Peter Lukacs — Hudbay: one of the best copper plays, and it might be cheap
Copper Series. A 20-minute teardown of Hudbay Minerals, the mid-tier Canadian copper-gold miner: tier-one jurisdictions (Peru, Canada, and a US growth hub in Arizona and Nevada), a gold by-product that pushes cash costs below zero, a net-cash balance sheet, a Mitsubishi-funded Copper World joint venture, and a three-scenario valuation at $5 / $6 / $7 copper that lands on ~$33 fair value against a $26 share price — though he is still waiting for a crash before buying any copper.
One-line take: the copper name in the series he likes most — fairly priced, even cheap — but still a "wait for the crash" name. Hudbay combines low-cost copper (negative C1 cash cost thanks to gold by-product credits) with growth from ~150k t today toward ~250k t medium-term and 500k t+ long-term, almost all of it in the US (Copper World and Cactus in Arizona, Mason in Nevada). It has deleveraged to net cash despite heavy capex, Mitsubishi paid $600m for 30% of Copper World, and management has actually delivered on past guidance. His model (10% discount rate, 5% perpetual growth) gives bear −4% / base +14% / bull +42%; with copper ~$6.60, fair value is ~$33 against a $26 price. Jurisdiction is the key selling point — "jurisdiction matters much more" now (look at Barrick vs Gold Fields) — and a takeover would not surprise him. It ranks top of the second page of his list; the first page is oil stocks and tobacco, and he still plans to buy copper only after a recession crash.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| HBM | Hudbay Minerals | QT · SA · STK · FA | Positive | "Fairly priced, even cheap." Fair value ~$33 vs $26 at ~$6.60 copper (bear −4% / base +14% / bull +42% at $5/$6/$7, 10% discount rate, 5% perpetual growth); net cash, negative C1 cost on gold credits, growth to 250k t then 500k t+ in the US; top of the second page of his ranking — but "I'm going to wait for a crash before buying anything in copper." | 17:21 |
| 8058.T | Mitsubishi Corporation (Tokyo) | QT · SA · STK | Neutral | Hudbay's Copper World joint-venture partner: paid $600m for a 30% stake and funds 30% of future equity contributions on capex, "significantly reducing the company's capital burden and of course de-risking the project." | 04:05 |
| FCX | Freeport-McMoRan | QT · SA · STK · FA | Neutral | Arizona benchmark: Copper World + Cactus (~226k t/yr pro forma) would make Hudbay's Arizona business the third-largest copper district in North America, behind only Grupo México and Freeport. | 05:00 |
| GMBXF | Grupo México | SA · STK | Neutral | Referenced (with Freeport) as the only Arizona copper producer ahead of Hudbay's planned Copper World–Cactus hub. | 05:00 |
| GFI | Gold Fields | QT · SA · STK · FA | Neutral | Example of a miner improving its jurisdiction profile — shifting from South Africa and Ghana toward Australia and new growth in Canada: "I think the market rewards that." | 14:04 |
| BHP | BHP Group | QT · SA · STK · FA | Neutral | The comparison: why consider Hudbay "over a BHP" — Hudbay has "very solid growth and the low-risk jurisdiction profile," plus low cost. | 18:19 |
| B | Barrick Mining | QT · SA · STK · FA | Negative | Cautionary example: "jurisdiction matters much more" now — "look at Barrick… how they underperformed everybody else with a better jurisdiction"; other company-specific issues too, but jurisdiction is "core to the argument." | 13:38 |
Not tabled: "oil stocks" and "some tobacco names" (the first page of his ranking — no names given here; see the tobacco pages of 2026-SEP-04); Grupo México's Arizona copper is held through its unlisted Asarco subsidiary, so the parent (OTC GMBXF / BMV GMEXICOB) is used rather than Southern Copper (SCCO); Hudbay's assets Constancia (Peru), Copper Mountain (BC), Snow Lake (Manitoba), Copper World and Cactus (Arizona), Mason (Nevada).
2. Talking points
00:25 Hudbay at a glance
- Stock "up massively"; listed in Toronto and New York as HBM, reporting in US dollars.
- A mid-tier copper-focused miner lifted by stronger copper prices, improving operations and a growth outlook; current operations basically all in tier-one jurisdictions.
01:14 The asset base and the US pipeline
- Constancia (Peru) is the core copper mine; Copper Mountain the Canadian growth asset; Snow Lake the gold exposure. Existing operations ~147k t a year through 2028.
- The bigger story is the US: Copper World and Cactus in Arizona, Mason in Nevada for long-term optionality — ~250k t medium-term and 500k t+ long-term.
02:40 Copper with a gold kicker — negative cash cost
- Revenue today 55% copper / 38% gold; reserves 66% copper / 20% gold; long-term ~80% copper.
- At the very bottom of the C1 cost curve — negative cash cost because gold by-product revenue offsets copper costs ("somewhat misleading"). A 10% gold price rise adds ~$75m to annual cash flow and EBITDA.
03:16 Dr. Copper and the copper-to-gold ratio
- A falling copper/gold ratio generally signals a slowdown — bad for copper miners, good for gold; in a liquidity squeeze "anything can sell off," but in theory the two metals offset each other inside Hudbay.
