Hudbay Minerals Annual Report 2015

Plain-text annual report

2015 Annual and CSR ReportMININGEXPERIENCETABLE OF CONTENTS OUR COMPANY BUSINESS AND FINANCIAL REVIEW CSR APPROACH OUR PEOPLE SOCIAL IMPACT ENVIRONMENT CSR PERFORMANCE DATA About This Report Contact Us Glossary 151 156 157 6 20 30 49 59 80 100 Hudbay 2015 Annual and CSR Report 1 MININGEXPERIENCEHudbay understands every phase of the mining cycle. Founded in 1927, the Company has benefitedfrom and endured every opportunity and challenge this industry can present. Between 2010 and2015, we met the test of simultaneously developing what are now three outstanding mines. Today,our low-cost metals production and growth potential position us for continued success as a solidinvestment and a reliable partner everywhere we operate.RECENTLY CELEBRATEDof the discovery of the Flin Flon deposit100thANNIVERSARYREVENUE BY SIGNIFICANTMETAL TYPE11. Based on 2015 annual gross revenue beforededuction of treatment and refining charges andpre-production revenue and including unrealizedgains and losses related to non-hedge derivativecontracts.Hudbay 2015 Annual and CSR Report 2 CASE STUDYMaintaining Safety and Controlling Costs in ManitobaIn underground mines, like Hudbay’s Reed operation in northern Manitoba, wire-meshscreens are bolted to the walls and ceiling to help prevent rock falls and cave-ins. Thescreens are held in place by plates, attached by lengths of rebar. Mining activities likeunderground blasting can lead to rocks falling or shifting behind the screens, which causesthem to bend outward or “bag”. To minimize “bagging” at Reed, the rebar securing theplates is driven into the rock face in a pattern like the “five” side on a die. It’s effective, butexpensive, with each length of rebar costing approximately C$14. After thorough researchand testing, miners at Reed determined they could use a mechanical bolt instead of alonger piece of rebar for the centre, while still employing the “five” dice pattern that hadbeen so effective. This one change will translate into annual savings of C$180,000 whilemaintaining our high safety standards. It’s a perfect example of continuous improvementat work, and has since been implemented at Hudbay’s 777 mine as well.Overall, continuous improvement and cost optimization initiatives contributed to morethan C$4 million in savings in 2015, while maintaining or improving our operatingstandards. Additional savings of C$15 million in the Manitoba operations are planned in2016.Hudbay 2015 Annual and CSR Report 3 CASE STUDYConstancia Expands Transport Fleet in Response to ProductionRamp-up and Transportation ChallengesThrough enviable performance, the team at Constancia ramped up to full production farmore quickly than anticipated. During the same period, the Peru Ministry of Transportationwas carrying out a major construction program that closed off traffic for seven hours perday on a 60-kilometre section of the 470-kilometre route from the mine to the port atMatarani. Consequently, a backlog of copper concentrate built up at the site in the fall of2015. To reduce the backlog, a much larger fleet of trucks and drivers was needed to getconcentrate to the port. Transport companies across Peru were contracted, and a team ofcontractors and subcontractors was soon assembled. However, it became clear that workneeded to be done to ensure that the new drivers understood and acted in accordancewith Hudbay’s safety expectations.Experienced instructors were hired to provide training, verify skills and periodically assessdriver performance. The drivers were educated in the principles of defensive driving,including self-monitoring for fatigue and aggressive driving. We added control points forchecking driver compliance and allowing drivers to rest if tired. Trucks were linked to a GPSmonitoring system that tracked location as well as driving speed. We also exploredalternative routes to bypass road construction, but these secondary roads through theAndes proved unsuitable for the safe operation of transport trucks.Although Hudbay represented less than one-third of the heavy truck traffic on most of theroute, more communities took notice of our operations, particularly on the unpavedsections of the route, as the number of trips increased. Constancia’s community relationsteam contacted local leaders, held public meetings, informed people about routes andtiming, and explained measures put in place to mitigate the impact of increased traffic (likewatering gravel roads to control dust).Hudbay 2015 Annual and CSR Report 4 To provide further opportunities for local communities to benefit economically from ourmove into operations, we also worked with committees for development in Uchucarco andChilloroya to help them purchase 25 trucks, which they could rent to contractors haulingConstancia concentrate to Matarani.Through our efforts to increase transportation capacity and safety, all of the excessconcentrate inventory was moved to port and sold by the end of 2015.CASE STUDYArizona Business Unit Builds Ties with the CommunityHudbay has a lot of experience in building close ties with the communities near our miningoperations – we’ve been doing it for almost 100 years. In 2014, we acquired the Rosemontproject. Located in Pima County, Arizona, approximately 50 miles (80 kilometres)southwest of Tucson, Rosemont has the potential to be one of the largest copper mines inthe US. Soon after the acquisition was completed, the head of our Arizona Business Unit,Pat Merrin, moved to Tucson with his family, and worked to demonstrate that Hudbay iscommitted to building the right mine, the right way, and that good community relationsare an essential part of that vision.While Rosemont is still in the permitting phase, we’ve had a team on the ground for twoyears, and have hired local people for a number of key roles. We’ve also put in place acommunity relations (CR) strategic plan with a stated mission to build meaningfulrelationships with stakeholders based on integrity and mutual respect. Our efforts in thisarea range from detailed protocols for CR and government relations; building localrelationships through engagement initiatives, such as site tours; implementing a robustcorporate contributions program; and doing simple things, like financially supporting andtaking part in local events.Hudbay 2015 Annual and CSR Report 5 We hope to complete permitting in 2016. Once the construction phase of the project isinitiated, business unit lead Pat Merrin notes, “we need to build not just a profitable mine,but a good mine… one that people respect, trust and see as a valuable addition to theircommunity.”Hudbay 2015 Annual and CSR Report 6 OURCOMPANYHudbay is an integrated mining company that produces copper concentrate(containing copper, gold and silver) and zinc metal. We are headquartered inToronto, Ontario, Canada, and listed on the Toronto Stock Exchange, New YorkStock Exchange and Bolsa de Valores de Lima under the symbol “HBM”.LALOR100% ownershipLong-life, underground zinc/copper/gold mineStall Lake concentrator processes Lalor ore777100% ownershipUnderground copper/zinc/gold/silver mineFlin Flon concentratorHydrometallurgical zinc plantREED70% ownershipUnderground copper mineROSEMONT92.05% ownership*Open pit copper projectCONSTANCIA100% ownershipOpen pit copper mine and concentratorCommercial production achieved in 2015* Our ownership in Rosemont is subject to an Earn-In Agreement with United Copper and Moly LLC (UCM) pursuant to which UCM has earned 7.95%interest in the project and may earn up to a 20% interest.MANITOBA1ARIZONA2PERU3Hudbay 2015 Annual and CSR Report 7 OUR COMPANYCEOMESSAGE2015 was a year of transition and important growth accomplishments for Hudbay. In my first letter asChief Executive Officer, I’m pleased to report that 2015 was also a year that confirmed the strengthsof our strategy and our people.When Hudbay successfully ramped up to full commercial production at Constancia, it completed thetransition from a company that had been focused on development to one focused on optimizingproduction and processes at operating mines. As we reported early this year, copper sales volumesfrom our mines – Constancia, Lalor, Reed and 777 – increased 850% year-over-year in the fourthquarter of 2015. This is a remarkable achievement by any measure and in any market conditions.EXPERIENCE MANAGING THE MINING CYCLEThe impact of this strong performance was in stark contrast to the low price environment thataffected the entire commodity market. At the same time, it demonstrated why we focused onbringing Lalor and Constancia, in particular, into production. High-quality, long-life, low-cost minesenable Hudbay to perform even in the tough times, and position us to capitalize on opportunitywhen, as it always does, the cycle follows its natural path to metal price increases.Copper sales volumes from our mines –Constancia, Lalor, Reed and 777 – increased850% year-over-year in the fourth quarter of2015. This is a remarkable achievement by anymeasure and in any market conditions.Hudbay 2015 Annual and CSR Report 8 In response to deteriorating commodity prices, we launched an extensive review of all of ouroperations as part of a company-wide efficiency improvement initiative. This review deliveredexpected 2016 capital expenditure and operating cost reductions of more than $100 million,compared to 2016 guidance, with no effect on our production guidance. It is important to make clearthat pursuing and implementing these savings had no impact on safety. Safety is never negotiable.In early 2016, Hudbay also announced amendments to our credit facility. We received commitmentsfrom lenders under our two secured credit facilities to consolidate the lender groups and restructurethe two facilities with more flexible financial covenants and longer maturity dates. Not only does oursuccess in this renegotiation enhance our liquidity position, but it is also a clear indication that themarket recognizes Hudbay’s strengths and it leaves us well positioned to respond to the currentprice environment.MEETING CHALLENGESGiven the size, location and complexity of the project, the ramp-up to commercial production atConstancia went remarkably smoothly, but inevitably, there were challenges. In fall 2015, driven inpart by strong ramp-up performance, we experienced a build-up of copper concentrate inventory atthe mine site. In response, a larger fleet was quickly certified, the range of routes to the port atMatarani optimized, and by the end of 2015, the entire excess inventory had been transported toport and sold.Hudbay Manitoba’s collective agreements with the seven unions expired on December 31, 2014. Wewere unable to establish an agreement with one union, which subsequently went on strike inMay 2015. Work proceeded under a contingency plan, and a new three-year collective agreementwas finalized in August 2015.Our acquisition of the New Britannia mine and mill (NBM mill), in May 2015, is an example ofimaginative near-term cost control and strategic long-term thinking. Though it is currently on careand maintenance, the NBM mill can be refurbished more quickly and more cost-effectively thanbuilding a new concentrator, as was initially planned for Lalor. At the same time, it offers a range offunctionality that gives us considerable flexibility in processing copper and gold from Lalor.MINDFUL OF OUR RESPONSIBILITIESAn organization-wide commitment to corporate social responsibility (CSR) has been essential to theachievements of the last five years, and will help sustain Hudbay through the ups and downs of thecommodity cycle. At all times, while taking steps to drive efficiency and optimize performance, weremain mindful of our responsibilities to our employees, our communities and the environment. CSRis very much like safety in this respect.Hudbay 2015 Annual and CSR Report 9 CSR makes a key contribution to productivity and efficiency at all of our operations, including our2016 priorities to achieve ISO 14001 (environmental) and OHSAS 18001 (health and safety)certification at Constancia, and to adopt the Mining Association of Canada’s Towards SustainableMining Initiative, the Voluntary Principles on Security and Human Rights, and other international bestpractice standards.This past year, we also strengthened our policies and procedures with respect to anti-corruption, andtook measurable steps to ensure they are widely understood throughout Hudbay.As already mentioned, safety remained our top priority. Our overall lost time accident (LTA)frequency was 0.3 per 200,000 hours worked in 2015. While not on par with our record 2014performance of 0.1, it was still a strong year for safety.CONNECTED TO COMMUNITIESBuilding strong relationships with the communities near our operations is a defining characteristic ofHudbay, and has been since its founding almost 90 years ago. Local residents must benefit from ouractivities. This includes hiring people from nearby communities to work at our operations, which caninvolve helping them upgrade their existing skills or teaching them new ones. At Constancia, HudbayPeru employed more than 400 local people in 2015, and our Manitoba subsidiary created 160 newjobs, primarily at Lalor.Along with providing employment, we contribute to local development through the goods andservices we purchase from local businesses, and through the taxes and royalties we pay on ouractivities. This year, Hudbay Peru completed its first project under an innovative program that allowscompanies to pay up to half their income tax through contributions to public infrastructure projects.These funds financed the building of an irrigation system in the district of Livitaca.Reflecting our commitment to openness and transparency, we pursued community outreachinitiatives at all of our operations and projects, keeping people informed of our activities and helpingthem understand how they can engage and work with us. This included particular efforts focused onAboriginal communities near our operations, where we continually work to build new relationshipsand strengthen existing ties.We marked our longest-standing community relationship throughout 2015 by commemorating the100th anniversary of the discovery of the Flin Flon deposit. Please visit the interactive centennialmuseum on our website for a historic look at this milestone and its impact on our company and thenorthern Manitoba region.Hudbay 2015 Annual and CSR Report 10 A SUSTAINABLE APPROACHHudbay is committed to mitigating impacts at its operations, while contributing to regionalsustainability. Our efforts in Manitoba include an ongoing commitment to boreal woodland caribouconservation, while in Peru they include species rescue and relocation initiatives, revegetationprograms using regionally appropriate seedlings grown by local community members, and wetlandsmanagement.Environmental studies at Rosemont in Arizona have been ongoing for the last several years. The datafrom these studies has been used in developing management and mitigation plans that should helpto establish Rosemont as a leader in environmental practice.A STRONG FOUNDATIONHudbay is guided by experience, so in the current challenging market, our focus will be on processoptimization and cost efficiency. But experience also tells us there are few companies in the sectoras strongly positioned as Hudbay to deliver long-term growth in performance and value.In 2016, Rosemont Copper Company, our Arizona subsidiary, will continue work on the Rosemontpermitting process and feasibility study to position it as one of the best shovel-ready projects in theindustry, ready to move forward when the economics for development improve. At Constancia, evenafter its first full year of commercial operation, the potential of this high-value, long-life assetcontinues to impress.The same is true in Manitoba, where the foundation provided at Lalor ensures that we will continueto operate in the region well beyond the 100th anniversary in 2015 of the discovery of the originalFlin Flon deposit. Despite our best efforts, including the exploration of the War Baby claim in 2015, ina matter of years, 777 will reach the end of its life as an operating mine. A priority for Hudbay in 2016will be working with our colleagues and with the community in Flin Flon to help ensure a smooth andeffective social and economic transition. At the same time, I cannot overstate that our commitmentto Manitoba remains strong and our connection to Flin Flon will endure.We intend to grow our company via exploration and development of projects already in our control,like Rosemont, while also keeping an eye on acquisition opportunities that fit our strategic criteria. Inorder to successfully achieve these initiatives, we recognize the need to have strong operating andmanagement teams, which is why we will continue to develop leadership programs to maintainuniform high leadership capability within Hudbay. Above all, we value the safety and well-being of allour employees and the communities where we operate, and maintaining or improving our safetyperformance and strong relationships with our local communities will remain top priorities for theCompany.Hudbay 2015 Annual and CSR Report 11 I would like to thank the Board for the confidence they have shown in me, and I want to thank mycolleagues throughout Hudbay for the support they have extended to me in my new role. The themeof this year’s report is Mining Experience, because it captures how Hudbay benefits from a depth ofexperience and a knowledge of mining that combine to give us a truly unique advantage.I invite you to review our report and our websites to find out more about Hudbay’s achievements in2015, and our priorities for the years ahead.Sincerely,Alan HairPresident and Chief Executive OfficerHudbay 2015 Annual and CSR Report 12 OUR COMPANYCORPORATEGOVERNANCEHudbay’s Board of Directors and management team believe that good governance supports theCompany’s strong performance and long-term success, providing oversight and accountability,strengthening internal and external processes, and helping secure the confidence and trust of ourmany stakeholders.The Board oversees the Company’s business and provides guidance to management to help meetcorporate objectives and maximize shareholder value. The Board fulfills its responsibilities directlyand through its five committees:Audit CommitteeCompensation CommitteeCorporate Governance and Nominating CommitteeEnvironmental, Health, Safety and Sustainability CommitteeTechnical CommitteeBoard members are selected based on criteria that include: judgment, character, expertise, skills andknowledge useful to the oversight of the Company’s business; diversity of viewpoints, backgrounds,experiences and other demographics including gender; business or other relevant experience; andthe overall composition of the Board.Hudbay 2015 Annual and CSR Report 13 W. Warren Holmes*ChairmanCorporateGovernance andNominatingCommittee (Chair)Alan HairPresident and ChiefExecutive OfficerIgor Gonzales*TechnicalCommittee,Environmental,Health, Safety andSustainabilityCommitteeTom A. GoodmanEnvironmental,Health, Safety andSustainabilityCommittee (Chair),Audit CommitteeAlan R. Hibben*CompensationCommittee (Chair),CorporateGovernance andNominatingCommitteeSarah B. Kavanagh*Audit Committee(Chair), CorporateGovernance andNominatingCommitteeBOARD OF DIRECTORSHudbay 2015 Annual and CSR Report 14 Alan J. Lenczner*Audit Committee,CompensationCommitteeKenneth G. Stowe*Technical Committee(Chair),Environmental,Health, Safety andSustainabilityCommitteeMichael T. Waites*Audit Committee,Technical CommitteeCarin S. Knickel*CompensationCommittee,Environmental,Health, Safety andSustainabilityCommittee* IndependentHudbay 2015 Annual and CSR Report 15 OUR COMPANYBUSINESSCONDUCTOperating openly, fairly and with integrity is the proper way to run our business and the right way totreat our stakeholders.Hudbay employees and contractors are expected to uphold high standards of honesty and integrity.Our Code of Business Conduct and Ethics (the “Code”) and related policies set out principles fordirectors, officers and employees on matters like compliance with law, conflicts of interest,confidential information, protection and proper use of Hudbay assets, and the reporting of illegaland unethical behaviour. We recognize that bribery and corruption pose risks wherever we operate,and we want to be very clear about our standards and expectations.On joining the Company, all board members and employees must sign a declaration confirming thatthey understand and will comply with the Code. The Board requires every director and executiveofficer to disclose any direct or indirect conflict of interest, and to confirm compliance with the Codeannually. Formal, annual confirmation of compliance with the Code is also required from allemployees above the manager level and those dealing with money or government officials.Employees and contractors working at Constancia are also expected to abide by a Code of Conductand Social Protocol based on the corporate Code and local community commitments. A plainlanguage booklet and a video inform all workers at the site about the obligations under theConstancia Code.Hudbay’s Legal department is responsible for providing compliance training on the Code of BusinessConduct and Ethics and related policies, and on the Canadian Corruption of Foreign Public Officials Act(CFPOA) and the US Foreign Corrupt Practices Act (FCPA), to specific groups or across the organizationas it deems appropriate. The focus on anti-bribery and anti-corruption was expanded in 2015 toinclude an online training component.We encourage employees who become aware of a real or potential conflict or departure from theCode to bring it to the attention of a supervisor or department head. The Board has adopted aWhistleblower Policy for employees to report concerns regarding, among other things, violations ofthe Code or anti-bribery legislation or concerns related to financial statement disclosure issues,accounting, internal accounting controls or auditing matters. Hudbay has a third-party managedethics hotline that allows individuals to report any concerns about inappropriate business conductconfidentially and anonymously by phone, website (http://www.clearviewconnects.com) or mail.Hudbay 2015 Annual and CSR Report 16 2015 PERFORMANCE HIGHLIGHTSWe strengthened our anti-corruption policies and procedures in multiple ways including:Developing a Statement on Anti-Corruption, which is posted to our website;Making a “How to Say No” video training series on bribery and corruption available to allemployees through our corporate intranet;Ensuring that select employees complete an online training program on anti-bribery andanti-corruption;Revising all contract templates to prohibit bribery and corrupt activities;Modifying the vendor onboarding process to ensure that employees consider a series ofquestions related to anti-bribery and anti-corruption and, in certain cases, obtain due diligencereports before engaging vendors; andBroadening the scope of employees across the organization who receive anti-bribery andanti-corruption training.Ethics and anti-corruption training:10 board members (100%) received ethics and anti-corruption training.360 employees were trained in anti-corruption policies, representing 21% of the workforce and91% of those who were required to receive training because of their role.The majority of complaints received through our third-party whistleblower reporting serviceinvolve operational matters and employee relations. Thirty-four incidents were reported in 2015,all of which were investigated and resolved with corrective action where necessary. While none ofthese incidents involved significant allegations of fraud or violations of our Code of BusinessConduct and Ethics, there were issues related to business, health, safety and environmentalpractices; inappropriate behaviour or violation of a Company policy or procedure; and conflicts ofinterest.TO REPORTAN ISSUEThere are a number of avenues available to people who wish to make inquiries on ethical and lawfulbehaviour, and on matters related to organizational integrity, as well as to register a concern aboutHudbay’s activities:Contact our Board of Directors by mail or email at chairman@hudbay.com.Hudbay 2015 Annual and CSR Report 17 To make a confidential report to the Chair of Hudbay’s Audit Committee about a perceivedviolation of the Company’s internal and accounting controls, auditing matters or violations of theCompany’s Code of Business Conduct and Ethics, call +1 877 457-7318 or visitwww.clearviewconnects.com. Reports are handled under our Whistleblower Policy, and the Chairof the Audit Committee is responsible for ensuring that they are appropriately investigated.The Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor is a resourceavailable for constructively resolving conflicts between project-affected communities andCanadian extractive sector companies outside of Canada. The CSR Counsellor can be reached byemail at csr-counsellor@international.gc.ca or by telephone at +1 343 203-6735.Canada’s National Contact Point (NCP) for the Organisation for Economic Co-operation andDevelopment (OECD) provides a forum where multinational enterprises, Canadian businesses,non-governmental organizations and labour organizations can voice their views and concerns.Canada’s NCP can be reached by email at ncp.pcn@international.gc.ca or by telephone at+1 343 203-2341.The majority of complaints received through our third-party whistleblower reporting serviceinvolve operational matters and employee relations. Thirty-four incidents were reported in 2015,all of which were investigated and resolved with corrective action where necessary. While none ofthese incidents involved significant allegations of fraud or violations of our Code of BusinessConduct and Ethics, there were issues related to business, health, safety and environmentalpractices; inappropriate behaviour or violation of a Company policy or procedure; and conflicts ofinterest.We also have grievance processes set up at our projects and operating sites to address communityconcerns. See Community Relations for details.Hudbay 2015 Annual and CSR Report 18 Alan HairPresident and ChiefExecutive OfficerDavid BrysonSenior Vice Presidentand Chief FinancialOfficerCashel MeagherSenior Vice Presidentand Chief OperatingOfficerEric CabaVice President, SouthAmerica BusinessUnitDavid ClarryVice President,Corporate SocialResponsibilityPatrick DonnellyVice President andGeneral CounselOUR COMPANYMANAGEMENTTEAMOur experienced management team is responsible for establishing and implementing the Company’slong-range goals, strategies, plans and policies, subject to the Board’s direction and oversight.Hudbay 2015 Annual and CSR Report 19 Jon DouglasVice President andTreasurerElizabeth GitajnVice President, RiskManagementEugene LeiVice President,CorporateDevelopmentTerry LindeVice President,Project and TechnicalServicesPatrick MerrinVice President,Arizona Business UnitMary-Lynn OkeVice President,FinanceRobert WintonVice President,Manitoba BusinessUnitHudbay 2015 Annual and CSR Report 20 BUSINESS ANDFINANCIAL REVIEWIn a challenging year for commodities, Hudbay leveraged decades of miningexperience to deliver nearly 300% growth in copper production and beatoperating costs guidance while carrying out an extraordinarily successfulramp-up of production at Constancia, optimizing the Manitoba operations andadvancing the Rosemont project.KEY ACCOMPLISHMENTSAchieved commercial production at Constancia and completed ramp-up – both on budget and onscheduleDelivered growth in copper production, sales, revenue and operating cash flow compared toprevious year2015 production of all key metals was within guidance ranges for both the Manitoba and SouthAmerica Business UnitsHudbay 2015 Annual and CSR Report 21 2015 SUMMARYOPERATIONS SUMMARYFor the years ended December 3120152014* Metal reported in concentrate is prior to refining losses or deductions associated with smelter contract terms.FINANCIAL SUMMARYFinancial condition (in $000s)Dec. 31, 2015Dec. 31, 2014Financial performance(in $000s, except per share and cash cost amounts)Dec. 31, 2015Dec. 31, 2014Production (contained metal in concentrate)*Copper (000 tonnes)147.337.6Zinc (000 tonnes)102.982.5Gold (000 ounces)100.273.4Silver (000 ounces)2,791.5745.9Cash and cash equivalents$53,852$178,668Working capital57,61387,166Total assets4,479,5854,850,881Total long-term debt1,274,880987,067Equity1,787,2902,109,058Revenue$886,051$507,515(Loss) profit before tax(399,041)13,942Basic and diluted (loss) earnings per share1(1.41)0.31(Loss) profit(331,428)65,269Operating cash flows before stream deposit andchange in non-cash working capital222,14016,771Hudbay 2015 Annual and CSR Report 22 Financial performance(in $000s, except per share and cash cost amounts)Dec. 31, 2015Dec. 31, 2014Attributable to owners of the Company.1. Metal reported in concentrate is prior to deductions associated with smelter contract terms.2. ProductionContained metal in concentrate2Copper (tonnes)147,28037,644Gold (ounces)100,17773,377Silver (ounces)2,791,536745,910Zinc (tonnes)102,91982,542Metal soldPayable in metal in concentrateCopper (tonnes)134,60031,734Gold (ounces)93,77963,950Silver (ounces)1,873,176634,402Refined zinc (tonnes)101,920102,981Hudbay 2015 Annual and CSR Report 23 “Our success indeveloping a newoperation, in a newcountry, a new languageand a new type of mining,helped give us theconfidence that we coulddo it here at Rosemont.”Eugene LeiVice President,CorporateDevelopmentBefore joining Hudbay, Eugene Lei worked as an investmentbanker focused on mining for over a decade. “I wanted tospecialize in something that Canada excelled at, and mining iswhere Canadian companies are the leaders in the world.” It wasthe opportunity to “be with companies that are growing,companies that matter” that drew Eugene to Hudbay. In 2014, heplayed a central role in Hudbay’s acquisition of Rosemont, an assetin Arizona that will position Hudbay among the world’s top copperproducers. “We’d been tracking Rosemont before I got here,”notes Eugene, “but part of my experience as an investment bankerwas helping to identify the right time, the right environment andthe right competitive situation for moving on Rosemont.”Hudbay’s experience with Constancia in Peru also made animportant contribution to the Rosemont acquisition, says Eugene.“Our success in developing a new operation, in a new country, anew language and a new type of mining, helped give us theconfidence that we could do it here at Rosemont. Closer to home,in 2015, Eugene led the acquisition of the New Britannia mine andmill in Snow Lake. Working with the Hudbay technical team, “weidentified that the assets could be cost-effectively refurbished toprocess gold-bearing ore from Lalor. New Britannia was a uniqueopportunity that provides Hudbay with strategic flexibility toincrease both throughput and recoveries, and deliver greater valuefrom Lalor.”Hudbay 2015 Annual and CSR Report 24 “A big thing for me isfeeling that I have made adifference. I have beenfortunate. I am reallyproud to work for thiscompany.”Ken CharukOperationsForeman, 777 MineLike many at Hudbay, Ken Charuk has learned through doing.When he first started working underground in 1988, Ken wasn’tsurprised to discover that he had a knack for mining. “I was bornand raised in the farming industry, so operating heavy equipment,doing all kinds of construction, that came very easy for me.” Overthe years, Ken has put his wide range of talents to use in a numberof jobs underground, from LHD operator to shaft inspector andtimberman. Today, he is an operations foreman at Hudbay’s 777mine – a position that requires as much coaching skill as it doestechnical expertise. Being able to pass along his decades’ worth ofknowledge and experiences at Hudbay is one of Ken’s greatestrewards: “A big thing for me is feeling that I have made adifference. I have been fortunate. I am really proud to work for thiscompany.”Hudbay 2015 Annual and CSR Report 25 BUSINESS AND FINANCIAL REVIEWSTRATEGYAt Hudbay, our mission is to create sustainable value for our stakeholders by acquiring, developingand operating high-quality, long-life deposits with exploration potential in mining-friendlyjurisdictions. Over the last five years, we have worked toward this objective, and in 2014 and 2015our efforts culminated with the successful ramp-up of three new mines: Lalor, Reed and Constancia.This achievement was tempered somewhat in that it occurred during a volatile price environment forcommodities.However, this environment highlighted another defining strength of Hudbay. We have been miningfor close to 90 years, and have a remarkable number of highly experienced people in all ourjurisdictions and at every level of our operations. We know what it takes to deliver sustainable,sector-leading growth at a low cost.Our strong asset base, solid financial position and experienced team provide Hudbay with a platformfor pursuing and implementing our strategy for growth. We believe that the best way to createstakeholder value in mining is to discover new mineral deposits and to develop facilities to profitablyextract ore from those deposits. In 2016 and beyond, we plan to grow Hudbay through explorationand development of properties we already control, such as our Rosemont project in Arizona, andthrough the acquisition of other properties that meet our strategic criteria. We will also continue tooptimize the value of our producing assets through efficient and safe operations.To help ensure that acquisitions we undertake always create sustainable value, we have a number ofcriteria for evaluating opportunities:Is the acquisition in a politically stable, mining-friendly jurisdiction in the Americas?Can we leverage our expertise in the exploration and development of volcanogenic massivesulphide and porphyry mineral deposits?Does the asset offer significant potential for exploration, development and optimization?At what stage of development is the asset? Because large mergers and acquisitions carrysignificant risks, we focus on early-stage projects, unless exceptional opportunities presentthemselves.Do we have a clear understanding of how Hudbay can add value to a potential acquisition, throughour technical, operational and project execution expertise, or by providing needed financial capitalor finding other optimization opportunities?Is the acquisition accretive to Hudbay on a per share basis?Hudbay 2015 Annual and CSR Report 26 Can we deliver environmental performance and achieve broad social acceptance?FINANCIAL AND BUSINESS OBJECTIVES FOR 2016Focus on optimizing production and cost performance at our Constancia and Manitoba operationsto ensure they remain cash flow positive.Work to advance the permitting process, technical development, and community and governmentrelations at the Rosemont project.Complete the planned 11,000-metre underground exploration of gold zones at Lalor, as well asthe related trade-off studies for mining and processing this gold mineralization. Phase 1 of adrilling program, which included 14 holes, was completed in 2015, and assay results confirmed ahigh-grade thick core down the middle of the main zone.Maintain sufficient liquidity to ensure Hudbay remains well capitalized in an uncertain priceenvironment.Continue to evaluate acquisition opportunities that meet our criteria and pursue those that are inthe best interest of Hudbay and our stakeholders.Hudbay 2015 Annual and CSR Report 27 BUSINESS AND FINANCIAL REVIEWOPERATIONS2015 was a transitional year for Hudbay. The successful ramp-up of our new mines supported a shiftin focus from advancing development to delivering production. Backed by nearly 90 years ofexperience, we were able to provide sector-leading growth in low-cost copper and zinc production.We also took action to further optimize our mine operations, enhance our liquidity status andachieve sustainable cost reductions. In 2015, our experience, our strategy and the strongperformance of our mines combined to ensure that Hudbay is well positioned to weather the currentcommodity price environment.2015 PERFORMANCE HIGHLIGHTSLaunched a Hudbay-wide efficiency improvement initiative. This ongoing review, combined withcost containment efforts, resulted in expected 2016 capital expenditure and operating costreductions of more than $100 million, with no impact on our 2016 production expectations.Ratified new three-year agreements, which provide enhancements to wage rates, pensions andbenefits, with all seven labour unions representing employees at Hudbay’s Manitoba BusinessUnit.Resolved an inventory backlog at our Constancia operation by increasing the size of our truckingfleet and expanding and optimizing our routes to the port of Matarani. See the Constancia casestudy to learn more.Acquired the New Britannia mine and mill (NBM), located in Snow Lake, Manitoba, forapproximately $11 million in net cash consideration, plus a contingent payment of $5 million.Currently on care and maintenance, the NBM mill, if refurbished, can potentially processapproximately 2,000 tonnes per day of gold zone ore from Lalor. A technical study on restartingthe NBM mill is currently underway and, as a result of the acquisition, Hudbay no longeranticipates constructing a new concentrator at Lalor.Achieved full-year production guidance and met or came in below cost guidance at all operations.ManitobaIn 2015, production of all metals increased compared to 2014 as a result of increased productionat Lalor and increased copper grades at Reed. Production of all metals and unit operating costswere within our guidance ranges.Hudbay 2015 Annual and CSR Report 28 Ore production was 9% higher than in 2014 as a result of increased production at our Lalor andReed mines, which achieved commercial production in 2014. This was partially offset by lowerproduction at our 777 mine as a result of equipment availability in the second and third quarters of2015.Copper and silver grades were lower than in 2014 by 2% and 10%, respectively, and zinc and goldgrades were higher by 11% and 4%, respectively.Combined, Hudbay’s Manitoba operations produced 41,383 tonnes of copper metal inconcentrate, 102,919 tonnes of zinc metal in concentrate and 92,793 ounces of precious metals inconcentrate.** Precious metals production includes gold and silver production on a gold-equivalent basis. Silver is converted to gold at a ratio of 70:1.PeruConstancia achieved commercial production in the second quarter of 2015, and subsequentlyramped up to full production in the latter half of the year. Over the course of the year, the Peruoperations produced 105,897 tonnes of copper concentrate and 47,263 ounces of precious metalsin concentrate. Production was within our guidance range for 2015.*Throughout 2015, optimization of plant performance was an important focus as on-site teamsbecame increasingly familiar with operating the mine and with varying ore types. A key challengefor the year was managing shipping and inventory issues. In May and June, shipments from theConstancia mine to the port of Matarani were constrained by a number of factors, including truckavailability, protests unrelated to Hudbay on portions of the trucking route, and road repairactivities that increased cycle times for concentrate trucks. As a result of these constraints and afaster ramp-up to full production than anticipated, an excess inventory of copper concentratebegan building up at the mine. Mine management addressed these issues in several ways,including by expanding the size of the mine’s trucking fleet. By year-end, inventory was back tonormal working levels. See the Constancia case study to learn more.Looking to 2016, expansion of the port of Matarani is near completion, with the new Pier F startingto handle concentrate shipments in February. This new facility is intended to alleviate portcongestion as other mines ramp up production.* Precious metals production includes gold and silver production on a gold-equivalent basis. Silver is converted to gold at a ratio of 70:1.Hudbay 2015 Annual and CSR Report 29 PDF !PDF !BUSINESS AND FINANCIAL REVIEWFINANCIALSNotwithstanding a weak metal price environment, Hudbay delivered strong financial results in 2015,reflecting the results of new capital investment and management’s focus on cost optimization.Revenue increased by 75% to $886.1 million. Operating cash flow before stream deposit and changein non-cash working capital increased more than 13-fold, from $16.8 million to $222.1 million. Cashcost per pound of copper produced, net of byproduct credits, decreased from $1.45 per pound to$1.14 per pound.*Consolidated Financial StatementsQ4 Management’s Discussion and Analysis* Operating cash flow per share and cash cost per pound of copper produced, net of byproduct credits, are non-IFRS financial performance measureswith no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under “Non-IFRS FinancialPerformance Measures” beginning on page 48 of Hudbay’s Management‘s Discussion and Analysis filed February 24, 2016.Hudbay 2015 Annual and CSR Report 30 “Hudbay has always hadan effective enterpriserisk process and now it ismore formalized acrossthe mine site and businessunit levels.”Elizabeth GitajnVice President, RiskManagementCSR APPROACHOperating sustainably is essential to our success. We have corporate socialresponsibility policies, systems, plans and practices in place, and commit tothem everywhere we operate. It makes us better at what we do – a lessonwe’ve learned through experience.An accountant by training, Liz Gitajn brings experience gained bothinside and outside the mining industry to her role. Prior to joiningHudbay in 2015, she worked for close to a decade in the goldsector, including five years with a senior producer that operated 27mines. She has been actively involved in assessing and managingrisk – “operational risk, financial risk, strategic risk and compliancerisk” – since 1992. Liz observes that Hudbay has “always had aneffective enterprise risk process,” but her background has helpedher further formalize that process, and better introduce it to “themine site level and the business unit level.” By working with people“closest to any given situation,” Liz gets the benefit of “educated,skilled evaluations” that help her develop and implement“effective risk management programs and processes,” as well asmitigation strategies that can have a company-wide impact.Hudbay 2015 Annual and CSR Report 31 “I pride myself on beingable to assemble andmanage high-performanceteams. That’s whatprojects are all about.”Terry LindeVice President,Project andTechnical ServicesHudbay was named to the second annualFuture 40 Responsible Corporate Leadersin Canada by Corporate Knights magazine.Focused on Canadian companies withrevenues under C$2 billion, the ranking isbased on 12 key performance indicatorscovering resource, employee andfinancial management.Flin Flon finished second in the 2015Manitoba Provincial Mine RescueCompetition. Teams are judged on firstaid, firefighting, mine rescue procedures,obstacle and recovery, and practical skills.2015INDUSTRY RECOGNITIONAn engineer by training, Terry Linde has been a leader on manymining initiatives, in many different locations, over the course ofhis 35 years in the business, including as Director of Projects forConstancia, where he worked from 2011 until 2015. Along withgathering experience, he has developed a global network ofconnections, which make an essential contribution to his new role.As Terry notes, “I pride myself on being able to assemble andmanage high-performance teams. That’s what projects are allabout.” Currently focused on Rosemont, Terry is helping to lay thegroundwork for development and making sure that lessonslearned at Constancia, another large-scale open pit mine, areapplied to the project. More broadly, he’s also leading a teamfocused on extending “a culture of excellence” in terms ofexecuting projects at Hudbay. That effort includes “documentingprocesses and procedures” that can be used by “future teams forwhatever project is on the horizon.”Hudbay 2015 Annual and CSR Report 32 CSR APPROACHCSR GOVERNANCEThe Environmental, Health, Safety and Sustainability (EHSS) Committee of Hudbay’s Board ofDirectors oversees the Company’s human rights, environmental, health and safety policies, programsand systems. The Committee meets quarterly to review performance and management of key EHSSrisks, such as the health and safety of our workforce and community members, and environmentalrisks. The Committee also tracks the external ISO 14001 and OHSAS 18001 processes for Hudbay’smanagement systems. Day-to-day management of Hudbay’s CSR program is the responsibility of ourVice President, Corporate Social Responsibility, along with line management at each operation.CSR GOVERNANCEHudbay 2015 Annual and CSR Report 33 CSR MANAGEMENT FRAMEWORKOur CSR management framework promotes continuous improvement and common performancestandards at all sites. Our approach begins with our Code of Business Conduct and Ethics, HumanRights Policy and Environmental Health and Safety Policy, which are the highest-level statements ofour commitment to corporate social responsibility.Corporate and site-specific management systems support decision-making and performance.Operating sites are required to maintain certification under the ISO 14001 (environmental) andOHSAS 18001 (health and safety) management standards. New sites are expected to achievecertification within two years of start-up or acquisition by Hudbay.We implemented the first company-wide integrated management software system for capturing,tracking and reporting health, safety, environment and social data in 2014. This system is now in useat all Hudbay locations. By supporting coordination between locations to spot trends, share bestpractices and flag potential issues, the system is expected to help us improve performance, mitigaterisk and maintain compliance.INTERNATIONAL BEST PRACTICE STANDARDSHudbay has adopted international best practice standards that we consider particularly vital to ourbusiness:ISO 14001 environmental management standardOHSAS 18001 health and safety management standardISO 9001 quality management standard for the production and supply of cast zinc productsTowards Sustainable Mining (TSM) – the Mining Association of Canada’s set of tools and indicatorsto drive performance and ensure that key mining risks are managed responsiblyVoluntary Principles on Security and Human Rights – an operating framework that ensures securitypractices include respect for human rightsGlobal Reporting Initiative (GRI) – the generally accepted framework for reporting on anorganization’s economic, environmental and social performanceCDP (formerly called the Carbon Disclosure Project) – thousands of organizations globally measureand disclose their greenhouse gas emissions, water use and climate change strategies throughCDP and CDP WaterHudbay 2015 Annual and CSR Report 34 Extractive Industries Transparency Initiative (EITI) – Hudbay is an official supporting company ofthe EITI. Hudbay Peru is a member of the Peruvian Mining Society, which is fully committed to theEITI process in Peru (see Economic Contributions for details)IFC Performance Standards – Hudbay has committed to following IFC Performance Standards atour Constancia project. Part of the World Bank Group, the International Finance Corporation (IFC)is the largest development institution in the world that is focused exclusively on the private sectorin developing countriesPRECAUTIONARY APPROACHHudbay operates under the precautionary principle through the life of a mine (that is, the duty toprevent harm, when it is within our power to do so, working with a balance of probabilities if ascientific conclusion is not yet available). We use baseline environmental and social impact studies toevaluate how to avoid, mitigate or control potentially significant impacts; implement appropriatemonitoring and management systems; and address the need for mine closure. In all cases, provisionis made for public consultation and input.INDUSTRYINVOLVEMENT +Hudbay participates in industry associations and multi-stakeholder groups through membership,funding, provision of expertise and participation in committees and working groups. Membershipsinclude the following:Aboriginal Chamber of Commerce (Manitoba)AIME – Society of Mining EngineersAmerican Exploration and Mining AssociationArizona Association of Economic DevelopmentArizona Chamber for Commerce and IndustryArizona–Mexico CommissionArizona Mining AssociationAsociación Vida Perú (non-profit organization that donates medical equipment and medicines)Cámara de Comercio Canadá–PerúCanadian Aboriginal Minerals AssociationHudbay 2015 Annual and CSR Report 35 Canadian Arizona Business CouncilCanadian Council for Aboriginal BusinessCanadian Dam AssociationCanadian Institute of Mining, Metallurgy and Petroleum and relevant societiesConfederación Nacional de Instituciones Empresariales Privadas, CONFIEP (National Confederationof Private Business Institutions in Peru)Cusco Chamber of CommerceDevonshire Initiative (a Canadian forum for leading international development NGOs and miningcompanies to engage on mining and community development issues)EITI – Extractive Industries Transparency InitiativeEmpresarios por la Educación (a Peruvian private sector organization to promote and developeducational projects)Green Valley Sahuarita Chamber of CommerceGrupo de Diálogo, Minería y Desarrollo Sostenible (multi-stakeholder group promoting open andtransparent dialogue on mining, environmental protection and sustainable development in Peru)Iniciativa para la Transparencia de las Industrias Extractivas en Perú, EITI–Perú (ExtractiveIndustries Transparency Initiative, Peru)International Zinc AssociationManitoba Employers CouncilMarana Chamber of CommerceMining Association of CanadaMining Association of ManitobaMining Foundation of the Southwest (US)National Math and Science Initiative (US)Northern Manitoba Sector Council (not-for-profit employer-led network focused on building askilled workforce for northern Manitoba’s resource-based sector)Oro Valley Chamber of Commerce (AZ)Hudbay 2015 Annual and CSR Report 36 Perú 2021. A private non-profit organization that promotes social responsibility (SR) as amethodology for business management. It represents the World Business Council for SustainableDevelopment (WBCSD) and is the only Peruvian organization accredited as a “Certified TrainingPartner” of the GRIPeruvian-Canadian Chamber of CommerceProspectors and Developers Associations (provincial associations)Prospectors and Developers Association of CanadaSARCC (organization of SNMPE member companies providing emergency response services)Saskatchewan Mining AssociationSNMPE (national society of mining, oil and energy in Peru)Southern Arizona Business CoalitionSouthern Arizona Leadership CouncilTucson Hispanic Chamber of CommerceTucson Metropolitan Chamber of CommerceHudbay 2015 Annual and CSR Report 37 CSR APPROACHHUMAN RIGHTS ANDSECURITYUpholding human rights is fundamental to sustainable development – and to the success of ourbusiness. Our Human Rights Policy spells out our commitment to human rights, settinginternationally accepted standards for business and labour practices, community participation andsecurity measures.In keeping with our policy, we also follow the Voluntary Principles on Security and Human Rights, anoperating framework that ensures security practices include respect for human rights. Our approachis rooted in the belief that security begins with our relationships with neighbouring communities andthe professional conduct of our employees and security contractors.Our business units train security personnel on the United Nations (UN) Code of Conduct for LawEnforcement Officials and the UN Basic Principles on the Use of Force and Firearms by LawEnforcement Officials, particularly in Peru. The training is provided to company employees as well ascontractors and public security who are on-site at our request. Security supervisors and the majorityof contracted security staff are unarmed except for government-mandated armed security guards atthe two explosive storage areas in Peru.In Peru, we regularly audit security policies and practices, and conduct gap analyses against theVoluntary Principles. Security personnel work closely with Constancia’s community relations team tomaintain open lines of communication with local communities and mitigate potential issues.Hudbay is named in three civil lawsuits relating to events prior to 2010 in Guatemala, where theCompany once owned a controlling interest in Compañía Guatemalteca de Níquel (CGN) and its Fenixferro-nickel project. Information about the litigation is posted to our website.2015 PERFORMANCE HIGHLIGHTSPeruFollowing the 2014 occupation of the Constancia property by members of a neighbouringcommunity, and its incident-free resolution, we conducted a thorough security review thatincluded interviews with security personnel and community leaders. Findings were shared atemployee and security staff workshops so that everyone could learn from the incident and knowwhat is expected of them.Hudbay 2015 Annual and CSR Report 38 We also engaged an NGO to audit Constancia’s security practices against the Voluntary Principles.The audit revealed opportunities for improvement, and our Peru team is evaluating the follow-upactions to be taken. Two beneficial outcomes of this process have been enhanced social andhuman rights risk assessment, and expanding engagement on security topics.The Constancia community relations and security teams initiated meetings with their peers atother mining companies in the area to collaborate on security approaches and discuss social unrestaffecting other mining projects.Our Constancia security manager coordinated a series of monthly meetings of mining securitymanagers in southern Peru. The group invited guest speakers from the Peruvian police force andlocal NGOs to share best practices, including their experiences with the Voluntary Principles onSecurity and Human Rights.ArizonaThe Rosemont property is within 50 miles (80 kilometres) of the Mexican border, and we are inregular communication with various federal, state and local law enforcement agencies includingthe US Border Patrol, FBI, USDA Forest Service, AZ Department of Safety, Pima County Sheriff andlocal EMS to ensure adequate protection for Hudbay workers and assets. Three meetings wereheld in 2015, and the decision was made to hold these meetings monthly in 2016.In the fall of 2015, we deemed it necessary to close public access to certain areas of private landon our property because of increasing safety hazards related to shafts and sinkholes from historicmining activities.ManitobaIn addition to increased management oversight, we hired a third-party security management teamat our operations during the 118-day labour strike. This was both to protect assets and non-strikingworkers and to provide a security resource. During this period, employees were required to showtheir company identification card to access our properties.Hudbay 2015 Annual and CSR Report 39 CSR APPROACHSTAKEHOLDER ENGAGEMENTStakeholder engagement is about connecting with people and organizations that can impact or beimpacted by our business (such as investors, employees, communities and government). We want tolisten, communicate and integrate stakeholders’ voices into our plans. Each business unit is expectedto put in place engagement practices that are consistent with Hudbay’s objectives while reflectingthe local context.Our corporate Stakeholder Engagement and Community Response standards and guidancedocuments provide clear direction on our expectations. By implementing these standards at eachsite, we aim to build trust, strengthen relationships, reduce social risk and improve opportunities tocreate value for the Company and stakeholders.Typical site processes and activities are as follows:StepTypical communityengagement activitiesIn practical termsIdentifystakeholdersSite mapStakeholder registerGetting to know our neighbours and allowing them toknow usUnderstandStakeholder map andprofilesSocio-economic profileRisk managementframeworkUnderstanding the culture, concerns and aspirations aswell as infrastructure (e.g., locations of nearby schools orhospitals)PlanStakeholder engagementplanMaking decisions and documenting how we will engagewith community stakeholdersEngageCommunicationmaterialsMeeting notesWorkshops, meetings, joint committees, visitsRespondStakeholder engagementlogbookCommitments registerRecording the progress of engagement for futurereferenceHudbay 2015 Annual and CSR Report 40 IDENTIFYING STAKEHOLDER INTERESTSTypical stakeholder priorities and concerns are listed below. Additional information on many of thetopics can be accessed by clicking on the relevant links.Stakeholder groupHow we engaged in 2015Priorities and concernsShareholders, investors andanalystsConferences (11 events)Investor meetings and conferencecalls (over 300 events)Annual General MeetingAnalyst and investor site visitsMeeting between representativesof our Board of Directors and theCanadian Coalition for GoodGovernance Ramp-up of Constancia Financial strength Shareholder returnsPermitting and communityrelationsEmployees and contractorsQuarterly company-wide “townhall” meetings via videoconferenceOrientation and training programsOne-on-one and small groupmanager/staff meetingsSocial events (potlucks, holidayparties, off-site staff luncheons)Health and wellness activities andcommittee meetingsIntranetHealth and safetyWork processesBusiness performanceUnderstanding of compensationand benefitsOpportunities for personaldevelopmentEnvironmental requirementsTraining for policies, permits orother requirementsUnionsMeetings with union leaders onoutstanding issuesFrequent meetings to renegotiatecollective bargaining agreementsRenegotiate collectivebargaining agreements withunionsGrievances and grievanceprocessesHudbay 2015 Annual and CSR Report 41 Stakeholder groupHow we engaged in 2015Priorities and concernsLocal communities andAboriginal/indigenousgroups/Native AmericansCommunity information andconsultation meetingsCommunity partnershipsMine tours and open housesSite grievance/communityresponse processesCommunity relations officesCultural awareness workshops andother trainingDialogue roundtables andagreementsDevelopment project updatesCommunity and area investmentSafety and environmentalconcernsLand useWater use and qualityCultural protection, awarenessand disseminationLocal employment andprocurementTraining programs forcommunity membersGovernmentMeetings and agreements withlocal, regional, provincial andfederal government officials andregulatorsJoint initiatives with governmentfor social investmentsPermittingEnvironmental and legalcompliance/mitigationAboriginal/indigenous/tribalrelations (where applicable)Economic contributionsCommunity and workforcedevelopmentCustomersDirect contactIndustry and business forumsAchieving agreed terms ofdelivery for productsCompliance withenvironmentally and sociallyresponsible performance andrisk managementIndustry associationsAssociation meetingsParticipation in committeesJoint initiativesPresentations and lettersMonthly security managersmeetings in southern PeruIndustry environmental, health,safety and communitystandardsLegislationEducationBest practicesHudbay 2015 Annual and CSR Report 42 Stakeholder groupHow we engaged in 2015Priorities and concernsNon-governmentalorganizations (NGOs)Meetings and writtencommunicationsParticipating in multi-stakeholdergroups (e.g., Devonshire Initiative,Grupo Dialogo Minero)Multi-stakeholder partnerships(e.g., Asociación Vida Perú[manage donations of medicinesand medical equipment])Community development andsupportEducationRespecting community andhuman rightsMediaOne-on-one interactions withjournalists, press releasesMeetings with editors anddirectors from key relevant mediaTransparency and accountabilityon social and environmentalissuesPresentations showingcommunity and socialinvestments and developmentHudbay 2015 Annual and CSR Report 43 CSR APPROACHMATERIALITYOnce every three years, we conduct a combined materiality, hazard and aspect assessment to guideour CSR reporting and management priorities. The assessment considers the environment, health,safety and community (EHSC) issues that are most significant to Hudbay in terms of business impactand the degree of stakeholder interest.Our last assessment was conducted in 2014. Please see our 2014 report to learn more about ourprocess.MATERIALITY MATRIXEleven priority issues were identified during the 2014 materiality assessment. Click on the issue inthe diagram below for details on how it is being managed and our 2015 performance.Hudbay 2015 Annual and CSR Report 44 This table indicates how our priority issues align with the G4 aspects reported in our GRI index:Priority issueGRI (G4) aspectsEthicsEthics and integrityAnti-corruptionHuman rightsSecurity practicesHuman rights grievance mechanismStakeholder engagementStakeholder engagementEnvironmental grievance mechanismsGrievance mechanisms for impacts on societyAboriginal/indigenous relationsIndigenous rightsHealth and safetyOccupational health and safetyEmployee relationsLabour/management relationsEconomic performanceEconomic performanceIndirect economic impactsProcurement practicesLocal market presenceEmploymentClosure planningResettlementLand and biodiversityBiodiversityWaterWaterTailingsEffluents and wasteHudbay 2015 Annual and CSR Report 45 BOUNDARIESThe materiality review was conducted on the initial boundary assumption of activities and facilitieswithin Hudbay’s management control (as described in the Our Company section of this report).Participants in the review process were then asked for cases in which boundary limits should beadjusted for specific aspects. The exceptions that were agreed to be appropriate based onstakeholder expectations and business risk are as follows:Safety statistics are tracked and reported for all contractor activities that are under Hudbaycontracts and supervision;Environmental incidents related to transportation between Hudbay locations and local supplieractivities are generally tracked and reviewed by Hudbay, but are not included in performancereporting in this report;Grievances are accepted and investigated with respect to local contractors, and are included ingrievance numbers and characterization in this report; andScope 2 greenhouse gas emissions are calculated and reported.Hudbay 2015 Annual and CSR Report 46 CSR APPROACHSUPPLY CHAIN STEWARDSHIPMining is the first stage of a vast supply chain that transforms the Earth’s mineral resources intoproducts that meet vital needs in every aspect of life. We focus our supply chain stewardship effortson the activities where we can have the greatest influence – namely, our own operations, contractorsworking at our sites, local suppliers and Hudbay products up to the point at which they have beendelivered to customers.OPERATIONSAll employees and contractors working at our sites are expected to meet the Company’senvironmental, health and safety, and human rights standards, as described throughout this report.SUPPLIERSThe direct supply chain for our copper concentrate and zinc metal products originates in Hudbay’sown mines in northern Manitoba and Peru, with the exception of some purchased zinc concentratethat augments Hudbay’s production as feed to our zinc metallurgical facility.1The indirect supply chain for energy, goods and services used in transforming ore and concentrateinto products includes thousands of suppliers. This supply chain includes operating supplies,maintenance supplies, energy and fuels as well as capital goods:In Peru, our supply chain in 2015 was related to the capital investment and operation of ourConstancia project, ranging from engineering and construction services to mine haulageequipment and the grinding mills installed in the process plant. Our top 50 suppliers accounted for91% of our spending, and 93% of our spending in 2015 was with suppliers based in Peru.In Manitoba, our supplier base relates to production operations and capital projects. Our top 50suppliers represented 75% of our spending in 2015, and 92% of spending was with suppliers inCanada, with another 7% of spending with suppliers based in other Organisation for EconomicCo-operation and Development (OECD) countries. These suppliers provided goods and servicesincluding engineering services, electricity, spare parts for equipment, and capital equipment suchas new underground haul trucks.Hudbay 2015 Annual and CSR Report 47 The top 10 suppliers and service providers to Hudbay in 2014 were:Caterpillar Leasing Chile S.A.Cementation Canada Inc.CN (Cad)Corporacion Primax S.A.Cosapi S.A.Edegel S.A.A.Glencore Canada CorporationManitoba HydroMoly-Cop Adesur S.A.Stracon GyM S.A.We believe that our greater stewardship responsibility is at the local supply level, because ourinfluence is much greater with small local suppliers. Our major international suppliers have their owninternal requirements and government regulations to comply with, and much of our procurement isin countries with robust environmental, health and safety, and human rights regulation.We therefore focus our supply chain sustainability efforts on encouraging and supporting localsuppliers in fulfilling their social responsibilities, often working with them to establish appropriatehealth and safety, environmental or quality systems and processes.PRODUCTSOur two main products, copper concentrate and zinc metal, come from our own mines in Canada andPeru, and from purchased zinc concentrate:34% of copper concentrate was sold to smelters in the Americas and Europe, and 66% to smeltersin Asia. From there, several stages of melting and purifying the copper content ultimately result in99.99% pure copper, which provides the building block for many of life’s essentials.We ship cast zinc metal produced at our Flin Flon zinc plant by rail and truck to industrialcustomers (primarily galvanizers who use it to protect steel from corrosion) throughout NorthAmerica.Hudbay products are conflict-free minerals under applicable regulatory requirements, meaning thatthey are not produced in regions of armed conflict or human rights abuses.Hudbay 2015 Annual and CSR Report 48 Copper and zinc products are accompanied by material safety data sheets that provide details onproduct composition, toxicology, handling, storage and exposure issues. We also meet our productstewardship commitments by collaborating with governments and industry associations such as theInternational Zinc Association.The International Maritime Organization (IMO) has established new hazard classification criteria forbulk cargoes. The International Convention for the Prevention of Pollution from Ships (MARPOL) hasimposed restrictions on the disposal of bulk cargo residues which have been classified as “harmful tothe marine environment” (HME) under the amended Annex V of the MARPOL convention.Hudbay engaged the European Copper Institute (ECI) to determine the MARPOL classification forConstancia’s copper concentrates, and the ECI has concluded it is not HME. Hudbay intends to haveits Flin Flon copper concentrates analyzed and classified in 2016.1. Purchased concentrate represents 10.5% of the feed to the zinc metallurgical plant and is 100% sourced from Canada.MORE ONSUPPLY CHAIN STEWARDSHIPThe minerals we mine play a fundamental role in the everyday lives of billions of people around theworld. Here are some interesting facts and figures from the Copper Development Association andthe International Zinc Association:Copper is the standard benchmark for electrical conductivity. It conducts electrical current betterthan any other metal except silver.Building construction accounts for nearly half of all copper use. About 200 kilograms (439 pounds)of copper is used in the average single-family North American home, primarily for building wireand plumbing tube, fittings and valves.About 23 kilograms (50 pounds) of copper and 18 kilograms (39 pounds) of zinc can be found inthe average car.About 60% of zinc is used for galvanizing to protect steel from corrosion.Zinc is called the “great protector” because it is used to protect metals (galvanizing) as well ashumans, in products such as sunscreen (zinc oxide), zinc lozenges and vitamins.Hudbay 2015 Annual and CSR Report 49 $4MILLIONin financial benefits derived fromcontinuous improvement initiatives inManitoba 400+LOCAL PEOPLEemployed at Constancia$189MILLIONin wages and benefits paid0.3LOST TIMEaccident frequencyper 200,000 hours workedOUR PEOPLEAcross borders, cultures and decades, the people at Hudbay define theCompany. Their experience and values – their commitment to safety, tocollaboration, to diversity and to performance – enable Hudbay to createopportunities and overcome challenges.Hudbay 2015 Annual and CSR Report 50 “The focus of Hudbay isalways on safety.”Walt RyanHealth, Safety andTrainingCoordinator,Manitoba“Part of my job is to sharethe core values ofHudbay, developed in FlinFlon starting 90 years ago,to the team in Arizona.”Kim ProctorDeputy ProjectDirector, RosemontAs Walt Ryan says, when it comes to evaluating situations relatedto health and safety, or advising his co-workers on the samesubject, “I can talk the talk because I walked the walk.” And thensome. Walt has been a miner for over 40 years, with most of thattime spent with Hudbay. Though he’s been “a jackleg miner”, muchof his career has been spent in underground construction and forthe last few years he’s been a health, safety and trainingcoordinator, working primarily in the 777 mine in Flin Flon. Inreflecting on his experience, Walt notes that “there’s acamaraderie in mining that you don’t see in other industries. Youcan count on the people you’re working with to keep an eye out.”That culture and those values are represented across Hudbay. “I’vestudied a bit of the Company’s history,” says Walt. “The focus isalways on safety – and that impresses me.”In a career that spans three decades, 12 different jobs and 10different mines, one of the things that Kim Proctor finds mostrewarding about mining in general – and about working forHudbay in particular – is the opportunity to learn new things.