管理層發言
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. Second Quarter 2026 Results Conference Call. I would like to remind everyone that this conference call is being recorded today, July 29, 2026, at 11:00 a.m. Eastern Time. I will now 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 Second 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 Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lei, our President and Chief Financial Officer; Andre Lauzon, our Chief Operating Officer, who will be retiring in September; and Rob Carter, our Senior Vice President of Canadian Operations and incoming 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. Before we begin with the quarter, I'd like to highlight two key executive leadership promotions. Eugene Lei has been appointed as President and Chief Financial Officer of Hudbay, and Rob Carter has been appointed as Chief Operating Officer, transitioning from Andre Lauzon, who will retire at the end of September. I strongly believe these leadership changes will position Hudbay for the next phase of transformational growth, and I could not be prouder to announce these appointments today. The appointment of Eugene Lei as President is a significant milestone for Hudbay and recognizes his passion and strategic vision for the long-term success of the company. Eugene was instrumental in a significant transformation of the company since becoming CFO in 2022. He successfully executed a strategic plan to unlock Copper World, including achieving our stated balance sheet targets ahead of schedule and helping to facilitate the Copper World partnership with Mitsubishi. He was the architect behind our holistic capital allocation framework, which positioned the company to embark on generational investments across the business while also increasing shareholder dividends for the first time in more than a decade. His deep knowledge of the business and strong collaboration with operations and finance have been central to driving significant free cash flow generation, accelerating the derisking of our growth pipeline and positioning Hudbay for continued long-term value creation. Robert Carter's appointment as Chief Operating Officer recognizes the significant impact he has had on the business through his successful strategic oversight of our Canadian operations. His leadership in Manitoba revitalized the operations into becoming what I have termed the golden child of Hudbay and a sustainable cash flow contributor. Over the past year, he has brought that expertise to our British Columbia operations. I am extremely proud of the best practices his team has implemented at Copper Mountain, and they are well on their way to becoming a sustainable cash flow contributor. Rob's deep focus on safety and continuous improvement is contagious, and I look forward to seeing him implement that positive culture throughout the entire operating platform. It is bittersweet to announce Andre's upcoming retirement. He has been a key contributor to our operational success in being able to deliver on our many growth objectives. At the same time, I want to congratulate him on his retirement. For those who know Andre, you may know that implementing management systems is very important to him. I have no doubt his legacy will live on at Hudbay through the many systems he put in place to ensure continued efficiency and long-term success. As CEO of Hudbay, I look forward to continuing to work closely with both Eugene and Rob in executing our strategy to deliver strong cash flow from our diversified operating platform while unlocking value in our growth pipeline for all our stakeholders. With that, I will now discuss our second quarter operating and financial performance, starting on Slide 3. Hudbay delivered another quarter of steady operating performance and industry-leading margins. We achieved record trailing 12-month adjusted EBITDA of $1.3 billion, driven by our unique copper and gold diversification and focus on cost control across the business. During the second quarter, our operations delivered consolidated copper production of 28,000 tonnes and gold production of 51,000 ounces. Copper production increased from the first quarter with British Columbia operations achieving higher mill throughput more than offsetting the lower planned mill throughput in Peru. Consolidated gold production was lower, primarily due to lower milled gold grades. We are on track to achieve our full year production guidance for all metals. We continue to achieve industry-leading margins during the second quarter with consolidated cash cost of negative $0.40 per pound of copper and sustaining cash cost of $1.39 per pound of copper. Our diversified operations in Canada and Peru continued to achieve operating efficiencies and deliver strong gold by-product credits, which have more than offset external cost pressures and allowed us to improve our 2026 consolidated cash cost guidance. During the second quarter, we realized quarterly revenues of $631 million and adjusted EBITDA of $321 million. Operating cash flow before change in noncash working capital was $210 million, remaining relatively consistent with the first quarter. Adjusted net earnings attributable to owners were $114 million or $0.28 per share. Slide 