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Rating Action: Moody's assigns B3 rating to Hudbay Mineral's new notesGlobal Credit Research - 22 Feb 2021Toronto, February 22, 2021 -- Moody's Investors Service, ("Moody's") today assigned a B3 rating to Hudbay Minerals Inc.'s ("Hudbay") proposed new $600 million of senior unsecured notes due 2026. Proceeds will be used to refinance the company's existing $600 million 7.625% senior unsecured notes due 2025.Assignments:..Issuer: Hudbay Minerals Inc.....Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD4)RATINGS RATIONALEHudbay (B2 CFR) is constrained by 1) its modest scale, 2) mine concentration, and 3) commodity price risk. Due to the temporary suspension of operations at Hudbay's Constancia mine in Peru in the second quarter of 2020, the mine recorded lower sales volumes and higher production costs a major contributor to gross profit falling 65% year over year in 2020 compared to 2019, demonstrating the company's concentration risk. Hudbay benefits from 1) its mine locations in favorable mining jurisdictions (Canada and Peru), 2) product diversity beyond copper (gold, silver, zinc and molybdenum) which allows for competitive costs, net of by-product credits, 3) leverage expected to be below 4x (about 3.5x in 2021, 5.1x Q4/20) and 4) long reserve lives at its Constancia mine (17 years) and Lalor/Snow Lake operations (18 years).Hudbay's liquidity is good (SGL-2) with $725 million in sources compared to about $70 million of uses over the next year. The company's liquidity sources include about $440 million of cash at Dec 31, 2020 and about $285 million of availability under its $400 million secured credit facility maturing July, 2022. Liquidity uses include our expectation of negative free cash flow of about $70 million over the next 12 months, and no debt maturities. In August 2020, Hudbay amended its credit facility which included revised financial maintenance covenants that we expect the company to remain in compliance with.The stable outlook reflects our expectation that leverage will be about 3.5x in 2021 and trend lower in 2022 once the company delivers gold under its prepaid agreement and reduces that liability ($123 million), which we consider to be debt. It also incorporates our view that Hudbay will maintain consistent production at its Constancia mine and execute on its Pampacancha satellite and New Britannia mill projects.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGThe ratings could be downgraded if Hudbay experiences operational challenges resulting in a material drop in production, or the company's adjusted debt/EBITDA is expected to be maintained above 4x (5.1x Q4/20) and (CFO- dividends)/ adjusted debt is sustained below 5% (11.6% Q4/20).Hudbay's ratings could be upgraded if its adjusted debt/EBITDA is sustained under 3.0x (5.1x Q4/20) and (CFO- dividends)/ adjusted debt is sustained above 15% (11.6% Q4/20)The principal methodology used in this rating was Mining published in September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1089739. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Toronto, Ontario, Canada, Hudbay Minerals Inc. is a mining company mainly focused on copper through its Lalor mine in Manitoba, Canada and its Constancia mine in Peru. Revenues in 2020 totaled $1.1 billion.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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