Is Hudbay Minerals (TSX:HBM) Still Undervalued Amid a Copper Supply Tightening and Strategic Partnership With Mitsubishi?

The global transition to clean energy and electrification has intensified demand for copper, a critical input for renewable infrastructure, electric vehicles, and grid modernization. Against this backdrop, Hudbay Minerals Inc. (TSX:HBM) has emerged as a focal point for investors seeking exposure to a decarbonizing economy. The company's recent strategic partnership with Mitsubishi Corporation-a $600 million investment for a 30% stake in the Copper World project-has further amplified its growth potential. This analysis evaluates Hudbay's fair value, capital structure advantages, and long-term catalysts to determine whether the stock remains undervalued in a high-copper-demand environment.

Strategic Partnership: A Catalyst for Production Expansion

Hudbay's collaboration with Mitsubishi represents a transformative milestone. The Japanese conglomerate's $600 million investment-split into $420 million in equity and $180 million in development costs-secures a 30% joint venture interest in the Copper World project in Arizona, a fully permitted site poised to begin operations by 2029. This partnership aligns with Mitsubishi's ambition to scale its copper production to over 400,000 tonnes annually by FY2030, while Hudbay gains access to significant capital and operational expertise. The project's projected peak output of 100,000 tonnes of copper per year positions Hudbay to capitalize on a tightening global supply chain, where demand is expected to outstrip supply by 2030.

Financial Metrics: A Strong Foundation for Growth

Hudbay's third-quarter 2025 results underscore its improving financial health. Net earnings of $222.4 million and a $0.56 earnings-per-share (EPS) performance were bolstered by a $322.3 million impairment reversal on the Copper World project. The company's liquidity has also strengthened, with $1.036 billion in total liquidity as of September 30, 2025, including $611.1 million in cash and cash equivalents. This reflects progress in debt reduction, including $13.2 million in senior note repurchases.

Valuation metrics suggest the stock remains attractively priced. Hudbay's P/E ratio of 13.07 (as of Q3 2025) is below the sector average, while its book value per share of $9.53–$10.83 implies a P/B ratio of approximately 2.0–2.2 (calculated using the January 13, 2026, stock price of $21.56). Analysts have raised fair value estimates to CA$26.90 per share, reflecting optimism about metals prices and free cash flow. More compellingly, a discounted cash flow analysis suggests the stock is undervalued by 47.2%, with an intrinsic value of $49.20 per share.

Capital Structure Advantages: Mitigating Risk in a Volatile Sector

Hudbay's debt-to-equity ratio of 38.67% is relatively conservative for a mining company, reducing exposure to interest rate fluctuations and commodity price volatility. The firm's diversified asset portfolio-spanning copper and gold-further insulates it from sector-specific risks. Gold, for instance, provides a stable cash flow stream, while copper benefits from structural demand growth. This dual-exposure model enhances resilience, particularly as inflationary pressures persist.

The partnership with Mitsubishi also mitigates capital constraints. By sharing development costs, Hudbay can allocate resources to other projects, such as its Arizona growth capital initiatives, which saw a $20 million increase in 2025 guidance. This collaborative approach reduces the need for high-cost debt financing and accelerates project timelines.

Long-Term Catalysts: Electrification and Infrastructure Spending

The primary growth driver for Hudbay-and the broader copper sector-is the global push for decarbonization. Copper demand is projected to grow at a 5% annualized rate through 2030, driven by electric vehicles, solar panels, and grid upgrades. The U.S. Inflation Reduction Act and Canada's Clean Energy Strategy are further incentivizing domestic production, positioning Arizona's Copper World project as a strategic asset in a geopolitically sensitive supply chain.

Hudbay's production profile is also expanding. The company reaffirmed its full-year 2025 copper and gold output guidance despite operational disruptions from wildfires in Manitoba and temporary shutdowns in Peru. This operational flexibility, combined with the Copper World project's expected 2029 start, ensures a steady revenue stream over the next decade.

Conclusion: A Compelling Case for Undervaluation

Hudbay Minerals is well-positioned to benefit from a confluence of favorable trends: a copper supply deficit, strategic partnerships, and a robust capital structure. While the stock's current price of $21.56 reflects recent gains, it remains significantly below its DCF-derived intrinsic value of $49.20. The company's low P/E ratio, manageable debt levels, and exposure to both copper and gold further enhance its appeal. As the world pivots toward electrification, Hudbay's strategic investments and operational discipline make it a compelling long-term holding for investors seeking undervalued exposure to the critical minerals sector.