4 highlights the consistent delivery of free cash flow as a result of our steady operating performance and expanding margins. With our enhanced balance sheet and diversified free cash flow generation, we are well positioned to fund our attractive growth pipeline. While most of our revenues continue to be derived from copper, revenue from gold represents a meaningful portion of total revenues with 38% of gross revenues from gold in the second quarter. Our cost control efforts continue to focus on navigating external cost pressures such as higher fuel prices and consumable costs. We continue to manage costs and deliver strong margins through initiatives to further improve throughput and enhance operating efficiencies. We are well insulated from these external cost pressures due to our diversified operating platform with significant byproduct credits from gold production and the polymetallic nature of our ore deposits. After accounting for our sustaining capital investments, but before growth investments, we generated over $100 million in free cash flow during the quarter, similar to the first quarter. Over the last 12 months, we have generated more than $400 million of free cash flow, which has further solidified our financial strength and positioned us well to prudently reinvest in high-return growth opportunities across the business to enhance our exposure to copper and gold. As of June 30, our total liquidity was over $1 billion, including $890 million in cash and cash equivalents and $154 million available on our revolving credit facilities. At the end of the quarter, we had a net cash position of $80 million, bringing our net debt-to-EBITDA ratio to negative 0.1x, the lowest level in more than a decade. Turning to Slide 5. Our Peru operations continue to demonstrate steady operating performance with production and costs in line with full year expectations. The operations produced 19,000 tonnes of copper, 5,000 ounces of gold, 565,000 ounces of silver and 277 tonnes of molybdenum during the second quarter. Production was slightly lower compared to the first quarter, in line with expectations due to the planned semiannual plant maintenance shutdown. We continue to be on track to achieve our 2026 production guidance for all metals in Peru. Total material moved in Peru was 24 million tonnes during the second quarter of 2026. And in May, the highest monthly total material moved over the last 10 years was achieved. The team realized improved productivity from enhanced fleet efficiency and the implementation of haulage optimization strategies. Mill throughput levels averaged approximately 86,000 tonnes per day in the quarter. We received permit amendments to further increase annual milling capacity at Constancia to 34 million tonnes per annum from the previous 31 million tonnes. This permit update enables additional capacity to further optimize Constancia's operations and deliver strong copper production. We continue to advance the installation of pebble crushers at Constancia to increase mill throughput rates starting in the third quarter of 2026. Milled copper grades decreased slightly compared to the first quarter due to blending targets implemented to control contaminants in the concentrate. Sales volumes were impacted by a temporary buildup of concentrate inventory at the port caused by ocean swells that resulted in temporary port closures and delayed scheduled shipments. As a result, approximately 10,000 dry metric tons of copper concentrate sales were deferred to early July. Second quarter cash costs in Peru were $1.66 per pound of copper. This increase compared to the first quarter was due to lower gold byproduct credits with the depletion of the Pampacancha gold stockpile in Q1, higher fuel prices and the planned semiannual plant maintenance shutdown. Cash costs outperformed the low end of the 2026 guidance range despite external cost pressures, positioning the operations well to achieve the full year guidance range. Moving to our Manitoba operations on Slide 6. We continue to execute our strategic initiatives during the quarter, navigating short-term operational hurdles while positioning the business for an expected strong second half of the year. Our Manitoba operations produced 40,000 ounces of gold, 2,300 tonnes of copper, 4,800 tonnes of zinc and 209,000 ounces of silver in the second quarter. Compared to the prior quarter, gold and copper production was lower due to lower tonnes milled. Production in the second half of 2026 is expected to be higher than the first half due to grade sequencing and higher ore output from Lalor, and we have reaffirmed full year production guidance for all metals in Manitoba. To address labor availability constraints in the quarter, we engaged an experienced mining contractor to advance the 1901 deposit. This strategic decision has enabled the team to redeploy our skilled internal workforce to other critical development areas at Lalor. We have simultaneously increased our internal capacity by onboarding and upskilling several new employees to enhance long-term operational self-sufficiency. The Lalor mine hoisted an average of 3,500 tonnes of ore per day in the quarter. While the operations experienced minor production impacts from an unplanned hoist