“Don’t back away from a career challenge,” says Kim. “Face it, ownit and use it as an opportunity to shine.” That’s advice she bothgives and follows. Before taking on her current role, Kim was theproject manager in charge of developing Lalor, a mine in northernManitoba that was completed with remarkable speed and aremarkable safety record. Today, she is in Arizona working on aproposed open pit project, after 30 years in underground mining.In addition to providing the insights of an expert mine developer,Kim is sharing “the core values of Hudbay, developed in Flin Flon,starting 90 years ago.”Hudbay 2015 Annual and CSR Report 51 OUR PEOPLEHEALTH ANDSAFETYA culture of zero harm is our first priority. We consider it essential that employees and contractors atour sites have the knowledge, skills and equipment needed to perform their jobs safely – and thesupport of management and co-workers to approach each task the right way.Within two years of start-up, operations are required to be certified to the OHSAS 18001 health andsafety management standard. In Manitoba, external evaluators perform semi-annual audits toconfirm ongoing compliance. We also follow the Mining Association of Canada’s Towards SustainableMining (TSM) health and safety protocols at operating sites within and outside of Canada. Internalassessments against the TSM protocols are performed annually and third-party verification takesplace once every three years.An integrated management software system supports the process of recording, investigating andtracking all types of incidents and non-conformances across the Company. Since its implementationin 2014, the system has enabled us to conduct more rigorous reviews of high-potential safety risksand put in place appropriate controls.The Positive Attitude Safety System (PASS) is an important program for driving performance inManitoba. PASS is based on facilitated discussions at all levels of the organization, to increase eachperson’s involvement in recognizing and managing workplace risks. PASS includes activities likesafety huddles at the start of each shift, “A” logs for recording crews’ safety fixes and improvements,the rating of safe days, and monthly PASS newsletters. Its success is due in part to its strongemphasis on positive reinforcement.At operating sites, we maintain programs aimed at promoting and maintaining employee health andwellness. For example, in Manitoba, the programs include:Fibrogenic dust screening conducted at least twice a year;Hearing surveillance tested at least annually; andBiological monitoring for workers who may be exposed to lead, cadmium or arsenic as part of theirwork. At the time of obtaining biological monitoring samples, employees are also counselled onproper respirator fit and use, personal hygiene, working and eating habits, smoking, alcohol anddrug intake, and potential sources of metals exposures outside of the workplace.Hudbay 2015 Annual and CSR Report 52 LOST TIME ACCIDENTFREQUENCYLOST TIME ACCIDENT SEVERITYConstancia is a remote site and many workers travel long distances to work eight- or 14-day rotationshifts. They remain on-site during their shift rotation, staying at company-provided accommodation.There are a variety of health and wellness services and amenities available to them at the camp,including a medical centre, a soccer field and a volleyball court. Constancia employees are offeredmassage therapy and chiropractor services semi-annually. We also host our own “Olympic Games”,which include chess and table tennis competitions.Wellness programs, run by employee wellness committees, have been launched at each location. Theprograms include lunch and learns, walking competitions, newsletter articles and targeted campaignsfor common topics like cold and flu, allergy awareness and managing stress. Your Health Matters Hereis a place on the corporate intranet for employees to share health and wellness information and topropose corporate donations to health-related programs that are meaningful to them.2015 PERFORMANCE HIGHLIGHTSCorporateOur lost time accident (LTA) frequency was 0.3 per 200,000 hours worked, compared to 0.1 in theprevious year. Lost time accident severity, which reflects the number of days missed, was 11.4versus 4.7 in 2014. While performance was not at our record 2014 level, it was still a strong yearfor safety. The major difference was in the increased number of LTAs in the first half of the year atConstancia, which, combined with fewer hours worked (about half of the previous year), resultedin the significant increase in LTA frequency.Hudbay 2015 Annual and CSR Report 53 ManitobaSafety performance was bolstered by a number of new processes and a strong emphasis onpotentially serious incidents:We introduced the incident cause analysis method (ICAM) for investigating incidents and nearmisses. ICAM helps determine root causes so that appropriate action can be taken. Twenty-fourICAM investigators were trained, including management and union members.Department heads held regular “Safety Stand-Downs” with their crews to discuss pressing safetyissues (incidents or trends).The metallurgical surface departments introduced the “Take Five” safety card system. In aprocess similar to the five-point safety card system used in the underground mines, workersidentify hazards on a Take Five card before starting a new activity. The system is credited withhelping drive noticeable improvement in the safety performance of the zinc plant and Flin Flonmill.PeruThe start of 2015 brought substantial change to the Peru team with the transition from aconstruction project to operations. Safety performance slipped in the first half of the year, andincluded two serious close calls, which prompted an increased focus on safety controls, proceduresand communications. Through a series of safety talks, we reinforced basics like pre-work job safetyanalyses. To help nurture a safety culture, the Peru management team also mandated weeklysafety audits conducted by department heads and started weekly, one-hour safety chats withsupervisors and contractors. These actions contributed to noticeable improvement in the secondhalf of the year.We also had to address transportation safety issues related to the large number of trucks haulingconcentrate from the mine to the port at Matarani. See the Constancia case study to learn more.ArizonaDespite the significant drilling campaign, there was only one reportable incident in 2015, relatedto an ergonomic issue.Most of the year was spent preparing health and safety systems and processes to be scaled up forconstruction. This included:Developing an Environment, Health and Safety Policy based on the Hudbay corporate policy andlocal health and safety standards;Establishing a joint occupational health and safety committee;Hudbay 2015 Annual and CSR Report 54 One of our summer students in Manitobadeveloped an innovative Stress Lesscampaign, meeting with work crews todiscuss stress and mental health, and topresent wellness and coping strategies.She also ran a Stress Less challenge inwhich participants completed weeklyquestionnaires about their physicalactivity and wellness for a chance to winprizes.In Peru, we offered a parenting skillscourse to employees and their spouses.At the end of the session, one-on-onecounselling was available free of chargeto those who wanted it.Introducing the “Take Five” safety card system;Establishing safety Golden Rules for high-risk tasks;Installing “lone worker” GPS tracking system for remote workers (surveyors, geologists, etc.);andImplementing an online material safety datasheet system (now called an SDS system).MORE ONHEALTH AND SAFETYHudbay 2015 Annual and CSR Report 55 OUR PEOPLEOUR WORKPLACEOur business depends on qualified, conscientious people to achieve our goals. With our sites atdifferent stages of operation, we continually evolve our human resources practices in line with localbusiness requirements and the expectations of the people we need to attract, retain and engage.Our recruitment processes prioritize hiring locally, ensuring job candidates represent diversebackgrounds, and planning for succession to top roles.We offer safe and meaningful work and competitive pay and benefits wherever we operate.Employees are actively involved in continuous improvement projects aimed at driving operationalefficiencies and cost savings. Information sharing and knowledge transfer across our operations isencouraged through short- and long-term international assignments, a vibrant intranet and onlinetools, and frequent senior management visits and communications.In accordance with our Code of Business Conduct and Ethics, all individuals are to be treated withrespect and dignity. We do not tolerate discrimination on the basis of race, colour, religion, gender,national origin, age, sexual orientation, disability or any other category protected by applicable laws.There is also zero tolerance for fraud or corruption. Violations of the Code are subject to prompt andconsistent action, which may include termination. Employees are encouraged to report issues of thisnature to a supervisor or department head, or to the confidential whistleblower hotline.We respect the rights of workers to join unions and engage in collective bargaining withoutinterference or fear of retaliation, and we work to build productive relationships with these unions inorder to collaborate on key matters. Approximately 62% of our workforce (1,053 employees) isrepresented by a union.To promote diversity and inclusion, we hold Aboriginal cultural awareness workshops for Hudbayemployees in Canada. Approximately 13% of our Manitoba workforce self-identifies as Aboriginal,and we want to make sure that our people respect and understand one another.2015 PERFORMANCE HIGHLIGHTSManitobaLabour negotiations took centre stage. We successfully negotiated new three-year collectiveagreements with seven bargaining units. While six of the agreements were negotiated withoutany labour disruption, we experienced a 118-day strike by one bargaining unit. We chose toHudbay 2015 Annual and CSR Report 56 operate during this strike and safely achieved our 2015 production guidance. This choice ensuredthat we upheld our commitments to our communities and other stakeholders.We hired 160 people in 2015, primarily at the Lalor mine, while we were still ramping upproduction. One of our challenges was that the experienced miners, tradespeople and technicalsupport people needed were not available until later in the year.The continuous improvement program delivered financial benefits of more than C$4 million in2015, for a total of over C$13.5 million since the program began in August 2013. See the Manitobacase study to learn more.PeruConstancia employed more than 400 local people in 2015, mostly from the communities ofUchucarco and Chilloroya. See Local Hiring and Skills Development to learn more.Our human resources team focused on building a OneHudbay culture and making a smoothtransition from construction project to permanent workplace through attention to matters likework conditions, pay and benefits, hiring procedures, management of complaints and professionaldevelopment.Employee engagement initiatives included “Rijchariy”(a Quechua word meaning “wake up”), toencourage idea sharing, and “Acerqémonos” (a Spanish word meaning “get closer”) meetingsaimed at building team spirit. We also created a telecommunications room with Internet accessand phones so that workers can stay in touch with their family and friends while at the miningcamp.ArizonaOur workforce increased with the hiring of employees in various functional roles (legal,environment, HR, project management, community relations, government affairs, IT, safety, andaccounting). As a result, there was significant time spent educating our workforce onenvironmental, health and safety policies, Hudbay’s Code of Business Conduct and Ethics, TimelyDisclosure Confidentiality and Insider Trading Policy, OneHudbay, and various systems andprocesses.To promote employee well-being, the wellness committee organized physical fitness activitiesincluding walks and hikes (many of which supported local charities), along with lunch and learns onhealth topics. To support teamwork and camaraderie, we hosted potlucks and regular “get toknow one another” luncheons at local restaurants. At year-end, we relocated to a new officebuilding, combining two former buildings into one large space.Hudbay 2015 Annual and CSR Report 57 CorporateJoining together to support community projects is a big part of the culture at our Toronto headoffice. In 2015, the 10-person Hudbay Ride to Conquer Cancer team raised nearly C$68,000.MORE ONOUR WORKPLACEHudbay has a talented and generous workforce. To recognize their work in local communities, weheld our first-ever Hudbay Community Champions event. Employees were invited to nominatecolleagues, and more than two dozen nominations were received. Kudos to our winners:Fermin Samorano, Arizona, for his support of various youth and education programs in Tucson andhis tireless efforts on behalf of the Rosemont Scholarship ProgramBob Lyons, Manitoba, for his volunteer work in Flin Flon and significant contribution to theenvironmental sustainability of the cityMartine Becker, Corporate, for her dedicated efforts on behalf of children’s charities andHolocaust awareness in TorontoHenry Rojas, Peru, for his extraordinary efforts to build strong relationships between Hudbay andthe communities of Chilloroya and UchucarcoAward winners were recognized at our annual shareholders’ meeting, and Hudbay made a$1,000 donation on behalf of each winner to the charity of his or her choice.Hudbay 2015 Annual and CSR Report 58 Our Constancia human resources team introduced a “grow on the job” program that givesemployees opportunities to take short-term assignments in different roles, whether by fillingin for somebody on vacation or strictly for career development purposes.OUR PEOPLETRAINING ANDDEVELOPMENTAs a company with distinct locations and diverse needs, Hudbay provides a wide range of formal andinformal training and development opportunities to help employees perform their jobs capably andfulfill their career aspirations:Many of our people are hired from local communities. We offer a variety of training programs tohelp them qualify for work at Hudbay and to advance their careers within the Company. See LocalHiring and Skills Development for current programs.As the Company grows, there is increasing emphasis on developing leaders. We introducedleadership training for all managers in Peru and conducted leadership skills seminars in Arizona.We encourage knowledge transfer across geographies and have multiple cross-company teamsand opportunities for people to take short- or long-term assignments at different locations. Thosewho take on expatriate roles are expected to transfer their knowledge and skills to the localworkforce.We provide English and Spanish language training to support communications between individualsacross Hudbay.In Manitoba, apprenticeship programs cover a wide range of trades including electrician,boilermaker/welder, mechanic, machinist, pipefitter and carpenter.In Peru, we have developed several training programs, attended by 522 local participants in total.173 participants were hired after completing the training sessions successfully. These programsenhanced the capabilities of operators, drivers, mechanics, environmental monitors, and specialistson food preparation and housekeeping.MORE ONTRAINING AND DEVELOPMENTHudbay 2015 Annual and CSR Report 59 $2.8MILLIONin funding to local communitiesincluding charitable donations$25.9MILLIONin goods and services purchased fromlocal enterprises near Constancia$17.7MILLIONin goods and services purchased fromsuppliers in northern Manitoba andnortheast Saskatchewan1stPUBLIC INFRASTRUCTUREPROJECTcompleted with funding from Hudbayunder the Peruvian Works for TaxesprogramSOCIAL IMPACTFor close to 90 years, Hudbay has been part of the positive impact awell-managed mine can have on people, on communities and on entire regions.That experience guides us in building strong relationships and making avaluable contribution wherever we are present.Hudbay 2015 Annual and CSR Report 60 “We’re employing andtraining people fromnearby communities,which provides thesepeople with lifelongbenefits.”John GutierrezMine Manager,Peru“Local workers take ownership. Constancia is ‘our mine and we’lltake care of it.’ That pride, that ownership, is huge for us.” It’s oneof the main reasons, notes John Gutierrez, an industry veteranwith decades of experience in mining in the US, Chile and Peru,that Hudbay places such importance on hiring people from localcommunities. Of course, in a remote location, developing a trainedworkforce requires a long-term commitment. Fortunately,Constancia is a long-life mine. “Right now,” says John, “we’reemploying a comparatively small number of people from our twonearest communities, Uchucarco and Chilloroya, in miningoperations, but we’re training people – gradually getting them upto the 240-tonne trucks and the bigger shovels.” Drawing from thelocal labour force simplifies logistics and scheduling, and providespeople with lifelong benefits. As John notes, “The skills we givepeople, they can use anywhere, but they’re excited about workinghere.”Hudbay 2015 Annual and CSR Report 61 “Part of my job is helpingFirst Nations groups andothers living inmineral-rich areasunderstand howexploration, andpotentially mining,activities can impact theirlives.”Craig TaylorExplorationManager, ManitobaDiscovering new resources. That’s the name of the game inexploration, and Craig Taylor has found it means both mineral andpersonal resources. As the exploration manager for the ManitobaBusiness Unit, Craig has had to develop skills as a presenter and ateacher, because part of his job is helping First Nations groups andothers living in mineral-rich areas understand how exploration, andpotentially mining, activities can impact their lives. “I like doing it,”says Craig. “Providing straightforward information about what wehave planned and how we’re going to go about it.” It’s an approachthat’s appreciated. And it’s allowed Craig – and his colleagues – tolearn a lot. “You get the First Nations perspective on things. That’swhy I try to get junior staff members involved in outreachactivities, because I’ve found the band leaders are very good atexplaining where they are coming from. And understandingdifferent perspectives is always valuable.”Hudbay 2015 Annual and CSR Report 62 SOCIAL IMPACTECONOMIC CONTRIBUTIONSHudbay strives to create sustainable value for our shareholders while simultaneously contributing tosocial and economic progress in the regions where we operate.In 2015, Hudbay provided:1,700 permanent jobs, 200 contractor jobs (full-time equivalent positions based on hours worked)and 57 co-op and summer student jobs$189 million in wages and benefits$6.8 million in municipal taxes and grants$1.5 million in funding to local communities through land use payments (including lump-sum life ofmine land acquisition payments), new housing and infrastructure related to resettlements$2.8 million in charitable donations and voluntary community investmentsIn 2015, our net payment to governments related to our projects and mining operations, other thanmunicipal taxes and grants, was a net credit of $34.1 million. In both Canada and Peru, governmenttax policies create incentives for investments in new mines by reducing tax obligations while thecapital investment is recovered. As a result of Hudbay’s substantial investments in the Constancia,Lalor and Reed mines, as well as lower market prices for the metals we produce, our income andmining tax payments to government are relatively low. In addition, during 2015, we received refundsfrom the Peruvian government of value-added tax paid on construction expenditures on theConstancia project.PAYMENTS TO GOVERNMENTSHudbay is a supporting company of the Extractive Industries Transparency Initiative (EITI) in itsefforts to establish a global standard for transparency regarding