects are entirely on private land. So the permitting regimes are exactly the same. So I think, as you know, we've had lots of discussions with the United States government with respect to what the future might look like, but there's no point in entering into permitting activities for second phase of growth at this point while we don't need access to federal lands.

And just for further clarification, Cactus is fully permitted today as per a PEA that was part of a qualifying document in 2021 when we IPO-ed the company. At that time, however, because it was a much smaller operation, it was only an 18-year mine life and only 28,000 tonnes of cathode production a year. As the project has grown in size and scale over the last 5 years, we have gone back to the local municipality and state regulators, and we've had the project permits amended. And the longest time period that we've had to wait for any amended permit was 5 months for an amendment to the Aquifer Protection Permit.

Remember, because we're on private land here, there is no federal nexus. So when we apply for permits at the state or the local municipal level, once the application is administratively accepted, within 6 months, the regulator by law must give us a response to the permit. And that's why when we're on private land, we're able to expedite the permitting process and obviously plan around that.

The next question comes from Matthew Murphy with BMO Capital Markets.

Congrats on the deal. Question just around project upside. And I'm kind of interested, I guess Hudbay first took a stake, I think, early 2025. So can you talk about the diligence you did on the asset? And are there any elements of the project that might not be well understood by consensus? So I don't know if it's resource conversion. And you talked about wanting to influence final design. Anything that you would change in scope conceptually versus the PFS?

Sure. It's Andre. So yes, we've done extensive due diligence on it. I think the first time we walked the property was in 2022. I think it was April '22. So quite some time. And so we've been following it for a number of years and looking at a variety of aspects. I think the team has done an excellent job on in this latest pre-feasibility study.

To your question around what people may not have insights to, I think Peter alluded to it a little bit in his narrative around the synergies with Copper World. And so with this being an SX/EW project, which is an acid leach of the copper, one of the key cost drivers for the Cactus project is the asset consumption to liberate the copper, and one of the key products from the Copper World project with our Albion process is we are extracting the sulfur product out, and we'll have an acid plant to generate sulfide -- sulfuric acid in Arizona. And so we'll be creating as a long-term reliable stream of sulfuric acid that the Cactus project will benefit on for the entire length of the project.

So I think something that's always an uncertainty when you're sanctioning these projects is what are those major drivers. And in this case here, we'll be able to have very, very stable reagent costs. In terms of the rest of it, I think it's all pretty straightforward. We're -- as Peter said, it's a very conventional open pit operation with a very straightforward capital project, and it's in a brownfield site with power already there, rail and water. So it's a great project. And so we've been interested for some time.

And Matt, I would add to what Andre says is that we -- so after our entry into the project in January of last year, we had technical committee observer rights which enabled us to follow the project very, very closely. So that in itself was also a form of very, very significant due diligence.

We're confident in the value.

And then just as a follow-on, if the asset is important to getting Cactus up and running, does that make you want to advance the Albion plant faster than maybe you were initially thinking?

I would say it's early days. Let's get through the feasibility studies and see how we sequence them, and then we'll make that decision. But it certainly does remain the form of optionality that we can contemplate.

The next question comes from Orest Wowkodaw with Scotia Bank.

A couple more for me, if I could. George and team, I believe you were working on a definitive feasibility study that was going to be done this year. How does that change now? Will that become an internal study? It sounds like Hudbay is planning to work on a PFS. I'm just wondering if we're going to see that DFS? Or if -- sort of how the sequencing and timing might be of the next technical report?

Orest, this is Peter. Let me step in quickly because just to explain. So the plan -- George and teams plan obviously was to proceed with the DFS through the remainder of the year. But now that we're putting the two companies together, our plan is to revisit the PFS because we need to revisit it in the context of our operating parameters, how we see things, et cetera. And so we will land on a prefeasibility study with which everybody is entirely comfortable. The permits need to be amended to reflect any modifications to the pre-feasibility study, then we will move into a definitive feasibility study. I hope that answers the question.

What do you think the timing of that sort of revisited PFS is? Is that this year? Or is that more likely next year?

I would say -- well, of course, we will complete -- carry on with the pre-feasibility study review this year. And then, of course, we need to make sure that, that's reflected in the amended permits. So I can't definitively say when that's complete. George has given you some idea of how long the permits take. But my guess is definitive feasibility is likely early next year.

Okay. And from -- obviously, your balance sheet is a lot different than Sonoran's. Is the scope of the project, I guess, still does that still make sense? Or is there a potential that Hudbay may look at it with a bigger lens?

I think it still makes sense as it is.

Okay. And then just finally, on the asset synergies. Can you -- how much does asset costs represent of the operating costs of Cactus? And any early ideas on what the potential savings could be from your internal supply?

I can tell you within the PFS that we published last October, November, we went out for quotes on asset, and we had quotes of $160 a tonne FOB delivered to the gate.

George, do you remember how many tonnes of assets you're consuming or we're going to consume per year?

No, not off the top of my head, Orest, but I can get that information for you, and I'll follow up with you and get it over to you.

And Orest, just to clarify, I think what I said with respect to timing is we'd complete the PFS next year, and then the DFS would follow.

The next question comes from Bryce Adams with Desjardin Securities.

I had a chance to ask questions earlier in the day, but one more that came to mind through this presentation is around ownership levels and risk. And maybe you touched on it a little bit. But would you want a project partner like the one announced last year for Copper World. Would that be part of the strategy? Or otherwise, with Phase one ramped up, would you go it alone on $1 billion of CapEx for Cactus? Does it appeal for you as a way of sharing CapEx but also managing risk within your business? That's all from my side. I appreciate the presentation.

Thanks, Bryce. We're always trying to balance risk and reward here with our prudent financial strategy. And when we -- as we execute the feasibility study and prefeasibility studies for Cactus, we'll understand the economic value of the project. We'll also be able to examine where the state of our balance sheet is from the free cash flow that we've generated, and then we can make a determination on what the best way to proceed is.

I can say that we certainly created a lot of value by partnering Copper World and the valuation we achieved. We would consider that and balance it off of the portion that we would have to sell to move that project forward. I think at this point, we don't have any current plans to sell down the Sonoran Cactus asset. We're going to go through the study and then evaluate what the best way to create value is on a balanced basis between equity and debt that would be required to proceed with funding the project and develop it.

The next question comes from Martin Pradier with Veritas Investment Research.

Most of my questions have been answered. I would be interested in any color on the savings on the asset part. Is that 20% of the cost, is 10% of the cost? I mean what kind of -- if you can give us some kind of color on that?

We'll give you a call back later. We just don't have the numbers in front of us at the moment.

The next question comes from Anita Soni with CIBC.

Like Martin, most of my questions have been asked and answered. But I just wanted to clarify with Lawson's question about sequencing. Would there be any -- are you contemplating at all if it makes sense, an overlap between the build-out of Copper World and Cactus?

Anita, I don't think so. We're going to do it optimally and sequentially and sensibly. There's no need to stretch -- overstretch ourselves. But remember that we can actually start stripping in the pit while Copper World's production facilities or process facilities are being constructed. But in essence, we're not going to build 2 at the same time.

The next question comes from Stefan Ioannou with ATB Cormark.

I think you've already kind of answered this, but maybe just to touch on it. I know previously, Arizona Sonoran spent some time with Rio looking at the sulfides at depth. Did that -- the sulfides factored all into your thinking about Cactus even way off in the future? Or is your vision very much just the cathode side of the project?

Yes. So it's Andre. So yes, we looked at the entire project. And the basis for the decision and the values on the pre-feasibility study, which is driven on the SX/EW component in the oxide. I think sulfide component remains an upside for the project later on. It's later on in the mine life towards the end. But we do have synergies in Arizona. We have SAG mill sitting in storage in Tucson and ball mills. And so there may be opportunities in the future to repurpose some of that infrastructure that we got when we bought the original Rosemont project many years ago. So there's lots of upside opportunity in the future.

This concludes the question-and-answer session. I would like to turn the conference back over to Candace Brule for any closing remarks. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, feel free to reach out to our Investor Relations team. Thank you. Have a great day.

Ladies and gentlemen, this concludes the conference call today. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, February 20, at 11:00 a.m. Eastern Time. I would now like to turn the conference over to Candace Brule, Vice President, Capital Markets and Corporate Affairs. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's Fourth Quarter and Full Year 2025 Results Conference Call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, and we encourage you to refer to it during this call.

Our presenters today are Peter Kukielski, Hudbay's President and Chief Executive Officer; and Eugene Lei, our Chief Financial Officer. Accompanying Peter and Eugene for the Q&A portion of the call will be Andre Lauzon, our 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 U.S. dollars unless otherwise noted. And now I'll pass the call over to Peter Kukielski.

Thank you, Candace. Good morning, everyone, and thank you for joining us for today's call. 2025 was a transformative year for Hudbay as we achieved the third consecutive year of record financial performance. We delivered record annual revenues of more than $2 billion, record annual adjusted EBITDA of over $1 billion and record annual free cash flow generation of more than $380 million.

Our diversified operating platform demonstrated resilience and enabled us to deliver our 11th consecutive year of achieving copper production guidance and fifth consecutive year of achieving gold production guidance. We also outperformed our twice improved consolidated cash cost guidance, demonstrating industry-leading cost performance.

These achievements are even more remarkable considering the significant challenges we had to overcome with wildfire evacuations in Manitoba and social unrest in Peru last year. We are delighted to have secured Mitsubishi as a premier long-term partner for our Copper World project in a precedent-setting joint venture transaction.

This transaction enables us to unlock significant value in our copper growth pipeline, further solidifies our financial strength and significantly reduces our share of future equity contributions for the development of Copper World. Our prudent strategic financial planning and execution has enabled us to achieve our balance sheet deleveraging goals ahead of schedule and lowered our cost of capital.

We now have the financial flexibility to sanction Copper World in 2026, embark on generational investments in our operating portfolio and commence increases in shareholder returns with our first-ever dividend increase as part of our holistic capital allocation framework. This will allow us to continue to deliver attractive growth and maximize long-term risk-adjusted returns for our stakeholders.

Slide 4 provides an overview of our fourth quarter operational and financial performance. The fourth quarter underscored our commitment to operational excellence with standout performance in Peru, driven by high-grade Pampacancha ore, record monthly throughput achieved at the New Britannia mill in Manitoba and the successful completion of the SAG mill feed system in British Columbia.

We achieved $733 million in record revenues and $386 million in record adjusted EBITDA during the fourth quarter. We produced 33,000 tonnes of copper and 84,000 ounces of gold in the quarter despite an 8-day power outage in Manitoba and lower throughput levels in British Columbia. Our operations in Peru had a strong finish to the year with a final quarter of Pampacancha mining activities.

Fourth quarter net earnings were $128 million or $0.32 per share, reflecting strong gross margins as a result of higher metal prices and $25 million received for business interruption insurance from the mandatory wildfire evacuations in Manitoba. After adjusting for the insurance proceeds and other noncash items, fourth quarter adjusted earnings was $0.22 per share.

We continue to demonstrate industry-leading cost performance in the fourth quarter with consolidated cash costs of negative $0.63 per pound and consolidated sustaining cash cost of $0.94 per pound. These costs significantly improved compared to the third quarter, primarily as a result of higher copper production and higher gold byproduct credits.

Turning to Slide 5. Hudbay's unique diversification in copper and gold, coupled with our relentless commitment to cost control, enables us to maintain industry-leading margins and deliver strong and reliable cash flows. Operating cash flow before change in noncash working capital was $337 million in the quarter, a meaningful increase compared to the third quarter, reflecting higher copper and gold sales volumes from normalized operations after the temporary interruptions and higher metal prices.

After accounting for the capital investments to sustain production, we generated $228 million in free cash flow during the quarter, bringing annual free cash flow to $388 million in 2025 and achieving new quarterly and annual record levels. While the majority of revenues continue to be derived from copper, revenue from gold continues to represent a growing portion of total revenues with 41% of gold revenues in the fourth quarter.

Our deleveraging efforts continued in the fourth quarter as we repurchased and retired an additional $39 million of senior unsecured notes through open market purchases at a discount to par. We are proud to say that since the end of 2024, we have reduced our long-term debt by $185 million, bringing our total debt levels to $1 billion today.

We ended the quarter with total liquidity of $994 million, including $569 million in cash and cash equivalents and undrawn availability of $425 million under our revolving credit facilities. Our net debt-to-EBITDA ratio further improved to 0.4x at the end of December. After year-end, our cash and cash equivalents balance increased to $992 million with the closing of the Copper World joint venture transaction in early January.

This increases our adjusted total liquidity to over $1.4 billion and further lowers our net leverage ratio to 0x. This financial transformation demonstrates the benefits of our diversified operating platform, industry-leading costs and prudent balance sheet management. We are extremely well positioned to prudently reinvest in our portfolio of attractive, high-return brownfield and greenfield opportunities to drive production growth and long-term value creation.

In Peru, we exceeded the top end of the annual gold production guidance range and achieved the copper production guidance range despite the impact of a temporary operational interruption due to social unrest as shown on Slide 6. Our Peru operations had the strongest quarter of the year in the fourth quarter as we continued to see strong copper and gold grades from Pampacancha, and we processed less ore from low-grade stockpiles compared to the prior quarter.

We continue to optimize the mine plan with more ore mined from Pampacancha during the quarter than previously expected, resulting in the accelerated depletion of Pampacancha in late December as opposed to early 2026. The operations produced 25,000 tonnes of copper, 33,000 ounces of gold, 731,000 ounces of silver and 325 tonnes of molybdenum during the quarter.

Production of copper, gold and silver increased by 38%, 25% and 27%, respectively, compared to the third quarter due to higher ore milled as the third quarter was impacted by the temporary operational interruption. Mill throughput increased to 7.6 million tonnes in the quarter due to higher mill availability than the third quarter, partially offset by the scheduled semiannual mill maintenance shutdown in the fourth quarter.

Milled copper grades increased by 26% compared to the third quarter with higher grades from Pampacancha and less ore processed from stockpiles. Milled gold grades also increased with a strong gold contribution from Pampacancha. Mill recoveries were in line with our metallurgical models based on the ore being processed.

Fourth quarter cash costs in Peru were $0.57 per pound of copper, decreasing by 56% compared to the third quarter with the benefit of higher gold byproduct credits, partially offsetting higher profit sharing. Full year cash costs in Peru outperformed the low end of the guidance range and improved by 8% from 2024 due to lower treatment and refining charges and higher by-product credits.

Fourth quarter metal sold was higher than the prior quarter as some copper concentrate sales in the third quarter were impacted by ocean swells and were deferred to the fourth quarter. While copper concentrate inventory levels normalized at the end of last year, there were elevated levels of precious metals contained in the inventory concentrate due to a higher portion of Pampacancha production in the second half of the year, resulting in a shift of some precious metal sales from December 2025 to 2026.

We continue to advance the installation of pebble crushers in Peru to increase mill throughput rates starting in the second half of 2026, which will allow Constancia to deliver steady annual copper production despite lower grades from the depletion of Pampacancha. These efforts align with the Peru Ministry of Energy and Mines regulatory change to allow mining companies to operate up to 10% above permitted levels.

Turning to Slide 7. Our Manitoba operations were previously tracking within the 2025 guidance ranges despite the wildfire impacts. However, as a result of the weather-related power outage in October and the subsequent ramp-up period required to restore full operations, gold and zinc production fell below the low end of the respective ranges. That said, we successfully achieved guidance for copper and silver despite these interruptions.

Performance in the fourth quarter demonstrates that our Manitoba operations have normalized following the significant wildfire disruptions. Our Manitoba operations produced 47,000 ounces of gold, 3,000 tonnes of copper, 6,000 tonnes of zinc and 214,000 ounces of silver in the quarter. Full year production in Manitoba was lower than the prior year as a result of production deferrals from the wildfires, the weather-related power outage and associated ramp-up to restore full operations.

However, we continue to focus on safety and achieved a 15% reduction in total recordable injury frequency in 2025. At the Lalor mine, the focus was on stabilizing production after resuming operations. Lalor averaged over 4,200 tonnes per operating day in the quarter, strategically prioritizing mining from the gold zones to ensure feed for the New Britannia mill. Gold grades slightly increased compared to the third quarter as we continue to improve ore quality and focus on prioritizing gold zones at Lalor.

Consistent with our strategy of allocating more Lalor ore feeds to New Britannia to maximize gold recoveries, the New Britannia mill achieved average throughput of approximately 2,300 tonnes per day in December, reaching a new monthly throughput record. Stall mill continued to focus on process optimization and enhancing gold recovery initiatives, which resulted in achieving over 70% gold recovery from our base metal ore stream.

The Stall mill processed significantly less ore in 2025 compared to 2024 in alignment with our strategy to allocate more Lalor ore feed to New Britannia. The 1901 deposit delivered 6,600 tonnes of development ore in 2025 as the project progresses towards full production in 2027. During the year, the team focused on establishing 1901 underground infrastructure and haulage and exploration drifts. Manitoba sales volumes in the fourth quarter reflect a rebuild of inventory levels as operations normalized.

Manitoba Gold cash costs in the fourth quarter were $705 per ounce, increasing compared to the third quarter, primarily due to higher overall costs in the quarter as operations normalized. Despite the production headwinds in 2025, full year gold cash costs were $549 per ounce, a 9% improvement from 2024 and outperforming the lower end of the cash cost guidance range. The strong cost performance was supported by the prioritization of high-margin gold production over byproduct zinc production.

In British Columbia, we continue to focus on advancing our multi-year optimization plan centered on ramping up mining activities and implementing standardized operating practices as shown on Slide 8. We produced 4,700 tonnes of copper, 4,000 ounces of gold and 57,000 ounces of silver in British Columbia in the fourth quarter. Production was lower compared to the prior quarter, primarily reflecting reduced mill throughput caused by unplanned maintenance on the primary SAG mill.

Full year production achieved the guidance range for gold and silver, while copper production fell below the low end of the guidance range because of the impact of the primary SAG mill unplanned maintenance and a higher amount of low-grade stockpiled ore processed throughout the year. Mining activities continue to focus on executing a 3-year accelerated stripping program to unlock higher-grade ore starting in 2027.

Total ore mined in the fourth quarter was 2.4 million tonnes, a 32% increase from the third quarter as we optimized the mining sequence and enhanced maintenance practices, which increased mining rates to a targeted 300,000 tonnes per day in December. To sustain this momentum, a new production loader was commissioned in January 2026, and the new shovel is currently scheduled for deployment in March.

Mill enhancement initiatives continued in the fourth quarter with the successful completion of the permanent feeder for the second SAG mill in December. The second SAG mill continued to demonstrate positive contributions to overall throughput in the fourth quarter. The mill processed 27% less ore in the fourth quarter compared to the third as a result of unplanned maintenance on the primary SAG mill to address localized damage to the feed and head.

Operations were further constrained by elevated clay content in the ore and the planned decrease in feed pile to accommodate the construction and tie-ins for the second SAG expansion project. The team implemented several additional initiatives in 2025 to mitigate further challenges and build long-term mill reliability, including completing crushing circuit chute modifications, installing advanced grinding control instrumentation and a redesigned SAG liner package.

Despite throughput constraints, fourth quarter milled copper grades were 18% higher than the third quarter, driven by higher grades in ore mined. Copper recoveries improved to 78% and gold recoveries saw a 7% increase over the third quarter. While the primary SAG mill continues to operate under a reduced load, it is being rigorously monitored ahead of a feed and head replacement in mid-2026.

The mill remains on track to achieve its permitted capacity of 50,000 tonnes per day in the second half of 2026. British Columbia cash costs and sustaining cash costs were higher than the prior quarter, largely driven by the ramp-up of mining activities advancing the accelerated stripping program, combined with the impact of lower production and byproduct credits due to the lower mill availability.

Despite the headwinds in the second half of 2025, the business unit demonstrated strong cost discipline, enabling the operations to achieve the full year cash cost guidance range. I'm now going to turn it over to Eugene Lei to introduce our capital allocation framework. Eugene?

Thank you, Peter. Turning to Slide 9. Hudbay has a proven track record of prudently allocating capital to high-return brownfield investments such as New Britannia gold mill refurbishment project and the development of the high-grade Pampacancha satellite deposit. Both these investments have delivered significant free cash flows and contributed to our recent deleveraging efforts.

These deleveraging achievements have been part of our financial transformation over the past 3 years. Hudbay has moved from being overleveraged and capital constrained to a preferred position where we can strategically allocate capital across the portfolio to maximize value and generate the highest risk-adjusted returns, creating long-term sustainable value for all our stakeholders.

Three years ago, when I became CFO, we put in place our 3 prerequisites plan known as the 3P plan, outlining financial criteria needed to be achieved prior to sanctioning Copper World. We have successfully executed all of the financial elements of the 3P plan and with prudent strategic financial planning over the last few years, we have completed the deleveraging of our balance sheet.

We are proud to have the strongest balance sheet in more than a decade and are one of the lowest debt leverage companies in our peer group. Together with the strategic investment by Mitsubishi, Hudbay is very well positioned to both sanction the Copper World project and embark on generational investments in our operating portfolio in 2026.

These investments include allocating capital to high-return brownfields projects at our 3 operating mines and advancing our world-class development and exploration pipeline. To provide transparency and continued financial discipline, we have implemented an enhanced capital allocation framework to provide a holistic approach around capital allocation decisions.

This includes growth capital reinvestments in the business through near-term brownfields projects, long-term greenfield projects, strategic investments and exploration, while also considering debt repurchases, share buybacks and dividends. Our capital allocation framework is embedded in our annual financial planning cycle.

The framework assesses capital allocation opportunities against key elements such as preserving a strong balance sheet, strategic fit for growth and diversification, accretion across key financial metrics, performing a rigorous risk assessment and applying accountable investment governance practices.

Consistent with our capital allocation framework and our recent financial transformation, we are now in a position to commence increases in shareholder returns in the form of a quarterly dividend. We are pleased to introduce a new quarterly dividend of $0.01 per share, which represents an annual increase of 100% over our former semi-annual $0.01 dividend. This increases our total annual dividend amount to $0.04 per share. Thanks, and I'll hand it back to Peter for our 2026 strategic objectives.

Thank you, Eugene. Our key company objectives for 2026 are summarized on Slide 10. We continue to focus on operational excellence, advancing organic growth opportunities and prudently allocating capital to deliver attractive high-return growth. At the core, we intend to demonstrate continued operational excellence to enable substantial free cash flow generation while maintaining industry-leading cost performance.

We plan to achieve this by investing in high-return brownfield growth opportunities across our operating platform, such as the mill throughput enhancement projects. We plan to prudently invest in our attractive organic growth pipeline to deliver long-term production increases.

This includes completing the Copper World definitive feasibility study, progressing the New Ingerbelle permitting and development, advancing studies on our regional satellite properties in Snow Lake, executing our large Snow Lake exploration program to look for new anchor deposits, initiating a pre-feasibility study at Mason, advancing Flin Flon tailings reprocessing project analysis and preparing for Maria Reyna and Caballito exploration to provide significant long-term upside potential in Peru.

With a strengthened balance sheet and our first ever dividend increase, we entered the year with unmatched financial flexibility. In 2026, we intend to maintain strong financial discipline by implementing our capital allocation framework to maximize returns. This will be achieved by continuing to reduce total debt, sourcing efficient project level financing for Copper World and evaluating all types of capital redeployment opportunities to generate the highest risk-adjusted returns.

Turning to Slide 11. As I mentioned earlier, 2025 represents the 11th consecutive year in which Hudbay achieved its annual consolidated copper production guidance, which includes every year since Constancia declared commercial production. 2025 also represents the fifth consecutive year achieving our annual consolidated gold production guidance since establishing stand-alone gold production guidance after Snow Lake became a primary gold-producing operation.

In 2026, consolidated copper production is expected to increase by 5% to 124,000 tonnes using the midpoint of the guidance range. This is driven by higher expected production in British Columbia as a result of mill throughput ramping up to the target 50,000 tonnes per day in the second half of the year, partially offset by the depletion of Pampacancha in December 2025. Consolidated gold production in 2026 is expected to decrease by 9% to 244,500 ounces as a result of the depletion of Pampacancha.

However, unstreamed gold production is expected to increase in 2026 with higher gold production in Manitoba as operations normalize following the wildfires, and we continued to achieve strong performance at the New Britannia mill. In Peru, 2026 copper production is expected to be relatively consistent year-over-year at 82,500 tonnes as higher mill throughput is expected to largely offset the grade decline with the depletion of Pampacancha.

Peru gold production is expected to decline to 17,500 ounces with the depletion of Pampacancha. The short-term mine plan changes in 2025 to optimize the mine plan during the period of social unrest resulted in reduced stripping activities in 2025, which has caused some grade resequencing in 2026, but we expected higher copper production in Peru in 2027 and 2028.

In Manitoba, 2026 gold production is expected to be 200,000 ounces, reflecting a 15% year-over-year increase as the operations normalize after the unprecedented wildfires. We expect to see continued strong mill throughput at New Britannia continue to operate above 2,000 tonnes per day in 2026, far exceeding its original design capacity of 1,500 tonnes per day.

In British Columbia, 2026 copper production is expected to be 30,000 tonnes, representing a 26% increase from 2025 production levels. This increase will be driven by the throughput improvements in the second half of the year. We expect to release an updated 3-year production outlook with our annual mineral reserve and resource update in late March.

Slide 12 summarizes our cost guidance. 2026 consolidated cash costs are expected to remain at historically low levels within a range of negative $0.30 to negative $0.10 per pound of copper. Cash costs this year will continue to benefit from higher gold production as a byproduct and our continued focus on maintaining strong operating cost control across the business. Sustaining cash cost guidance for 2026 is expected to be within $1.70 to $2.10 per pound of copper, benefiting from higher copper production and higher byproduct credits, offset by higher expected sustaining capital expenditures.

In Peru, 2026 copper cash costs are expected to be between $1.70 and $2.10 per pound, reflecting steady unit operating cost performance, offset by lower byproduct credits with the depletion of Pampacancha. Peru cash costs will benefit positively from lower treatment and refining charges and lower electricity rates with a new renewable power contract in effect.

In Manitoba, gold cash costs are expected to be between $500 and $800 per ounce in 2026, remaining at industry low levels, driving strong margins at current gold prices. In British Columbia, copper cash costs are expected to decrease in 2026 to a range of $1.50 to $2.50 per pound. The decrease will be driven by higher copper production, higher by-product credits and higher capitalized stripping related to the accelerated stripping activities.

Capital expenditures in 2026 include approximately $96 million of capital deferrals from 2025, higher growth capital spending as we reinvest in several high-return growth projects and onetime sustaining capital expenditures. Total sustaining capital expenditures are expected to be $435 million and total growth capital expenditures at the operations are expected to be $140 million, excluding Copper World joint venture spending. The growth capital for Copper World is expected to be $135 million.

In Peru, 2026 sustaining capital is expected to be maintained at $140 million, which includes about $20 million of deferrals from last year and $18 million in onetime heavy civil work projects, offset by lower spending on tailings dam raises. Growth capital in Peru of $40 million relates to the installation of 2 pebble crushers to increase mill throughput starting in the second half of 2026 and includes $13 million of capital deferrals from 2025.

In Manitoba, sustaining capital expenditures are expected to temporarily increase to $105 million in 2026, including $5 million of deferred capital, $20 million in onetime expenditures related to a project at New Britannia to lower nitrogen levels and $12 million for an accelerated 1-year construction project for a dam raise at our Anderson tailings facility. Underground capitalized development at Lalor is expected to return to normal levels after reduced levels in 2025 from the wildfires.

Manitoba growth capital is expected to be $15 million this year related primarily to the development of exploration platforms and haulage drifts at the 1901 deposit. In British Columbia, 2026 sustaining capital expenditures are expected to be $60 million, an increase compared to 2025, including a $5 million onetime expenditure for the replacement of the feed and head of the primary SAG mill as well as $13 million in capital deferrals from 2025. We expect to incur $130 million of capitalized stripping costs in 2026 related to the continued accelerated stripping program.

BC growth capital expenditures are expected to increase to $85 million, including $10 million in capital deferrals with the remaining capital related to early works and infrastructure development for New Ingerbelle. As we continue to advance Copper World towards a sanction decision, we expect capital expenditures to be $135 million, excluding post-sanctioning construction costs. This growth capital has been largely funded by the proceeds from the Mitsubishi joint venture received in January 2026 and relates to feasibility study costs and continued derisking until a sanctioning decision.

It includes $35 million of capital deferrals from 2025 and approximately $60 million for accelerated long lead items and derisking activities. Post-sanctioned construction costs will be updated at the time of project sanction. Looking at exploration expenditures in 2026, we expect an increase in spending to $60 million as we continue to execute the multi-year extensive geophysics and drilling program in Snow Lake as well as spending allocated to New Ingerbelle inferred resource conversion efforts.

As part of our long-term growth pipeline, Slide 13 summarizes the threefold strategy we are executing in Snow Lake as part of the largest exploration program in the company's history in Manitoba. The first objective is to execute near-mine exploration, including underground and surface drilling at Lalor. This past year's significant progress was made with the completion of the initial exploration drift at the 1901 deposit, which saw positive step-out drilling and delivered some zinc development ore to the Stall mill.

Underground drilling is planned for 1901 from the new exploration drift to upgrade and expand the mineral reserve and resource estimates. Activities at 1901 over the next 2 years will focus on exploration, definition drilling, ore body access and establishing critical infrastructure for full production in 2027. We also plan to complete underground and surface drilling at Lalor to continue expanding mineral resource and reserve estimates.