gearbox failure in June, the hoist is now repaired and fully operational, and the team strategically prioritized high-value gold zones to maintain consistent feed for New Britannia. The 1901 deposit delivered approximately 7,600 tonnes of development ore in the quarter and continues to progress toward full production in late 2027. The New Britannia mill processed approximately 1,900 tonnes per day in the second quarter, matching the gold ore output from Lalor. New Britannia continued to achieve steady gold recoveries of approximately 90%. The Stall mill processed less ore than the prior quarter, consistent with the Lalor base metal production. The Stall mill achieved gold recoveries of 71% in the second quarter, continuing to reflect recovery-focused initiatives. We have initiated early works on installing new tailings lines between the two mills, which is expected to increase pipeline capacity to enable higher throughput and leaching of gold-bearing tailings material at New Britannia from base metal ore originally processed at Stall. Manitoba Gold cash costs in the second quarter were $776 per ounce. The increase compared to the first quarter was primarily due to lower gold production and higher unit operating costs across mining, milling and G&A. Despite the increase, cash costs were within the guidance range for 2026, and we remain on track for achieving full year cash cost guidance for Manitoba. At our operations in British Columbia, we continue to focus on advancing our multiyear optimization plans as outlined on Slide 7. Copper Mountain produced 6,500 tonnes of copper, 5,600 ounces of gold and 71,000 ounces of silver in the second quarter. Production increased compared to the first quarter for all metals as a result of higher ore mined, improved grades and higher mill throughput. We continue to expect higher production in the second half of the year as the mill improvement projects take effect, and we are on track to achieve our 2026 production guidance in British Columbia. Milled copper grades during the second quarter of 2026 were higher compared to the first quarter. However, copper and gold recoveries during the quarter declined due to the ramp-up of mill throughput during the quarter, which revealed a grinding constraint in the ball mills. Several grinding initiatives are underway alongside flotation advanced process controls to improve recoveries. British Columbia saw cash cost of $3.22 per pound of copper. Costs were higher than the prior quarter, primarily as a result of higher mining costs, less deferred stripping and lower byproduct credits. Although the second quarter cash costs were above the 2026 guidance range due to external cost pressures, we expect to achieve the full year cash cost guidance in British Columbia. The next slide highlights the significant progress we have made with our optimization efforts at Copper Mountain. Mining activities reached a record total material movement of 30 million tonnes in the second quarter. As part of the accelerated stripping program, this production resulted in a record daily average mining rate of 331,000 tonnes per day, ahead of budget. This ramp-up was supported by the successful commissioning of a new production shovel in April. During the quarter, blending initiatives from the main pit maintained stable ore feed to the mill, allowing the operation to prioritize waste stripping activities to expose higher-value mining fronts in the future. The mine is now positioned favorably to unlock high-grade copper from the main pit starting later this year. During the second quarter, the mill processed 3.6 million tonnes of ore, which increased 17% compared to the first quarter of 2026 despite operating constraints on the primary SAG mill. The quarterly mill throughput averaged approximately 40,000 tonnes per day, the highest quarterly average achieved since our acquisition. Mill performance continues to demonstrate the benefits from the second SAG mill and the mill optimization initiatives. The primary SAG mill was temporarily shut down in late June and will be offline for approximately one month to replace the feed end head. The replacement is tracking on schedule and will remove the constraints previously in place due to the liner erosion event that occurred late last year. While repairs are underway in the primary SAG mill, the second SAG continues to operate. The mill remains on track to achieve its permitted capacity of 50,000 tonnes per day in the second half of 2026. During the quarter, the New Ingerbelle project achieved a significant milestone, celebrating the official groundbreaking of the project expansion. The event was attended by executives, the British Columbia Minister of Mining and Critical Minerals, the Chief of the Upper Similkameen Indian Band and regional leaders and representatives of the community. The groundbreaking comes shortly after the government of British Columbia added New Ingerbelle to its list of priority resource projects, recognizing initiatives that support economic growth, responsible resource development and create long-term value across the province. New Ingerbelle enhances the copper and gold production profile and secures a longer mine life at Copper Mountain. The project is designed to access