Canadian Minerals and Materials

1
Canadian Minerals and Materials

• Presented on November 2, 2006 by
• Christopher Diaz
• Simon Zhang
• Eddie Mo
• Cordelia Zeng

2
Contents
1
Industry Analysis
2
CAMECO CORP.
3
TECK COMINCO LTD.
4
HUDBAY MINERALS INC..
3
Industry Overview

• Canadian Minerals and Materials
• Mining for base and precious metals is a highly
  capital intensive business
• Large sums to explore for deposits and construct
  mines once deposits are discovered.
• Since the early 20th century, mining costs have
  risen dramatically.
• Risks in mining are numerous, and long-term
  survival and profitability require deep pockets.

4
Industry Overview

• The global mining industry is consolidating
• Increase in demand for base metals
• Rising demand for durable goods from China and
  India along with less rapid increases in the
  supply of base metals should support generally
  higher prices, sales and profits.

5
Uses of minerals and metals
Coal for energy Metallurgical coal in steelmaking
Uranium for energy
Zinc in steel-making (prevents corrosion)
Uses
Copper for wiring
Gold for satellites and sophisticated electronic
components
Silver as a precious metal and for photography
and electronic components
6
Global Supply (2006)
7
Supply The Mining Process

• Mining is digging into the earth to extract
  naturally occurring minerals.
• 2 kinds
• Surface mining, a.k.a. open-pit mining or strip
  mining
• Used if the mineral is near the earth's surface.
• Usually more cost-effective and requires fewer
  workers than underground mining.
• Underground mining
• Used when the mineral deposit lies deep below the
  surface of the earth

8
Surface mining

• After engineering the mine, construction starts
  by clearing the site and drilling blast holes.
  After blasting with explosives, workers use huge
  earthmoving equipment, such as power shovels or
  draglines, to scoop off the layers of soil and
  rock covering the mineral bed. Once the mineral
  is exposed, smaller shovels are used to lift it
  from the ground and load it into trucks or it
  can also can be broken up using explosives or
  crus, if necessary. The mineral is then crushed
  into ore.

Natural Resources Canada website http//www.nrcan.
gc.ca/mms/mining/mine3.html
9
Underground mining

• After engineering the mine, miners first must dig
  two or more openings, or tunnels, deep into the
  earth near the place where they believe coal or
  minerals are located. Depending on where the vein
  of ore is in relation to the surface, tunnels
  interconnect with a network of passageways going
  in many directions. Long steel bolts and pillars
  of unmined ore support the roof of the tunnel.
  One opening allows the miners to move in and out
  of the mine and also serves as a path for
  transporting the mined rock by small railroad
  cars or by conveyor belts to the surface. The
  other opening is used for ventilation.

Natural Resources Canada website http//www.nrcan.
gc.ca/mms/mining/mine1.html
10
Concentrator facility

• Mineral concentrator facilities contain
  connected buildings with the equipment to recover
  the minerals. The recovery processes would
  involve grinding, flotation, thickening,
  filtering, and concentrate storage and loading.

Natural Resources Canada website http//www.nrcan.
gc.ca/mms/mining/mine2.html
11
Smelting and Refining

• Smelting is transforming mineral concentrates
  into usable metals and alloys. Once concentrates
  are transported from the mines and concentrators
  to a smelter, they are sent through the sintering
  process, which uses a sinter machine to burn
  sulfur from the ore and then conveyed into a
  blast furnace where it reaches molten-liquid form
  at approximately 3,000 degrees Fahrenheit. The
  refineries are used to extract undesirable
  minerals still remaining.

Natural Resources Canada website http//www.nrcan.
gc.ca/mms/mining/mine4.html
12
Reclamation of land following mining

• The mine and surrounding environment must be
  restored to the condition that existed before
  mining began.
• Highly regulated by government and reclamation
  plans must be approved before mining permits will
  be granted.
• In surface mining, the layers of topsoil, or
  overburden, that were removed in order to reach
  the mineral are used to fill in the mine and
  reshape the land.
• Underground mining reclamation is not as
  extensive however, companies must ensure that
  ground water remains uncontaminated and that
  abandoned mines will not collapse.

13
Technology and Labour

• Required labour declined significantly as new and
  more sophisticated mining techniques increased
  productivity
• Growth in output while employing less workers
• Most mining machines and control rooms are now
  automatic or computer-controlled
• Many mines also operate lasers and robotics,
  which further decrease the number of workers
  needed to mine materials.

14
Industry Consolidation
May 16, 2006
15
Consolidation in Canada's mining industry

• Inco, with Arizona-based Phelps Dodge, were
  planning to merge with Falconbridge and form the
  world's largest nickel producer and publicly
  traded copper producer. The megadeal, announced
  on June 26, 2006, would be worth 56 billion US
  and would represent the biggest merger in
  Canadian history.
• Falconbridge shareholders chose a richer offer
  from Xstrata, which already owned almost 25 per
  cent of Falconbridge.
• Inco was already fending off an unwanted takeover
  bid from Vancouver-based Teck Cominco Ltd. So it
  positioned itself to accept a friendly merger
  with Phelps Dodge, through a share swap that was
  valued at 20.1 billion.

16
Consolidation in Canada's mining industry

• But then on Aug. 11 Brazil mining giant Companhia
  Vale do Rio Doce (CVRD) stepped up with a
  19.4-billion, all-cash offer for Inco. And Teck
  dramatically stepped up its bid, leading to a
  high-stakes showdown.
• Teck's 20-billion bid was based on it being able
  to quickly raise 5.7 billion in a new share
  offering, which did not happen soTeck withdrew
  its takeover bid.
• Then, in early September, Inco cancelled its
  attempt to merge with Phelps Dodge after it
  became clear that Inco shareholders would not
  support the deal. That left only Brazil's CVRD in
  the running.
• In late September, Inco told its shareholders to
  tender their shares to CVRD's 86-a-share offer.

17
Demand for minerals and metals

• Mined materials used as inputs for consumer
  goods, processes, and services provided by all
  other industries
• agriculture, manufacturing, transportation,
  utilities, communication, and construction.

18
Tilting towards Excess Supply
BMO Nesbitt Burns Capital Markets Report on
Commodities - September 26, 2006 http//www.bmones
bittburns.com/economics/goods/20060926/goods.pdf
19
Demand from US and China

• If the U.S. economy slumps, the impact on base
  metals will be felt. Copper is particularly at
  risk, as residential construction is
  copper-intensive with over 30 of total copper
  usage earmarked for home construction, a decline
  in housing starts next year would carry the
  market deeper into oversupply territory.
• While a significant correction for most
  commodities is likely owing to an improvement in
  the supply/demand balance, because of Chinas
  ferocious appetite for everything from oil to
  zinc will keep demand growing at a healthy rate
  and supply will only grow modestly, the commodity
  downtrend will be less shorter than normal.
• Given the growing importance of the developing
  world to the global economy (all very intensive
  consumers of commodities), and relatively modest
  capacity increases, commodity prices should trend
  higher after the current patch.

BMO Nesbitt Burns Capital Markets Report on
Commodities - September 26, 2006 http//www.bmones
bittburns.com/economics/goods/20060926/goods.pdf
20
Supply and Demand Balance

• From Sep05 to Sep06, all the metals in the Metals
  Minerals Index enjoyed large gains advancing
  55 overall.
• Prices for zinc and nickel more than doubling and
  copper close to doubling.
• Latest data
• The Index slipped (-1.1) in Sep06 as prices
  retreated on concerns that moderating US and
  global economic growth and a weakening US housing
  market were seen as reducing demand for
  industrial metals, and as receding Middle East
  tensions reduced the safe-haven appeal of
  precious metals.
• Low inventories, limited production growth, the
  potential for further industrial disputes, and
  solid demand are expected to keep prices at
  relatively high levels through 2007.

BMO Financial Group Economics Department Commodity
Price Report October 2006 http//www.bmo.com/econ
omic/commod/mcpr.pdf
21
Copper

• Copper is used in a variety of industries,
  including construction, electric and electronic
  products, transportation equipment, consumer and
  general products, and industrial machinery and
  equipment.
• From 1996 through 2005, refined copper
  consumption increased at a compound annual growth
  rate (CAGR) of 3.4, while refined production
  increased at a CAGR of 3.0. The market for
  refined copper was in deficit in 2003, 2004 and
  2005.
• Major companies in the copper market Teck
  Cominco, Chile's state-owned copper company,
  Corporacion Nacional del Cobre de Chile
  (Coldelco), Phelps Dodge, Grupo Mexico, BHP
  Billiton, Rio Tinto and Southern Peru Copper.
• The copper price in 2006 was unusually high as a
  result of strike activity along with investment
  fund demand.

22
Copper Price
BMO Nesbitt Burns Capital Markets Report on
Commodities - September 26, 2006 http//www.bmones
bittburns.com/economics/goods/20060926/goods.pdf
23
Copper
24
Copper Supply and Demand
25
Copper Price

• Tight market conditions have kept prices high,
  facilitating a near doubling over the past year.
• Several factors including strikes at mines in
  Chile and Mexico, some possible short covering,
  and purchases by commodity investment funds
  contributed to the record high prices.
• However, we believe that supply/demand
  fundamentals will not support a copper price at
  the current 3.37 level. We anticipate that
  resolution of strike-related disruptions and a
  moderation in demand will cause the price to
  decline in late 2006.
• However, with inventories at low levels, demand
  still strong, labour unrest a persistent threat,
  and supply growth lethargic, prices should remain
  high over 2007.