The second strategic focus area is on testing regional satellite deposits within trucking distance of the Snow Lake processing infrastructure to identify potential additional ore feed to fully utilize the available processing capacity. In 2026, we plan to advance activities at many of our satellite deposits, including Talbot, New Britannia and Rail, testing for both base metal and gold potential. We will touch more on Talbot, a highly prospective target on the next slide.

And the third strategic focus area is on exploring our large land package for a new potential anchor deposit to significantly extend the mine life of our Snow Lake operations. In 2026, we will continue the ground electromagnetic survey and extensive airborne geophysics survey. In early January, we announced the signing of an amended option agreement with JOGMEC and Marubeni to expand the Flin Flon exploration partnership for 3 projects in the Flin Flon region, including Cuprus-White Lake, West Arm and North Star.

Turning to Slide 14. In July, we commenced an extensive summer drill program at the copper-gold-zinc Talbot deposit focused on expanding the known mineralization at depth. Talbot is located within trucking distance of the Snow Lake processing facilities, making it an ideal deposit to potentially provide supplemental feed to our mills.

As part of the initial drilling program in 2025, Hudbay drilled 6 holes to test the continuity of the Talbot deposit at depth with all the holes yielding positive results and 4 of them returning mineralized intercepts with economic potential. The image shows a 3D view of the deep holes drilled at Talbot confirming continuation of the mineralization at depth. As shown in the image on the slide, the drill results indicate that the mineralized footprint of Talbot has doubled.

We have commenced the 2026 drilling program in January with 6 drill rigs turning, including 1 rig focused on continuing to expand the footprint of the deposit at depth. An additional hole provided a significant intercept of visible copper mineralization over approximately 20 meters and assays are pending. This year, we plan to progress a PFS and prepare an updated mineral resource estimate utilizing our standard method that has a high reserve conversion rate.

Turning to Slide 15. Our Copper World project in Arizona continues to achieve key milestones to progress towards sanctioning later this year. The closing of the strategic joint venture partnership with Mitsubishi validates the attractive long-term value of Copper World as a top-tier copper asset and endorses the strong technical capabilities of Hudbay. Together, we will continue to advance this high-quality copper project and unlock significant value for all of our stakeholders.

With the closing of the transaction, Mitsubishi's initial cash inflow of $420 million will be used to fund the remaining feasibility study and pre-sanctioned spending in addition to initial project development costs for Copper World once we sanction. Mitsubishi will also contribute the remaining $180 million within 18 months to complete its initial 30% stake and will continue to fund its pro rata 30% share of future capital contributions.

Copper World feasibility activities are underway, and we are on track for the completion of a definitive feasibility study in mid-2026. We have allocated growth capital expenditures in 2026 for accelerated detailed engineering, certain long lead items and other derisking activities, and we continue to expect to make a sanction decision in 2026. We are very well positioned to build one of the next major copper mines in the United States while continuing to maintain a strong balance sheet and reinvesting in other growth opportunities across our portfolio.

Before we conclude, I want to take a moment to highlight the New Ingerbelle expansion permits at our Copper Mountain Mine just received and announced. This is a very exciting milestone for the British Columbia team as we expand growth optionality for Copper Mountain. The receipt of these permits is an important step to enhance the copper and gold production profile at Copper Mountain.

It secures a longer mine life, preserves more than 800 jobs and ensures continued economic benefits and long-term financial stability for the region. We received the amended Mines Act and Environmental Management Act permits through the coordinated authorizations process managed by the British Columbia Major Mines Office. Throughout the permitting process, we proactively engaged with the local communities and the upper and lower Similkameen Indian band to ensure transparency.

We recently finalized refreshed participation agreements with the bands, reinforcing our commitment to strong Indigenous partnerships. The New Ingerbelle permit ensures that we'll be able to advance this BC major project and extend our partnership with the local communities to facilitate additional growth investments at Copper Mountain and further add to our 99 years of successful operations in Canada.

Concluding on Slide 16. 2025 demonstrated the benefits of Hudbay's diversified operating base, our unique copper and gold exposure and our operating resilience. I'm extremely proud of the performance we were able to achieve despite the many operational interruptions. Our continued focus on cost control enables us to maintain industry-leading margins and deliver strong and stable cash flows. Once Copper World is in production, we expect our annual copper production to grow by more than 50% from current levels.

This will reinforce our position as one of the largest Americas-focused copper producers with a well-balanced and geographically diversified portfolio of assets. Our expected production will be weighted approximately one-third each in Canada, the United States and Peru and further enhanced Hudbay's exposure to copper, representing more than 70% of consolidated production and revenue.

I have no doubt that we will continue to see more transformations as we execute on our growth strategy and prudently invest in our world-class pipeline to deliver the highest risk-adjusted returns for our stakeholders. And with that, we're pleased to take your questions.

[Operator Instructions] The first question is from Ralph Profiti with Stifel Financial.

Peter and Eugene, this capital allocation framework is coming at a time when we're seeing the biggest spread between actual metal prices and spot metal prices and consensus metal prices. And when you talk a little bit about some of the commodity price scenarios, I'm just wondering how would you characterize your approach versus the past on some of the scenario analysis that you do? And how are you going to balance crowding out opportunities versus metal prices being used versus buy versus build context? I'd like a little bit on that, please.

Thanks for your question. And I think this is an ideal time to unveil this capital allocation framework because of the volatile markets that you described. So as you know, we have a proven track record of allocating capital to high-return opportunities. That's what netted us the New Brit gold mill and then the Pampacancha investment, and that's achieved 25% IRRs over the past few years and helped us deleverage our balance sheet.

Now with Mitsubishi on board, that really essentially helps us fully fund the Copper World project. And so we're going to be able to go into the end of this decade, having delevered the company, funded and built Copper World and now have the opportunity to fund greenfield projects and brownfield high-return projects at each of our operating sites.

When we run and to best determine how to allocate that capital, running this process allows us to run various scenarios, use varying prices and even opportunities to finance some of this growth. And so when we use this holistic approach, we are able to balance the growth aspects and prudently fund them, but while also keeping an eye to capital returns.

And so we're ramping into the first dividend increase in our company's history. It's nominal, but it's a start. And as you saw last year, when we implemented the NCIB, these options or opportunities are on the board to be compared with reinvestment in our portfolio. So we're going to test these as these opportunities as they come.

As you know, we have a very skilled technical services team and our operations are always looking for ways to enhance production and enhance mine life, and we'll weigh those opportunities at varying prices to the balance sheet and have an opportunity to increase returns to shareholders once we've determined the optimal structure.

Helpful. I appreciate the descriptive answer. And if I can just switch more to a technical question. Peter, what is Q3 going to look like in British Columbia on the SAG rehabilitation work? What does downtime look like? How does it -- what is tie-in time required? And I'm just wondering what happens to sort of throughput in that scenario in that quarter.

Thanks, I mean, great question. I think that as I mentioned in the comments that the planned replacement of the feed head will be early in the third quarter. So we continue to operate pretty carefully in the interim. But we still expect the operations to stabilize and improve progressively through that period.

There will be a project period of, I imagine, several weeks during which we replace that head. But I don't expect there to be anything abnormal that's not provided for in our guidance. But Andre, do you want to perhaps elaborate on it a little bit?

Sure, sure. So the team is doing an excellent job. The parts are procured. So we've cast 4 sections, 2 have passed QA/QC, and we have a team over there inspecting there as we speak. Tentatively, as Peter mentioned, it's about a month of work. We'll be able to continue to run our SAG2 at the same time, and the teams are working through the details of that. It's scheduled, like you said at the beginning of Q3, which is probably straddling around July, August.

We're looking for opportunities to pull that forward. We don't know exactly what that is right now. It's still they're inspecting, looking at shipping and all of the details of getting that in place. And so as we get to report next quarter, I think we'll definitely have a lot more clarity on the timing of that is like the opportunity of pulling it forward if we're able to do that is obviously ramping up the higher throughput sooner, which will improve our -- what we're forecasting for the year.

But right now, it's scheduled on that end. But right now, as it stands, the back end of the year is probably about, call it, 20-ish percent higher than what the front half is of the year on a total metal. So if you want to give that sort of cadence, but the improvement, if we can pull it forward a bit as we know, then that will be a positive to the year.

The next question is from George Eadie with UBS.

Can I ask at Manitoba, just clarifying the updated 3-year production guide, that won't include any new drilling, will it? And secondly, just when we -- when exactly in the year will we get the next tech report for Manitoba, potentially bringing in Talbot and some other satellites?

Thanks for the question. So we haven't decided that we're producing a tech report for Manitoba this year. A lot of what we're doing, I mean, the current technical report is still valid in terms of production at Lalor. And our thinking with respect to another revised technical report at some point would be in order to bring in some of the other -- the results of other drilling that we're performing in the region, but it's not determined yet when that would be. Andre, perhaps you could elaborate.

Yes, sure. So it's a great question. I'd say is there's so much going on in Manitoba right now. And it's on all fronts. So we've seen some positive success with drilling 17 zone, the high-grade gold down plunge of Lalor. We now know the plunge direction. And so we'll be targeting an exploration drift to do this year to get to that area. The Talbot area is very exciting. There are 6 drills going at site right now. About 5 of them are doing definition drilling to prepare to be able to have that, call it, maiden Hudbay reserve for that.

So the teams are working actively on pre-feasibility studies to be able to understand how we're going to mine it, ramp versus shaft, all of those details in optimizing it. And to date, the drilling as indicated, like Peter had mentioned, doubling the footprint of what we know, and it's open in many directions still. So that's also very exciting. The gold, there's a ton of optimization going on right now around New Britannia. We're looking at improving our flash flotation.

And what that allows us to do, like although we have a permit at 2,500 tonnes per day, we're seeing some really high copper grades, which is great. And what we have to do is slow down the mill a little bit during when we're seeing those really high grades. And so the teams are looking on optimization there at New Britannia. We have a SART plant coming in at the end of the year, and that's also going to reduce our costs with reduction in cyanide, but also improvements on recoveries.

We have some additional things we're looking at Stall. And if I complicate it even more, New Brit mill is sitting on top of New Brit mine. And that mine for close to 20 years, about 1.5 million ounces. And we -- since with the real run-up in gold prices, probably wasn't on our radar for a number of years. And so now we have teams actively looking at putting together a plan is like what do we actually have and what's the potential? And there'll be a lot more to come on New Britannia mine. So that's quite exciting.

So why I say all of that is there's so many moving parts on how do you fit all of that into a technical report. And so it's just around how -- what's the timing to do that? And so I think we'll be able to give snippets later this year around what does it starts to look like. But to put all that in, we're very, very confident on sustaining about 185,000 ounces per year profile at a really good all-in sustaining, probably less than $1,200 an ounce long into the future.

And I didn't mention as well as we're looking at optimization of cut-off within the mine as well. And that also has the potential to bring low-cost capital good grade ounces that were on the cusp before at $2,000 or so an ounce now at much higher prices. So we're looking at a lot of things. And so hold tight, I guess, is what I'd say is there's going to be some really good stuff coming.

If I could add with some comments in terms of catalysts, the 3-year guidance will be released along with our reserve and resource update at the end of March, and that will show this extension of this higher gold production at Lalor and Snow Lake that Andre speaks of at 185,000 ounces, well beyond kind of what was contemplated in the technical report.

As Peter highlighted, we're looking at ways to daylight what would be the longer-term profile and with all the opportunities that Andre highlighted, we hope by the end of the year that we'll be able to catalyze many of those projects and be able to provide the market with this 5- to 10-year outlook at these new levels, and we think they'll be very value creating for Manitoba and Hudbay.

Yes. No, that's super detailed and helpful, guys. Thanks very much. And maybe just one more, if I can sneak in kind of similar, but Mason, like the comments about that in the release, the PFS, like when could that be completed? And will we see the outcomes, I guess? And any updates on a potential partner even there?

Sure. So we're currently starting to work on Mason. We're building the team. We're kicking into pre-feasibility study work. I would expect that we would complete a pre-feasibility study in Mason later on next year. For sure, we would not contemplate partnering Mason at this early stage. But as we progress through the pre-feasibility study, we would look at opportunities to do that based on the work that we do. But partnering is not something that we're contemplating there right now.

Yes. It's the right time. It's the right time right now. Eugene mentioned about our capital allocation framework and investing in different opportunities. It was somewhat parked for 2 reasons. One, because our availability of capital to spend on doing that because we have to do geotechnical drilling, hydrology, getting all of the key things to really put a robust pre-feasibility together.

And we are waiting for some clarity with the federal government around the placing waste rock and tails on federal land. That has now been resolved. And so with both of those in our back right now is we are ramping up like as what Peter said, and building the team to accelerate that project because it is the next to copper world, like it's the next largest undeveloped copper deposit there in the U.S. It's a great project.

The next question is from Fahad Tariq with Jefferies.

Maybe just on Peru, can you let us know what the latest is on the Maria Reyna and Caballito permits and what's happening there?

Yes, absolutely, for sure. It's -- there's been no change to the remaining steps for the drill programs, which includes the government's prior consultation process with the local community. And given the environment in Peru right now, I think this process is likely delayed. Remember that this is an election year coming up. We've had a change in President. So the time lines are quite difficult to predict as we've learned from Pampacancha several years ago.

I think that predicting -- although we can't predict the permitting time lines, I think let's get through the elections. We're confident we will get the permit. I just can't tell you when it will be. But I am extremely confident that Maria Reyna and Caballito play a big part in value creation at Peru in the future. But at the moment, I can't provide you with an accurate time line.

Okay. I understand. And then maybe just switching gears to Copper World. I know we're still waiting for the feasibility study, but just thoughts around the copper price assumption that you might be using or how we should be thinking about CapEx relative to the $1.3 billion, which is the current estimate?

I can address the copper price assumption. And as you saw in the PFS, this is a very robust project. It generated close to 20% IRR at $3.75 copper. It is the highest-grade undeveloped copper deposit in the Americas. And as we update the pricing for the feasibility study, we'll be moving toward consensus prices, which is today moved from -- moved in the area of $4.50 to $4.75 per pound of copper. We'll obviously do various pricing scenario analysis around those prices, but I would expect that it would be in that range at this moment.

And on the CapEx side, I would say, recall that the PFS was issued in October of '23, so 2.5 years have passed. So of course, there's going to be a little bit of escalation. There's been some tariffs introduced on key equipment that might be procured from outside the country. So we expect there to be some escalation, but we don't expect it to be material.

Yes. And different than the response from Maria Reyna with the government, like this is fully in our control to deliver the feasibility and the team is doing an excellent job. Like we're within 1.5% of our schedule. So we're tracking right now at about 67% out of about 68%. And so the team is doing an excellent job building a world-class feasibility. And so we expect it to come to FID at the times that we had forecast.

And the collaboration with our JV partner, Mitsubishi has been excellent. We've had our first JV Board meeting. They're on site with all of the decisions and have contributed. And so for those that were worried that this would delay the DFS, it does not, as Andre said, we're right on schedule.