higher-grade mineralization while improving operational efficiency with a stripping ratio approximately three times lower than current mining areas. We are advancing critical infrastructure required for the expansion, including the construction of an access road, a bridge across the Similkameen River and the development of an East haul road to link New Ingerbelle with existing operations. We have also initiated a targeted drilling program focused on upgrading existing inferred resources to reserves. Growth capital expenditures in British Columbia in 2026 are expected to increase by approximately $30 million to $115 million related to additional costs associated with infrastructure development at New Ingerbelle. The brownfield investments we are making in our operating portfolio will result in consolidated copper production increasing by 24% to approximately 150,000 tonnes next year, as shown on Slide 10. We also continue to take significant steps towards enhancing our attractive copper growth pipeline. At Copper World, feasibility activities are progressing well with 95% of the engineering work completed and the sanctioning decision remains on track for later this year. The DFS is expected to reflect higher capital expenditures as compared to the 2023 pre-feasibility study, primarily due to typical cost inflation along with new capital related to project scope changes that would allow for future mill expansion optionality while continuing to generate robust economics. On June 24, Copper World received proceeds of $52 million in long-term, low-cost, non-amortizing U.S. municipal bonds carrying a fixed interest rate of 4.5% and an initial mandatory tender date of July 2, 2036. We completed the acquisition of Arizona Sonoran in June, adding the Cactus project to our significant U.S. copper growth business. As shown on Slide 11, the transaction brings together two highly complementary copper growth assets in Arizona and strengthens Hudbay's position as a premier Americas-focused copper company with a pipeline of long-life, low-cost assets located in Tier 1 jurisdictions. High-quality copper assets are scarce globally, especially in good mining jurisdictions, and Cactus is the highest grade undeveloped open pit copper oxide project in the world, as seen on Slide 12. Cactus enhances our long-term copper production profile, expands the U.S. growth pipeline and is expected to generate significant operational efficiencies and regional synergies with the staged development of Copper World and Cactus. The staged development of the two 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 later this year while focusing on integrating Cactus into our Arizona business, advancing permitting activities and kicking off an updated pre-feasibility study. We expect to spend approximately $30 million at Cactus in the second half of 2026 on the updated pre-feasibility study, performing site derisking activities and conducting exploration activities. The updated Cactus PFS is expected to be completed in the second half of 2027. The Cactus project envisions a simple operation with a conventional open pit mine and 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 copper grade, makes the upfront capital intensity attractive. 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 construction team and realizing project efficiencies and cost savings. Together, the two assets expand our strategic footprint in the United States, positioning us as one of only a few operators capable of producing refined copper domestically to support the U.S. critical mineral supply chain. Our third development asset in the United States, the Mason project is a large-scale open pit copper project in Nevada with the potential to be the third largest copper mine in the United States. During the quarter, we commenced pre-feasibility study activities at Mason, and we expect the study to be completed in the second half of 2027. As we continue to advance all these attractive growth initiatives across the portfolio, we remain committed to prudently allocating capital to the highest risk-adjusted return opportunities under our holistic capital allocation framework. Concluding on Slide 13, our focus on demonstrating continued operational excellence while prudently advancing our many organic growth opportunities will deliver significant copper production growth. Looking ahead, our growth road map is clear. By next year, our attractive brownfield investments are expected to increase production by 24%. By the end of the decade, Copper World will increase annual copper production levels by 70% to approximately 250,000 tonnes. And with the staged development of Cactus and Mason to follow, we have a line of sight to 500,000 tonnes of copper by the middle of the next decade. What sets Hudbay apart is its low-risk, low capital intensity growth located in some of the best mining jurisdictions in the world, underpinned by our unique diversification in copper and gold exposure, strong margins and a rock-solid balance sheet. We have the right assets, the right team and the financial strength to execute on our strategic plans and are fully committed to delivering significant value for all of our stakeholders. And with that, we are pleased to take your questions.
