HBM Gains More than 50% in 3 Months: How to Play the Stock?

Shares of Hudbay Minerals HBM have surged 54.6% over the past three months on the back of rising demand for critical minerals in the United States amid heightened geopolitical tensions. The company is advancing its long-term copper vision while navigating a year marked by social unrest in Peru, wildfires in Manitoba and ongoing optimization challenges in British Columbia.During the last two quarters, the miner leaned heavily on its unique dual exposure to copper and gold, its aggressive cost-containment strategy, and a multi-front expansion plan spearheaded by the Copper World project. This has allowed the company to maintain resilience amid volatility while laying the groundwork for a transformational production increase later in the decade.Over the past three months, HBM has delivered mixed performance relative to peers such as Ero Copper ERO and NexGen Energy NXE. While shares of ERO have soared 64%, those of NXE have risen 24.9% over the past three months.3-Month PerformanceImage Source: Zacks Investment ResearchCopper World: The Centerpiece of Hudbay’s Long-Term StrategyCopper World, Hudbay’s flagship U.S. development in Arizona, has rapidly evolved from optionality to centerpiece. The company’s strategic joint venture with Mitsubishi, announced earlier this year, injects $600 million into the project, with $420 million upfront and the balance within 18 months. Management highlighted that the deal implies a premium valuation to consensus NAV and reduces Hudbay’s own capital requirements to roughly $200 million, with its first contribution deferred until 2028.Feasibility work is now accelerating, with up to $110 million allocated in 2025 to fast-track engineering, long-lead orders and critical-path de-risking. A sanction decision is targeted for mid-2026, with first production expected in 2029. Once operational, Copper World is expected to add 85,000 tons of copper annually, increasing Hudbay’s total copper output by 50% and positioning the company among the largest Americas-focused pure-play copper producers.Beyond scale, the project is positioned as a strategic U.S. supply-chain asset, fully permitted on private land, aligned with U.S. critical mineral policy. It is also structured with a union-backed construction plan supporting more than 1,000 jobs.Gold and Silver Provide Critical Cash Flow StabilityWhile copper remains the strategic growth engine, gold and silver continue to underpin cash flow and cost positioning. Over the last two reported quarters, gold accounted for more than one-third of the company’s revenues, supported by strong contributions from both Peru and Manitoba.In the second quarter, consolidated gold production reached 56,000 ounces, aided by strong recoveries at New Britannia and record throughput in April. Even amid Manitoba wildfire disruptions, the Lalor mine prioritized gold zones to maintain mill feed stability.By the third quarter, despite operational interruptions in both Peru and Canada, gold output totaled 54,000 ounces. Peru delivered a standout performance, producing 26,000 ounces, supported by higher Pampacancha grades. Manitoba added another 22,000 ounces, achieving record gold recoveries of 92% at New Britannia and 73% at Stall.Silver production remained a reliable secondary contributor — 815,000 ounces in the second quarter and 730,000 ounces in the third — with steady recoveries across assets.Cost Reduction Remains a Defining StrengthHudbay’s cost performance across both quarters remained among the strongest in the sector, underscoring the company’s disciplined operational strategy. In the second quarter, consolidated cash costs were 2 cents per pound, supported by robust by-product credits, while sustaining cash costs were $1.65 per pound.By the third quarter, consolidated cash costs rose modestly to 42 cents per pound as by-product credits declined, though management still tightened full-year cash cost guidance to an impressive 15-35 cents per pound range. Gold cash costs in Manitoba also improved meaningfully, dropping from $710 per ounce in second-quarter to $379 per ounce in the third, reflecting stronger by-product contributions and enhanced metallurgical recoveries. Peru showed similar momentum, with unit costs benefiting from higher-grade gold feed from Pampacancha during the quarter.Combined, these efficiencies, along with consistent free cash flow generation and continued debt reduction, reduced leverage, giving Hudbay the financial capacity to reinvest in its growth pipeline without straining its balance sheet.Estimate Revision Favoring HBM StockReflecting the positive sentiment around HBM, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have raised their EPS estimates for the current and next fiscal year by 1.2% to 85 cents and 37.5% to $1.21, respectively, indicating year-over-year growth of 77.1% and 42.9%.Image Source: Zacks Investment ResearchOperational Challenges Across Peru, Manitoba and British ColumbiaBoth quarters faced protest-driven mine sequencing adjustments, supply-chain constraints and a nine-day suspension in September. Despite this, Constancia remained on track to meet annual guidance, with fourth-quarter forecast implying Peru’s strongest quarter of the year.Manitoba endured multiple evacuations, a two-month interruption, and later a week-long power outage in October. These events deferred production and pushed 2025 gold output slightly below guidance, though infrastructure remained untouched due to extensive emergency response efforts.Copper Mountain continued its multiyear stabilization, but premature liner wear on the primary SAG mill (SAG1) and continued reliance on lower-grade stockpiles pressured third-quarter output and elevated costs to $3.21/lb. Hudbay maintains that the site will achieve 50,000 tpd throughput by mid-2026, following completion of SAG2 optimization.Is HBM Stock Overvalued?Shares of Hudbay have been on a run since the beginning of 2025 amid rising demand for U.S.-based mining companies. This surge has also bolstered its valuation and it trades at a premium to the industry’s current valuation but well below its peers. HBM’s shares currently trades at a price-to-book (P/B) of 2.35X, significantly higher than the industry average of 1.63X. Currently, Ero Copper and NexGen Energy trade at 3.28X and 8.31X, respectively.Image Source: Zacks Investment ResearchConclusionHudbay enters 2026 with a reinforced balance sheet, advancing copper pipeline and rising gold by-product credits. While short-term operational volatility persists, the company’s execution of Copper World, Snow Lake expansion drilling and Copper Mountain optimization collectively point toward structurally higher production and lower long-term costs — a trajectory that could materially re-rate its standing among North American base-metal producers.The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Although the company’s can become a strategic asset for the United States over the long-term, the near term challenges coupled with premium valuation makes its risky for new investors. We advise existing investors to continue to hold their position while new investors should wait for the company an entry point with attractive valuation.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report HudBay Minerals Inc (HBM): Free Stock Analysis Report Ero Copper Corp. (ERO): Free Stock Analysis Report NexGen Energy (NXE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks