We came across a bullish thesis on Hudbay Minerals Inc. (HBM) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on HBM. Hudbay Minerals Inc. (HBM)’s share was trading at $8.91 as of Dec 4th. HBM’s trailing and forward P/E were 36.64 and 9.57 respectively according to Yahoo Finance.
A large open-pit mining site, its machinery providing a long-term supply of copper.
Hudbay Minerals (HBM) represents a compelling investment opportunity within the copper and gold mining sector, underpinned by professional management, operational efficiency, and a strong long-term thesis on copper demand. Despite a modest pullback in copper prices from $4.36 to $4.14 since June, the essential case for copper remains intact, with rising demand and a constrained pipeline of new mines creating a robust outlook. HBM’s appeal lies in its focus on sustainable operations and strategic positioning, delivering steady performance even amid price fluctuations.
HBM has consistently showcased its operational acumen. Over the past year, the company reduced its all-in sustaining costs from $2.04 to $1.95 per pound of copper while maintaining flat earnings per share despite lower output. It also delivered $840 million in EBITDA over the past nine months, demonstrating significant financial discipline by repurchasing $83 million in debt, paying down $130 million on its revolving credit facility, and bolstering cash reserves. This disciplined approach has substantially improved its balance sheet, setting the stage for future growth.
The Lalor gold mine, a notable component of HBM’s portfolio, continues to exceed expectations. Producing 39% above nameplate capacity, the mine generated 187,000 ounces of gold in 2023 at a cash cost of $727 per ounce, contributing over $300 million annually in EBITDA at current gold prices. This gold production, paired with copper assets, provides diversification and an inverse correlation between the two metals, enhancing resilience.
HBM’s growth pipeline, while not aggressive, is promising. The successful integration of the Copper Mountain acquisition is expected to add $180 million in annual EBITDA by 2026, complementing the $600 million EBITDA from the flagship Constancia mine in Peru. Longer-term projects like Copper World and the Mason Nevada project, while years away, offer additional upside, contingent on further balance sheet strengthening.
At a market capitalization of $3.5 billion and projected 2026 EBITDA of $1.3 billion, HBM trades at a favorable valuation. Its book value per share has risen 7.5% over six months, underscoring management’s effective capital allocation. While the lack of direct shareholder returns is a drawback, the company’s ability to weather cyclical downturns and generate solid returns makes it an attractive long-term play. With copper prices stabilizing and gold providing a hedge, HBM’s stock looks increasingly enticing, particularly at current levels.
Hudbay Minerals Inc. (HBM) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held HBM at the end of the third quarter which was 38 in the previous quarter. While we acknowledge the risk and potential of HBM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HBM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