分析師問答
Our first question comes from Orest Wowkodaw with Scotiabank.
I just also wanted to say congrats to Eugene and Rob, and good luck to Andre in his retirement. In terms of the quarter itself, the release did cite labor availability issues at Lalor in the second quarter. Has that now been fully cleared? And have mining rates returned to normal levels at the start of the third quarter?
Orest, thanks for the question, and thanks on behalf of Rob, Eugene and Andre for your kind comments. The short answer to your question is yes, but I'll let Andre and Rob dig into it a little bit further.
Yes. Sure. Thanks, Orest. The team has done an amazing job. It is a hot market out there for people, obviously. They put together a series of medium and very short-term actions. They've hired, I think, about 100 people. They have put in place programs to train local people to retain the workforce. They've brought in contractors. We have embedded contractors supplementing our crews as well as contractors taking over the 1901 temporarily while we deploy our skilled people. In short, the answer is yes. Although bringing these contractors in is in the ramp-up phase, the team has really taken the opportunity to focus on efficiencies. Over the last month, we've seen probably as much as 10% improvement in terms of efficiencies we'll be able to build on as we go forward in the future. Rob, did I miss anything?
Yes, Andre, I think that's a really good summary. Hi there, Orest. We worked on a multipronged approach and recognized this maybe at the beginning of the year, so a lot of heavy lifting was done in Q2. Andre hit the high points on it. We've hired an experienced mining contractor to advance 1901, which allowed us to redeploy our people into the critical areas at Lalor. We've further enhanced our embedded contractor workers, specifically around development miners and bolter operators. That's well in place right now. We onboarded 100 new employees and upskilled them. It's been a bit of a journey for us, and the teams recognized that a number of months ago. We were on site there in June and July, and we've seen a significant uptick in our production because of these proactive measures we put in place.
Just as a follow-up on Manitoba. Should we still anticipate an updated mine plan technical report on Manitoba to come out, I believe, in September?
I think, as you know, Orest, we've had a lot of exploration and engineering activities underway, which could potentially add production and mine life extensions in Snow Lake. Based on the progress of the exploration activities and mine optimization efforts, we're confident that we'll be able to demonstrate an improved long-term profile for Snow Lake based on reserves only. We have a visit to Manitoba later on in the year, and we could probably comment further then.
The next question is from Richard Garchitorena with Barclays.
Congrats on all the progress. My first question is on Copper World. It looks like you made some solid progress there now at 95% engineering. Just wondering, you mentioned CapEx going to be higher than the 2023 pre-feas. How should we think about the magnitude of that as well as the opportunities that you may have in terms of creating a district there, talk about the potential for future mill expansion optionality. If you could touch on that, that would be great.
Sure. Richard, thanks for the question. Of course, we live in inflationary times, and there will definitely be increases to the initial capital of Copper World since the PFS figure we published three years ago. In addition to typical cost inflation, there will be some additional capital related to project scope changes that will allow for future mill expansion optionality. You may recall that one of the new terms in the renegotiated precious metal stream last year is the additional payment from Wheaton Precious Metals if we expand the mill by year five. So we're looking at how to optimize the project design to maintain future mill expansion optionality. That said, we're seeing higher copper prices today, and there's a much more bullish long-term view of copper prices given the supply-demand fundamentals. The price movements will likely offset any potential cost changes, and the economics of the project will be robust. Regarding district-scale development, there are massive synergies between Cactus and Copper World. A key synergy is the construction of the concentrate leach facility, which will provide acid for Mason, which is one of the highest drivers of cost for Mason. Another synergy is the staging of the projects and the utilization of the same team to continue from one project to the next. We will ultimately deploy the study team from Copper World to Cactus to update the Cactus pre-feasibility study so that we can then move into a definitive feasibility study, update permits, and so on. The same will apply to construction: as we move off Copper World construction, we'll move into Cactus construction. It's a much simpler project being a heap leach and SX/EW plant only. We get the benefit of time, skill and utilization of the same workforce, which provides cost benefits. On the magnitude of the CapEx increase for Copper World, I don't have the exact answer today because we're following an integrated project delivery approach where contractors participate in the oversight of the project. We are waiting for some of the data from those contractors to fill the estimate buckets. Until that's completed, I don't know exactly what the capital will be, but it's going to be higher for sure. I don't think it's a blowout, but the combination of increased capital and the increased price environment ensures that we are going to have a highly robust project.