the host country governance ofnatural resources and full disclosure of government revenues from its extractive sector. Our Peruviansubsidiary, Hudbay Peru SAC, as a member of the Peruvian Mining Society, is supporting the EITIprocess in Peru.In Canada, the Extractive Sector Transparency Measures Act (ESTMA) was proclaimed into force onJune 1, 2015, and requires businesses involved in the resource exploration and extractive sector tofile reports on certain types of payments to foreign governments. Hudbay was actively involved inthe Resource Revenue Transparency Working Group (RRTWG), a collaboration of CanadianHudbay 2015 Annual and CSR Report 63 exploration and mining associations and civil society organizations that promoted the need forCanada to adopt such a standard and developed a set of recommendations, to provide Canadianfederal and provincial governments with a blueprint for a government payment reporting frameworkthat would serve the needs of both the data’s end-users (such as citizens, governments andinvestors) and the reporting companies. ESTMA is largely consistent with the recommendations ofthe RRTWG, and in 2015 the industry and civil society members of the group were heavily engagedwith the Government of Canada on the development of guidance that will support companies’disclosure obligations.Hudbay 2015 Annual and CSR Report 64 SOCIAL IMPACTCOMMUNITY DEVELOPMENTMining done right can be a catalyst for positive change. We make strong efforts to leverage ourcapabilities and resources to advance the sustainable development of communities near ouroperations and create conditions in which our business and our neighbours can flourish.Hudbay’s community development efforts focus on:Helping communities build capacity to ensure sustained prosperity;Supporting community efforts to improve the quality of the natural environment; andContributing to social cohesion and community spirit.When we enter a region, we engage with the communities to understand their social and economicdevelopment needs and priorities. From there, we seek to create employment and businessopportunities for local people and we work with the communities to develop programs focused ondelivering lasting benefits.In Peru, we made specific commitments to invest in health, education and social development as partof the land use agreements with the communities of Uchucarco and Chilloroya. Multi-sectorialcommittees for development (CMD), comprising Hudbay and community representatives, approveand oversee the projects being carried out using the proceeds of the agreements.In addition, we signed co-operation agreements with communities in our indirect areas of influence,which spell out social development projects that we will work on together within a specifiedvoluntary budget provided by Hudbay. We engage with different levels of government and seek outdevelopment projects that can be implemented as public-private partnerships. Our TechnicalAssistance Office also acts as a lobby group for local municipalities, helping them qualify for publicand private funding of public investment projects.In Canada, Hudbay’s first mine gave rise to the towns of Flin Flon and Creighton, and we remain anintegral part of the social and economic fabric of the region. Today, we prioritize educational supportand training, as a means of strengthening community capacity and building a local talent poolavailable to Hudbay and other employers. We are a primary supporter of the Northern ManitobaMining Academy and we have strong affiliations with local universities, colleges and high schools.While the Lalor mine resources and exploration potential provide a foundation that ensures we willcontinue to operate in the region well beyond the 100th anniversary of the discovery of the firstdeposit, in a matter of years 777 will reach the end of its life as an operating mine. While our effortsto find additional resources, including the exploration of the War Baby claim in 2015, have not beenHudbay 2015 Annual and CSR Report 65 fruitful, we are working to optimize our cost structure in order to maximize the economic life of theknown reserves and assessing future options for the Flin Flon metallurgical complex. We have alsoengaged a community planning consultant to assist us in 2016 in working with our colleagues andwith the communities around Flin Flon to help ensure a smooth and effective social and economictransition. Community leaders have noted that opportunities exist and enabling conditions need tobe identified for economic diversification, and Hudbay is committed to supporting them in theirefforts.In Arizona, Hudbay supports longstanding commitments related to well owner protection,community water pipeline construction and water replacement mitigation plans. We have alsodeveloped new programs and support priorities (see below).2015 PERFORMANCE HIGHLIGHTSCorporateWe finalized our Community Giving and Investment Standard and Local Procurement andEmployment Standard. The Community Giving and Investment Standard outlines the strategicapproach that Hudbay sites are expected to follow for voluntary support, contributions andinvestments in local communities. It emphasizes community involvement, mutual benefit,partnerships, sustainability and capacity development.ArizonaIn keeping with the new corporate standard, we formalized our Arizona contribution policy,establishing clear support priorities: education (in particular, science, technology, engineering,environment, agriculture and mathematics initiatives); social services; military and veteranssupport; job training, research and development; and infrastructure. Our employees are veryactive in our community programs and were surveyed on their support preferences as part of thepolicy development process.We introduced an employee giving program, in which the Company matches 50% of employeecontributions through United Way of Tucson and Southern Arizona to an annual maximum matchof $1,000 per person.Ongoing financial commitments include the following:Three-year, $10,000 per year commitment to the National Math and Science Initiative earmarkedfor the Sahuarita School District in Sahuarita, Arizona$24,000 in scholarships provided to 10 high school students and three military veteransHudbay 2015 Annual and CSR Report 66 Sponsorship of El Tour de Tucson cycling eventOngoing partnership with the University of Arizona and Department of Natural Resources tosupport graduate student researchPeruIn addition to fulfilling the annual social development commitments under our land useagreements, we completed our first project under the Peruvian Works for Taxes program. Thisprogram allows a company to pay up to half of its income tax through contributions to publicinfrastructure projects in communities near its operations. Hudbay funds were used to build anirrigation system in the district of Livitaca.As a way of supporting the “Sierra Productiva” project for agricultural entrepreneurs, Hudbayco-financed a dairy plant in the district of Velille together with the Ministry of Agriculture.The Global Indigenous Development Trust north/south exchange program presented a uniqueopportunity for local community leaders from Chumbivilcas province to take two trips to Canadato see Canadian best practices in mining and agriculture. With Hudbay’s financial support,participants took part in workshops and hands-on training in Timmins (an Ontario miningcommunity), visited farms, and met with municipal, government and community leaders inToronto.ManitobaWe agreed to donate company property to the town of Snow Lake for a new EMS station.Hudbay donated C$206,847 to community initiatives and university research benefiting the FlinFlon/Snow Lake area, primarily in the areas of health, education, environment, culture and sports.Major contributions ($10,000 or more) included:Flin Flon Community Adult Learning Centre sponsorshipUnited Way of WinnipegFlin Flon Bombers junior hockey teamGreen Project – multi-year project aimed at accelerating restoration of forest land around FlinFlon and CreightonHudbay 2015 Annual and CSR Report 67 Our Arizona Business Unit has a program for awarding grants of $750 to $5,000 to local publicschools. In 2015, Sunnyside School District received a grant to support the Lauffer MiddleSchool Sustainable Garden. The school is in an area where fresh produce is unavailable and/orunaffordable. To teach students lessons in science and nutrition, the school has a functionalgarden with 17 planting beds and 11 fruit trees. Not only do the students maintain thegarden, but they also sell the produce to staff, community and family members. Proceeds gotowards purchasing seeds and supplies. Hudbay’s $750 grant was used to buy seedling plantsand packets, garden hoses, soil, fertilizer and gloves.Our $5,000 grants included a donation to Pima County Joint Technical Education District(JTED) to support development of a joint laboratory for agri-science and vet science in AmphiSchool District.MORE ONCOMMUNITY DEVELOPMENTHudbay 2015 Annual and CSR Report 68 SOCIAL IMPACTLOCAL HIRINGAND SKILLS DEVELOPMENTLocal hiring and skills development can generate significant economic benefits for the communitiesnear our operations and is often identified as a high priority for stakeholders. We know fromexperience that we benefit too, because it builds our talent pipeline and strengthens community andemployee relationships.In Manitoba, we are a member of the Northern Manitoba Sector Council (NMSC), and we partnerwith the NMSC, Workplace Education Manitoba (WEM), University College of the North (UCN),Workplace Essential Skills Training (WEST) Centre and First Nations communities on training tosupport first steps in mining career paths. We recruit local job candidates through communitymeetings and relationship building, and we provide basic industry and mining skills training so thatcandidates can succeed in their roles once they join Hudbay. Hudbay is also a strong supporter of theNorthern Manitoba Mining Academy.In Peru, we have hired approximately 2,900 people in total from the surrounding communities,primarily from the rural communities of Uchucarco and Chilloroya. In 2015, local employment wasreduced to 400 people as construction ramped down and Hudbay worked with local communities tohelp people transition to other livelihoods. We continue to prioritize local hiring and look foropportunities to build the talent pool. To this end, we have partnerships with local technicalinstitutes for semi-skilled trades and heavy equipment training. The intent is to help local peopleacquire skills through Hudbay-sponsored training programs and on-the-job experience so that theycan apply for future jobs, with our company or others in the region.In Arizona, there is a wealth of mining skills in the area near the Rosemont project, which we aredrawing on as the project progresses. We also want to help build the local talent pool. We have alongstanding relationship with the Department of Natural Resources at the University of Arizonathrough funding and a field laboratory that gives students an opportunity to perform work at ouron-site test plots. The program has resulted in a number of master’s degrees, theses and papers,helping equip students with the credentials they need for their future careers. We are in discussionto create a mining industry channel for high school students through the local Joint TechnicalEducation District (JTED). JTEDs offer career and technical education programs to public high schoolstudents up to age 22.Hudbay 2015 Annual and CSR Report 69 2015 PERFORMANCE HIGHLIGHTSPeruConstancia employed more than 400 local people in 2015, mostly from the communities ofUchucarco and Chilloroya. The majority work as general labourers in operations and logistics, andin hospitality jobs at the camp. Forty-three local people completed technical training funded byHudbay and now work in advanced jobs, operating heavy equipment or providing technicalassistance in the processing plant.As part of our new recent graduate trainee program, 11 engineers and 15 technicians areparticipating in a rotational program, which gives them the opportunity to work in different partsof the processing plant. During the one-year period, they receive full pay and benefits. We hope tohire them permanently at the end of the year.ArizonaWe awarded several grants to local schools for science, technology, engineering, environment,agriculture and mathematics (what we call “STEEAM”) initiatives, including: $5,000 to The RisingSchool for a robotics program; $5,000 to Continental School District for a math interventionprogram; $5,000 to Pima County JTED to develop a laboratory for agri-science and vet science; and$5,000 to Walden Grove High School to install smart boards in advanced placement (AP) math andscience classrooms.We participated in the 4H Junior Livestock auctions, which provided nearly $20,000 in scholarshipfunds to science programs for high school students in two counties near the project site.Four interns from San Miguel High School worked at the Hudbay Arizona Business Unit offices. Thehigh school is located on Tucson’s economically disadvantaged south side. Students take a fullcollege preparatory course load while simultaneously holding internships in corporations andearning nearly 40% of their school tuition.Hudbay 2015 Annual and CSR Report 70 Hudbay has a close working relationship with the Northern Manitoba Mining Academy. In2015, some of the training needed by the Lalor mine was conducted at the Academy to relievethe workload at the site. In addition, six newly hired general labourers from Flin Flon trainedfor six weeks at the Academy and the 777 North mine before starting their jobs at Lalor.ManitobaWe revised our First Nations training to employment process to address shortcomings identified inthe 2014 program. A joint initiative of Hudbay, local First Nations communities and governmentagencies, the process is aimed at helping people gain the skills needed for work at Hudbay. Ourteam is now involved earlier in the process, screening and interviewing candidates before they startany of the training programs. We expect this new approach will lead to more people meetingHudbay’s essential skills requirements and being hired once they complete the training.Other First Nations employment and training activities included:Presenting Hudbay job opportunities and hiring processes to women at the Saskatchewan IndianInstitute of Technologies – Creighton Work Prep Centre. Attendees included Aboriginal womenwho had just completed a 16-week carpentry course and welding students from NorthlandCollege.Participating in the Northern Connections Job Fair sponsored by Flin Flon Aboriginal FriendshipCentre and making mining presentations to high schoolers and adults at the Opaskwayak CreeNation Oscar Lathlin Collegiate Job Fair.Participating in a one-day event at Norway House Cree Nation, where we delivered our Mining101 presentation and provided an overview of job opportunities for qualified candidates.MORE ONLOCAL HIRINGAND SKILLS DEVELOPMENTHudbay 2015 Annual and CSR Report 71 SOCIAL IMPACTLOCALPURCHASINGSpending on local goods and services is one of the ways in which we contribute to the sustainabilityof our host communities. It leads to more local jobs and income, transfers skills and technology, andhelps create vital domestic business networks. Importantly to us, local purchasing can also lowercosts in the long run and contribute to our social licence to operate.Hudbay’s approach to local purchasing is guided by five principles: mutual benefit; fairness,competitiveness and transparency; targeted capacity development; informed and integrateddecision-making; and collaboration with community representatives and available supportingorganizations.In Peru, we are honouring commitments to give first consideration to local suppliers for services suchas equipment rental and catering, as set out in the life of mine community agreements. We also helpthem register their business and formalize quality standards and procedures so they can qualify forpotential business opportunities with other companies, and we work with them on sales andmarketing strategies.In Manitoba, we have longstanding relationships with local transportation and constructioncontractors. We work closely with these suppliers, often helping them establish systems andprocesses to fulfill their social and environmental responsibilities.2015 PERFORMANCE HIGHLIGHTSCorporateWe finalized a corporate Local Procurement and Employment (LP&E) Standard aimed at ensuringthat, at each site, we actively identify opportunities for supporting and utilizing local workforceskills and business capacity to provide goods and services, include LP&E when negotiatingcommunity agreements, and integrate LP&E into ongoing business processes.ManitobaPayments to suppliers located in our region of northern Manitoba and northeast Saskatchewantotaled $17.7 million in 2015.Hudbay 2015 Annual and CSR Report 72 Founded in 2013, El Nandito is a Chilloroya bakery owned by local entrepreneur Felipe Quispe.One of El Nandito’s local customers is Newrest, Hudbay’s catering and housing contractor,which buys about 4,000 loaves of bread daily.Our Exploration team met with the Opaskwayak Cree Nation (OCN) Nakow Mining and Supplycompany to discuss possible partnerships in the area of early exploration. This type of partnershiphas worked for us before, and we presented an overview of geophysical activities, challenges andrisks.ArizonaIn preparation for when our permits are received, we created an online contractor and vendormanagement system accessible from our corporate website. The system allows contractors,vendors and suppliers to identify themselves and their capabilities so they can be considered forfuture work.We also met with local unions, contractor groups and government representatives to inform themof potential future business opportunities.PeruAbout 60 of the contractors working at Constancia are from local communities. Most are focusedon trucking and hospitality. Total purchases from local enterprises were $25.9 million.In 2015, we worked with the CMDs (community development committees) in Uchucarco andChilloroya to buy 25 trucks that they could rent to local contractors to transport Constanciaconcentrate to the port of Matarani.MORE ONLOCAL PURCHASINGHudbay 2015 Annual and CSR Report 73 SOCIAL IMPACTCOMMUNITY RELATIONSAs with any mining company, Hudbay’s presence can create both opportunities and concern for localresidents and indigenous people. Engaging with these communities in an open and inclusive way isvital for earning our social licence to operate. We must address their concerns about mining andcompeting land use priorities, and demonstrate how our operations can provide meaningful,long-term benefits. Above all, we must maintain respect, trust and understanding.Each business unit conducts its own stakeholder analysis and implements a stakeholder engagementplan to build relationships, understand local concerns, and respond to them. This requirement isdocumented in our Stakeholder Engagement Standard. We also formalized a company-wideCommunity Response Standard (also known as a grievance process) to ensure complaints can besignaled and then appropriately documented, investigated and addressed.ManitobaIn Manitoba, we engage regularly with the Flin Flon and Snow Lake communities. Recent discussionshave focused on training and job opportunities for the people of northern Manitoba, the impact ofthe Lalor mine on the town of Snow Lake, and engagement with First Nations communities.We place particular emphasis on engagement with First Nations communities locally. Thecommunities nearest Hudbay are Opaskwayak Cree Nation, Mosakahiken Cree Nation and MathiasColomb Cree Nation in Manitoba and three communities in Saskatchewan that are part of the PeterBallantyne Cree Nation. Through meetings, school presentations, mine tours, open houses andworking together on joint initiatives (usually related to employment), we seek to improveunderstanding of one another and build constructive relationships. Hudbay’s full-time AboriginalLiaison Officer coordinates our efforts and facilitates dialogue. In addition, the Vice President of ourManitoba Business Unit co-chairs the Minister’s Mining Advisory Council, which brings together FirstNations leadership, industry representatives and the Government of Manitoba to ensure FirstNations communities benefit from the development of new mines.We have a court injunction preventing members of Mathias Colomb Cree Nation (MCCN) fromblocking access to our sites, as a result of blockades they staged at the Lalor site in 2013. Hudbay isonly seeking free access for employees and contractors to our sites. The injunction is not a lawsuitand it does not prohibit members of MCCN or other communities or community companies frombidding on Hudbay contracts or seeking employment. We recognize it as an ongoing relationshipchallenge, which makes it difficult for the community to fully realize the benefits and opportunitiesthat our operations can offer, and we are seeking a path to restore our collaboration with MCCN.Hudbay 2015 Annual and CSR Report 74 Hudbay is a member of the Canadian Council for Aboriginal Business (CCAB) and participates in itsProgressive Aboriginal Relations (PAR) program. We are working to progress from PAR’s“committed” category to the bronze certification level. Certification confirms that we have practicesin place to be a good business partner and great place to work, and demonstrates our commitmentto prosperity in Aboriginal communities.PeruIn Peru, there are two communities within our direct area of influence – Uchucarco and Chilloroya.Both signed life of mine land use agreements with Hudbay in exchange for portions of theircommunity-owned land. We maintain community relations offices in both communities and engagefrequently with residents on a wide range of topics, most often related to fulfilling commitmentsunder the agreements.We have signed co-operation agreements with a number of communities within our indirect area ofinfluence. Under these agreements, we commit to working together on social development projectswithin a specified budget provided by Hudbay. In 2015, we began building relationships withcommunities along the route from Constancia to the port of Matarani where we transportconcentrate. See details below.ArizonaThe Rosemont site is close to a major urban area. Since acquiring this project in 2014, we haveworked to both understand the aggregate views of local stakeholders and engage directly with theindividuals and groups most interested in, and connected to, the project. We believe that a robustpermitting process contributes to the development of world-class mines, and it is in that spirit thatwe are engaging in the regulatory process to secure the final permits needed to advance theRosemont project.Hudbay 2015 Annual and CSR Report 75 CIRCLES OF INFLUENCE2015 PERFORMANCE HIGHLIGHTSCorporateMost of our employees live in the communities where they work. In 2015, we held a CommunityChampions event that recognized them for their service to the community, through volunteerismor on behalf of Hudbay. See Our Workplace to learn more.ArizonaWe took a number of steps in 2015 to build our relationships with local communities, adopting theapproach of small group and one-on-one meetings with government officials, community groupsand neighbours to promote dialogue and build trust and understanding. See the Arizona casestudy to learn more.Our team conducted a focused community relations effort related to the water well drilling andHudbay 2015 Annual and CSR Report 76 confirmatory drilling programs taking place at the site. They sent letters to people within twomiles of the site, visited the homes of our closest neighbours, spoke to community andgovernment leaders, and gave contact cards to all workers so they could direct any questions tothe appropriate Hudbay contacts.In developing relationships with Native American tribes in the region, we have sought to share andbuild on our experiences in relationship building with First Nations in Manitoba. Cultural sensitivitytraining is included in the Rosemont Environmental Impact Statement, and we will be developingprograms to help crews and staff better understand and appreciate Native American culture andpeople.PeruDespite social unrest and opposition to certain mining projects in the region near Constancia, wemaintained constructive relationships with local communities through regular dialogue andcollaboration on community projects.Once we started transporting concentrate 468 kilometres to the port at Matarani, we initiatedcommunications with about 14 communities along the route. Our community relations teamcontacted local authorities and community leaders beforehand. They also organized communitymeetings where they explained how they would mitigate issues like dust, listened to people’sneeds and concerns, and offered to help these communities access government funds for theirdevelopment projects. See the Constancia case study to learn more.With the shift from construction to operations, Constancia’s relationships with its communities areevolving and we have begun to look at the long-term role we can play in tackling poverty. Weexpect to become more involved in helping build business capacity by training entrepreneurs tomarket and sell their goods.There were 57 complaints or concerns registered through the site grievance mechanism in 2015.Of these, 89% related to local supply chain issues, mainly pertaining to vehicle maintenanceexpenses and payments for services, and pending payments by third-party suppliers; 5% related tolabour practices; and 6% related to human rights, and environmental issues and compliance.ManitobaAmong our efforts to strengthen relationships with First Nations communities, we met withmembers of the Peter Ballantyne Cree Nation to discuss our duty to consult and hiring practices,exploration early notification and environmental concerns. Several Hudbay departments alsoparticipated in an information session with Cumberland House Cree Nation to discuss exploration,environment and employment.Hudbay 2015 Annual and CSR Report 77 With the planned expansion of the Anderson tailings impoundment area near Snow Lake, weconducted a community information campaign to share plans, answer questions and addressconcerns. Our team met with the Snow Lake mayor and town council and invited the public todrop-in sessions in Flin Flon and Snow Lake to speak with experts on the topic. We also conductedindividual meetings with concerned citizens and solicited input through a community feedbackform.There were seven complaints registered through our site complaint hotline. The main issues wererelated to health and safety, and environmental concerns. All were resolved in the reporting year.Hudbay 2015 Annual and CSR Report 78 SOCIAL IMPACTRESETTLEMENTAND LAND USEMining activities require land, which sometimes competes with land used for livelihoods, householdsand communities. Recognizing the concerns of local people and the risks to our business, we explorealternatives to minimize disturbances and implement measures to protect human rights and culturalheritage in every region where we wish to mine.Resettlement – When it became clear that the development of Constancia would require thedisplacement of 36 families from Chilloroya, we established a resettlement negotiation process thatadhered to international standards for fairness and transparency (including the IFC performancestandards), and committed to providing equal or better housing with improvements like betteraccess to water and roads. The guiding principle for the process was collaboration – with communityleaders and government authorities as well as affected individuals.All but two of the resettlements were completed in 2014. As part of our agreements, we havecontinued to help the affected families get settled and will do so until 2016. Agreements with thetwo remaining families were reached in 2015 and they have relocated.Small-scale mining – Small-scale, informal mining occurs in the Pampacancha area of our Constanciamineral claims. Hudbay Peru and the community implemented a five-year agreement that allowsmining by a community enterprise, provided that it is restricted to the one area and is brought intolegal compliance. The agreement, which helped formalize the activity there and reduce the risk ofconflict, expired in June 2015 and we have begun negotiations to renew it.Cultural heritage sites – Peru is a country rich in archeological heritage. Before construction started,we conducted a study to find any archeological sites on the property and obtained a Certificate ofNon-Existence of Archeological Remains. The site has an archeological monitoring plan (AMP) topreserve cultural heritage and protect any archeological artifacts that may be found. As part of theplan, we have marked protected areas, have erected signage and continue to recover new artifacts.We also hold weekly cultural heritage and awareness training for project workers and communitymembers. The AMP is regularly audited by the Ministry of Culture and all of our activities to datehave received government approval.The Rosemont Environmental Impact Statement (EIS) recognizes the potential impact of mineoperations on historic properties and traditional uses and perceptions of the land for the manycommunities who have used it over the past centuries. Ancestral human remains and sacred sites areknown to exist in the project area, as are traditional resource collecting areas. The USDA ForestHudbay 2015 Annual and CSR Report 79 Service developed a historical properties treatment plan in co-operation with the tribes, the statehistoric preservation office and Rosemont. The plan is aimed at preserving cultural resources bytraining work crews on identifying potential cultural artifacts and the steps to follow to protectthem. Rosemont, in co-operation with the USDA Forest Service, has developed a cultural awarenesstraining video which will be used to train employees and contractors about the requirements atcultural sites.Hudbay 2015 Annual and CSR Report 80 2,180KGof native grass seed was collected bycommunity members and purchased byConstancia for progressive reclamationactivities7.91%OF WATERused in operations is recycled and reused4.0%OF THE LANDwe own, lease or manage is used forHudbay activities; the rest remains in itsnatural state35%OF MANITOBA’S TAILINGSare used as paste backfill to supportunderground minesENVIRONMENTFrom exploration to reclamation, our steps are guided by science, andenvironmental considerations shape our plans. Drawing on long experienceand the latest research, we continually work to minimize our environmentalfootprint and enhance our contributions to sustainability and biodiversity.Hudbay 2015 Annual and CSR Report 81 “Hudbay’s commitment tooperating in anenvironmentallyresponsible andsustainable way has madeit a place where I canmake a positivedifference.”Erika Calmell delSolarEnvironmentSuperintendent,ConstanciaWhen Erika Calmell del Solar announced, after receiving herdegree in Environmental Engineering from Universidad NacionalAgraria La Molina, that she was pursuing a career in the miningindustry, some of her friends were more than a little surprised. But12 years later, the last five with Hudbay at Constancia, Erika knowsshe made the right choice. “I wanted to go where I felt I could dothe most good, and that was mining. I also made sure that I workedfor companies that wanted to do things the right way – likeHudbay.” Both during the construction phase of Constancia andnow that it is a working mine, Erika and her colleagues in theEnvironment department have always been consulted by theoperations team. “They listen to our advice, and they makechanges based upon it.” In Erika’s experience, Hudbay’scommitment to operating in an environmentally responsible andsustainable way has made it a place where she “can make a positivedifference.”Hudbay 2015 Annual and CSR Report 82 “I help people understandthat Hudbay uses bestpractices through everystage of mining, fromexploration toreclamation, and thatenvironmentalmanagement standardshave becomeincorporated into the waywe do business.”Jay CooperEnvironmentSuperintendent,Manitoba BusinessUnitCommenting on the ongoing construction and management workat the Flin Flon tailings facilities, Jay Cooper observes, “We aretrying to build something as sustainable and long-lasting as thepyramids.” Clearly, as environment superintendent for theManitoba Business Unit, Jay is comfortable with setting andmeeting tough standards. That willingness to take on challengesextends to teaching people outside the industry about responsiblemining – what it means and what it requires. “A large portion ofthe population has a skewed vision of what mining is today. It’s ourjob to teach people how things have changed and that, as anindustry, we are operating responsibly.” Drawing on close to 20years in mining, Jay helps people understand that Hudbay usesbest practices through every stage of mining, from exploration toreclamation, and how environmental management standards, likeISO 14001, have become incorporated into “the way we dobusiness.”Hudbay 2015 Annual and CSR Report 83 ENVIRONMENTLAND AND BIODIVERSITYAt every stage of the mining lifecycle, we strive to understand and actively manage our impacts onbiodiversity conservation and ecosystem services. Our efforts help to minimize our environmentalfootprint and related social and environmental risks, and strengthen Hudbay’s reputation andrelationships.While each site develops its own management plans specific to its unique location, they are allexpected to apply the biodiversity mitigation hierarchy throughout the mining lifecycle, inaccordance with our corporate Biodiversity Conservation Standard. The mitigation hierarchy is awidely accepted set of prioritized steps to alleviate environmental harm as far as possible, firstthrough avoidance of detrimental impacts to biodiversity, and then through mitigation (or reduction)of these impacts and restoration of the area’s ecosystem. Biodiversity offsetting is only consideredas a last resort.ManitobaIn Manitoba, land and biodiversity are managed in line with actual operational activities. Once theactivities and associated risks are defined during the year, annual biodiversity objectives and plansare set and implemented, within the context of long-term environmental goals.The Manitoba Business Unit plan includes an ongoing commitment to boreal woodland caribouconservation, financially supporting Manitoba Conservation’s caribou research and implementingManitoba Conservation’s postcard system for caribou sightings to aid in its research. Borealwoodland caribou are currently listed as threatened under the federal Species at Risk Act andManitoba’s Endangered Species and Ecosystems Act. We took specific measures in the design andconstruction of the Reed mine to reduce and mitigate any potential operational impacts on caribou,which are known to spend most of their time on the west side of Reed Lake, 2.5 kilometres from themine site, with a highway and forest in between.Hudbay 2015 Annual and CSR Report 84 PeruIn Peru, we are committed to ensuring there is no net loss of biodiversity as a result of our activities.We have developed a biodiversity action plan (BAP) in keeping with international standards (TowardsSustainable Mining and IFC) for protecting and conserving biodiversity. To date, the BAP has involveda series of mitigation plans, including:Floral species management plan – Protected plant species are being managed and monitored. Wetransplant plants to temporary nursery areas and conduct various germination, propagation andconditioning tests.Revegetation programs – We plant native seeds and seedlings in degraded areas near the site andas part of our progressive reclamation activities. The seedlings are grown by community membersin the Hudbay nursery.Rescue and relocation plan – After rescuing, captive breeding and relocating species listed asthreatened (including reptiles and aquatic frogs) to similar areas off-site, we are now focused onmonitoring how well the animals are adapting to their new habitat. The work is done inpartnership with neighbouring communities.Wetlands management plan – Working with community users, we are undertaking measures topromote the conservation and/or restoration of wetlands and very wet grasslands near the site.ArizonaOver the past six years, the Arizona team has carried out extensive environmental baseline studiesand ongoing monitoring in the Rosemont project area. The data collected has been used, inconsultation with stakeholders and regulators, to develop effective management plans andincorporate environmental considerations into project design, so as to minimize potential impacts onthe biodiversity of the area.To conserve water resources and biodiversity, we established the Rosemont Copper ConservationLands Program, which includes mitigation proposed in the permitting process as well as additionalareas that Hudbay has set aside for conservation purposes. Under this initiative, Hudbay Arizona willpermanently conserve more than 4,827 acres of open land and allocate more than 1.9 billion gallonsper year of private surface water rights to the public. Once finalized, this program will establishsecure, sustainable habitat for bats, birds, fish, frogs and other animals, including some endangeredspecies.Arizona is home to many prominent astronomical observatories that need full darkness for theirresearch, and the state has a number of “Dark Skies” ordinances intended to minimize light pollution.We are working with suppliers to develop modified lighting systems and technologies at our facilitiesHudbay 2015 Annual and CSR Report 85 and on our equipment that will reduce potential impacts far below what the code requires, whilemeeting the operational safety requirements set by the Federal Mine Safety and HealthAdministration.Rosemont also has cowboys on its payroll who tend cattle on the property. Cattle ranching is atraditional land use in the area, and the cattle help maintain ecosystem function and provide a bufferaround the proposed mine. Once mining is finished, the area will revert back to ranchland.2015 PERFORMANCE HIGHLIGHTSCorporateWe finalized our corporate Biodiversity Conservation Standard, which sets out the minimumrequirements for identifying environmental conditions and managing biodiversity conservationand ecosystem services at each site. The standard is consistent with Hudbay’s commitment toimplement the Towards Sustainable Mining Biodiversity Conservation Management Frameworkand Protocol.ArizonaEnvironmental baseline studies and monitoring programs completed at Rosemont in 2015included: yellow-billed cuckoo surveys, Chiricahua leopard frog surveys, bat surveys, Cestus skippersurveys, chinchweed surveys, road kill surveys, groundwater level and quality review, stormwaterquality sampling as well as ephemeral system measurements, meteorological monitoring,groundwater model updates, review and analysis of possible impacts on surface water anddependent species, and normalized difference vegetation index (NDVI) measurements of riparianareas.In late 2015, a draft of a second biological opinion was published by the US Fish and WildlifeService, based on additional information on new species, to ensure that proper measures are takenat the mine to prevent any negative impacts on endangered species. It is expected that thisdocument will be finished by mid-2016.Thirteen drill rigs operating on the east side of the mountain observed Rosemont’s Dark Skieslighting plan. Their performance was monitored by consultants, and only one minor incident (anerrant light) occurred, which was subsequently corrected.Hudbay 2015 Annual and CSR Report 86 Constantino, the official mascot of the Constancia mine, was welcomed by local schoolchildren and communities in 2015. Constantino represents the Andean lizard, one of thespecies preserved as part of the mine’s biodiversity rescue and relocation effort. We bringConstantino with us to community events to promote environmental stewardship.PeruImplementation of the Constancia biodiversity action plan was assessed against both the IFCmitigation hierarchy and the Towards Sustainable Mining (TSM) standard. The TSM assessmentgave it a B level rating and recommended actions needed to bring it to an A level, all of which willbe implemented in 2016.We implemented a native grass seed collection program in which community members are paid forthe seeds they provide, which amounted to 2,180 kilograms in 2015. These seeds, along withnative flora seedlings grown in our nursery, were used in progressive reclamation activities in thefourth quarter of 2015.Approximately 80 security personnel were trained on environmental procedures and how torespond to wildlife sightings.ManitobaManitoba Conservation conducted information sessions for Reed mine employees on caribouresearch and how to avoid scaring caribou.We conducted environmental effects monitoring (EEM) in accordance with Metal Mining EffluentRegulations (MMER). An external consultant performed the required field studies to assess thehealth of aquatic habitat downstream from Ross Lake, with input from Environment Canada andsupport from two aquatic biologists from the Institut National de la Recherche Scientifique. Thereport will be submitted in June 2016.MORE ONLAND AND BIODIVERSITYHudbay 2015 Annual and CSR Report 87 ENVIRONMENTENERGY USE ANDGREENHOUSE GASAs users of fossil fuels to extract and transport ore, and electricity to run processing plants, Hudbayoperations track energy consumption and associated greenhouse gas (GHG) emissions. We strive toreduce our impact by minimizing energy use and, where possible, reducing the carbon intensity ofour operations.In Manitoba, we set annual energy and GHG reduction objectives, which we strive to achieve throughenergy savings and continuous improvement projects. We also closely monitor the regulatory climateto guide our actions.With Constancia and Rosemont still in the early stages of the mining lifecycle, the sites are justbeginning to develop energy management plans. There is, however, a demonstration solar powersite at the Rosemont field office that generates credits under the Tucson Electric Power program.We are testing various solar technologies to determine their viability for our future use and toprovide feedback to the technology providers.Constancia coming into production at the start of 2015 has impacted Hudbay’s overall energy andGHG profile in several ways:Our production of metal in concentrate more than doubled, and the substantial energy going intoconstruction activities in Peru in 2014 has been replaced by energy going to operations, therebysubstantially reducing overall energy intensity per tonne of contained metal in concentrate.At the same time, electricity consumption has increased to power the Constancia process plant,and electricity in Peru has a much higher emission factor than the hydro-generated electricity inManitoba, thereby substantially increasing the indirect GHG emissions and increasing overall GHGintensity per tonne of contained metal.GHG emissions related to direct energy have also increased per unit of energy since in Manitobaapproximately 50% of direct energy consumption is from combustion of propane while all thedirect energy consumption in Peru is from diesel combustion, which has a much higher emissionfactor than propane.Hudbay submits an annual climate change report to the CDP (formerly called the Carbon DisclosureProject) that can be accessed from the CDP website.Hudbay 2015 Annual and CSR Report 88 2015 PERFORMANCE HIGHLIGHTSManitobaTotal energy usage declined by 2.9% from 2014, with incremental improvements throughout theoperations. Energy intensity, which is a measure of energy used per tonne of metal produced, wasdown by 4.1% from 2014.PeruWith the rise in copper production, energy consumption and GHG emissions also increased. Thesite achieved steady-state operation in August 2015, which will enable us to establish a GHGbaseline from which we can develop reduction targets.Approximately 67% of GHG emissions are indirect emissions associated with the purchase ofelectricity from the Peruvian electrical network, while the remainder are directly related to fuelconsumption at the site.ArizonaWe have started developing a Rosemont energy management plan, as mitigation measures forGHG emissions are part of the permitting process. Among the proposed measures, the site designwill minimize energy requirements and related emissions (for example, through the use oftopography to minimize pumping). Currently, enough solar energy is generated on-site to powerthe administration building.Hudbay 2015 Annual and CSR Report 89 DIRECT ENERGY CONSUMPTION(terajoules)201520142013Heavy oil000Propane629700580Natural gas000Diesel2,0341,9931,346Light oil046Gasoline111211Biofuel000Ethanol000Hydrogen000Other100Total2,6752,7091,943TOTAL GREENHOUSE GAS EMISSIONS(kilotonnes of CO2-equivalent and intensity)Hudbay 2015 Annual and CSR Report 90 ENVIRONMENTAIRAir quality in and around