26
Zinc

• Zinc's primary use is for corrosion protection in
  the galvanized steel industry.
• Zinc is also used to die cast components in the
  auto, construction, battery, brass and chemical
  industries.
• From 1996 through 2005, refined zinc production
  increased at a CAGR of 3.4, while refined
  consumption rose at a CAGR of 3.4. In 2004 and
  2005, the market for refined zinc was in deficit.
  
• Major companies in the zinc market are Teck
  Cominco, Anglo American, Grupo Mexico, Xstrata
  and Penoles.

27
Zinc
28
Zinc Supply and Demand
29
Zinc Price
BMO Nesbitt Burns Capital Markets Report on
Commodities - September 26, 2006 http//www.bmones
bittburns.com/economics/goods/20060926/goods.pdf
30
Zinc Price

• Tight market conditions have kept prices high,
  facilitating a near doubling over the past year.
• With inventories at low levels, demand still
  strong, labour unrest a persistent threat, and
  supply growth lethargic, prices should remain
  high over 2007.

31
Gold and Silver
BMO Nesbitt Burns Capital Markets Report on
Commodities - September 26, 2006 http//www.bmones
bittburns.com/economics/goods/20060926/goods.pdf
32
Uranium market

• Past history of uranium consumption by nuclear
  reactor
• Uranium outlook

33
Uranium Supply and Demand Balance
34
Uranium market

• Uranium market price has increased more than
  sixfold in the past five years, fuelled by
  growing demand for nuclear power and an already
  large gap between demand and supply.
• Average uranium spot price USD/lb.
• Source The Ux Consulting Company, LLC
• Volatility - Possible factors
• Political risk due to peoples fear of nuclear
  disasters Chernobyl-style

35
Uranium market

• Uranium production
• By country

• Top world producers

36
Sectoral Outlook

• Mineral prices soared to record-high levels in
  2006 in the face of voracious demand from China
  and very low inventory levels.
• Yet output in the sector is down from 2005
  levels.
• In part, Canadian mining operations have been
  slowed by strikes.
• Capacity at existing mines is stretched and while
  high prices have boosted exploration and
  development, production from these expansions has
  not yet come on line.

37
Sectoral Outlook

• Output in the mineral extraction sector is
  expected to rebound in 2007.
• Prices for industrial and precious metals are
• anticipated to ease somewhat, yet remain
  relatively
• high for the remainder of 2006 and in 2007.
• The recent resolution of a strike at Voiseys Bay
  should boost
• mineral production during the final quarter of
  2006 and
• in 2007.
• Uranium production is expected to get underway at
  Cigar Lake in 2007 after recent flood.

38
Sectoral Outlook bottom line

• Commodity prices have retreated from their spring
  record highs. However, metals prices are expected
  to remain sufficiently attractive to stimulate
  significant investment and output growth in
  resource development, extraction, and related
  industries.
• Longer term, we are positive on regular demand
  for copper and other base metals, and uranium.
• In our view, the industrialization of China and
  India will lead to greater demand. At the same
  time, we believe production of copper and zinc
  will increase less rapidly than demand, as output
  at existing mines is exhausted and fewer new
  mines come into production.
• Another positive development is that minerals
  companies are generating greater free cash flow
  than in the previous cycle. We think this will
  enable them to fund expansion internally and
  still have funds to buy back shares or increase
  dividends.

39
Sector

• SP/TSX Capped Diversified Metals Mining Index
  (GSPTTMN)
• Compared against our three stocks and the SP500

SYMBOL COMPANY 1 AUR Aur Resources
Inc. 2 EZM EuroZinc Mining Corporation 3 FM First
Quantum Minerals Ltd. 4 FNX FNX Mining Company
Inc. 5 FDG.UN Fording Canadian Coal
Trust 6 HBM HudBay Minerals Inc. 7 N Inco
Limited 8 IMN Inmet Mining Corporation 9 IVN Ivanh
oe Mines Limited 10 LIM Lionore Mining
International Ltd. 11 NNO Northern Orion
Resources Inc. 12 S Sherritt International
Corporation 13 TCK.B Teck Cominco Ltd.
40
Sector Trends

• Year to date through October 2006, the SP
  Diversified Metals Mining Index (in which
  copper companies dominate) rose 13.5, compared
  with a 7.7 gain for the SP 1500.

41
(No Transcript)
42
Cameco Corp.
43
Cameco Corp
1
Camecos profile and business
2
Financial Statements
3
Stock price analysis
4
Conclusion and recommendation
44
Cameco Corp. Stock

• Last  C 38.150
• Net Change   C -1.350
•  Change   -3.42
• Ask   38.150 Bid   38.120
• High  39.590 Market Cap 13.336 billion
• Low  37.670 EPS   1.22
• Volume  3,484,525 P/E   31.30
• Yield  0.41 Indicated Annual Div.  0.16
• 52-Week High  49.950
• 52-Week Low  28.000
• Shares outstanding

45
Cameco Stock price
46
Cameco Corp.

• Cameco is the worlds largest, low-cost uranium
  producer
• Account for 20 of the worlds uranium production
• It has more than 500 million pounds of proven and
  probable reserves to sustain decade development.
• Also involved in the business segments of Fuel
  services, Nuclear electricity generation, and
  Gold
• Based in Saskatoon, Saskatchewan
• Listings
• Common Stock TSX (CCO)
• NYSE (CCJ)
• Convertible debentures CCO.DB

47
Management team

• Victor J. Zaleschuk, Chair
• Gerald W. Grandey, President CEO
• Terry V. Rogers, Sr-VP COO

48
Business strategy

• Remain the low-cost producer
• Protect and expand market position
• Maintain supply flexibility

49
Camecos business
Mining
Conversion
Commercial use of uranium
Enrichment
Electricity generation
50
Camecos business
Description Cameco
Mining Uranium ore is mined and milled to U3O8 Worlds largest uranium producer, 20 of world production
Conversion U3O8 are purified and converted to UF6 One of only three western conversion suppliers, control 40 of world capacity.
Enrichment UF6 is enriched to prepare it for use as fuel in light water reactors UF6 is enriched to prepare it for use as fuel in light water reactors
Electricity generation 440 nuclear reactors, 31 countries, 16 of worlds electricity Own 31.6 of a nuclear power plant in Ontario, supplied gt 34M pounds of uranium in 2005
51
Nuclear Energy

• Energy crisis argument
• Natural resources in a bull market trend
• Nuclear power
• Astonishing development in 2005
• Major possible breakthrough in 2006
• Some negative trends
• Uranium market

52
Nuclear energy

• Increasing demand for nuclear power
• Currently, nuclear is the worlds third largest
  source of electricity (16)
• Increase energy demand
• Need for cleaner baseload generating technology

53
Conversion outlook

• As with uranium, conversion capacity falls short
  of demand
• In 2005, demand for UF6 conversion services 55
  million kilograms of uranium
• Suppliers have combined capacity of 47 million
  kilograms
• Shortfall made up from secondary supplies

54
Conversion outlook (cont )

• Average conversion spot price (US/kgU as UF6 in
  North America)
• In the last 24 months, increased 66 in N.A.
  markets and 45 in Europe.
• In 2005 alone, increased 28.

55
Camecos Uranium Projects

• MacArthur River
• Cigar Lake
• Key Lake
• Rabbit Lake
• Crowe Butte
• Smith Ranch Highland
• Inkai

56
Uranium Reserves
57
Camecos projects McArthur River Mine
58
McArthur River Mine

• Located 620 km north of Saskatoon, 70 owned by
  Cameco.
• The worlds largest, low-cost uranium producer. (
  accounting for 17 of world uranium production. )
• The proven and probable reserves are 389 million
  pounds U3O8 and average grade is 24 U3O8.

59
Key Lake Mill

• Key Lake Mill Located 570 km north of Saskatoon,
  83 owned by Cameco.
• Milling support for MacArthur and Cigar Lake
  operations

60
Camecos projects Cigar Lake and Rabbit Lake
61
Cigar Lake

• Cigar Lake Mine located 660 km north of
  Saskatoon.
• Joint venture 50 owned by Cameco. Proven and
  probable reserves are 232 million pounds of U3O8.
  
• The worlds second largest high-grade uranium
  deposit. The average uranium grade is 19, nearly
  100 times the world average.
• Estimated to hold as much as 17 of the worlds
  supplies.

62
Cigar Lake

• Production is expected in early 2008 (growth
  opportunity). When at full capacity, will provide
  enough ore to produce 18 million pounds of U3O8
  annually.
• But, on October 23, 2006

63
Cigar Lake Flood inflow

• Uranium price soared 7 in a week
• Stocks of other uranium companies shot up
• Construction is expected to be delayed by at
  least one year
• Capital expenditure to be significantly higher
• Ability to meet contractual obligations
• - right to reduce
• - supply interruption in the contract

64
Rabbit Lake

• Rabbit Lake Mine located 700 km north of
  Saskatoon, 100 owned by Cameco. Annual milling
  capacity is 12 million pounds U3O8. Proven and
  probable reserves are 11 million pounds U3O8.
• Now milling ore form the Eagle Point mine. The
  operation 6 million pounds U3O8 annually.
• Prospects for additional reserves have been
  identified near the site and exploration work
  continues.

65
Centerra Gold

• A sub traded in TSX starting June 2004
• Canadian-based gold producer focused on
  acquiring, exploring and developing gold
  properties in Central Asia, the former SU and
  other emerging markets.
• Cameco owns 52.7 interest
• Transferred all its gold assets to Centerra
• Strategy to unlock the value of these assets
• Not doing very well as per 2006 Q3 F/S (published
  on Oct 30, 2006)

66
Financial Information

• 2005 Annual Report
• Income Statement
• Balance Sheet
• CFS
• 2006 Q3 report
• 5 year comparative data

67
Financial information

• Uranium business key performance drivers
• Price spot and long-term
• Volume sales, production and purchases
• Costs production and purchase
• Exchange rate

68
Performance drivers Price

• Uranium price is volatile
• Camecos contract mix
• 60 long-term contract, 40 sold at fixed prices
  (adjusted for inflation)
• Does not sell uranium in the spot market
• As a result, camecos average realized price was
  15.45/pound, compared to an average spot price
  of 28.67 (US).
• It hedges unfavorable exchange rate movement.
  Average realized selling price rose by 20 in US
  dollars, but only 12 in Canadian dollars

69
Performance drivers Price

• Cameco has benefited from the rising uranium
  price, which is expected to continuously grow,
  especially after flood inflow to the Cigar Lake.
• Camecos growth in revenue is highly correlated
  with the arising price of uranium.

70
Performance drivers volume

• Sales volume
• In 2005, sold 34.2 million pounds of uranium, a
  6 increase from 2004 sales of 32.3 million.
• Cameco sells more than it produced. The
  contractual delivery commitments are met through
  mine production, long-term purchase arrangements,
  and inventory.

71
Performance drivers costs

• Production cost
• Primarily fixed, 1/3 to labour
• Other variable costs production supplies,
  maintenance materials
• Production costs are driven mostly by the
  complexity of the operation.
• The grade and size of reserves
• Purchase costs under long-term, fixed
  arrangement
• Significantly lower than the current spot price
• Total commitment 661 million (US), see note 21

72
Performance drivers volume

• Production volume

73
Performance drivers FX

• Sales in US and uranium production (costs) in
  Canada
• During 2005, C/US increased from 1.17 to 1.20.
• A primary reason for decreasing 2006 Q3 profit.
• Cameco provided FX hedge to shelter revenue
  against decline in the US dollar in the shorter
  term.

74
2005 Income statements
75
Analysis 2005 F/S

• I/S by business segment

76
Financial Highlights
77
Analysis 2005 F/S

• Significant increase in cash, CFS
• Largely due to restructuring Burce Power (Note
  16) and sale of investment in Energy Resources of
  Australia Ltd.
• New debt issue (297,750M, but no debt before).
  It is wise to use some debt financing to take
  advantage of Camecos favourable credit rating
• Debt to capitalization ratio is 9 in 2005
  decreased from 13 in 2004 and 22 in 2003

78
Analysis 2005 F/S

• Increase in long-term investments
• Change accounting method to account for the
  interest in BPLP (note 5) as a result of BPLPs
  restructuring

79
2006 Q3 interim F/S

• 2006 Q3 interim available on Oct 31, 2006

80
Analysis 2006 Q3

• Adjusted net income 42M (or 0.11/share), vs.
  78M (or 0.21/share in 2005 Q3).
• Lower earnings in electricity and global business
• Reduced sales volume of uranium 26 decline in
  volume. Uranium business revenue decreased by 12
  to 136M.
• 30 increase in realized selling price, but
  offset by a lower sales volume in the Q.
• Exchange rate effect stronger C, but sales are
  in US.

81
Stock price
82
Stock price analysis

• Appreciated by gt 200 in the past three years.
• Mostly correlated with the increase of uranium
  price, but at times with energy and precious
  metal prices.
• Is the stock over-valued?

83
Stock price analysis

• Is how valuation of Camecos shares justified?
• Reflected a robust nuclear future
• high quality of asset value low-cost,
  geographically diversified suite of production
  assets in both uranium refining and conversion.
  They are long-lived and supporting a portfolio of
  contracts which now reflect much improved market
  conditions.

84
Recommendation

• High valuation of Camecos shares is justified
• Decrease in the stock price is expected and this
  will continue until Cigar Lake has been fully
  recovered
• The company is in good health and their shares
  are appropriately priced
• SPECULATIVE BUY

85
Teck Cominco

86
Company Snap Shot
Symbol TCK.B
Last Trade Nov 01, 2006 1651 EST
Last  C 79.900 Net Change   C -2.760  Change   -3.34
Open  84.000 Bid  79.800
High  84.050 Ask  80.790
Low  79.610 EPS  9.98
Volume  939,716 P/E  8.00
52-Week High  87.750 IndicatedAnnual Div.  2.00
52-Week Low  49.010 Yield  2.42
215,500,000 shares outstanding
87
Stock Performance(5 years monthly)
88
Company Snapshot




ANNUAL FINANCIALS ANNUAL FINANCIALS ANNUAL FINANCIALS ANNUAL FINANCIALS ANNUAL FINANCIALS
  Dec 31, 2005 12 MonthsC Dec 31, 200412 MonthsC Dec 31, 200312 MonthsC 3Yr.Growth Change
Total Revenue (000) 4,570,000 3,452,000 2,229,000 27.48
Earnings before Interest Tax (000) 1,989,000 960,000 172,000 208.08
Profit/Loss (000) 1,345,000 617,000 134,000 255.21
Earnings per Share 6.62 3.18 0.71 253.35
Total Assets (000) 8,809,000 6,059,000 5,375,000 21.12
Dividends Per Share 0.80 0.30 0.20  
Return on Com. Equity 35.38 21.85 5.42  
Employees 6,710 6,710 N/A  
89
Company Snapshot

• Shares outstanding
• 215,500,000 shares
• Market Cap
• 17,813M
• Base on share price of 82.66 as of 09/30/2006
• Trade on TSE (TCK.B TCK.B) and NYSE (TCK)
• A member of the SP/TSX Composite Index

90
Section Agenda

• Corporate Profile
• Management
• Business Strategy
• Mineral Reserves
• Financial Performance
• Recommendation

91
Corporate Profile

• Teck Cominco was formed by the merger of the two
  company Teck Cominco in July, 2001
• Teck Cominco is a diversified mining company,
  headquartered in Vancouver, Canada
• TCK is a world leader in the production of
• zinc
• metallurgical coal
• TCK is also a significant producer of
• copper, gold, indium, germanium and other
  specialty minerals
• TCK also a significant participant in Canadian
  Oil Sands drilling

92
Management

• Norman B. KeevilNon-executive Chairman of the
  Board
• Donald R. LindsayPresident Chief Executive
  Officer

93
Norman B. Keevil

• Director Since 1963
• Background
• University of Toronto (B.A. Sc.)University of
  California, Berkeley (Ph. D.)University of
  British Columbia (Honourary LL.D) P.Eng
  (Ontario)
• Vice-President Exploration at Teck Corporation
  from 1962 to 1968
• Executive Vice-President from 1968, President
• Chief Executive Officer from 1981 to 2001 and is
  presently Chairman of the Board of Teck Cominco
• He is a a Lifetime Director of the Mining
  Association of Canada

94
Donald R. Lindsay

• Director Since 2005
• Background
• Queens University (B.Sc., Mining Engineering,
  Honours)
• Harvard Business School (M.B.A.)
• Employed by CIBC World Markets Inc. (investment
  banking) from 1985 to 2004
• President of CIBC World Markets Inc.
• Head of Investment and Corporate Banking
• Head of the Asia Pacific Region.
• Joined Teck Cominco Limited as President in
  January 2005,
• Appointed Director in February, 2005 and Chief
  Executive Officer in April, 2005
• He is a Director of Fording  (GP) ULC. 

95
Business Strategy

• Committed into diversification
• Differentiate from competitors
• Reduce volatility and maintain stable earning
• Open to any profitable acquisition or partnership
  opportunity
• Utilizing core mining skill to reduce operation
  expenses
• Strive to increase profit margin

96
Business Portfolio

• Business Strategy
• Maintain high margin through cost minimizing
• Diversification in business portfolio to reduce
  risk
• Core operations

97
Business Portfolio

• Surplus Power Sale (Trail)
• Waneta hydroelectric power plant
• Sell surplus power to Canada U.S.
• Generated 69M operating profit in 2005
• Sales of other by product mineral during
  operation
• indium, germanium and other specialty minerals

98
Major Mining Operation

• Major Mining operation across North and South
  America
• Copper and Molybdenum
• 97.5 ownership in the Highland Valley Mine (BC,
  Canada)
• 22.5 interest in the Antanina Mine (Peru)
• Coal
• 45.2 ownership in the Elk Valley Coal
  Partnership (Second largest seaborne exporter of
  the Metallurgical Coal in the Word)
• Zinc
• 100 owned Red Dog (Alaska, US) and Pend Oreille
  (Washington, US) mines
• Gold
• 50-owned mines in the Hemlo district of Ontario
• 40-owned Pogo mine in Alaska
• Oil Sand
• acquired a 15 interest in the Fort Hills Energy
  Limited Partnership, which is developing the Fort
  Hills oil sands project in northern Alberta

99
America Focused Operation
Red Dog (Alaska, US)
Pogo (Alaska, US)
Fort Hills (Alberta, Canada)
Elk Valley (BC, Canada)
Hemlo (Ontario, Canada)
Highland Valley (BC, Canada)
Pend Oreille (Washington, US)
Trail (BC, Canada)
Copper Mine Zinc Ref. Zinc Gold Coal Oil Sands
Antamina (Peru)
100
Red Dog Mine (Alaska, US)
101
Red Dog Mine (Alaska, US)

• The Red Dog mine in northwest Alaska is the
  largest zinc mine in the world
• Expected life of the mine
• Main Pit 7 yrs at current rate
• Extendible up to 23 yrs due to additional
  discovery of reserves
• Total Reserves 72.2M tonnes (Ore grade 17.7)
• Proven 19.5M tonnes
• Probable 52.7M tonnes
• 100 owned by TCK

102
Antamina Mine (Peru)
103
Antamina Mine (Peru)cont

• Antamina is the worlds third largest mine and
  the leading combined copper-zinc mine
• Total reserves 450 million tonnes (Ore grade
  0.93)
• Proven 76M tonnes
• Probable 37.4M tonnes
• 22.5 interest owned by TCK in the Join-Venture

104
Highland Valley Mine (BC)
105
Highland Valley Minecont

• The Highland Valley Copper mine is the largest
  copper mine in Canada and one of the largest
  copper mining operations in the world
• Total reserves 318.7 million tonnes (Ore grade
  0.43)
• Proven 260.2M tonnes
• Probable 58.5M tonnes
• Expected to close 7 yrs from now (2013)
• 97.5 owned by Teck Cominco

106
Elk Valley Coal Partnership
107
Elk Valley Coal Partnershipcont

• The second largest shipper of seaborne hard
  coking coal in the world
• Operates six coal mines in western Canada
• Total Reserves 686 million tonnes
• Proven 483M tonnes
• Probable 203M tonnes
• Teck Cominco holds an effective 45.2 interest in
  the partnership and is managing partner

108
Pend Oreille Mine (Washington, US)
109
Pend Oreille Mine (Washington, US)

• Underground zinc mine completed in 2004
• A proven and probable reserve of 4.7 million
  tonnes grading 7.0 zinc and 1.2 lead
• expected mine life of 7 years with some potential
  for extension.
• Total Reserves 4.7 million tonnes
• TCK 100 Owned

110
Hemlo district (Ontario, Canada)
111
Hemlo district (Ontario, Canada)

• Williams and David Bell gold mines in the Hemlo
  area of Ontario
• Co-owned by TCK and Barrick Gold Corporation
• Total Reserves 18.83 million oz (Grade
  1.8210.97 g/t)
• Proven 12.82M oz
• Probable 6.01M oz
• Williams mine is expected to close in 2010 and
  David Bell mine is expected to close in 2009
• 50 owned by TCK

112
Pogo mine (Alaska)
113
Pogo mine (Alaska)

• A 40 interest Join-Venture Project
• Facilities and Mine completed in end of 2005
  (Start production in 2006)
• Probable Reserves 7 million tones (Ore grade
  16.12 g/t)
• Est Production Capacity 350-500 thousand oz gold
  over a 10 yrs life of project

114
Zinc Operation
Production (000s tonnes) Production (000s tonnes) Production (000s tonnes) Production (000s tonnes)
Year 2004 2005 2006F
Red Dog, Alaska 100 554 568 560
Antamina, Peru 22.5 43 41 37
Pend Orellie, Washington 100 17 45 43
Other 5 3 -
Total 619 657 640
Red Dog
Highland Valley
Pend Oreille
Antamina
115
Zinc Refineries
Production (000s tonnes) Production (000s tonnes) Production (000s tonnes) Production (000s tonnes)
Year 2004 2005 2006F
Trail 296 223 295
Trail (Zinc Ref.)
116
Metallurgical Coal Operation
Production (000s tonnes) Production (000s tonnes) Production (000s tonnes) Production (000s tonnes)
Year 2004 2005 2006F
Elk Valley, BC 45.2 9277 9948 11.0
Elk Valley
117
Copper Operation
Production (000s tonnes) Production (000s tonnes) Production (000s tonnes) Production (000s tonnes)
Year 2004 2005 2006F
Highland Valley, BC 97.5 158 175 175
Antamina, Peru 22.5 82 84 84
Other 8 4 -
Total 248 263 259
Highland Valley
Antamina
118
Molybdenum Operation
Production (000s pounds) Production (000s pounds) Production (000s pounds) Production (000s pounds)
Year 2004 2005 2006F
Highland Valley, BC 97.5 9853 6149 N/A
Antamina, Peru 22.5 1778 3333 N/A
Total 11631 9482 N/A
Highland Valley
Antamina
119
Gold Operation
Production (000s oz) Production (000s oz) Production (000s oz) Production (000s oz)
Year 2004 2005 2006F
Hemlo, Ontario 50 261 245 N/A
Pogo
Hemlo
120
Financial Performance( in million)
121
CF from Operation Vs CapEx
122
Company Financial

• Year 2004
• Year 2005
• Year 2006 Second Quarter

123
Revenue and Profit Boom

• What contributed to the profit boom in 2004
  2005?
• Increasing commodity price in minerals since 2002
• Increased sales volume
• Efficient control of operation expenses

124
Question

• What is going on with a huge amount of cash
  sitting in the bank?
• Obligation fulfillment on the Fort Hills Oils
  Sand project (850M, 34 of the first 2.5
  billion project expenditure)
• Takeover bid for Inco (did not succeed in 2006)