04:05 Copper World and the Mitsubishi JV
- Mitsubishi paid $600m for 30% of Copper World and funds 30% of future equity capex, leaving Hudbay 70% — lighter capital burden, de-risked project.
- Copper World + Cactus + Copper World phase 2 ≈ 226k t/yr pro forma — the third-largest copper district in North America, behind only Grupo México and Freeport in Arizona.
05:00 An integrated Arizona copper hub
- Copper World near Tucson, Cactus near Phoenix, developed sequentially with shared teams and established infrastructure — synergies for a long-term US copper platform.
05:36 Deleveraged to net cash
- Debt/equity 16%, 19× interest coverage, net debt −$81m (net cash), ~$1bn cash.
- Credit rating upgraded on debt reduction, liquidity and lower geopolitical risk — BB−, still not investment grade but out of the highly speculative bucket.
07:02 The 2023 dilution, then free cash flow
- Most dilution came from the all-share Copper Mountain acquisition (~84m new shares).
- Since then, despite heavy growth capex, solid free cash flow has funded the deleveraging.
07:28 Ownership, KPIs and licence to operate
- No shareholder owns more than 10% — no key-owner risk; insider ownership meaningful but not large.
- Management KPIs track the thesis: growth, low cost, cash generation, leverage, TSR, ROIC, plus community and government relations — crucial when you sink capital into mines.
08:49 The production path
- From 118–147k t near-term to 250k t medium-term mainly via Copper World, retaining gold exposure; Cactus, Copper World and Mason could push output above 500k t a year — all in the US.
- Canadian operations remain the backbone with growth through 2027–28; Copper World adds the US leg.
10:05 Capital allocation: reinvest, no dividends or buybacks
- A "tight ship": strong balance sheet, reinvesting only where returns justify it; effectively no dividends or buybacks — "I do approve of this… the best thing a company can do is to compound capital within the business."
11:01 The valuation model
- Three scenarios at $5 / $6 / $7 copper, 10% discount rate (maybe 8–9% given jurisdictions), 5% perpetual growth given the post-2030 outlook, $600m capex, flat share count, operating cash flow compounding 10% 2026–30.
- Free cash flow of $2bn / $3bn / $4bn; result bear −4%, base +14%, bull +42%.
12:47 Explosive if copper runs
- "If copper prices go to eight to nine, well, this is a cheap stock"; long-term mix targets ~81% copper vs 13% gold.
13:38 Jurisdiction is the key selling point
- "We are in a different world than 20 years ago. Now jurisdiction matters much more" — Barrick underperformed peers with better jurisdictions; Gold Fields is shifting to Australia and Canada and "the market rewards that."
- Also makes Hudbay more likely to be acquired.
- Still a commodity seller exposed to macro, but a low-cost producer whose gold credits can offset part of the cycle; net cash after funding capex; improved BB− rating.
- Management has followed through on guidance — he checks projections from five to seven years ago and "usually… they just made numbers up… Not the case here."
16:57 Margin of safety: ~$33 fair vs $26
- With copper ~$6.60, halfway between base and bull: fair value ~$33 vs a $26 price — "some margin of safety to buy the company and just hold through."
- ~$400m 2026 free cash flow → ~3% FCF yield after non-controlling interest, understated by growth capex.
19:05 Where it ranks — and the plan
- Not on the first page of his list (oil stocks — "extremely mispriced" — and tobacco), but top of the second.
- Still waiting for a crash before buying copper: the dream is oil stocks triple, the economy crashes, sell oil at the top, buy copper at the bottom.
3. In plain English
HBM — Hudbay Minerals Positive
Hudbay is a mid-sized Canadian mining company that digs up mostly copper, plus a good amount of gold, from mines in Peru and Canada. Because it sells so much gold as a side product, the gold revenue more than covers the cost of producing its copper — on paper its copper costs are below zero. Its big growth plan is in the United States: new copper mines in Arizona (Copper World and Cactus) and later Nevada (Mason), which could roughly triple its copper output over time. A Japanese trading house, Mitsubishi, has paid $600 million for 30% of the main Arizona project and pays its share of the building costs, which lowers Hudbay's risk.
The company has paid down its debt until it now holds more cash than it owes, and it reinvests its money in new mines rather than paying dividends. Lukacs values it by projecting cash flows at three copper prices ($5, $6 and $7 a pound): at today's copper price he puts fair value near $33 a share against a $26 price, so it looks fairly priced to cheap. What he likes most is where the mines are — safe countries like Canada and the US — which he thinks the market now rewards. Still, he says he will wait for a recession-driven crash before buying any copper stock.
B — Barrick Mining Negative
Barrick (formerly Barrick Gold, now Barrick Mining) is one of the world's largest gold and copper miners. Lukacs uses it as a warning: much of its production sits in riskier countries, and he says it has underperformed rivals whose mines are in safer places. His point is not a detailed call on Barrick but that in today's world, where a mine is located matters much more to investors than it did 20 years ago.
For personal study — not investment advice. Source material © Peter Lukacs Research.