Sorry, I'll just go back to the Maria Reyna and Caballito question. I think I was saying I can't predict when it's going to be. It's going to happen for sure. It's going to happen, but it may not be this year, but it's coming. And what I can say is that our communities and our partners are incredibly eager to get going on it. It's just a process that's got to be followed. And we know how Peru goes, especially during an election year. It's still a great copper destination, will continue to be. So just hold tight it's going to happen.

Yes. And we've refreshed the team, too, right? So brand-new minted Vice President down there in South America, very familiar with the area, coming out of some of the challenges that we had through the summer with some of the communities. We refreshed the team for Uchucarcco and Chilloroya. And so those are the people that will carry this through to the final.

The next question is from Orest Wowkodaw with Scotiabank.

A couple of follow-ups. Your CapEx guidance for this year at Copper World, $135 million, should we anticipate that, that could increase if you FID the project in the second half of the year? Or will that just start in '27?

The CapEx guidance that we provided of $135 million is basically the feasibility study plus the early works we need to continue to keep schedule for potential first production in early 2029. With the FID, we'll provide sort of the rest of the spend for the year, but I do not expect that to exceed the $420 million that we've already received from Mitsubishi. So if you think about sort of the funding, I would say that we would expect Copper World to be cash flow positive from a Hudbay consolidated perspective this year.

The $420 million contribution obviously came in January. We're going to spend about $135 million leading into the FID decision. On FID, the Wheaton payment becomes due, the first $180 million. And so we expect to be in a very good position from a funding perspective. So that's why one of the reasons we carved out the Copper World JV spending from the growth CapEx of the company because it's more than fully funded.

So that $135 million, that's basically all pre-FID.

It would be -- it will be all pre-FID, but it's -- some of the spend would have been post FID. So it's basically ensuring that we move the project along as soon as possible, and we have the endorsement with Mitsubishi to proceed in this manner.

Okay. And then just shifting gears, I just wanted to clarify something you said earlier. Did I hear correct that you're suggesting that you can maintain 185,000 ounces of gold in Manitoba for the next 5 to 10 years?

That's the goal. And we'll be able to tell you that number for the next 3 years with our 3-year guidance. And the opportunity this year is to pull all of the projects that Andre speaks of and put them in buckets so that we can talk about the long-term production horizon of Snow Lake, which is targeted to be at that level for the next 5 to 10 years.

Okay. And the end of March then update will just be the 3-year guide, and then we'll have to wait for the rest after. Is that right?

More to come.

The next question is from Emerson [indiscernible] with Goldman Sachs.

So I have 2 questions here. First one, just trying to understand, I mean, what is the pecking order of the projects that the company have right now? I mean there are a lot of stuff going on. So Copper World is obviously a priority, but then you have Ingerbelle expansion, 1901 development deposits, Mason project right now. And also -- so just trying to understand here what is the priorities apart from Copper World?

And also on Copper World, just trying to understand here if you guys could bring forward the concentrator leach facility that was expected by 2032. Just because, I mean, you have been seeing U.S. administration putting copper as a critical mineral. So I think could make sense, right, to bring that project forward so you can sell copper cathode domestically?

And just a final question on Manitoba. Just trying to understand here how could the asset's economics profile change with this ramp-up in production coming from 1901, Talbot, et cetera. So would we still see the same level of all-in cash cost for the asset or that could change in light of this new ore coming from those deposits?

These are great questions, thank you. So in terms of priorities, you're absolutely right. So Copper World is just such a transformational project for our company that it is. So it's a clear priority in terms of the activities that are underway by the U.S. business unit. And of course, it occupies a lot of attention from corporate management, from our Board, et cetera. But it is a U.S. business unit priority and a company priority.

That said, as Eugene described in his words about capital allocation, given the company's situation balance sheet-wise, the strength of our balance sheet going into this year, we do have capital available for the lowest risk-adjusted return projects at each business unit, and we want each business unit to push projects forward for consideration in that pecking order. So yes, you spoke about New Ingerbelle.

We're super excited to have received the New Ingerbelle permit yesterday. And of course, that will be a priority in British Columbia once the SAG mill 2 and second SAG mill project has been completed fully and ramped up, it will become a priority there. In Peru, of course, the priority is getting the pebble crushing circuit done and then looking forward towards getting permits whereby we could further expand production over there.

Manitoba, of course, you've heard about what our priorities there is that we're growing that whole asset up into something pretty amazing. So in terms of your question with respect to the economic profile there, we would target and expect that the economic profile or all-in sustaining costs would remain roughly of the same order of, let's say, $1,200 or so an ounce because we don't have to develop any new infrastructure.

Everything is close to infrastructure. And then with your question with respect to Copper World and concentrate leaching and bringing that forward, we certainly would consider bringing it forward, but we don't want to start construction of that facility while we're still building the Copper World mine itself because we don't want to divert the attention of the project team.

But it may make sense as we progress through construction that we look at bringing it forward so that we can actually continue to utilize the same team that's actually building the mine out itself. So I would say more to come on that. So Andre, would you -- anything that you would add?

I think you characterized it really well. It just feels like a $15 billion company. There's a lot of things going on in all areas and lots of growth going on in each different business unit. And so it's not -- they're all competing for capital. But the way, as Eugene set it up earlier on is we set ourselves up so that we can invest in all of the different areas. We have great projects in each of the different areas. And so it's just a really exciting time. And yes, there's a lot going on.

Maybe to summarize, Emerson, the budget for 2026 and the guidance for 2026 for growth capital includes funding for all of these projects already. And so they have been -- they've gone through the process. These are the best projects that are in each of the business units, and they're accounted for. So for example, there's $80 million of growth capital for British Columbia allocated to advance New Ingerbelle.

For example, there's $40 million of growth capital allocated to Peru for the pebble crusher and $50 million to $60 million of exploration and development work in Manitoba for 1901 and exploration. So we are going to be able to build Copper World and fund advancements and increases in throughput and high-return projects at each of our business units to be able to come out of the decade with not only a new mine, but also refreshed and improved mines at 3 of our existing sites.

The next question is from Craig Hutchison with TD Cowen.

I just want to follow back on Eugene's comments and Orest's question on Manitoba. The extension of the production and grade profile for gold for the next 5 to 10 years, is that being driven by resource conversion? Is it more just the exploration step out? Or do you also include some mill throughput expansions there?

All of those. All of those. So there's -- we've been drilling and exploring around Lalor mine for the last couple of years, right? And we've been pretty silent on what we've been finding, but we've been getting success. And so part of that is conversion of resource to reserve. Some of it is some new discovery. We talked about the satellites. So Talbot would be considered a satellite. There's a number of other ones in our portfolio. The real unknown is obviously New Britannia mine, right?

So the best place to find is right in the shadow of a headframe and like that itself is a company maker. And so if you take all of that and then what you said is around the improvements. So we're challenging recovery. We're up over 70% recovery at Stall. We're looking at it with, like I said, the SART process at New Britannia, which is in our project for the end of the year. Hot tails as we look at the opportunity to get even more from Stall and even precious metal reprocessing from the tailings there.

And then the Flin Flon one that someone mentioned earlier on that we didn't talk about, we're into the depths of pre-feas. We're working on and we're in the final stages of solving how to get the precious metals out of the zinc plant residue. And that is like the solution for the back end of the Flin Flon tails and the team is working on a really unique, but it's a process to convert pyrite to pyrrhotite and run it through our autoclaves and then use the solution that we have for the zinc plant.

So that's moving along quite well, too. And so yes, no, we have a lot of -- there's a lot of gold to add to our portfolio from new discovery all the way through to getting better at recovering it and bringing new deposits online. So yes, it's an exciting few years ahead of us for sure.

Great, guys. And just maybe on New Ingerbelle, now that you guys have the permit in hand. Is that something that could positively impact your production in, say, 2028? Is there much capital to bring that project into play?

You're talking New Ingerbelle mine or the mill.

New Ingerbelle, the permits.

New Ingerbelle, sorry, and still on goal.

You're still in Manitoba.

I'm still in Manitoba. So -- yes, new Ingerbelle, yes, absolutely. So we have about 2 years of construction we have to do. It's very straightforward, haul roads, East haul road, West haul road, build the bridge, some ponds to build and then we'll be into it. And what's really neat about it, and we alluded in the press release is it's pretty much if you look at the long term, the copper grade is a little bit lower, but it's very close. But it's almost 60% to 100% higher gold grade.

It's a really, really big improvement in grade. And the stripping is like we're running at almost like a 5:1 strip right now, it's about 3x less. And so from a profitability standpoint, not only are we increasing the gold through that increased throughput, but we're going to be spending a lot less on stripping. So it's -- New Ingerbelle is -- will be transformational for Copper Mountain in the 2028 range.

And there's also exploration upside at New Ingerbelle too. So we could...

$20 million of drilling going on, and we're exploring at Ingerbelle for upside potential to expand that high-grade gold, copper resource and -- as well as there's some targets on the Copper Mountain side as well, too. So yes.

So it sounds like that something could come into 2028 time frame based on the 2-year build.

That would be the plan, I would think, is where we'd be, yes.

And just one last question for me. Just on costs. It looks like you guys are using pretty conservative metal prices for your C1 calculations. Can you tell us what you're using for your TCRC costs just to get a sense of whether there's some potential upside there from a C1 cost perspective?

They didn't seem that conservative at the beginning of the year, but they are today. So we're definitely enjoying the benefits of the higher prices. On the TCRC front, we're -- our assumption is 0. So again, we're entering into deals that are lower -- that are below 0. So again, there could be a little bit of upside there.

The next question is from Anita Soni with CIBC World Markets.

Most of them have been asked and answered, but I just want to clarify on BC. With the tie-in in the second half of the year, do you expect there'll be any impact into 2027 from the, I guess, the delay in that tie-in?

No, not at all. No, it's scheduled to ramp up, like there's -- like right now, even with the reduced mill capacity, we're seeing upwards sometimes above 40,000 tonnes per day at the current -- with the current restrictions that we placed on it. And so all of our processes are all being prepared right now for that ramp-up once we have that new feed-in shell in place. So we don't anticipate anything that's really problematic. Like -- there's no new feeders, nothing.

It's just changing it and running at a heavier loading rate in the mill. So right now, we're being conservative on the bearing pressure in terms of the amount that we actually feed into the mill, but it's literally turning up the dial. And the mine itself has made some really, really great strides to increasing their production rate. So we're seeing averaging around 280,000 tonnes per day, which is unlocking high-grade copper coming in, in the mid part of the year as well, too.

Okay. So then on Jan 1, 2027, what's the throughput rate we should be using?

We should be using 50,000 tonnes a day. That's where we anticipate to be.

And our last question is from Martin Pradier with Veritas Investment Research. I'm sorry, Martin, we're unable to hear you. It's a very corrupted line. Are you speaking directly into your microphone? Okay. Unfortunately, I think we're going to have to move on. So I would like to hand the conference back over to Candace Brule for closing remarks.

Thank you, operator. And Martin, please feel free to e-mail us your questions given the technical difficulties there. But thank you, everyone, for joining us today. If you have any further questions, please feel free to contact our Investor Relations team. Thank you and have a great day.

This concludes the conference call for today. You may now disconnect your lines. Thank you for participating and have a pleasant day.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Third Quarter 2025 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, November 12 at 11:00 a.m. Eastern Time.

I would now like to turn the conference over to Candace Brule, Senior Vice President, Capital Markets and Corporate Affairs. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's 2025 Third Quarter Results Conference Call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, 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 Eugene Lei, our Chief Financial Officer; and Andre Lauzon, our 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 U.S. dollars unless otherwise noted.

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

Thank you, Candace. Good morning, everyone, and thank you for joining us for today's call.

The third quarter was a quarter of resilience for Hudbay as we demonstrated the company's strong operating capabilities and the benefits of our diversified operating platform as we faced mandatory wildfire evacuations in Manitoba and temporary operational interruptions in Peru. The agility of our teams and continued dedication to driving efficiencies and reliable performance helped to minimize the impact to our operations due to these external events. This has allowed us to maintain the low end of our consolidated copper and gold production guidance ranges for 2025, and we have been able to significantly improve our consolidated cost guidance for the second time this year, which is truly remarkable given the circumstances.

We continue to take steps to reduce long-term debt while reinvesting in high-return growth initiatives across the organization. We are delighted to have secured Mitsubishi as a premier long-term partner for our Copper World project this quarter, enabling us to unlock significant value in our copper growth pipeline. This transaction further solidifies our financial strength and significantly reduces our share of future equity contributions for the development of Copper World. We look forward to continuing to work with Mitsubishi under this strategic partnership as we advance Copper World towards a sanction decision in 2026 and first production in 2029.

Hudbay's unique diversification in copper and gold, coupled with our relentless commitment to cost control, enables us to maintain industry-leading margins and deliver strong and stable cash flows. Slide 3 provides an overview of our third quarter operational and financial performance.

Our operations in Manitoba showed remarkable resilience against unprecedented wildfires, prioritizing the safety of our people and communities. In Peru, the team navigated regional social unrest and temporary interruptions to deliver gold productions far exceeding quarterly cadence expectations. And in British Columbia, our team made progress with the SAG mill conversion project, called the SAG2 project, to enhance mill throughput and drive future cash flow generation.

In light of temporary operational interruptions and production deferrals, our diversified asset portfolio delivered consolidated copper production of 24,000 tonnes and consolidated gold production of 54,000 ounces in the third quarter. Consolidated copper and gold production was lower than the second quarter, primarily due to the impact of the wildfire disruptions that persisted in Northern Manitoba for a majority of the third quarter as well as the temporary production interruption in Peru for 9 days during the quarter. In addition, mill maintenance and increased processing of lower-grade stockpiles at Copper Mountain contributed to lower quarter-over-quarter production.

Consolidated silver production was 730,000 ounces and zinc production was 548 tonnes in the quarter.

Adjusted EBITDA was $143 million in the third quarter, a decrease compared to the second quarter, primarily due to the temporary operational interruptions I mentioned as well as lower sales volumes as a result of a delayed 20,000 dry metric tonne copper concentrate shipments in Peru with high gold content valued at approximately $60 million. This shipment was expected to be sold at the end of September, but ocean swells at the port prevented it from being loaded and shipped until early October.

Cash generated from operating activities was $114 million in the third quarter, and operating cash flow before change in noncash working capital was $70 million. Adjusted net earnings were $0.03 per share in the third quarter after adjusting for various noncash items on a pretax basis, including a $322 million impairment reversal related to Copper World, a $15 million contingent payment received from a noncore asset sale and various mark-to-market adjustments.

During the third quarter, we continued to demonstrate industry-leading cost performance with consolidated cash costs of $0.42 per pound and consolidated sustaining cash costs of $2.09. These costs increased compared to the prior quarter, primarily as a result of lower gold byproduct credits in Manitoba, partially offset by strong gold production in Peru.

While we have reaffirmed our consolidated full year production guidance for all primary metals and we are anticipating a strong production in the fourth quarter, we now expect consolidated full year copper and gold production to be near the low end of the guidance ranges. We believe our ability to maintain our initial production guidance in the face of the recent operational interruptions is remarkable, and I am extremely proud of the team.