125
Potential Growth

• Increasing expenditure in exploration
• Put life extension on mines by discovering
  additional reserves
• Future return on Fort Hill Oils Sands project
• Possible Acquisition
• Backup by huge liquid assets (3084M sitting in
  the bank)
• Ex. New acquisition of an option to purchase 100
  interest in new Carrapatenna copper-gold mine
  (South Australia)

126
Recommendation
Buy
127
Hudbay Minerals Inc

• Vertically Integrated Mines to Metals

128
Stock Quotes
129
Charts
130
Essential Info

• Outstanding shares 124,796,513
• Market capitalization C2.327 billion (based on
  the share price of 18.65 as of November 2nd,
  2006)
• Ticker HBM (TSX)
• A member of the SP/TSX Composite Index

131
Section Agenda

• Corporate profile history
• Corporate Management
• Business segments and Business strategy
• Competitive advantages limitations
• Financial statements
• Recommendation conclusion

132
Corporate Profile

• Fully integrated Canadian mining and smelting
  company
• Producing zinc, zinc oxide, copper and precious
  metals
• The third largest producer of both zinc metal and
  copper metal in Canada and the third largest
  producer of zinc oxide in North America

133
Company History

• Incorporation Ontario, Canada, Jan 16, 1996
• Changed its name from ONTZINC Corporation to
  HudBay Minerals Inc. on December 21, 2004
• Prior to that date, the Company had not earned
  significant revenue and was considered to be in
  the development stage

134
Key Personnel

• Peter R. Jones
• President, CEO Director
• Jeff A. Swinoga, CA, MBA
• Vice-President and Chief Financial Officer
• Tom A. Goodman
• Vice President, Technical Services and Human
  Resources

135
Map for Operations
136
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137
Business Segments

• Zinc
• Annual production 115,000 tonnes of zinc metal
• Third largest producer of zinc metal in Canada
• 75 of zinc metal sold directly to customers
• Zinc price premium up to US 7/lb in 2005.
• The worlds first use of two-stage pressure
  leaching.

138
Business Segments

• Zinc oxide
• Annual production 45,000 tonnes of zinc oxide
• Third largest zinc oxide producer in North
  America
• Produced by 100 owned Zochem division
• 25 of HudBay zinc metal used by Zochem

139
Business Segments

• Copper
• Annual production 90,000 tonnes of copper anode
• Third largest producer of copper metal in Canada
• White Pine Refinery purchased 2006
• Copper price premium up to US 6/lb in 2006

140
Business Segments

• Gold and silver
• Annual production 100,000 oz. of gold
• Annual production 1,000,000 oz. of silver
• Most gold and silver produced from HudBay owned
  mines
• Produced during electrolysis at White Pine Copper
  Refinery

141
Summary of Business Segments (Based on Revenue)
142
Competitive Advantages

• Mineral reserves resources
• Financial position
• Exploration

143
Mineral Reserves Resources

• reserves of 21.4 million tonnes
• resources of 4.9 million tonnes
• long history of adding to reserves and resources
• 25 mines discovered to date in Manitoba and
  Saskatchewan

144
Mines 777 Mine, Manitoba

• First production in 2004
• HudBays flagship mine
• Ore production in 2005 was 1.1 million tonnes
• Ore production increased to 1.35 million tonnes
  as of January 2006
• Increased production replaces Konuto mine
  production

145
Mines Trout Lake Mine, Manitoba

• First production in 1982
• Ore production in 2005 was 859,000 tonnes

146
Mines Chisel North Mine,Manitoba

• First production in 2000
• Ore production in 2005 was 337,000 tonnes

147
Mines Balmat Mine, New York

• First ore production before the end of Q2,
  2006
• Will produce up to 60,000 tons of zinc in
  concentrate when in full production in 2008
• Majority of concentrate will be treated at the
  CEZ refinery in Quebec

148
Map of Major Mines
149
Mineral Reserves Resources
150
Financial position

• record earnings of 85 million (1.04 per share)
• operating cash flow of 145 million (1.77 per
  share)
• net debt of 67 million
• new 25 million credit facility
• metals un-hedged

151
Financial Performance
152
Financial Statements

• HBM Financial Statements

153
Note 21
154
Exploration

• 10 million annual exploration expenditure
• 210,000 hectares of exploration land in Flin
  Flon Greenstone Belt
• 20,000 hectares in Balmat district
• extensive zinc prospect lands in SW Ontario
• Tom Valley lead/zinc deposit in the Yukon
• San Antonio copper prospect in Chile

155
Reserves Exploration
156
Growth Opportunities

• In 2006, the Company will look at opportunities
  to identify and evaluate strategic growth,
  focusing on zinc but not to the exclusion of
  copper, precious metals or secondary products.
• Opportunities synergistic with the Companys
  fully vertically integrated operations will be of
  particular interest.

157
Other Performance
158
Stock Performance 3 years trend
159
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160
Recommendation

• Speculative Buy

Thank You !