Great. And since you mentioned Cactus, it looks like you're going to be spending about $30 million this year to conduct some derisking, some exploration activities. The pre-feas is expected in 2027. So do we should expect more CapEx next year as well?
Yes, absolutely. We'll provide those details in due course as we go through the capital reviews later on in the year.
The next question is from Lawson Winder with Bank of America.
Congratulations to everybody who's getting a promotion or role change. If I could ask about just one quick follow-up on Copper World. On timing, is it reasonable to expect the release of the PFS before the end of Q3? Or could it be something we might expect with our Q3 results in late October or early November?
Lawson, thanks for the question. It's hard to pinpoint exactly when it will be, but I expect it to be later rather than earlier because internally we need to go through our own approval process. At the same time, Mitsubishi has to go through their processes. We don't want to release the DFS in advance of completing our internal processes. So it's more likely to be early Q4 than in Q3.
Okay. That's great. And if I could also maybe just add, we are on track for an FID decision later this year, which will put us in a position to have first production in the second half of 2029. So while the DFS is still completing the final reviews of it, the FID is on track for 2026.
Okay. Very helpful. As a follow-up, can I ask about the gearbox motor failure at Lalor. Can you just walk us through what the root cause of that failure would have been? And then can you clear up for us if that was an isolated equipment event or perhaps just a maintenance issue? Or was it something more structural?
Yes. It was very much an isolated event, but Rob can give you a little more detail. The team did an excellent job. They turned it over in a few days with a critical spare on site, but Rob may have some details. It was truly, I believe, an anomaly.
I can add a little additional color. First of all, the team reacted really quickly. We did have a critical spare on site, so it was put back safely over several days. There was a failure; we are reviewing the root cause analysis. There was a shaft and gear premature failure that occurred. We got the other one out and it's being refurbished and will be our critical spare. We don't foresee this to be a problem in the future; it's very isolated.
And then just to be clear, is it fair to expect no meaningful impact on Q3 or Q4?
Yes. This was an isolated incident in June. It happened in the first 10 days of June, and we were back up within several days, and it's been operating well.
The next question is from Anita Soni with CIBC World Markets.
Congratulations to everyone getting a promotion today. I just wanted to ask about Copper Mountain in B.C. and how your throughput will evolve in Q3 and Q4. I know you said you're on track for 50,000 tonnes per day in the second half. Could you just remind me what SAG1 should be operating at when it comes back online? And I assume that's in August, but it's coming back online.
I can answer that on our throughput at Copper Mountain. Things are going quite well. In Q2 we saw record mill throughput since acquiring Copper Mountain. The second SAG mill reached commercial production and we averaged around 12,000 tonnes per day earlier, and in late June and early July we've seen a ramp-up of the secondary SAG up to 20,000 tonnes per day. Going forward, the second SAG will consistently operate somewhere in the range of about 15,000 to 18,000 tonnes per day. Regarding the primary SAG and the feed end head replacement, we were shut down for approximately a month starting late June, and as of yesterday we started back up. We had some really positive days in the quarter with several days in the 45,000 to 50,000 tonnes when operating both SAGs. We're fairly confident we can achieve 50,000 tonnes later in the second half of this year, with a small commissioning and ramp-up period.
Could you just remind me what the nameplate of SAG1 itself is?
Yes, it's about 40,000 tonnes, and we'll operate SAG1 around 35,000 up to 45,000 tonnes, complementing what we're doing with SAG2.
The next question is from Fahad Tariq with Jefferies.
