Title:   Portfolio Update — HBM: Harvest Time, Once More
Source:  Haymaker (Substack newsletter, paid)
Author:  The Haymaker Team / David Hay
Date:    2026-JUN-22
URL:     https://haymaker.substack.com/p/portfolio-update-17c
Type:    Premium Substack post (PAID). Full text captured from the subscriber session for personal
         study only — not redistributed. A portfolio update trimming Hudbay Minerals (HBM) plus a
         bonus energy section (APA, FANG, HAL [new], RRC). Chart placeholders ("Bloomberg",
         "(click to expand)") are noted inline; prose otherwise verbatim.

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HBM: Harvest Time, Once More
Highlight Name: Hudbay Minerals

Where We Stand

When we recommended Hudbay last July at roughly $10.46, it was a cheap, unloved copper miner that the
market treated as a leveraged bet on a commodity nobody wanted to own. At the time we flagged the clear
breakout above overhead resistance it had produced. As nearly all Haymaker readers are aware, that's one
of our favorite go-long signals. [chart: Bloomberg]

In addition, the chart of copper itself generated a resounding buy signal back then. To our eyes, its
price advance since then has been much more methodical than that of either gold or silver, leaving it
less exposed to a severe correction. (Note: we also had two HBM trim/highlight notes in September when it
was in the $14-$15 range and furthered the case with a brief mention on October 8th*, when it was around
$17; we also provided a year-end update when it was around $19.) [chart: Bloomberg]

Eleven months later (~eight months from the late-September/early-October trim recommendations) HBM is
around $29 (as of this writing), up roughly 175%, having recently hit an all-time high before pulling back
a bit. This is obviously a call that has done very well, and now the question is whether the thesis still
has some runway left, or if the momentum is running out of steam.

Last summer, Hudbay was the classic setup: lowest-cost production, a clean balance sheet, a real growth
pipeline, and a structural copper-deficit story the market hadn't yet priced. We were paid to wait, and
what we own now is a very different proposition at a very different price. HBM is near its all-time highs,
on a commodity at record levels, with the copper-supercycle narrative now a firmly consensus trade. This
update is about not letting a great investment round-trip and erase a year's worth of strong gains.

Why It Worked

Three things drove it, and naming them may help tell us where we are in the uptrend.

First, copper went vertical. The metal pushed to record highs around $13,000 per tonne, or $6.50/pound,
on the convergence of AI data-center power demand, EVs, grid expansion, and a supply side that cannot
respond for 15-plus years. The structural-deficit thesis we bought went from contrarian to mainstream,
and the whole copper complex re-rated with it.

Second (and this is the underappreciated driver) gold went on a tear at the same time, and Hudbay's large
gold by-product stream turned that into a remarkable cost story. With gold at its own records, by-product
credits drove Hudbay's cash cost to negative territory in Q1, meaning gold effectively paid for the entire
cost of producing copper. Record Q1 revenue, record EBITDA, a balance sheet carrying zero net debt and
roughly $1 billion in cash. The operational execution was damn-near flawless.

Third, the market finally awarded the multiple. A miner that traded like a cyclical afterthought got
repriced as a tier-one-jurisdiction copper growth story with a North American pipeline (Copper World in
Arizona, the New Ingerbelle expansion at Copper Mountain) exactly when Washington called for more domestic
copper. Put simply, cheap, hated, and boring became en vogue and in-demand.

The Easy Money Is Made and the Cycle Looks Extended

If you bought when we touted it last July — and even if you did some October trimming — you're sitting on
a big gain in a cyclical commodity producer trading near all-time highs. The company's double-cyclical
exposure to copper and gold was a tailwind on the way up and is a concentrated risk going forward. A
meaningful pullback in either metal compresses earnings, and a decline in gold specifically would gut the
negative-cash-cost story that makes the current numbers look so stellar. We are already seeing warning
flickers, as there has been a recent retreat in gold and silver worth watching closely given how much of
Hudbay's profitability now rides on the by-product credit.

The valuation suggests the easy money is made. Hudbay trades at a reasonable trailing multiple, but that
is peak-cycle earnings in the denominator (i.e. record copper plus record gold). As you can see below, the
Price/Sales ratio, which is less impacted by lofty and potentially unsustainable profit margins, is near
the highest of the last five years. That's a classic warning signal with highly cyclical stocks, though,
of course, there are always exceptions. [chart: Bloomberg]

On mid-cycle metal prices, the stock is not cheap and looks closer to fully valued, which is exactly what
the Street appears to be signaling. Despite a Strong Buy consensus, the average analyst target (~$30) sits
only modestly above the current price. The majority of analysts still like the company, but they no longer
see much upside in the stock.

And the structural-deficit thesis, while real, is a late-decade story. Goldman has argued copper's surge
is running ahead of current fundamentals and could be capped near-term. There's also the prospect of a
near-term surplus from soft demand and disrupted supply returning. The deficit is real for 2029 and beyond;
the next 12 months could just as easily be a surplus.

What's Left in the Tank

In our view, the bull case from here is possible, but the path looks increasingly narrow. The long-term
copper deficit is genuine and durable because you obviously cannot manufacture copper ore, and the demand
curves (AI power, EVs, grid) are structural. Hudbay's Arizona and British Columbia growth pipeline gives
it a multi-year production runway in safe jurisdictions. The company's balance sheet is also pristine,
giving HBM flexibility and downside protection. If copper holds its record levels into the late-decade
deficit, the current earnings are the new normal and the stock can grind higher over time. Stated plainly,
the bull case is that this is a legitimate own-through-the-cycle asset because of copper's essential role
in the AI infrastructure buildout.

Where We Net Out

The disciplined move is to take partial profits here by trimming enough to bank a meaningful chunk of the
gain and de-risk a position that has grown large and cyclically extended. We do think it makes sense to
hold a core stake for the genuine long-term copper-deficit thesis. We would probably not advise adding at
these levels, and would look to add on a substantial pullback. If the price of copper rolls over toward
$10,000 to $11,000 ($5 to $5.50/pound) on a confirmed surplus and softening China, or if gold's pullback
deepens and the by-product cost story unwinds, the near-term case breaks even though the decade-long case
survives. In our view, you'd far rather be the patient buyer of that dip than the holder who rode the top
all the way down. What has happened with the gold and silver miners in recent months is a prime example of
this scenario.

Consequently, we are moving Hudbay from Hold status (where it's been since late March) to Hold/Trim. As
noted at the outset, this is one of several position reductions we've suggested on this name in the last
year. However, even if one had trimmed it last September/October, the recent price surge means it should be
a larger position than it was when it was initially recommended.

Bonus: Energy Picks/Updates

Considering our strong statement about the attractiveness of energy equities right now, we are running an
energy-centric Portfolio Update today, built around charts and valuation data for a few names we find
particularly appealing. (Note, we also covered EOG Resources in last week's Trading Alert.)

All of these have been recommended previously, except Halliburton, a new name. It is an oil-service
company, but it closely tracks the performance of oil and gas producers.

In the interest of keeping this section succinct, we'll simply state that we like all of the following
charts and each company's valuation. One could reasonably argue that FANG and HAL have not yet broken out
at this point. It's our contention they both will before long, but that could be wrong.

What's not debatable is how extremely undemanding the multiples are for all of these entities. This is
despite the fact that all of these names are well above the throw-away price levels they hit last year.
It's our belief that they are in the process of a long-term valuation elevation. In each case, we feel
there is a distinct possibility their P/E and Price/Sales ratios will gradually rise to become more in-line
with growth stocks and less consistent with deep value situations.

The first three primarily track oil prices, while RRC tends to align with natural-gas pricing. Long term,
we continue to be more bullish on natural gas than we are on oil, despite our very upbeat view of oil at
this exceedingly depressed level, particularly on an inflation-adjusted basis. For those who missed it in
our Wednesday Daily, the main U.S. oil benchmark, WTI, is in the $50 vicinity in 2011 dollars (i.e.,
factoring in the roughly 50% increase in the CPI since then). This is a shockingly low number based on the
current crisis levels of global oil inventories.

APA Corp (APA)
[Five-Year Price Chart with overhead resistance displayed; green line reveals the long-term downtrend it
broke last year — Bloomberg. Five-Year Price/Sales and P/E Ratios — Bloomberg.]

Diamondback Energy (FANG)
[Five-Year Price Chart with overhead resistance displayed — Bloomberg. Five-Year Price/Sales and P/E
Ratios — Bloomberg.]

Halliburton (HAL)
[Five-Year Price Chart with overhead resistance displayed — Bloomberg. Five-Year Price/Sales and P/E
Ratios — Bloomberg.]

Range Resources (RRC)
[Five-Year Price Chart with overhead resistance lines drawn in — Bloomberg. Five-Year Price/Sales and P/E
Ratios — Bloomberg.]

The Haymaker Team

(IMPORTANT DISCLOSURES omitted — standard Haymaker/Evergreen boilerplate.)