With the strong cost performance at all our operations year-to-date and increased exposure to gold byproduct credits, we have further improved our full year consolidated cash cost guidance to a range of $0.15 to $0.35 per pound of copper from the previously reduced range of $0.65 to $0.85 per pound. We are also improving our consolidated sustaining cash cost guidance range to $1.85 to $2.25 per pound of copper from the original guidance range of $2.25 to $2.65 per pound.

Along with these operating cost improvements, we are also expecting total capital expenditures to be $35 million lower than the original guidance, primarily due to deferring certain expenditures to 2026. This includes $15 million in reduced sustaining capital expenditures as a result of the temporary operational interruptions and $20 million in lower growth capital expenditures that have been deferred to 2026.

Turning to Slide 4. We continue to further reduce debt during the quarter despite lower consolidated free cash flows. Our Peru and Manitoba operations generated positive free cash flow in the quarter despite the temporary production interruptions. This was offset by our continued investment in optimizing our British Columbia operations with the planned stripping activities. Consolidated free cash flow would have been positive if the excess copper concentrate inventory in Peru was sold at the end of September.

To continue our prudent balance sheet management, we repurchased and retired $13.2 million of senior unsecured notes through open market purchases at a discount to par during the third quarter. Following the quarter-end, we repurchased and retired an additional $20 million in senior unsecured notes, reducing our total principal debt levels to $1 billion. Since the beginning of 2024, we have reduced total debt and gold prepay liabilities by approximately $330 million.

We ended the quarter with total liquidity of $1.04 billion, including $611 million in cash and cash equivalents and undrawn availability of $425 million under the revolving credit facilities. As of September 30, our net debt-to-EBITDA ratio was 0.5x. We expect liquidity to be further enhanced upon closing of the Copper World joint venture transaction, which is anticipated to close in late 2025 or early 2026. Our strengthened balance sheet will allow us to continue to prudently reinvest in our portfolio of attractive, high-return brownfield and greenfield opportunities to drive production growth and long-term value creation.

Taking a look at our Peru operations on Slide 5. We delivered steady operating performance despite facing temporary interruptions due to social unrest. The operations produced 18,000 tonnes of copper and 26,000 ounces of gold during the third quarter, as well as 577,000 ounces of silver and 195 tonnes of molybdenum.

Countrywide protests that began early in the third quarter temporarily impacted the transportation routes, leading to limitations of supplies and concentrate transportation. To manage through these limitations, we adjusted mine sequencing to prioritize Pampacancha mining activities and blend stockpile ore in the mill feed. In late September, the social unrest escalated across Peru, and along with other mines in the southern mining corridor, our Constancia mine was impacted by local protests and illegal blockades. The safety of all of our personnel is our top priority, so we suspended operations on September 22 as a precaution.

During the temporary downtime, the team performed preventative maintenance at the mill and on certain mining equipment. Since the restart of mining activities on October 3 and milling activities on October 5, the Constancia operations have normalized. I'm extremely proud of our resilient team in Peru and the way they continue to navigate the dynamic environment.

Quarterly copper production was lower than the prior quarter, primarily due to lower ore milled as a result of this temporary operational shutdown, while gold production was higher due to stronger head grades from a larger contribution of the mill feed coming from Pampacancha.

The fourth quarter is expected to be the strongest copper and gold production quarter this year in Peru. Production in the month of October totaled approximately 9,000 tonnes of copper and 17,000 ounces of gold, reflecting optimal mill ore feed with continued strong ore contribution from Pampacancha and lower stockpiled ore being processed. We remain on track to achieve full year copper production guidance in Peru, while gold production is now expected to be above the top end of the 2025 guidance range.

Mill throughput averaged approximately 76,000 tonnes per day in the third quarter, lower than the second quarter due to low ore mined and the temporary operational shutdown. Milled copper grades decreased by 9% compared to the second quarter as a result of the stockpiled ore feed, partially offset by higher grades from Pampacancha. Milled gold grades significantly increased with a higher portion of ore feed from Pampacancha where the gold grades are meaningfully higher than in the other ore sources. Mill recoveries of copper were impacted by the nature of stockpile feed while gold and silver recoveries were in line with metallurgical models.

The road blockades along the transportation route reopened midway through the quarter, allowing us to reduce site concentrate inventory levels and replenish supplies. However, as I mentioned earlier, ocean swells at the port later in the quarter impacted sales volumes with a 20,000 tonne copper concentrate shipment being deferred to early October.

Cash costs were $1.30 per pound during the third quarter, decreasing from the prior quarter with higher gold byproduct credits and lower maintenance costs as planned. With cash costs continuing to outperform the low end of the cash cost guidance range, we are reaffirming our full year cash cost guidance in Peru.

Moving to our Manitoba operations on Slide 6. I want to first thank the regional operating team for all their efforts in safeguarding the company's assets and completing an efficient, orderly resumption of operations. I can't imagine what our employees and their families had to endure during these unprecedented wildfires, and we will continue to do our part to support the rebuilding efforts in the communities and the provinces. And I will say again how proud I am of the continued resilience demonstrated by our Manitoba team and the successful restart of operations in late August following the lifting of mandatory evacuation orders.

The operations produced 22,000 ounces of gold, 800 tonnes of copper, 500 tonnes of zinc and 102,000 ounces of silver in the third quarter, lower than the second quarter due to the 2-month wildfire evacuation that deferred gold production. A business interruption insurance claim has been submitted to compensate for a portion of the wildfire-related downtime.

Total ore mined at Lalor reduced by over 50% during the quarter due to the temporary operational interruption. Gold grades increased by 9% compared to the second quarter, while copper, zinc and silver grades were in line with the mine plan expectations.

Consistent with our strategy of allocating more Lalor ore feed to New Britannia to maximize gold recoveries, the New Britannia mill achieved average throughput of approximately 2,300 tonnes per day over the operating period in the quarter, and gold recoveries were a record 92%, reflecting the increase in gold grades. The Stall mill experienced a greater throughput impact from the wildfire shutdown as the Lalor mine prioritized mining from the gold zones over base metal zones to ensure a consistent feed to the New Britannia mill. The team focused on process optimization and enhanced gold recovery initiatives, enabling record gold recoveries of 73% at Stall in the third quarter.

Gold cash costs for the third quarter were $379 per ounce, decreasing compared to the second quarter, primarily due to the higher byproduct credits and the recovery of secondary gold products as a result of mill tank clean-outs. While the Manitoba operations were previously tracking within the 2025 guidance ranges despite the significant impacts from wildfire evacuations, we are now expecting to be slightly below the low end of the gold production guidance range as a result of a week-long power outage in October from severe winter storms that further deferred gold production.

With year-to-date cash costs continuing to outperform the low end of the cash cost guidance range, we are reaffirming our full year 2025 cash cost guidance range in Manitoba. Given the strong cash cost performance to date in Manitoba, Hudbay will continue to prioritize primary gold production over byproduct zinc production in 2025, and full year zinc production is now expected to be below the low end of the guidance range.

Looking at our British Columbia operations on Slide 7. We continue to focus on advancing our optimization plans at the Copper Mountain mine. This includes the ramp-up of mining activities to optimize ore feed to the plant and implementing site improvement initiatives that mirror Hudbay's best-in-class operating practices.

In the third quarter, the British Columbia operations produced 5,200 tonnes of copper, 4,800 ounces of gold and 51,000 ounces of silver. Production decreased compared to the prior quarter primarily because of restricted mining efficiencies and lower grades as higher waste stripping continued. The waste stripping activity is a part of the continued execution of the accelerated stripping program intended to bring higher grade ore into the mine plan in 2027.

During the third quarter, we made significant progress on the key mill improvement project completing the initial phase of the SAG2 mill conversion in July. The subsequent ramp-up demonstrated positive contribution from SAG2 during the quarter with several days achieving 50,000 tonnes per day of mill throughput in September. The team continues to optimize the circuit as planned through the remainder of 2025 with the final phase of the project involving the conversion of an interim feed arrangement to a permanent configuration. Construction remains on target for completion in December 2025.

In late September, the primary SAG mill, which I will refer to as SAG1, required unplanned maintenance due to localized damage to the feed head. After completing the repairs in mid-October, SAG1 restarted at a reduced rate. Under enhanced monitoring controls, SAG1 throughput will continue to ramp up over the course of the fourth quarter. Together with the completion of the final phase of the SAG2 project, Hudbay expects mill throughput to ramp up towards 50,000 tonnes per day by mid-2026.

Total ore processed during the third quarter was 6% higher than the second quarter, reflecting the completion of the first phase of the SAG2 project, partially offset by planned and unplanned maintenance. During the third quarter, copper recoveries were 77% and gold recoveries were 59%, both lower than the prior quarter due to the processing of lower-grade stockpile material.

British Columbia cash costs were $3.21 per pound in the quarter, higher than the prior quarter, largely due to lower copper production and lower byproduct credits. Fourth quarter production is expected to be impacted by lower mill throughput from reduced levels at SAG1 in October, which, together with a higher portion of ore milled from low-grade stockpiles this year, is expected to result in full year copper production in British Columbia to be below the low end of the guidance range. Cash costs continue to track well versus the guidance range and, therefore, we are reaffirming full year cash cost guidance in British Columbia.

Turning to Slide 8. As I mentioned briefly in my opening remarks, our Copper World project in Arizona achieved a significant milestone this quarter with the announcement of our 30% strategic joint venture with Mitsubishi. We welcome Mitsubishi's world-class expertise as we work together to advance this high-quality copper project and unlock significant value for all our stakeholders. This strategic partnership validates the attractive long-term value of Copper World as a top-tier copper asset and endorses the strong technical capabilities of Hudbay.

Mitsubishi is acquiring its 30% stake for an initial contribution of $600 million. This deal will provide $420 million in cash once it closes, and $180 million within 18 months of its closing. These proceeds will be used to fund the remaining feasibility study and pre-sanction costs in addition to initial project development costs for Copper World. Mitsubishi will also fund its pro rata 30% share of future capital contributions.

This valuation is highly attractive to Hudbay as it implies a significant premium to consensus net asset value for Copper World. As a result of the JV proceeds and future capital contributions, Hudbay's estimated share of the remaining capital contributions have been reduced to approximately $200 million based on pre-feasibility study estimates. It also defers our first capital contribution to 2028 at the earliest and significantly increases the levered IRR to Hudbay to approximately 90%.

With recent achievement of our stated balance sheet targets, we have successfully completed the key elements of our prudent financing strategy as part of our 3-P plan. We are very well positioned to build one of the next major copper mines in the United States while continuing to maintain a strong balance sheet to reinvest in other growth opportunities across our portfolio, while continuing to delever.

Copper World feasibility activities are underway, and we are on track for the completion of a definitive feasibility study in mid-2026. We have accelerated detailed engineering, certain long lead items and other derisking activities, with the additional $20 million in growth capital expenditures announced in August. We continue to expect to make Copper World sanction decision in 2026.

As part of our long-term growth pipeline, Slide 9 summarizes the threefold strategy we are executing in Snow Lake as part of the largest exploration program in the company's history in Manitoba. The first objective is to execute near-mine exploration at the Lalor and 1901 deposits to enhance near-term production and further extend mine life. We completed the development of the initial exploration drift at 1901 earlier this year, and the development of the haulage drift is underway. Positive initial step-out drilling from the exploration drift was achieved earlier this year, and during the third quarter, some additional zinc development ore was delivered for processing at Stall.

Activities at 1901 over the next 2 years will focus on exploration, definition drilling, ore body access and establishing critical infrastructure for full production in 2027. Exploration activities will also target additional step-out drilling to potentially extend the ore body as well as complete infill drilling to convert inferred mineral resources in the gold lenses to mineral reserves.

The second strategic focus area is on testing regional satellite deposits within trucking distance of the Snow Lake processing infrastructure to identify potential additional ore feed to fully utilize the available processing capacity. With our significant Snow Lake land package, we have an attractive portfolio of regional deposits, including the Talbot, Rail, Pen II, Watts, 3 Zone and WIM deposits. The most advanced of these satellites is the Talbot deposit, which I'll discuss further on the next slide.

And the third strategic focus is on exploring our large land package for a new potential anchor deposit to significantly extend the mine life of our Snow Lake operations. We are conducting the largest geophysics program in our history in Snow Lake, consisting of 800 kilometers of ground electromagnetic surveys and an extensive airborne geophysics survey.

In July, we commenced exploration drilling at the Talbot copper-zinc-gold deposit. Talbot is located within trucking distance of the Snow Lake processing facilities, making it an ideal deposit to potentially provide supplemental feed to our Stall mill.

The current phase of the drilling program includes 4 drill rigs intended to complete 10 holes by the end of the year. After completion of the initial 3 holes, we are pleased to see that the core logging has confirmed the continuity of the Talbot copper gold mineralization at depth and look forward to receiving the full assay results later this year. This drilling will determine the future scope requirements for a pre-feasibility study, which we intend to initiate in 2026. In January 2026, we expect to kick off phase 2 of the Talbot drilling program focused on infill drilling to support the pre-feasibility study.

Concluding on Slide 11. This quarter demonstrated the benefits of Hudbay's diversified operating base, our unique copper and gold exposure and our resilient operating capabilities. Our continued focus on cost control enables us to maintain industry-leading margins and deliver strong and stable cash flows.

Once Copper World is in production, we expect our annual copper production to grow by more than 50% from current levels. This will reinforce our position as one of the largest Americas-focused pure-play copper producers with a well-balanced and geographically diversified portfolio of assets. Our expected production will be weighted approximately 1/3 in each of Canada, the United States and Peru. And the significant increase in copper production from Copper World will further enhance Hudbay's exposure to copper with more than 70% of consolidated production and revenue expected to be derived from copper.

Hudbay's existing strong operating platform in Tier 1 mining jurisdictions and resilient balance sheet offer significant upside potential for further value creation at higher copper and gold prices. We will be able to prudently advance Copper World while also being able to invest in many other high-return growth opportunities to unlock value across the portfolio and create meaningful value for all our stakeholders.

And with that, we are pleased to take your questions.

[Operator Instructions] Our first question is from Lawson Winder with Bank of America Securities.

Peter, Eugene, Andre, nice to hear from you guys today. I wanted to ask first about Copper Mountain. So the construction decision, can we expect that to occur in mid-2026? And then just thinking about spending around Copper World this year -- or in 2026, do you expect any preconstruction spending that could occur in advance of the completion of the feasibility study and a construction decision?

Lawson, thanks for the question. So the first part of your question is, yes, we do expect to complete the feasibility study in mid-2026, and we expect a construction decision in 2026 as well.

One of the comments that we made during my comments was that we did authorize an additional $20 million this year to get ahead of some of the long lead items and engineering items associated with the critical path of the project. We also expect to be spending a fair amount of money, pre-sanction money, I guess you would call it, in order to keep things moving and in order to make sure that we address the critical part properly. So yes, the answer in your question for short -- in short is, absolutely, we will spend on developing the project in conjunction with doing a feasibility study.

Now remember that we are following an integrated project development approach, which means that the engineers, constructors, et cetera, are all in an integrated team. And so we are able that way to advance certain elements of the project ahead of others where there's risk. So 50% roughly engineering will be completed before the end of the feasibility study, but in some areas, as much as 70% will be completed. So we are very much taking sort of a holistic approach to make sure that we address the critical path and spend on the right things even before the FID decision.

Okay. That's helpful. And then just a clarification. The $20 million, will some of that be in '25, or will that all be in '26?

Lawson, it's Eugene here. So the original budget for this year for Copper World was $90 million, and we increased that to $110 million as part of that decision to make some long lead items. If you look at the slide that we show in terms of the total funding, there's approximately a $150 million in total spending from January 1, 2025 until the sanction decision expected in mid-2026.

So you would have -- from the money that we've outlined, there's a total of $150 million. We expect to spend about $100 million of that this year and with about $50 million remaining in the first half of 2026, to be in a position to sanction Copper World along the time lines that Peter outlined.

Okay. Yes, that's very helpful. Thanks for highlighting those notes. I just hadn't noticed them yet. And then same question, but I just wanted to ask about CapEx. So you deferred $35 million of sustaining CapEx into 2026. The original budget for this year was about $365 million. So should we think about sustaining CapEx in 2026 as $365 million plus the $35 million from this year? Or are there some other puts and takes there we should be considering, and what are they?

It's Andre. So there is some of it, like some of the CapEx there is a little carryover. But a lot of the CapEx were actually deferrals related to the wildfires in Manitoba and some of the tailings with some of the blockades in Peru. So those things are just kind of offset. And there's not an increase, it's just the mine plan is just continuing. So Manitoba restarted their operations and ramped back up, but they're not developing at a rate that's higher than what they did historically. So it's just a sliding of a lot of that.

So to break that $35 million down for you, Lawson, it's $15 million in deferrals and sustaining capital. But that's not additional capital. So you don't just add it to 2026, as Andre mentioned. And then of the remaining $35 million, $20 million relates to growth projects that were deferred -- that will be deferred in 2026. So that's not new capital; again, that is capital that will just be not spent in '25 and spent in 2026.

Yes, that's super helpful. And then just ultimately what I was trying to get at is like a good baseline for sustaining CapEx for next year then would be basically this year's guidance of $365 million plus or minus, say, 5%. Like is that fair?

We haven't finished all the budgeting for next year, but that's a fair amount. I think every year, there is -- in Peru, depending on the year, whether there's a tailings dam raise or not, the capital will fluctuate by between $20 million and $30 million. And in Manitoba, it's been very stable at this level. And in BC, while we're continuing the stabilization program, it's going to be at this level until the end of '26, as we've kind of mentioned on a 3-year plan basis. So I think your assumption is fairly consistent.

The next question is from Ralph Profiti with Stifel Financial.

Peter, it's been sort of surmised that some of the issues in Peru are around informal mining and regulations therein. Just wondering, can you discuss a little bit about informal mining practices in and around Maria Reyna and Caballito? Is this a significant issue that may need to be considered when we talk about the consulta previa process?

Ralph, it's a great question. Look, actually, there's been a fair amount of informal mining around Maria Reyna and Caballito for a long time since -- actually since before we acquired the mineral rights for the assets. I would say that the informal miners do not constitute a material impediment to our ability to get permits or go through the consulta previa process or get access to exploration. In fact, a lot of the work that we've done with the community is to try to prepare the communities to be able to support us with drilling themselves. And it would make sense that it might be the informal miners who actually do some of the work for us.

So in general, I would say that, to answer your question, that informal miners are absolutely not an impediment to getting the consulta previa done. It's just more complicated right now given the social environment in Peru, change of government, et cetera, et cetera, to get the government to conduct the consulta previa process, to get everybody together and to ultimately get the nod that the surface rights were acquired without coercion or anything like that.

What I would say about Peru also is that there's no difference today to the way it's been for the last 25 years. And the term that I would use to characterize it is stable instability. I've spoken many times about the time that I've spent in Peru with the pendulum swinging left and right and left and right. And the one thing that stays the same is -- or 2 things that stay the same are the fiscal environment, but also the bureaucracy.

And what's really important is that stable bureaucracy to get things done. But the time lines are very, very difficult to predict, especially now with elections coming up next year. And the equation of the informal miners, how that plays into the broader social environment. But I don't think there's any direct impact on the prior consultation process.

There were small-scale miners on Pampacancha prior to our permitting and accessing it. They are a stakeholder, and we've successfully navigated that in the past.

The next question is from Orest Wowkodaw with Scotiabank.

Maybe just shifting gears to Copper Mountain. The asset seems to be underperforming your expectations since you acquired it. Can you give us a sense of the SAG mill issue that you disclosed here most recently? Is this now going to negatively impact '26? And I'm wondering if we should already start thinking about the low end of the Copper Mountain production guide for '26 based on this issue.

Orest, the first thing that I would say is that we are highly confident that Copper Mountain was the right asset to purchase. We believe strongly that the skill set that Hudbay brings to bear will ultimately be fully realized in value at Copper Mountain. Like we said, it's a 3-year optimization -- or stabilization and optimization process. We're sort of 2 years into it, there's a good year to go, and there's a lot of work to be done.

And there will be some puts and takes. I think Andre always explained it as being, when you renovate a house, you find a few things when you pull the Sheetrock off the walls, et cetera. But we'll get there. But Andre, maybe you can provide a little bit more color.

Yes. No. As you were saying, I was thinking that TV show Love It or List It, and we love it. We love it and there's -- and it is very much a -- it's a journey. And so I'll talk to the event there, Orest, and to your specific question. But I would say, I start with is there's been tremendous progress throughout the course of the year. The team has done an excellent job on navigating a whole number of challenges and opportunities and in terms of ramping up the mine.

And the mine was under-stripped and there's smaller benches, and they're working through a lot of it. And so we've seen steady progress in that. We delivered SAG2 ahead of schedule or on schedule back in July, and ramping that up where, initially, when we envisioned this, we weren't even going to turn it on until the end of the year. And it's proved to be fruitful around that optionality as we got into the SAG1 incident, if you will, that was described by Peter earlier on in the discussion.

So what it appears to have happened with that example is, and we've done a lot of investigation, there's more investigation to understand, is just it was a premature liner wear. And it's the same set of liners and it wasn't wearing the same as what we had thought previously. It's the same tonnage. And it appears that our operational excellence in terms of we introduced something called the MillSlicer to really run a real stable, efficient operation, and what we ended up seeing, which we didn't anticipate, was a little bit more selective wear rather than wear throughout the liners. And it caused that incident. It caught us a little bit by surprise.

They've repaired it. We've gone through a very cautious, meticulous ramp-up process. We're ramping up to date. We're almost at the level right now of where we were, call it, the average of prior to Q3. So it's a ramp-up.

Is there a bit of an impact to next year? A little, but not significant. And so the unknown for us is like the ramp-up on SAG2, on the combined of SAG2 and SAG1 exceed our permit capacity for Copper Mountain. And so we were cautious in the wording. As you know, we're generally conservative operators and we want to deliver what we say. And so we're confident in the forecast that we put to the end of the year.

And then we'll update more -- we're going to know a lot more going into when we set guidance on next year. But like we said, we're pretty confident on hitting that by midyear up to that 50,000 tonnes a day.

Good luck.

No luck needed, but -- it's been a lot of hard work, but I appreciate the kind words.

The next question is from Marcio Farid with Goldman Sachs.

So just on Peru. Obviously, you've just adjusted the mining sequence in the third quarter towards the high-grade Pampacancha deposit just trying to minimize impact from the interruptions, right? But just trying to understand, I mean, you mentioned on the release that October, the ramp-up at Constancia has been quite well. Just trying to understand if you're confident that you can get back on track throughout the fourth quarter of the year at Constancia?

Sure. This is Andre. I'll take that question. So absolutely confident. As you saw in the press release, the month of October, as we disclosed, is the highest copper production for the year. We're into the high-grade cycle. The team has done an excellent job. I could never imagine them running with 3 shovels and producing at the levels that they have at Pampacancha, and thoroughly impressed by the team.

And so Pampacancha is going at a very, very high rate. Could finish it potentially by the end of the year, which was the original plan, by the way. So the team has basically caught up. And so that cadence is why we're seeing high copper grades through to the end of the year as well as the high gold. So Pampacancha has really contributed to us exceeding the high end of guidance on gold for Peru.

Marcio, it's Peter. As Andre says, we are highly confident in our ability to hit the ball out of the park with Constancia for the remainder of the year.

Great. Can I just follow up on Manitoba as well? Obviously, gold grade has been quite strong. Just trying to understand if you can maintain, sustain that level at around 5 grams per tonne? And what does the mine plan look like for Manitoba?

Yes. So I'll add, and if you can add if I miss something there. So Manitoba, like, again, resilience -- the team, unfortunately, with the wildfires going into the year, we were on track to exceed gold, the high end of guidance. And that's why despite being down for 2 months with the evacuations, we're still in really, really good shape. And the team has ramped up.

We are in a high-grade cycle right now. I won't say the grade because you'll project it to the end of the year. But we are in a very high-grade cycle of both copper and gold right now, and the mill is we -- to that extent, we have to slow down a bit because the grade was a little bit high. But overall, very confident in the grade to deliver to the end of the year and meet our gold consolidated guidance, as we said.

I would add, Marcio, that the average grade that's in the mine plan is 4.5 to 4.6 grams per tonne, which is the basis for our mine plan. And we expect to average those grades through the fourth quarter and throughout 2026.

The next question is from Martin Pradier with Veritas Investment Research.

Some of my questions have been answered. But in terms of the Q4 for BC, are you expecting to be lower than Q3, because there's a couple of moving parts? I think you have lower grade, and the throughput, I think it should be higher because now you have the second mill. So I'm just trying to understand that.

Sure. It kind of answered the question. The reason why we're saying we're right at -- going to be at the low end of copper guidance is because it is -- we're dealing with that situation that I described on the ramp-up. So the incident that happened at the SAG1 mill was right at the end of Q3. So there will be compensating effects, like SAG2 is compensating for SAG1. But the throughput is built into that projection of achieving the low end of copper guidance.

On a consolidated basis.

On the consolidated basis. So that's why we're telegraphing that BC was going to be below the low end on its individual guidance, is because of that incident. Otherwise, we were -- we would have been in a good spot.

So the ramp-up is ongoing right now. We're quite pleasantly surprised and pleased with the team on how quickly they're ramping up. But there is an impact in the quarter, and that's why we're telegraphing to the low end of copper guidance consolidated.

Yes, I understand that. But you expect it to be higher or lower than Q3?

So we are running SAG2 in Q3, and SAG1 was running at its typical capacity. It's not running at full capacity right now. It's still -- we're in the ramp-up mode. And so it's not -- it's going to be close, but it's probably a little bit less.

But the grade in this quarter is different than in Q3. I'd say the grade compensates for it because we were mining a lot of low-grade stockpile in Q3, and we are seeing a bit higher grades than normal now. So they kind of balance each other off. It's not our strongest one from BC, and that's why we telegraphed it to the bottom end.

The next question is from Fahad Tariq from Jefferies.

Just coming back to Pampacancha in the fourth quarter. How should we be thinking about mining rates? Like is it going to be similar levels to the third quarter? That was my understanding from the answer to the previous question.

Yes.

Yes. That's fair.

That's fair? Okay. And then the remaining feed, should we assume that the Constancia pit is the remainder versus being stockpiled in the fourth quarter?

We're back mining in Constancia. So it's a mixture of the 2, whatever makes the most sense. But yes, we're back in Constancia for the remainder.

Okay. Great. And then just unrelated, but switching gears to Manitoba. Can you just let us know how much you expect to receive from the insurance claim related to the wildfires?

It's a bit premature to give you a number. But as you know, we have good coverage that covers both property and business interruption. And business interruption has a 30-day standard deductible. So we're really grateful that there wasn't any significant damage on a property basis and given our proactive defense activities. And so we submitted a claim and we'll get you a number kind of in 2026. But a bit premature to give you an exact number today.

The next question is from Stefan Ioannou with Cormark Securities.

Maybe that's a tough one to answer, but just when we think about growth in the next steps for Hudbay, should we just assume in the near term all hands on deck are going to be focused solely on Copper World? Or should we start to think about maybe more news or thought or consideration given to other projects or assets in the company's portfolio?

Stefan, thanks for the question. So the one thing that we've tried to make very, very clear is, having retired the 3-P plan now, having procured the joint venture partner for Copper World, we are now in an extremely strong position to be able to fully fund Copper World, as well as to continue to pursue high-return, low-risk brownfield production improvement projects across the portfolio.

So I think what you'll see is that -- we talked today a little bit about the exploration efforts that are underway with advancing 1901, et cetera, et cetera. We've got the pebble crushing circuit in Peru next year, a bunch of these things. So I think you can be assured that we will continue to invest in the portfolio as well as to continue pushing Copper World. Remember, Copper World is one single integrated team and we are decentralized organization with different business units who will continue to pursue their other projects.

If I could add to that. We're in a really enviable position with our strong balance sheet and cash balance where we're going to be able to build Copper World with very little capital until 2028. We're going to be able to build Copper World, reduce our leverage, delever, and allocate capital to other business units, so that we're able to reinvest in building up additional production capacity in Manitoba, in BC, in Peru and advance even Mason.

So I think it's a really enviable position where coming out of the decade, we will have built Copper World, have lower debt and invested in all the other areas and built up our entire business. And that was the benefit of bringing in this joint venture partner to fund a significant portion of the Copper World capital, was because we saw so much opportunity within our portfolio to invest to grow the other parts of the business as well. And it's pretty exciting for us to be in this position to be able to do that.

This concludes the question-and-answer session. I'd like to turn the conference back over to Candace Brule for any closing remarks.

Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, feel free to reach out to our Investor Relations team. Thanks, and have a great day.

Ladies and gentlemen, this concludes the conference call for today. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. Second Quarter 2025 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, August 13, 2025, at 11:00 a.m. Eastern Time.

I would now like to turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's 2025 Second Quarter Results Conference Call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, 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 Eugene Lei, our Chief Financial Officer; and Andre Lauzon, our 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 U.S. dollars unless otherwise noted.

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

Thank you, Candace. Good morning, everyone, and thank you for joining us for today's presentation. Once again, we delivered another quarter of significant free cash flow generation, driven by continued industry-leading cost margins and diversified exposure to copper and gold. This strong financial performance enabled us to further reduce long-term debt, invest in our many high-return growth projects and further strengthen our balance sheet to its best position in well over a decade.

We are also very pleased to announce a minority joint venture agreement with Mitsubishi Corporation at our Copper World project in Arizona, which further solidifies our financial strength and significantly reduces our funding requirement to develop this attractive project. We have secured the premier joint venture partner at an attractive valuation to develop our world-class Copper World project and establish a long-term strategic partnership that will unlock significant value in our copper growth pipeline.