our sites is important. We monitor and report air emissions to comply withair quality laws and regulations in the countries where we operate.Air emissions from our Manitoba operations are minor and related to vent and fugitive dustemissions. We have a particulate monitoring program in place to ensure that particulates, which maycontain metals, remain below regulatory limits. Readings are reviewed by the government andexternal compliance auditors.Each year, a dust management plan is implemented at Flin Flon in line with the annual tailingsdeposition plan and weather conditions. Water cover on tailings areas is controlled to reduce thepotential for dust generation. We use a variety of methods for dust control on active tailings dams,such as creating covers of calcium chloride sand, adding chemical binder on exposed beaches, as wellas utilizing a straw covering where possible. To minimize dust generation from vehicles, we havepaved about 50% of the main in-plant roads. Road dust calculations for the year were higher than in2014 due to a reassessment of applicable roadways.We have a dust management plan at Constancia, which includes the application of a dustsuppressant on roads in and around the site. We apply water to temporary and haul roads when dustsuppressant cannot be used. Other measures include changing blasting schedules according to windconditions to minimize dust in nearby communities.In its Environmental Impact Statement, Rosemont has committed to using numerous mitigationmeasures to minimize air emissions, including operational and engineering controls for controllingfugitive dust associated with tailings, paving roads within the mine site, using covers to controlemissions from mix tanks and settlers, using spray or physical enclosures for low-emission-potentialprocesses, using natural gas–powered buses, and including stockpile and loadout areas within theenclosed stockpile building.2015 PERFORMANCE HIGHLIGHTSManitobaIn Manitoba, negotiations have been initiated with the federal government on a new performanceagreement for air emissions from the zinc plant, as required by Environment Canada for smelters,zinc plants and refineries.Hudbay 2015 Annual and CSR Report 91 PeruIn Peru, air monitoring was carried out monthly in the community of Chilloroya and quarterly inUrasana and Ichuni, and reports were submitted to regulatory authorities. There were no materialexceedances of air quality standards during the year.ArizonaOur Rosemont air quality permit is currently in litigation, which is not unusual in the US regulatorysystem. We are working through this process and do not expect it to delay overall projectprogress.Hudbay 2015 Annual and CSR Report 92 ENVIRONMENTWATERAstute water management is an essential component of Hudbay’s growth strategy and operations.Our success depends on designing water-efficient operations and continuously monitoring ourconsumption and discharge, while always maintaining our commitments to local users and regulatoryagencies within the jurisdictions where we operate.Each of our sites – and each community in which we operate – has different water needs andchallenges depending on the supply, demand and water quality within the watershed.Prior to developing a project, we assess water quality and availability as part of our feasibility andenvironmental impact studies. These assessments also consider the water needs of localcommunities. Mining site designs and management plans incorporate water considerationsthroughout the entire mine lifecycle. Our operations are subject to extensive regulation by federal,state, provincial and local authorities, and we expect to comply with all applicable laws andregulations. Our commitment to the ISO 14001 management standard requires us to pursuecontinuous improvement in water management and periodically update our water-related riskassessments.We committed under our Environment and Social Impact Assessment (ESIA) at Constancia to limitthe amount of sediment discharged to the nearby Huayllachane, Soropata and Chilloroya rivers. Toaddress issues during the rainy season, we have put in place a robust sediment management planand installed structures designed to last for the life of the mine. Controls include barriers like checkdams and silt fences, and structures for diverting water to collection and sedimentation ponds. As afinal control, the water is treated before being released to the water bodies.At Constancia, we also have a joint environmental monitoring committee of community members,government authorities and company representatives that monitors impacts resulting from the site.We provide committee members with technical training and support. An important part of thecommittee’s mandate is to track and record surface water quality and flows, and groundwaterquality and levels.In Manitoba, water usage is managed through water rights licences and related reporting as well asannual objectives to reduce the use of fresh water. Discharge is managed at specified dischargepoints using site-specific water treatment technologies and extensive water quality monitoring. Theenvironment department tracks water quality data and reports to management on an exceptionbasis.Hudbay 2015 Annual and CSR Report 93 In Arizona, Hudbay plans to implement technologies, such as dry-stack tailings, to minimize wateruse. We also plan to replace all groundwater pumped with replacement surface waters from theCentral Arizona Project (CAP). Our team conducted extensive baseline studies of surface andgroundwater conditions in the project area and has incorporated considerations of these conditionsinto the development of the design as well as future management and mitigation plans forRosemont.Hudbay submits an annual water report to the CDP (formerly called the Carbon Disclosure Project),which can be accessed from the CDP website.2015 PERFORMANCE HIGHLIGHTSCorporateHudbay had no material non-conformances relating to discharges into water in 2015. None of theeffluents discharged from Hudbay operations have a significant impact on the receiving streams orwater bodies in which they are discharged. Stringent regulatory requirements must be met at thepoint of effluent discharge.ManitobaTotal fresh water consumption rose by 0.9% due to increased production at the Lalor mine andStall Lake mill, which more than offset reductions at Flin Flon (1%) and Reed (28%). Water usageintensity decreased by 7.8%, confirming that we are using water more efficiently.ArizonaRosemont received its Clean Water Act Section 401 certification from the Arizona Department ofEnvironmental Quality, which is required before the Army Corps of Engineers can issue a separatepermit for the project under the federal Clean Water Act.Water impacts were minimal and limited to stormwater runoff from exploration drilling in 2015.Water use was primarily associated with providing drinking water, stock watering, or water for thedrilling program. The drilling program used a new mud recycling process to minimize the amountof water used at each drill, which reduced normal water use by an estimated 50%. Stormwater wasmanaged through controls placed on the disturbed areas. Inspections and samples were taken asrequired, and there was only a minimal amount of runoff during the drilling.Hudbay 2015 Annual and CSR Report 94 PeruCommitments for surface and groundwater usage, as well as community water supply, wereachieved within the respective conditions.Effluent releases made in early 2015 from the main sediment pond and non-continuous releasesthroughout the year from road sediment ponds were within regulatory limits.Hudbay 2015 Annual and CSR Report 95 ENVIRONMENTWASTE ANDTAILINGSAll Hudbay operations have waste management plans to reduce, reuse, recycle and responsiblydispose of waste. Waste rock from our mines and tailings from processing plants are a particularpriority.Waste rock is the mined rock that does not have economic value. It is managed on-site according tostrict and detailed environmental regulations and industry standards. Wherever possible, it is reusedas fill in underground operations and site rehabilitation.Tailings are the finely ground rock, trace metals and process chemicals remaining after ore has beenprocessed. Hudbay adheres to the Mining Association of Canada’s highly regarded TSM protocol formanaging tailings. Where water is plentiful, tailings have historically been piped into secureengineered impoundments contained by tailings dams. TSM guidelines address best practices for thelocation, design, construction, operation and closure of tailings facilities so that structures are stableand comply with industry and government standards, and solids and water are properly managed.Independent reviews are conducted on our tailings management design and practices inSaskatchewan and Manitoba and at Constancia, in accordance with the TSM protocol.Safety measures used at our Flin Flon Tailings Impoundment System (FFTIS) and Constancia TailingsManagement Facility (TMF) include the following:Frequent inspections by trained Hudbay personnel.Comprehensive inspections by third-party geotechnical engineering consultants.Deposition plans produced by third-party engineering consultants to manage projected tailingsproduction.Detailed geotechnical designs for annual construction on the dams, completed or validated bythird-party consultants and approved by regulators.An independent quality assurance/control monitoring program is in place during dam construction.Upon completion of construction, detailed as-built engineering drawings are produced by thegeotechnical engineering consultant, validated and submitted to regulators where required.Hudbay 2015 Annual and CSR Report 96 In consideration of the environmental conditions in Arizona, Rosemont plans to construct a state-of-the-art, dry-stack tailings facility, which would use significantly less water than traditional facilities,allow for better dust control, be significantly more stable and reduce the potential of environmentalimpacts to groundwater. The use of dry-stack tailings will also allow more effective and earlierrehabilitation of the tailings area.2015 PERFORMANCE HIGHLIGHTSCorporateHudbay manages tailings in accordance with the TSM Tailings Management Protocol and guidancedocuments. The protocol and documents were recently reviewed by an independent task force,and 29 recommendations were brought forward. We are participating in MAC’s work to determinehow the recommendations will be implemented and how they will affect us.ManitobaWe conducted a community information campaign as part of the Environmental Assessmentprocess for a planned expansion of the Anderson tailings impoundment area (TIA) toaccommodate tailings through the life of the Lalor mine. The new infrastructure will includeadditional water retention dams, a seepage collection system and associated pump houses, and anew spillway to replace the existing one. We must submit an Environmental Assessment (EA) toManitoba Conservation and Water Stewardship for approval before work can begin. The EAaddresses all physical, aquatic, terrestrial and socio-economic factors related to the expansion.PeruConstruction of the Constancia Tailings Management Facility (TMF) advanced far enough to permitthe storage of the required water inventory for the start of operations and the deposition oftailings in the east TMF impoundment. Construction of east and west embankments will be afeature of ongoing Constancia operations during the life of the mine. Tailings pumping anddeposition facilities performed as designed during early production.In 2015, we commissioned a third-party engineering consulting firm to conduct a geochemicalstudy of waste deposition. The firm’s recommendations, which were subsequently implemented,were to place non-acid generating material in the exterior boundary to minimize the potential foracid rock drainage.Hudbay 2015 Annual and CSR Report 97 Backfill is needed at Lalor to support the underground mine. We are studying the potentialuse of tailings from the Stall Lake mill and/or the Anderson TIA in the generation of paste fill.ArizonaWe plan to use the best available technology applicable to site conditions in the proposeddry-stack tailings facility. In 2015, our study of potential filtering systems included a visit toAustralia to see how the technology is being used in mines there.MORE ONWASTE AND TAILINGSHudbay 2015 Annual and CSR Report 98 ENVIRONMENTCLOSURE AND RECLAMATIONAll mines have finite lives, and all Hudbay mines and development projects have closure plans thatare supported by financial provisions. Once mining is finished, we aim to leave behind land that willsupport productive uses for future generations.As a member company of the Mining Association of Canada, Hudbay has committed its new projectsand operations to management of mine closure in accordance with the TSM framework on mineclosure. The framework consists of eight key elements, ranging from effective and sustainableclosure planning, to consultation with communities, continuous improvement, and monitoring ofreclamation programs. As part of this commitment, Hudbay identifies opportunities to helpcommunities plan for sustaining economic development and incorporates community issues intolong-term closure considerations.In addition to the TSM framework, Hudbay’s mine closure planning in Peru is guided by IFCperformance standards, as well as by Peruvian mine closure regulations. In all jurisdictions in whichHudbay operates, mining companies are required to plan for closure before the start of operationsand to provide financial assurance to relevant regulatory agencies for proposed mine reclamationactivities.Over the course of our history, we have closed many mine sites, including some in environmentallysensitive areas. In the process, we have developed core competencies in mine closure andreclamation. Our practices include the following:Designing for closure from the beginning – By considering closure from the start of new projects,we can incorporate design features (like buildings that can be easily dismantled) to minimize bothour impact on the environment during and after operations and our costs of closure.Progressive rehabilitation – By progressively reclaiming areas once they are no longer needed formining activities, operations are able to start reclamation sooner and reduce the work to be donewhen the mine closes. We have an ongoing rehabilitation program at Flin Flon, aimed at restoringthe environment in and around the complex and enhancing the visual surroundings. Activities includethe removal of old structures and equipment, the reconfiguring and revegetating of tailings sites andthe greening of spaces between the community and the operations.Hudbay 2015 Annual and CSR Report 99 Closed mines – Hudbay’s closed mine site activities are tailored to the applicable jurisdictionalregulatory requirements and the specific and unique characteristics of each site. Closed mine siteactivities can include monitoring activities and adaptive management strategies to ensure theeffectiveness of the reclamation activities until such time as reclamation objectives are determined,in consultation with regulators, to be complete.2015 PERFORMANCE HIGHLIGHTSPeruProgressive rehabilitation activities at Constancia included the closure of two redundant wasterock facilities and other smaller areas used during construction. Runoff water and native seedswere used in the reclamation.Constancia’s closure plan was updated to incorporate recent studies and technological changesthat will reduce costs and financial guarantees that Hudbay must provide annually to the Peruviangovernment. The updated plan was submitted in 2015 and approved by the Ministry of Energy andMines in June.ManitobaProgressive rehabilitation activities performed in Flin Flon included tailings covering, seed plantingand weed control on surrounding property.ArizonaRosemont supports studies by the University of Arizona’s Department of Natural Resources onreclamation techniques, procedures, and the appropriate vegetation to use. These studies aresystematic and sequential, starting with a study of the existing vegetation, moving intogreenhouse studies and continuing on to field tests at the Rosemont site. The results will guidethe reclamation techniques that will be used and how plants will be managed. We collect datafrom the six reference plots and have had good success so far on seed mixtures and types of cover.The USDA Forest Service will evaluate the reference areas before issuing its final permit.Hudbay 2015 Annual and CSR Report 100 CSRPERFORMANCE DATABASIS OF REPORTINGAll financial information is presented in US dollars except where otherwise indicated. All operatingdata is reported using the metric system. Some metrics are reported on both an absolute basis andan intensity basis against kilotonnes of metal processed. Safety data frequency rates are measuredper 200,000 hours worked.DATA MEASUREMENT TECHNIQUESData is measured or estimated, and operations are asked to explain significant deviations inyear-over-year trends. The performance data is reported at a mix of operational and corporate levels.Data is checked and approved at the site level, and also reviewed for consistency by the corporatedata collection team.We provide safety and environmental incident definitions so that all operations report incidentsconsistently. We calculate greenhouse gas (GHG) emissions using published factors for emissions.Most of the performance data for water and energy is metered. We purchase most of our electricityfrom local grids. Utility grid statistics are therefore used to compile purchased electricity-relatedGHG numbers. We generate electricity at some of our project sites (such as Constancia and Reed) andthis energy is reflected in fuel consumption, while GHG numbers are calculated based on conversionfactors.Data for the indicators is collected and compiled using information submitted by each site on astandard template. We provide instruction and criteria for GRI G4 and Towards Sustainable Mining(TSM), and also supply a GHG emissions worksheet (developed by the Mining Association of Canada).Hudbay 2015 Annual and CSR Report 101 KEY PERFORMANCE DATAECONOMIC2015201420132012Direct economic value generated anddistributed (in $ millions) (EC1)Profit (loss) before tax$(331.4)$13.9$(53.7)$48.7Revenues$923.1$507.5$500.9$702.6Operating costsCanada(408.5)(428.6)(399.7)(490.7)US(5.7)(7.6)(1.8)(10.4)Peru(186.0)(8.7)(9.7)(13.0)Chile(0.5)(1.9)(2.7)(7.0)Colombia(0.4)(0.8)(3.9)(4.6)Total$(601.1)$(447.6)$(417.8)$(525.7)Employee wages and benefitsCanada157.1156.5160.8190.6US9.34.61.11.9Peru22.420.615.711.9Chile0.00.01.21.8Colombia0.20.21.21.3Total$189.0$181.9$179.9$207.5Hudbay 2015 Annual and CSR Report 102 2015201420132012Payments to governmentTaxes paidCanada6.1(21.1)5.659.3US0.00.10.00.7Peru28.05.81.50.0Chile0.00.00.00.0Colombia0.00.00.00.2Total$34.1$(15.2)$7.1$60.2Municipal taxes and grantsCanada6.77.87.67.5US0.10.50.70.0Peru0.00.00.00.0Chile0.00.00.00.0Colombia0.00.00.00.0Total$6.8$8.3$8.3$7.5Penalties and interest paidCanada0.10.00.00.0US0.00.30.00.0Peru0.00.20.00.0Chile0.00.00.00.0Colombia0.00.00.00.0Total$0.1$0.5$0.0$0.0Hudbay 2015 Annual and CSR Report 103 2015201420132012Payments to providers of capitalDividends paid$3.6$3.8$18.5$34.7Interest payments made to providers ofloans$108.6$82.1$56.8$0.0Financing fees paidCanada1.30.92.86.0Peru1.24.60.04.6Total$2.5$5.5$2.8$10.6Other interest paidCanada0.00.00.00.1Peru0.00.00.00.0Total$0.0$0.0$0.0$0.1Capital expenditures – cash flow basis$490.6$890.9$878.7$510.7Cash and cash equivalents$53.9$178.7$593.7$1,343.9Payments – Local communities forland use (in $000s)Canada0.00.00.00.0US0.00.00.00.0Peru579.51,684.510,647.124,437.9Total land use payments$579.5$1,684.5$10,647.1$24,437.9Hudbay 2015 Annual and CSR Report 104 2015201420132012Political donations are included in this total; however, in accordance with Hudbay policy, political donations were $0.1. Public benefitCommunity investment and charitabledonations (in $000s)Canada307.1602.8650.61,059.2US63.5212.948.460.7Peru2,435.73,103.03,952.0756.2Chile0.00.00.00.0Colombia0.00.00.023.5Total community investments anddonations$2,806.3$3,918.7$4,651.0$1,899.7Resettlement investment (Peru)(in $000s)$957.5$7,857.0$16,429.9$8,262.4Production (contained metal inconcentrate)Copper (000 tonnes)147.3 37.629.939.6Zinc (000 tonnes)102.9 82.586.580.9Gold (000 troy ounces)100.2 73.479.286.6Silver (000 troy ounces)2,791.5 745.9772.5824.0Metal productionZinc metal (000 tonnes)101.9105.196.3100.71Hudbay 2015 Annual and CSR Report 105 EMPLOYEES2015201420132012Total workforce (G4-10)Number of full-time employeesMBU1,3991,3911,3731,281Ontario68615265Arizona5034N/apN/apNew York0888Peru183174157131Colombia00115Chile00114Total full-time employees1,7001,6681,5941,516EmploymentNumber of part-time employeesMBU214N/av – See total belowOntario00N/av – See total belowArizona22N/av – See total belowNew York02N/av – See total belowPeru00N/av – See total belowChile00N/av – See total belowTotal part-time employees41852421Hudbay 2015 Annual and CSR Report 106 2015201420132012Number of contract (term) employeesMBU718N/av – See total belowOntario51N/av – See total belowArizona00N/av – See total belowNew York01N/av – See total belowPeru187138N/av – See total belowChile10N/av – See total belowTotal contract employees2001582334Number of co-op and summer studentshiredMBU4041N/av – See total belowOntario32N/av – See total belowArizona20N/av – See total belowNew York00N/av – See total belowPeru126N/av – See total belowChile00N/av – See total belowTotal co-op/summer students57494339Number of employees represented bycollective bargaining agreements(G4-11)1,0531,0911,047961Percentage of full-time employeesrepresented by trade unions61.9%65.4%65.7%63.4%Operational changes (LA4)Minimum number of weeks providedbefore operational changes (MBU only)2222Negotiated into collective agreements(MBU only)YesYesYesYesNumber of strikes or lockoutsexceeding one week (MM4)1000Hudbay 2015 Annual and CSR Report 107 2015201420132012Employee turnoverRegionMBU206118N/avN/avCorporate57N/avN/avABU91N/avN/avPeru3253N/avN/avChile00N/avN/avTotal252179N/avN/avAge distribution<3023.4%18.4%N/avN/av30–5040.5%50.3%N/avN/av>5036.1%31.8%N/avN/avGenderMale75.4%82.7%N/avN/avFemale24.6%17.9%N/avN/avVoluntary turnover rate (Hudbay total)11.4%7.4%4.3%5.0%Involuntary turnover rate (Hudbaytotal)3.6%3.4%4.1%N/avNew employee hiresRegionMBU221155N/avN/avCorporate127N/avN/avABU2336N/avN/avPeru160183N/avN/avChile00N/avN/avTotal416381N/avN/avAge distribution<3040.6%22.6%N/avN/av30–5047.4%64.0%N/avN/av>5012.0%13.6%N/avN/av2Hudbay 