Hudbay (HBM) Beats Q2 on Higher Copper Output, Keeps Guidance

Hudbay Minerals beat second-quarter earnings estimates, reporting adjusted earnings of $0.25 per share. That topped the $0.20 consensus compiled by FactSet. Revenue rose 12% year over year to $462 million, helped by higher copper production and prices.

Copper output reached 38,500 tonnes, up 8% from a year earlier and ahead of internal plans. The company kept its full-year guidance of 145,000 to 165,000 tonnes, with the second half expected to be stronger than the first. CEO Peter Kukielski said the company remains "very bullish on copper" despite near-term price swings. Structural supply deficits from electrification and data-center construction will underpin demand growth that outpaces new mine supply for the rest of this decade, he said.

Not everything moved in the same direction. Gold output fell 14% from the prior quarter to 28,500 ounces. Zinc dropped 22% to 10,400 tonnes. CFO Eugene Lei said gold production should improve in the second half as higher grades come through at the Lalor mine. Zinc is a smaller part of revenue and the decline was within expectations, he added.

Cash from operations reached $112 million, up from $95 million a year earlier. Cost controls kept all-in sustaining costs at $1.72 per pound of copper produced, inside the full-year target of $1.65 to $1.85. Free cash flow came in at $34 million after $78 million in capital spending, which included early work at Copper World.

That project remains the central long-term value driver for the stock. Hudbay expects Arizona regulators to issue the final state permit for Copper World in the fourth quarter. Kukielski said the company has secured sufficient water rights and land access for the first phase. A positive permit would lead to a construction decision in the first half of 2027. Analysts asked whether Hudbay would need to raise equity or take on project financing. Lei said the company sees multiple options and does not plan to dilute shareholders. Hudbay recently locked in $52 million in Arizona IDA bonds at 4.50% for the project.

The balance sheet has improved. Net debt stood at $554 million at the end of June, down from $617 million at the end of last year. Available liquidity totals $412 million.

Copper prices will be the biggest variable for the rest of 2026. LME copper averaged $4.25 per pound in the second quarter, below the first quarter's $4.38 but still well above the company's planning assumption of $3.75. Hudbay does not hedge its copper output, Kukielski said, so every price move affects earnings directly. The weaker Canadian dollar helps costs at Snow Lake by about $0.10 per pound on an annualized basis, Lei said, with the benefit expected to show more in the second half.

Kukielski is set to retire as CEO next year. The company has not announced a successor. He said the board is managing the process and will provide an update in due course.

HBM shares trade at about 1.1 times net asset value, a discount to larger peers like Freeport-McMoRan at 1.7 times. The AlphaScala rating for Hudbay is 64 out of 100, labeled Moderate.