Through a highly accretive joint venture and enhanced precious metal streaming deal and the achievement of our financial targets, we have successfully realized the key elements of our prudent 3P financial plan and significantly derisked the Copper World project as we advance towards a sanctioned decision in 2026. I will touch on the JV transaction in more detail in a moment, but first, I will discuss our second quarter results, starting on Slide 3.

The strong financial results in the second quarter were driven by steady copper production, complementary gold production and continued cost control across the business. Our operations in Manitoba showed remarkable resilience against unprecedented wildfires, prioritizing the safety of our people and communities while still delivering strong gold production. In Peru, our steady operating performance delivered production and costs in line with our expectations. And in British Columbia, we made excellent progress on our optimization plans with the SAG mill conversion project.

Thank you, Candace. Good morning, everyone, and thank you for joining us for today's presentation. Once again, we delivered another quarter of significant free cash flow generation, driven by continued industry-leading cost margins and diversified exposure to copper and gold. This strong financial performance enabled us to further reduce long-term debt, invest in our many high-return growth projects and further strengthen our balance sheet to its best position in well over a decade. We are also very pleased to announce a minority joint venture agreement with Mitsubishi Corporation at our Copper World project in Arizona, which further solidifies our financial strength and significantly reduces our funding requirement to develop this attractive project. We have secured the premier joint venture partner at an attractive valuation to develop our world-class Copper World project and establish a long-term strategic partnership that will unlock significant value in our copper growth pipeline.

Through a highly accretive joint venture and enhanced precious metal streaming deal and the achievement of our financial targets. We have successfully realized the key elements of our prudent 3P financial plan and significantly derisked the Copper world project as we advance towards a sanctioned decision in 2026. I will touch on the JV transaction in more detail in a moment. But first, I will discuss our second quarter results, starting on Slide 3.

The strong financial results in the second quarter were driven by steady copper production, complementary gold production and continued cost control across the business. Our operations in Manitoba showed remarkable resilience against unprecedented wildfires, prioritizing the safety of our people and communities while still delivering strong gold production. In Peru, our steady operating performance delivered production and costs in line with our expectations. And in British Columbia, we made excellent progress on our optimization plans with the SAG mill conversion project.

Consolidated copper production in the second quarter was 30,000 tonnes, and consolidated gold production was 56,000 ounces. Consolidated copper production was relatively in line with the first quarter as higher production in Peru offset lower production in Manitoba from a suspension of operations in June due to mandatory wildfire evacuation orders. Consolidated gold production was lower than the first quarter because of the wildfire impacts in Manitoba. Consolidated silver production was 815,000 ounces and zinc production was 5,000 tonnes in the second quarter.

We had another quarter of industry-leading cost performance with consolidated cash cost of negative $0.02 per pound and sustaining cash cost of $1.65 per pound. The increase compared to the first quarter was due to lower byproduct credits, combined with planned higher sustaining capital expenditures, but both metrics are well below the low end of the cost guidance ranges.

With the strong performance in the first half of the year, we are reaffirming our full year consolidated production guidance for all metals. We are favorably tracking well below our full year consolidated cost guidance for 2025, which has resulted in an improved cost guidance range of $0.65 to $0.85, a decrease from our original cost guidance range of $0.80 to $1 per pound.

In the second quarter, we achieved adjusted EBITDA of $245 million, resulting in record annual trailing 12-month adjusted EBITDA of $996 million as of June 30. Net earnings were $0.30 per share and adjusted net earnings were $0.19 per share in the second quarter after adjusting for noncash gains from foreign exchange, revaluation from environmental reclamation provisions, mark-to-market investment revaluation and flow-through share expenditures. Cash generated from operating activities of $260 million increased compared to the first quarter as a result of higher gross margins driven by stable copper production, higher realized prices and positive working capital management. Similarly, operating cash flow before change in noncash working capital was $194 million, a $30 million increase from the first quarter as a result of lower cash taxes, offset by lower gold and copper sales volumes in Manitoba.

The strong financial performance during the second quarter marked the eighth consecutive quarter of meaningful free cash flow generation, as shown on Slide 4. We generated $88 million of free cash flow in the quarter. And over the last 12 months, we have generated more than $400 million in free cash flow as a result of steady operating performance, expanding margins from strong copper and gold exposure, and a focus on cost control across the business.

As a result of the continued free cash flow generation and prudent balance sheet management, we repurchased and retired $50 million of senior unsecured notes at a discount to par during the quarter. This has resulted in approximately $295 million in total debt repayments and gold prepayment liability reductions since the beginning of 2024, including $133 million in total bond buybacks, $100 million of revolver repayments and $62 million to fully repay the gold prepay facility completed in August 2024.

We ended the quarter with $626 million in cash and cash equivalents, and our net debt reduced to $434 million. This has further improved our leverage ratio to 0.4x as of June 30, the lowest in more than a decade. While the majority of revenues continue to be derived from copper production, gold continues to represent more than 36% of total revenues in the second quarter. Our unique copper and gold diversification continues to provide significant leverage to both higher copper and gold prices. Our fortified balance sheet and robust free cash flow generation will allow us to continue to prudently reinvest in our portfolio of attractive high-return brownfield and greenfield opportunities to drive near-term and long-term production growth.

Turning to Slide 5. Our Peru operations produced 22,000 tonnes of copper in the second quarter, in line with quarterly cadence expectations. Copper production increased compared to the first quarter as milled copper grades exceeded first quarter levels. Constancia also produced 7,000 ounces of gold, 552,000 ounces of silver, and 375 tonnes of molybdenum.

During the quarter, the last major stripping program at Pampacancha was completed, which included higher amounts of waste stripping than originally planned. As a result, we replaced higher-grade Pampacancha ore with higher-grade Constancia ore in the quarter, and Pampacancha is now expected to be depleted in the first quarter of 2026 rather than in late 2025.

Protests that started early in the third quarter temporarily impacted the transportation of supplies and concentrate and has affected mine sequencing. The Constancia mill has continued to operate during this period and the road blockades along the concentrate transportation route have since reopened, allowing us to reduce site concentrate inventory levels and replenish supplies. Despite these short-term mine plan changes, we remain on track to achieve our full year production guidance for all metals in Peru.

Mill throughput in the quarter was impacted by the planned semiannual mill maintenance shutdown and therefore, was lower than the first quarter. Milled copper grades increased by 13% relative to the first quarter due to higher grades in the Constancia pit, while milled gold grades remained consistent with the prior quarter as Pampacancha stripping activities were underway in both quarters. Mill recoveries for all metals remained in line with our metallurgical models for the ore type that was being processed. The operations delivered strong cost performance in the quarter with cash cost of $1.45 per pound despite higher maintenance costs associated with the planned mill maintenance program and lower byproduct credits. We remain well positioned to achieve the full year cash cost guidance in Peru.

Moving to our Manitoba operations on Slide 6. I personally want to thank the dedicated on-site team who demonstrated tremendous effort and unwavering commitment during the unprecedented wildfire situation in both Flin Flon and Snow Lake during the quarter. The team tirelessly safeguarded our assets and collaborated closely with the local communities and provincial authorities, providing essential support to emergency response efforts. These efforts resulted in no damage to Hudbay's infrastructure and facilities. In addition, we committed over CAD 2 million in funding support to our evacuated employees, including $1.6 million in direct financial support and $500,000 in a donation to the Canadian Red Cross to support wildfire emergency relief and rebuilding efforts in northern Manitoba.

Despite disruptions from the mandatory evacuation orders in May and June, the Manitoba operations showed remarkable resilience and achieved several key milestones in the second quarter. The operations produced 43,000 ounces of gold, 1,600 tonnes of copper, 5,100 tonnes of zinc and 198,000 ounces of silver in the second quarter. These were lower than the first quarter, primarily due to lower production in June associated with the 13-day temporary suspension of operations from the wildfire evacuation shutdown.

The Lalor mine managed through a period of reduced workforce prior to and after the temporary suspension of operations. Despite these challenges, the mine averaged 3,300 tonnes per day in the second quarter, strategically prioritizing mining from gold zones to ensure a consistent feed for the New Britannia mill. Gold grades were in line with mine plan expectations, while being lower than the exceptional gold grade mined in the first quarter of 2025. Continuous improvement efforts at Lalor focused on ore quality and advancing stope modifications to enhance mucking productivity. Capital development continued, aiming to secure high-grade copper gold mineralization from Zone 27 and prepare Zone 17 for the next copper gold mining front.

The New Britannia mill achieved record monthly production levels in April, exceeding 2,300 tonnes per day. This significant milestone is a testament to ongoing low capital projects and recent piping improvements that boosted throughput and maintained strong gold recoveries. New Britannia's mill throughput averaged approximately 1,800 tonnes per day during the second quarter, reflecting the record levels achieved in April, offset by lower throughput levels in June associated with the wildfire evacuation shutdown. New Britannia gold recoveries of 89% were consistent with the first quarter.

The Stall mill continues to process less ore compared to prior periods, which is aligned with our strategy of allocating more Lalor ore feed to New Britannia to maximize gold recoveries. The Stall mill achieved gold recoveries of 68% in the quarter, reflecting benefits from recent recovery improvement programs. Gold cash costs for the second quarter were $710 per ounce, impacted by lower gold production, as previously mentioned, but were within the guidance range. On July 10, the second mandatory wildfire evacuation notice was issued for the town of Snow Lake, and we suspended the Snow Lake operations in a controlled, safe and orderly manner. All of our employees remain safe, and there has been no structural damage to Hudbay's on-site surface infrastructure and facilities.

With the strong start to the year, we continue to expect to achieve our 2025 production guidance in Manitoba. And with cash costs in the first half of the year outperforming the low end of the cost guidance range, we are still well positioned to achieve the 2025 cash cost guidance range in Manitoba.

At our third operating business unit, British Columbia, which is discussed on Slide 7, we continue to focus on advancing our optimization plans. Copper Mountain produced 6,600 tonnes of copper, 5,700 ounces of gold and 65,000 ounces of silver. Production of gold was higher than the first quarter due largely to higher recoveries, while copper and silver were lower primarily as a result of lower head grades from the use of stockpiled ore in the second quarter. We remain on track to achieve our 2025 production guidance for all metals in British Columbia and continue to expect higher production in the second half of the year as the mill improvement project takes effect.

Mining activities in the quarter continue to focus on execution of the 3-year accelerated stripping program intended to bring higher-grade ore into the mine plan. Total material moved in the quarter increased with the effective usage of the mining fleet and continued focus on mining efficiencies, including improvements with blasted muck inventories and operator recruitment. Total material moved is expected to continue to increase quarter-over-quarter as per the mine plan.

Mill throughput in the second quarter was limited by both planned and unplanned maintenance and area constraints related to the completion of the SAG conversion project. We made significant progress on this project, which entails converting the third ball mill to a second SAG mill. On July 10, we successfully completed the initial phase of the project on time and on budget. The next phase of the project involves converting an interim feed arrangement to a permanent configuration, which remains on target for completion in the second half of the year. This is anticipated to enable mill throughput to ramp up throughout the second half of the year and increase the nominal plant capacity to its permitted level of 50,000 tonnes per day in 2026.

During the second quarter, copper recoveries were 81% and gold recoveries were 68%, both higher than the first quarter despite lower head grades. Similar to our other operations, British Columbia achieved strong cost performance this quarter. Cash costs were $2.39 per pound in the quarter, an improvement over the first quarter as a result of higher by-product credits and the realized benefits from ongoing optimization efforts. With cash costs in the low end of the 2025 guidance range for the first half of the year, we are well on track to achieve our 2025 cash cost guidance range in British Columbia.

We also achieved a significant permitting milestone for our New Ingerbelle growth project at Copper Mountain during the quarter. On May 12, after more than a year of detailed preparation, our permitting application was successfully accepted into review by the B.C. Major Mines Office and is now advancing through a Mine Review Committee process. Our team continues ongoing engagement with the local First Nations and other stakeholder groups as part of our commitment to cultivating transparency and mutually beneficial relationships.

At our Copper World project in Arizona, we are very pleased to be welcoming Mitsubishi Corporation as our 30% strategic partner, representing an important milestone as we advance this high-quality copper project towards sanctioning and unlock significant value in our copper growth portfolio. Slide 8 discusses the details of the transaction.

Under the joint venture transaction, Mitsubishi will acquire a 30% minority equity interest in Copper World for an initial contribution of $600 million. This comprises $420 million in cash contribution at closing and $180 million within 18 months of closing. Mitsubishi will also fund its pro rata 30% share of future capital contributions. This valuation is highly attractive to Hudbay as it implies a significant premium to consensus net asset value for Copper World. As a result of the JV proceeds and future capital contributions, the levered project IRR to Hudbay significantly increases to approximately 90%.

I have a long history of involvement with joint ventures over my career, including developing and operating Antamina with Mitsubishi back in the 1990s and 2000s, and I've seen how strategic joint ventures have built some of the best mines in the world. After a highly robust and competitive process, we have selected the premier partner of choice in Mitsubishi.

As noted on Slide 9, Mitsubishi is one of the largest of the Japanese trading houses and is a globally integrated minerals trading and investment company. Mitsubishi currently has investments in 5 of the top 20 copper mines in the world and is looking to continue to add to that world-class pipeline. They have a significant United States business that has over 50 subsidiaries and affiliates across various business sectors and manages $9 billion in total assets in North America. This strategic partnership validates the attractive long-term value of Copper World as a world-class copper asset and endorses the strong technical capabilities of Hudbay.

We have also amended the Wheaton Precious Metals stream at Copper World as summarized on Slide 10. This enhanced stream provides an additional contingent payment of up to $70 million on future potential mill expansion milestones and recognizes the long-term potential at Copper World. We have also modernized the ongoing payments for gold and silver from fixed pricing to 15% of spot prices to provide upside exposure to higher precious metals prices. The JV transaction initial cash contributions plus future pro rata equity capital contributions from Mitsubishi provides significant financial flexibility for Hudbay by reducing our estimated share of the remaining capital contributions to approximately $200 million based on PFS estimates. It also defers our first capital contribution to 2028 at the earliest.

Slide 11 highlights our 3P plan that we implemented in late 2022 to guide investment and value creation at Copper World. The announcements of the Mitsubishi joint venture and the enhanced Wheaton stream, together with the recent achievement of our stated balance sheet targets has successfully completed the key elements of our 3P plan. Since 2022, we have secured all required permits for Copper World Phase 1. Definitive feasibility studies are well underway and on track for completion by mid-2026 as we advance the project towards a sanction decision. With the financial results we announced today, we completed all of the key elements of our prudent financing strategy. We are well positioned to build one of the next major copper mines in the United States, while continuing to maintain a strong balance sheet throughout the build.