The updated cost guidance, can you talk a little about the operational efficiencies that were mentioned in the press release? Are there any specific examples you can point to, whether it's Manitoba or Peru?
Yes, we're pleased to improve our cost guidance based on a number of factors. One factor is the continued strong performance in throughput year to date, better than expectations in the first half of the year, particularly in B.C., seeing the highest quarterly average since we acquired it. We're expecting higher production in the second half in Manitoba and the implementation of pebble crushers in Peru in the second half. Year-to-date cash costs are approximately negative $1, and our forecast for the year is significantly better than the initial range of negative $0.10 to negative $0.30. A lot of that is baked in from the gold price we realized in the first half and our assumptions for the second half give us flexibility for gold to drop below $3,500 and still meet this improved cost guidance. There's runway from both production throughput and by-product realization. Regarding higher fuel and input costs, for every $10 change in WTI oil, which we budgeted at $65 a barrel earlier this year and is closer to $95 today, it's about $0.04 per pound on the cash cost. We are fairly insulated from that. We feel confident these factors let us improve cost guidance for the rest of the year with room for continued improvement as we realize Q3 and Q4.
Okay. Great. And then switching gears to Arizona. Thinking about sequencing and phasing of different projects, can you remind us why Copper World Phase 2 wouldn't proceed before Cactus? Why would Cactus come first?
Because it's a question of permitting. Cactus will be fully permitted by then, and we'll be able to move the workforce straight from one to the other. We would not seek to permit Phase 2 before Phase 1 is in operation, and permitting in the United States still takes several years. There is a constructive environment for permitting right now, but it would nevertheless take time to permit Phase 2.
The next question is from Craig Hutchison with TD Cowen.
I want to circle back on Copper Mountain on throughput. During the downtime of the primary SAG mill, should we assume throughput through most of July was around 15,000 to 20,000 tonnes a day? And second, should we expect a material pickup in grades through the second half of this year?
We ran SAG2 for the majority of the month. You're pretty close on the tonnage. There was a liner change that took SAG2 out for a few days, but overall we ran it through the month. The mine has been stripping at extremely high rates and really low cost, around $2.20 a tonne. During the shutdown for feed end replacement, they built up a lot of ore. Stockpiles are at record highs, probably 350,000 tonnes, a large ore pile in front of the crusher. The driver at Copper Mountain is stripping to unlock the high grade, and in the latter part of the year you'll see much higher grades. To simplify, SAG2 can run around 20,000 tonnes per day and SAG1 can run around 40,000 tonnes, which together is 60,000 tonnes per day. The mill can run at 80% availability and still achieve throughput, so we're confident going in with the ore built up and the large stockpile for the second half of the year.
Okay. Great to hear. And circling back on Orest's question about Manitoba operations, there's discussion about potentially extending mine life to five to ten years at that 180,000 ounce range. Can we expect some kind of PEA or scoping level study on what that mine life extension could look like around the site visit later this year?
I think that seems very reasonable. We're working diligently on that. We've done a lot of exploration work underground at Lalor and 1901 to enhance the deposit, as well as other satellite deposits coming into the production profile. I'm looking at a number of things on updating reserves and that's roughly what we're working towards: a five-year enhanced gold production profile for the Snow Lake operations.
The next question is from Dalton Baretto with Canaccord Genuity.
I wanted to start by asking about Constancia. You're permitted now to get up to 34 million tonnes per annum. With a 10% overrun, you're at 37.5 million tonnes. You're running at 31 million tonnes right now. Is there a plan to eventually get up to 37 million tonnes? How advanced is that and when do you think we can see it?
There's a lot going on in Peru. Originally we were just looking at one pebble crusher, and then we were ahead of schedule on getting the new permit to 34 million tonnes. The team is focused on fragmentation and real-time analysis in the pit, and we're seeing spot days of over 100,000 tonnes per day. On average we were running in the low 90s, and we're seeing significant improvements despite some harder material, just by dealing with fragmentation and blasting. We're putting in two crushers with instrumentation likely around September. Those will bring us to a new level and maintain recoveries with flotation. We have theoretical calculations on what the pebble crushers will give us combined with fragmentation and are also looking at pebble sorting. We're chasing the number you said in the long term, trying to do that without a third line expansion, and these are relatively low CapEx improvements. The team is also modifying ball sizes within both the SAG and ball mills and trialing lines to increase throughput and we're seeing positives. We'll have more confidence as we turn on those pebble crushers.
Maybe, Eugene, post FID you're going to construction at a time when the administration is building a tariff wall around the country. Are there any major inputs you can lock in at sanction? Or are you exposed over the construction period?
Those are considerations in our sourcing. We've been in discussions with many suppliers. As Peter mentioned, our integrated delivery model means we're actively participating with partners in sourcing the right inputs at the best possible cost. There are trade-offs we'll analyze on cost and availability. We advanced the budget last year to place orders on long-lead items, and we're in the queue for a number of things that put us in position to get equipment at the right time and optimize cost. It's hard to answer directly as tariff policies continue to evolve in the United States, and we are actively working to ensure we get the best price in the short term and reflect that in the capital estimate we'll put out in the second half of this year.
If I can squeeze in one last question on Copper World: this future mill optionality, can you comment on the scale or quantum of what you're looking at from an expansion and whether there's any read-through into Phase 2 being brought forward?
It's not really very large items. We're talking about the size of the initial SAG mill, so the size is set to allow that optionality combined with the ball mill later on. There are some pumping configurations and foundations set for the future so we don't see delays. We're sizing tailings lines and certain infrastructure. There's a cost to it, but it's not a huge amount.
And on the tariffs, there's a benefit on the revenue end as well. If tariffs apply, the price of copper in the United States will benefit. You've seen a range of 3% to 12% premiums for copper in the U.S. on COMEX versus the LME. So there are positive effects of tariffs for the Copper World and Cactus projects as they will produce cathode copper in the United States.
We have a follow-up from Lawson Winder with Bank of America.
Just on M&A, there's been a clear trend at Hudbay towards acquisitions in North American copper. Does there still remain an appetite at Hudbay for further M&A? And does North America continue to offer good potential for consolidation in your view?
Lawson, our strategy hasn't changed. We continue to look for opportunities that meet our very stringent criteria. We have a skilled team, particularly in efficient operations and world-class project development. We will pursue inorganic opportunities that are accretive for shareholders. There is opportunity in the United States, and we'll continue to pursue opportunities in a very disciplined manner.
And our last question is from Emerson Vieira with Goldman Sachs.
Now that you guys are advancing the PFS at Cactus and redoing it, I want to hear your thoughts on the project economics, mainly related to the CapEx figure. The project follows a pretty standard process with conventional two-stage crush and heap leach, so it's much less complex than Copper World and could justify a lower CapEx intensity. What do you think the final CapEx for Cactus could look like? Could we see a slight increase in Cactus CapEx when Hudbay brings its approach to greenfield projects?
Emerson, it's a little premature to talk about Hudbay's CapEx estimate for Cactus. We just integrated post-closing and are one month into integration, and we are about to initiate Hudbay's pre-feasibility study. One month in, we're pleased with what we acquired. We believe there are significant synergies between the two projects. We see lots of potential at Cactus. The study we're embarking on over the next year will define the project. We expect it to complement Copper World timelines. We expect Cactus to produce upwards of 100,000 tonnes of copper per year, and as an oxide deposit the capital intensity is one of the lowest. It's the highest grade undeveloped oxide project in this part of the world, so we would expect attractive capital intensity. But it's too early to comment on specific capital numbers until we complete the PFS.
I'll add that we've been very pleased with the work done by the Arizona Sonoran team. That's one reason why we like the project so much: the team and the work. It's a well-done project, but we need to bring it to our standards.
This concludes the question-and-answer session. I'd like to turn the call back over to Candace Brule for closing remarks.
Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, please feel free to reach out to our Investor Relations team. Thanks, 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.