Copper World will support the United States government's foreign investment and national security objectives with direct $1.5 billion of investment into the U.S. critical mineral supply chain, which also represents one of the largest investments in southern Arizona's history. Hudbay is the fourth largest copper company listed on the New York Stock Exchange. And with the majority of our shareholders domiciled in the United States, we are pleased to advance America's next major copper mine. Copper World is a critical minerals project that underpins the United States as a global leader in copper production. We are supported by a partner with a large operational footprint in the United States, deep ties to the domestic economy and the history of significant investment into the United States.

The fully permitted initial phase of the Copper World project is located on private land owned by Hudbay. The mine is expected to produce 85,000 tonnes of copper per year over an initial 20-year mine life with an average of 92,000 tonnes per year expected over the first 10 years. During the 3-year construction period, Copper World is expected to create more than 1,000 jobs and will engage union labor for project construction with letters of commitments currently in place with seven U.S. labor unions. Copper World is also expected to contribute over $850 million in U.S. taxes and create more than 400 direct jobs and 3,000 indirect jobs in Arizona once in production. Our Made in America copper production will contribute to the domestic U.S. copper supply chain and strengthen manufacturing capacity, national security and energy independence.

Turning to Slide 13. Copper World is the most advanced greenfield project in our portfolio and offers significant copper exposure and highly attractive project economics. With this successful JV milestone at Copper World, we will continue to derisk the project by accelerating detailed engineering, some key long lead items and other derisking activities this year, resulting in an additional $20 million in growth capital expenditures that have been advanced to 2025 from future years. As a result, total 2025 Arizona growth spending guidance has increased to $110 million from $90 million on a 100% basis. Copper World is one of the highest grade open pit copper projects in the Americas with mineral reserves of 385 million tonnes at 0.54% copper. Once in production, Copper World is expected to be one of the largest copper producers in the United States.

Concluding on Slide 14, Hudbay currently produces more than 130,000 tonnes of copper per year, which is further augmented by more than 250,000 ounces of gold per year, offering commodity diversification and cash flow resiliency in volatile pricing environments. In our pipeline of near-term and long-term copper growth, Copper World positions us well to benefit from strong long-term copper market fundamentals.

Once Copper World is in production, we expect our annual copper production to grow by more than 50% from current levels. This will reinforce our position as one of the largest Americas-focused pure-play copper producers with a well-balanced and geographically diversified portfolio of assets. Our expected production will be weighted approximately 1/3 in each of Canada, the United States and Peru. And the significant increase in copper production from Copper World will further enhance Hudbay's exposure to copper with more than 70% of consolidated production and revenue expected to be derived from copper.

Hudbay's existing strong operating platform in Tier 1 mining jurisdictions and resilient balance sheet offers significant upside potential for further value creation at higher copper and gold prices. Through our new JV partnership, we will leverage our complementary strengths to deliver Copper World, produce domestic copper in the United States for the domestic critical mineral supply chain and unlock significant value in our long-term copper growth pipeline. At the same time, we continue to advance our many other high-return growth opportunities to unlock value across the portfolio and create meaningful value for all our stakeholders.

And with that, we are pleased to take your questions.

[Operator Instructions] Today's first question comes from Ralph Profiti with Stifel.

Congratulations on a quite significant deal. Peter, I have one question on commercial arrangements and then maybe one for Eugene on the balance sheet. Firstly, will Mitsubishi be allowed commercial offtake in proportion to that 30%, Peter? And have you looked at the ability for commercial arrangements to place concentrates in U.S. smelters? Or is there the possibility to either bring forward the concentrate leach facility or even expand it?

Ralph, thanks very much for your kind words. The short answer to your question is -- on the first item is yes. So they will have -- Mitsubishi will have rights to 30% offtake that's consistent with their ownership share. As far as where that concentrate would be placed, it remains to be seen because we haven't really got into that level of detail.

On the other hand, I think the other question that you raised was with respect to the Albion Process. And of course, Albion is part of the pre-feasibility study. We plan to get it into operation as soon as possible. And sorry, was your question with respect to when we would do it? Or could you repeat that, please?

Yes, Peter. The potential to bring forward from year 4, that concentrate leach facility, which is in the current pre-feasibility study. Is that a possibility?

Absolutely. And that will be completely studied in the feasibility study that we undertake together with our partner, but absolutely a possibility.

Eugene, when you look at the leverage ratio, the balance sheet and the cash flow generating power of Hudbay in the next few years, it reduces the project financing number to a relatively small number. And I would have thought that there's a possibility that this can perhaps be foregone. Or is there strategic special interest or cost of capital that Mitsubishi is bringing to the table? And is this the reason that this still is an advantageous to the deal? And what's your thinking behind that?

Thanks for the question, Ralph. And yes, we're really pleased to bring on Mitsubishi as an equity joint venture partner. And as you can see from the slides, the JV proceeds plus the capital contributions from Mitsubishi contribute to over 50% of the project capital. And using, I'll call it, light version of project level financing at about 1/3, that makes Hudbay's equity contribution only 15% of the capital. We think that kind of 1/3 equity is kind of the right way or 1/3 debt is kind of the right way to look at funding a project of this size. It's manageable. We think that there is project level financing that is available to this project in a variety of sources, both from U.S.-based sources and potentially with our partner that will help the equity returns for both Hudbay and Mitsubishi.

So it's kind of an enviable position to be in. We want to build this project with a lower level of debt, but also with some debt that has a low cost of capital to generate the most efficient returns, but also sustainably be able to build this project on a risk-adjusted basis that provides the most shareholder value for our shareholders.

It's a very strong deal.

And our next question today comes from Orest Wowkodaw with Scotiabank.

I echo Ralph's comments. Congratulations on the transaction. I have a few more questions on how you're thinking about Copper World. Has there been any discussion with the U.S. administration about potentially moving forward with the Rosemont part sooner than Phase 2, and whether there potentially might be some give and take on the permitting related to that now?

Again, thank you for the kind comments. Look, I think that -- I guess the overall commentary is that we are completely and absolutely focused on Phase 1 of Copper World. It's fully permitted. We own the land. It's simple. It's got a 20-year mine life, 385 million tonnes of reserves. And so right now, there is no need to enter into discussions related to the next phase of Copper World. That said, we do think that the current federal environment is highly constructive, and we've been encouraged by the bipartisan support that we have for developing the overall project. But at this point, we are completely focused on Phase 1. Let's get that done. Let's get the feasibility study done, let's get into operation, and we'll turn our attention to Phase 2 once we've done that.

Okay. The feasibility study, you mentioned is underway. A couple of questions there. The idea of moving forward the Albion Process, if you do bring it forward, can we still assume that's not going to be at the front end, which would obviously increase the capital and the risk profile?

Yes, I think it's pretty safe to assume that, Orest. We will take a look with our partner during feasibility of what the optimal timing for it is. But at this point, we're not looking at increasing CapEx associated with Albion.

Okay. And then it's been a couple of years since you issued a CapEx estimate for Copper World. I know you're in the early stages of the feasibility, but can you give us any sense of whether you're seeing any major cost inflation from the previous number?

Sure. I mean we live in an inflationary cost environment, and there will likely be modest increases to the initial CapEx at Copper World since the last figure that we published back in the 2023 PFS. But that being said, remember that we're also seeing higher copper prices today, and there's a more bullish long-term view of future copper price given the supply-demand fundamentals. So we do see that there will be mild CapEx escalation. But in any event, Copper World will still be substantially funded even in the case of a modest CapEx increase.

Okay. Final question. Is there any major scope changes in the feasibility study versus the other study? I'm just wondering if you're [indiscernible] bigger processing facility or anything like that?

No, there are no changes foreseen in the current feasibility study in terms of scope. We've contemplated the idea of an expansion after we go into production, but that won't be part of the definitive feasibility study scope.

And our next question today comes from Dalton Baretto with Canaccord.

Peter and team, really excellent work on this. I wanted to start by asking about any potential approvals here. And I'm thinking back to the challenges Nippon Steel had with their acquisition of U.S. Steel. Do you think this transaction raises any eyebrows in Washington? And do you need any approvals there?

I mean that's a great question, Dalton. So I don't believe that it does. We do plan to file a CFIUS brief or whatever one calls it, but it's not a requirement, but we do plan to do that, but we don't see any complexity associated with that.

This project enables the production of Made in America copper, and we feel that this is job creating and aligned with the U.S. administration's critical minerals intentions for national security and U.S. supply chain strengthening.

And Dalton, I would just add to what Eugene says that this is a minority stake. And this minority stake is going to facilitate the creation of a lot of jobs in the United States as well as new investment in the United States.

Okay. And then as a follow-up, I wanted to ask the same question Orest asked on the Albion, but sort of reverse it. Your balance sheet is in great shape. And yes, there'll be a bit more CapEx involved. But on the flip side, right, there's a lack of smelting capacity in the U.S. There's a potential a tariff could come in on concentrate export, and then there's the obvious social benefits there. Is there any reason -- like what sort of reasons would you have for not bringing it to the front end?

Dalton, I think that that's a subject that needs to be properly studied in the feasibility study. So you can be absolutely assured that as we go through the feasibility study with our partner that we will investigate the optimal approach to developing this project. But at this point, we are saying that Albion will be coming to production separately, will be part of a separate estimate. But for sure, we will study it in the feasibility study.

And our next question today comes from Fahad Tariq with Jefferies.

Can you maybe walk through Manitoba in the third quarter? I'm just trying to get a better sense of grades and see if the high grades will continue and potentially be an offset for the continued shutdowns.

Sure. Thanks for the question. It's Andre. So the grades are pretty much the same right through the year. So they're pretty flat through to the end of the year. So there's no major variation from what we're seeing. We did have a very strong quarter as a surprise in Q1 with grades, but -- and those happen from time to time, but it's very consistent through the year. And so the fire situation is actually getting much, much better, and they've been getting rain and the fires passed through town. And so we're really expecting operations to resume this month and looking forward to that, meeting our guidance forecast that we're projecting to the end of the year.

Okay. And then apologies if I missed the answer to this or if this was already asked, but are you having any discussions with the current U.S. administration that could help with Copper World Phase 2 or Mason permitting?

Fahad, no. We're not having discussions right now related to Phase 2. We're completely focused on Phase 1. Phase 2 down the road, let's get Phase 1 done. And then once it's behind us, we'll focus on what Phase 2 might look like. But what I would add or what I added is that we do view the current environment in the United States on a bipartisan basis as well as the current administration to be highly constructive with respect to the project. And I think that will stand Phase 2 in good stead, but we're focused on Phase 1 right now because it's on private land, 385 million tonnes of reserves, 20-year mine life, perfect partner. We've got our work cut out for us.

On the Mason one there, Peter, I think with this deal allows us to look at our portfolio at other opportunities, and Mason is another great opportunity in our portfolio. And with the current administration and permitting, it's ripe to be advanced as well. So I think this deal does set us up to be able to look at other opportunities in our portfolio.

Absolutely.

Our next question today comes from Matthew Murphy at BMO Capital Markets.

Just modeling out the Copper World financing, the waterfall you have in terms of project financing structure, how do we think about order of funding sources then? Is that representative that like first, you would do the Wheaton stream, then project finance and then this JV capital would get drawn, and then your capital goes in last alongside whatever else additional capital Mitsubishi has to put in?

Matt, it's Eugene here. Actually, the waterfall is a simplification of the sources of capital rather than the order. The order of capital is a much longer spreadsheet. But I think what you can -- the priority of the funding is the first funding comes from this JV partner and the proceeds that are in this deal, $420 million on closing, followed by $180 million within 18 months of closing. That's sort of the first piece of capital that's going to be used.

The -- upon sanctioning, the Wheaton stream, $50 million of the $230 million is due. And having spent about $100 million in project spend, the next $180 million of Wheaton comes through. So the first significant portion of capital comes directly from the JV proceeds and Wheaton. The project financing, we expect to be arranged at the time of sanctioning, and that would be available to be drawn as the next piece of capital. And then the last piece of capital would be the 70-30 piece of equity that Hudbay and Mitsubishi jointly fund. So that's one of the reasons why we said in our -- in this agreement that it allows Hudbay's equity funding to be delayed until 2028 at the earliest, which is what gives us the very strong IRR of 90-plus percent from a project -- to Hudbay versus a project IRR of around 20% for the project.

Got it. Okay. Separate question. Good to hear that you've fared okay through the fires. That's a relief. Just have you been able to do your exploration programs this summer? And what's the outlook for getting drilling to work? And maybe I'll include Peru as part of that question. Do you have any update on your timing where you actually get drills turning in Peru?

Sure, Matt. It's Peter. So we did conduct an exploration program, we started an exploration program in Manitoba during the summer. Obviously, that was interrupted by the wildfires, both in Flin Flon and in Snow Lake. So exploration there has been paused right now. Once the conditions abate, then we'll go back into exploration. So there's nothing significant coming out of Manitoba right now, but we do expect to have a very, very strong continuing exploration program through the winter.

In Peru, the same -- the status is similar. We don't have a time at which we'll start exploration at Maria Reyna and Caballito because the Consulta Previa process has to be completed first. That's underway right now. We don't have a precise date of when we'll get it because it's in the hands of the government, but it's the last piece that remains before we actually start drilling.

Peter, just to add to that is -- so as we press released earlier, we did sign an agreement with Mosakahiken Cree Nation around the Talbot deposit. And the area has cleared for us from the fires from those, and we have two drills currently operating and drilling off that deposit. So a couple of the other drills are capped, as Peter mentioned, but that program is up and running and doing well. So we'll look to see some results in the future.

And our next question comes from Shange Nagle at National Bank Financial.

Most of my questions have been asked here, but congratulations again on a good transaction at Copper World and a good quarter as well. Just a couple of questions. One, maybe on the intricacies of this matching contribution, the $180 million. Is that basically covering your costs as they're incurred within the project? And is that $180 million truly Hudbay share? Or is that $180 million into the JV? Just trying to better understand the mechanics of that second contribution.

Shane, the $180 million is straight into the JV. And as -- I think I mentioned to Matt, that's basically the first $600 million of project work will be funded from the JV proceeds, including the initial earn-in and the matching contribution, which will be within 18 months of closing.

Okay. So it's not entirely net to Hudbay in terms of the total $600 million number. It's kind of into the JV?

Yes, that's the most efficient way to take the proceeds into the project and ensure the project gets developed with the lowest level of equity capital contribution for Hudbay going forward.

Okay. And then just secondly, on Constancia and Pampacancha. You mentioned the mine sequencing being impacted in Q3 just due to the protest, and we'll see the deposit now depleted in Q1. Does this mean that there's more stockpiles to be processed in Q3 as well as a result of that?

This is Andre. Yes, you're correct. So there's -- so we're processing a little bit more stockpile in the quarter but not slowing down Pampacancha. So Pampacancha is going full bore. So it's more of a blend of the two looking forward.

And that concludes our question-and-answer session. I'd like to turn the conference back over to Candace Brule for any closing remarks.

Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, please reach out to our Investor Relations team.

Thank you. This brings to the close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.