2015 Annual and CSR Report 108 2015201420132012GenderMale79.3%82.9%N/avN/avFemale20.7%17.3%N/avN/avNet number of full-time employeesadded (decreased)Canada1527797US8320 (7)Peru9172657Colombia0(1) (14)15Chile0(1) (13)14Total32747886Number of contractor full-timeequivalent staff (G4-10)Manitoba274245316381Peru4,3379,5956,4382,972Arizona55N/apN/apN/apOther454256Person-hours of work (includingcontractors) (LA1)North America3,245,8823,359,6633,245,6253,329,467South America9,907,70520,458,80613,781,6066,459,441Total person-hours13,158,58723,818,46917,027,2319,788,908Employees receiving regularperformance and career developmentreviews (LA11)Percentage reviewed41%22%26%N/av433Hudbay 2015 Annual and CSR Report 109 2015201420132012Hudbay total workforce agedistribution (LA12)<3013.0%13.8%11.4%11.1%30–5047.9%47.8%47.4%50.0%>5039.6%36.6%41.2%38.9%Composition of governance bodiesand breakdown of employeesWorkforce diversityFemale (Hudbay)MBU187182N/avN/avOntario3227N/avN/avArizona2415N/avN/avNew York00N/avN/avPeru2835N/avN/avChileN/ap0N/avN/avPercentage of total workforce that isfemale16%16%17%15%Aboriginal (MBU only)N/av14%13%11%Disabled (MBU only)N/av6%5%6%Visible minorities (MBU only)N/av6%5%6%Composition of executivemanagement and corporategovernance bodiesBoard of Directors (ratio male tofemale)4:110:19:110:0Age distribution<300%0%0%0%30–500%10%10%10%>50100%90%90%90%Executive management (ratio male tofemale)5.5:110:110:111:16555Hudbay 2015 Annual and CSR Report 110 2015201420132012Age distribution<300%0%0%0%30–5064%72%64%58%>5036%27%36%42%Ratio of annual compensation ofhighest paid individual to mean totalcompensation (G4-54)Canada (Manitoba Business Unit,excluding Corporate office)6.5:16.1:18.9:17.2:1Canada (including Corporate office)16.4:129.8:123.5:120.0:1Peru10.0:19.5:111.3:112.8:1United States (Arizona Business Unit)4.2:13.1:1N/apN/apWorkforce represented in formal jointmanagement-worker Health andSafety Committees (LA5)Percentage represented100%100%100%100%Health and safety performance (per200,000 hours worked, except wherenoted) (LA6)Lost time accident frequency (LTA)Manitoba1.01.00.7N/avManitoba contractors0.70.80.3N/avPeru0.70.00.0N/avPeru contractors0.10.00.2N/avArizona0.0N/apN/apN/apArizona contractors0.0N/apN/apN/apNorth America (not including MBUand ABU)0.00.00.0N/avNorth America contractors (notincluding MBU and ABU)0.00.00.0N/avSouth America (not including Peru)0.00.00.0N/avSouth America contractors (notincluding Peru)0.00.044.1N/avTotal0.30.10.40.37Hudbay 2015 Annual and CSR Report 111 2015201420132012Lost time accident severity (SEV)Manitoba35.236.034.4N/avManitoba contractors14.823.00.3N/avPeru22.00.00.0N/avPeru contractors3.60.27.1N/avArizona0.0N/apN/apN/apArizona contractors0.0N/apN/apN/apNorth America (not including MBUand ABU)0.00.00.0N/avNorth America contractors (notincluding MBU and ABU)0.00.00.0N/avSouth America (not including Peru)0.00.00.0N/avSouth America contractors (notincluding Peru)0.00.0163.0N/avTotal 11.44.711.03.3Restricted work case frequency (RWC)Manitoba1.82.21.6N/avManitoba contractors0.00.40.6N/avPeru0.20.00.0N/avPeru contractors0.00.00.4N/avArizona0.0N/apN/apN/apArizona contractors0.0N/apN/apN/apNorth America (not including MBUand ABU)0.00.00.0N/avNorth America contractors (notincluding MBU and ABU)0.00.00.0N/avSouth America (not including Peru)0.00.00.0N/avSouth America contractors (notincluding Peru)0.00.00.0N/avTotal 0.40.30.60.8Hudbay 2015 Annual and CSR Report 112 2015201420132012Medical aid frequency (MA)Manitoba11.012.812.1N/avManitoba contractors12.312.98.8N/avPeru2.30.00.6N/avPeru contractors0.20.50.9N/avArizona4.9N/apN/apN/apArizona contractors5.3N/apN/apN/apNorth America (not including MBUand ABU)0.01.20.0N/avNorth America contractors (notincluding MBU and ABU)0.02.10.0N/avSouth America (not including Peru)0.00.00.0N/avSouth America contractors (notincluding Peru)0.00.070.5N/avTotal 3.02.13.04.7First aid frequency (FA)Manitoba22.128.526.0N/avManitoba contractors6.08.23.7N/avPeru4.80.41.8N/avPeru contractors0.61.32.4N/avArizona17.2N/apN/apN/apArizona contractors5.3N/apN/apN/apNorth America (not including MBUand ABU)0.03.70.0N/avNorth America contractors (notincluding MBU and ABU)0.08.30.0N/avSouth America (not including Peru)0.00.028.1N/avSouth America contractors (notincluding Peru)0.00.0136.6N/avTotal5.24.46.27.6Hudbay 2015 Annual and CSR Report 113 2015201420132012Fatality (number)0000Absentee rate (as a % of hoursscheduled to be worked)N/avN/avN/avN/avReportable occurrences (defined as EHSincidents required by Hudbay policy tobe reported to our Board of Directors)14181127 738Hudbay 2015 Annual and CSR Report 114 BENEFITSCorporateMBUFull timePart timeFull timePart timePeruABUFull timePart timeFull timePart timeLife insuranceYesNoYesMembersof 9338whenmeetingspecifiedcritieriaHealth careYesNoYesMembersof 9338whenmeetingspecifiedcritieriaDisability and invalidity coverageYesNoYesNoParental leaveYesNoYesNoRetirement provisionYesNoYesNoStock ownershipYesNoYesNoOther – Critical illness insuranceYesNoManagementonlyNoOther – Accidental death anddismemberment insuranceYesNoYesNoLife insuranceYesN/apYesNoHealth careYesN/apYesNoDisability and invalidity coverageYesN/apYesNoParental leaveYesN/ap00Retirement provisionYesN/apYes (401k)NoStock ownershipYesN/apYesNoOther – Critical illness insuranceYesN/apNoNoOther – Accidental death anddismemberment insuranceYesN/apYesNoHudbay 2015 Annual and CSR Report 115 Separated out to report employment type by region for the last two years; therefore, data for the previous two years is not available (N/av) in thisformat as only Hudbay totals were reported previously.1. As per G4-LA1 – Report total number and rate of new employee hires by age, gender and region. LA1 was not broken down into these subsections inreporting years prior to 2014; therefore, data for the two previous years is not available (N/av).2. Decrease due to reduced construction activities.3. Note that only full-time staff receive this review.4. This information is not made available until June; therefore, we are a year behind in our public reporting.5. VP levels. Corporate data only.6. LA6 was not broken down into these subsections in reporting years prior to 2013; therefore, data for 2012 is not available (N/av).7. Concluded that the level of effort required to assemble this data accurately isn’t practical at this time.8. Hudbay 2015 Annual and CSR Report 116 SOCIETY2015201420132012Total number of incidents ofdiscrimination (and actionstaken) (HR3)0000Land use disputes (MM6)0020Resettlements (MM9)Number of households363600Number of individuals15015000Employees trained in anti-corruptionpolicies (SO4)Number360182336261Percentage of workforce21%10%21%17%Percentage of employees given trainingbased on internal requirement91%N/avN/avN/avEmployees that anti-corruptionpolicies have been communicated toNumber – management229412N/av – See abovePercentage98%100%N/av – See aboveNumber – non-management560485N/av – See abovePercentage100%100%N/av – See aboveGovernance body members thatanti-corruption policies have beencommunicated toNumber1010N/avN/avPercentage100%100%N/avN/avGovernance body members thatreceived training on anti-corruptionNumber1010N/avN/avPercentage100%100%N/avN/av44321Hudbay 2015 Annual and CSR Report 117 2015201420132012Average hours of trainingMales in management19.65N/avN/avN/avFemales in management50.17N/avN/avN/avMales in non-management51.86N/avN/avN/avFemales in non-management36.71N/avN/avN/avSecurity practices (security personneltraining) (HR7)Hudbay security personnel trained inhuman rights policies and proceduresNumber1515N/av – Not previouslyreportedPercentage98%100%N/av – Not previouslyreportedContractor security personnel trained inHuman Rights policies and proceduresNumber175158N/av – Not previouslyreportedPercentage99%92%N/av – Not previouslyreportedValue of fines or sanctions fornon-compliance with laws andregulations (SO8)$5,000$3,352$1,277$900Grievances about impacts on society(SO11)Number filed through formal grievancemechanisms6778110N/avNumber addressed during reportingperiod6778110N/avNumber resolved during reportingperiod6567103N/avNumber filed prior to the reportingperiod that were resolved during thereporting period632N/avN/avNumber of other concerns78704109Environment (EN34)4N/av – See above65Hudbay 2015 Annual and CSR Report 118 2015201420132012An employee in Manitoba filed a harassment complaint against a co-worker. Hudbay and the Mines Inspector investigated and the complaint was notsubstantiated. The complainant subsequently filed a Human Rights Complaint and it is still going through the process. This number may be revisedpending the outcome of that process.1. Same numbers as last year because this is a multi-year process. These are the same 36 households/150 people as we reported last year; some wereresettled during the 2014 calendar year, some during the 2015 calendar year.2. Added to reflect G4 reporting guidelines. SO4 was not broken down into these subsections in reporting years prior to 2014; therefore, data for thetwo previous years is not available (N/av).3. Governance bodies (Board of Directors) are only in Toronto, Canada, and therefore other regions were excluded.4. Our largest employee-based location did not provide details, so this information applies only to Peru and Arizona.5. This line is the formal complaints from communities; allows transparency of concerns raised which are outside of the definition of “grievance”.6. Filed through a community grievance process; does not include grievances covered under a collective bargaining agreement.7. Three “extra” because TL, Chisel and Britannia (MBU) are closed but infrastructure continues to be used at these sites.8. Over 100% because there are three additional closure plans for non-operating sites at our Manitoba Business Unit where infrastructure continues tobe used.9. Labour and commercial practices(LA16)54N/av – See aboveResettlement/livelihood2N/av – See aboveHuman rights1N/av – See aboveOther6N/av – See aboveClosure plans (MM10)Total number of operations78N/avN/avNumber of company operations thathave closure plans101067Percentage of total operations thathave closure plans125%125%100%100%Number of advanced explorationprojects that have closure plans0143Percentage of advanced explorationprojects that have closure plansN/ap100%100%100%Overall financial provision representingthe present value of future cash flowsrelating to estimated closure costs perCanadian generally accepted accountingprinciples (in $000s)$147,027$185,395$141,566$157,675987Hudbay 2015 Annual and CSR Report 119 ENVIRONMENT2015201420132012Direct energy consumption byprimary energy source (terajoules)(EN3)Heavy oil0000Propane629700580578Natural gas0000Diesel2,0341,9931,346475Light oil0465Gasoline1112119Biofuel0000Ethanol0000Hydrogen0000Other1000Total2,6752,7091,9431,067Indirect energy consumption byprimary energy source (terajoules)Total electricity consumed4,9363,3223,0483,127Indirect energy sold/credit(terajoules)Electricity0.4N/avN/avN/avTotal indirect energy consumed byorganization (terajoules)4,936N/avN/avN/avHudbay 2015 Annual and CSR Report 120 2015201420132012Energy intensity (terajoules perkilotonne of metal in concentrate)(EN5)30.950.242.934.8Total direct and indirect greenhousegas emissions (kilotonnes ofCO2-equivalent)Direct carbon dioxide emissions(EN15)188.08182.28133.2671.52Indirect carbon dioxide emissions(EN16)267.226.914.844.60Total455.30189.19138.1076.12GHG intensity (EN18)1.821.571.190.63Emissions of ozone-depletingsubstances (kg) (EN20)0.00.00.0850.5NOx, SOx and other significant airemissions (in kilotonnes)(EN21)Sulphur dioxide emissions0.00.00.00.00Particulate0.160.170.160.04Total water withdrawal (000 cubicmetres) (EN8)Surface water11,54911,28710,78910,687Ground water2,698930441367Rainwater collected directly andstored by the organization7,1684,048N/avN/avWaste water from anotherorganization0N/avN/avN/avMunicipal water supplies010.010.06Total water withdrawal21,41516,26611,23011,0544321Hudbay 2015 Annual and CSR Report 121 2015201420132012Percentage and total volume ofwater recycled and reused (EN10)Total volume (megalitres)16,944.37N/avN/avN/avPercentage7.91%N/avN/avN/avTotal water discharged (000 cubicmetres) (EN22)To Flin Flon Creek/Ross Lake/SchistLake10,54610,81912,41812,906To Anderson Creek/Wekusko Lake4,5943,9394,1803,626To Woosey Creek/Morgan Lake1,1061,1841,1231,368Town of Snow Lake Sewer08N/apN/apTo ground21718735N/apTo Oswegatchie River in New YorkN/ap3,0131,9721,777To land (irrigation using treated waterin Peru)0013910To Chilloroya River (Peru)2,623737N/apN/apWater treated (000 cubic metres)19,08619,88719,86719,687Total number of significant spills(EN24)91253Volume (m3)382.0103.03.81.5Hazardous waste disposed of atexternal facility (tonnes) (EN25)1,508.5658.5522.32,763.0Total waste (tonnes) (MM3)OverburdenN/avN/avN/avN/avWaste rock42,764,760.0N/avN/avN/avTailings24,780,081.6N/avN/avN/avNumber of fines or sanctions fornon-compliance with environmentallaws and regulations (EN29)0000765Hudbay 2015 Annual and CSR Report 122 2015201420132012Land use (hectares) – Mineral tenure(controlled) (MM1)Manitoba137,832.4135,068.4226,679.4219,386.4Saskatchewan135,352.1139,316.2136,887.5145,757.5Ontario0.00.00.00.0Yukon5,823.45,823.45,823.45,823.4Nunavut21.021.021.021.0Total Canada279,028.9280,229.0369,411.2370,988.3New York0.031,532.331,570.231,590.4Michigan0.00.03,161.83,141.1Arizona7,284.00.0N/apN/apTotal USA7,284.031,532.334,732.034,731.5Chile1,531.01,531.01,531.01,531.0Colombia0.00.05,210.85,210.8Peru43,669.532,369.526,932.522,532.5Total South/Central America45,200.533,900.533,674.329,274.3Total331,513.3345,661.8437,817.5434,994.1Land use (hectares) – Surface tenure(disturbed)Manitoba7,314.16,130.36,115.86,083.0Saskatchewan535.2744.5744.5928.7Ontario0.00.00.00.0Yukon120.7120.7120.7120.7Nunavut0.00.00.00.0Total Canada7,969.96,995.56,981.07,132.4New York0.057.757.757.7Michigan0.00.0571.0550.3Arizona0.00.0N/apN/apHudbay 2015 Annual and CSR Report 123 2015201420132012NOx emissions are not tracked as the government of Canada does not consider the mining sector to be significant emitters of NOx. Particulate fromstack emissions is directly measured and converted to site-specific emission factors. Road dust emissions are calculated using Environment Canada’sUnpaved Industrial Road Calculator.1. The large change in particulate matter released is due to a number of reasons across our business units, including:1) A recalculation of road dust at Lalor resulted in increases in particulate matter emissions;2. Total USA0.057.7628.7608.0Chile0.00.00.00.0Colombia0.00.00.00.0Peru5,187.05,187.04,225.83,774.2Total South/Central America5,187.05,187.04,225.83,774.2Total13,156.97,053.211,835.511,514.6Percent land used vs. controlled4.0%2.3%2.7%2.6%Sites requiring biodiversitymanagement plans (MM2/EN12)Number of sites legally requiring plans100N/avPercentage of sites with plans in place100%N/apN/apN/avNumber of sites with voluntary plansin place112N/avHabitats protected or restored(hectares) (EN13)Protected0000Restored0.62222.811.5Partnerships existYesN/avN/avN/avStatus at close of reporting periodMonitoringN/avN/avN/avIUCN Red List species and NationalConservation List species (EN14)Critically endangered3N/avN/avN/avEndangered8N/avN/avN/avVulnerable14N/avN/avN/avNear threatened9N/avN/avN/avLeast concern6N/avN/avN/avHudbay 2015 Annual and CSR Report 124 2) In Flin Flon, ore haul has moved from a longer paved road to a shorter unpaved one, doubling the road dust at the site;3) Methodologies required to calculate particulate matter in Arizona are different.87% of groundwater withdrawn in Arizona is reused.3. During 2015, the TMF increases its capacity in 260%, and 2015 was a humid year (more precipitation) in comparison with 2014.4. Water discharged from the Tom Valley exploration property is not reported.5. As of 2014, we were able to discharge our grey water from our Lalor construction camp located in the Town of Snow Lake directly to the town’snewly upgraded wastewater treatment plant.6. Increase due to Peru: 51% waste oil and cooking oil, 23% treatment plant sludge, 9% hydrocarbon impregnated waste.7. Hudbay 2015 Annual and CSR Report 125 CSR PERFORMANCE DATA2015 TARGETS ANDACHIEVEMENTSTargetAchievementDetailsHEALTH AND SAFETYImprove on our three-year average lost timeaccident frequency of 0.2Did not achieveSee Health and Safety.Improve on our three-year average lost timeaccident severity of 6.5Did not achieveSee Health and Safety.Improve on our three-year total recordable injuryfrequency average of 3.6AchievedAs of December 31, 2015, ourthree-year average total recordableinjury frequency was 3.2.Implement a company definition andinvestigation standard for severe andhigh-potential safety and environmentalincidentsAchievedA high-potential incident is anyincident that, due to luck or chance,did not result in a fatality, life-alteringinjury or major environmental event.COMMUNITYDevelop a company-wide introduction to humanrights training programPartially achievedAchieved formal agreement withMining Association of Canada andGovernment of Canada to jointly fundan introduction to mining and humanrights video, now in production andexpected to be available in H1 2016.Develop and implement a company-wide localemployment and procurement standardAchievedSee Local Hiring and SkillsDevelopment and Local Purchasing.ENVIRONMENTAchieve a 1% greenhouse gas emissionsreduction in ManitobaAchievedSee Energy Use and Greenhouse Gas.Achieve a 1% water reduction in ManitobaPartially achievedMBU achieved an intensity but not anabsolute reduction. See Water.Hudbay 2015 Annual and CSR Report 126 TargetAchievementDetailsGOVERNANCEDevelop a matrix identifying key skills that needto be represented in the Board of DirectorsmembershipAchievedSee Information Circular.Amend Hudbay’s governance guidelines toreflect the desire for increased board diversityAchievedSee Information Circular.Implement at least one additional module ateach business unit as the second phase of ourEHSC information systemPartially achievedCommenced implementation of anadditional module, scheduled forcompletion by the end of Q2 2016 atall locations.FINANCIAL EXCELLENCE/GROWTH TARGETSAchieve commercial production from theConstancia mineAchievedSee Operations.Achieve an increase in copper production(contained metal in concentrate) of more thanthan 270% over 2014AchievedSee Business and Financial Review.Advance permitting and technical work at theRosemont projectAchievedProgressed towards federal permitsas well as advancing engineeringwork.Hudbay 2015 Annual and CSR Report 127 CSR PERFORMANCE DATA2016 TARGETSHEALTH AND SAFETYImprove on our current three-year average lost time accident severity of 8.3Improve on our three-year total recordable injury frequency average of 3.2Implement a Visible Felt Leadership program for management – to achieve regular safety-focusedworkplace visits and constructive employee interactions by all levels of operations management(to CEO level)Sustain our focus on learning from severe and high-potential incidents by ensuring uniformapplication of incident criteria, investigation process and corrective action follow-up at all businessunitsCOMMUNITYImplement a program to achieve company-wide exposure to human rights introductory videobeing developed with MAC and the Canadian government and connect to Hudbay policies andstandardsComplete gap analysis for recently approved Community Giving and Investment Standard andLocal Procurement and Employment Standard at each operating location and identify businessunit defined action plansAchieve Canadian Council for Aboriginal Business PAR (Progressive Aboriginal Relations) Bronzelevel or higher at our Manitoba Business UnitENVIRONMENTAchieve a 1% greenhouse gas emissions intensity reduction in ManitobaAchieve a 1% fresh water consumption intensity reduction in ManitobaSet Constancia environmental benchmark and improvement targets for 2017Hudbay 2015 Annual and CSR Report 128 GOVERNANCEAnti-bribery and anti-corruption refresher training for board membersAdopt Shareholder Engagement Policy encouraging shareholders to communicate directly withthe Board of DirectorsAchievement of ISO 14001 and OHSAS 18001 management system certification for the ConstanciaoperationFINANCIAL EXCELLENCE/GROWTH TARGETSThrough efficiency improvements, combined with cost containment efforts, achieve 2016 capitalexpenditure and operating cost reductions of more than $100 million, compared to 2016guidance, while maintaining or improving on production guidanceEnhance Hudbay’s liquidity position in the current commodity price environment by consolidatingthe lender groups and restructure Hudbay’s two secured credit facilities (2016 objective achievedin Q1)Build on the 2015 technical and permitting work at the Rosemont project to complete theDefinitive Feasibility Study and continue progress on the outstanding permitsHudbay 2015 Annual and CSR Report 129 CSR PERFORMANCE DATAGRIINDEXSTRATEGY AND ANALYSISGeneral Standard DisclosuresExternalAssuranceORGANIZATIONAL PROFILEGeneral Standard DisclosuresExternalAssuranceG4-1Statement from the most senior decision-maker of theorganizationNoOur Company > CEO MessageG4-3Name of the organizationNoOur CompanyG4-4Primary brands, products and servicesNoOur CompanyBusiness and Financial ReviewBusiness and Financial Review > OperationsCSR Approach > Supply Chain StewardshipG4-5Location of the organization’s headquartersNoOur CompanyHudbay 2015 Annual and CSR Report 130 General Standard DisclosuresExternalAssuranceG4-6Number of countries where the organization operates,and names of countries where the organization hassignificant operations or that are specifically relevantto the sustainability topics covered in the reportNoOur CompanyBusiness and Financial Review > OperationsG4-7Nature of ownership and legal formNoOur CompanyWebsite – Our BusinessAnnual Information Form (AIF)G4-8Markets servedNoCSR Approach > Supply Chain StewardshipG4-9Scale of the organizationNoOur CompanyBusiness and Financial ReviewCSR Performance DataG4-10Employee/workforce detailsNoCSR Performance DataG4-11Percentage of total employees covered by collectivebargaining agreementsNoOur People > Our WorkplaceHudbay 2015 Annual and CSR Report 131 General Standard DisclosuresExternalAssuranceG4-12Describe the organization’s supply chainNoCSR Approach > Supply Chain StewardshipG4-13Significant changes during the reporting periodregarding the organization’s size, structure, ownershipor supply chainNoOur CompanyOur Company > CEO MessageBusiness and Financial ReviewBusiness and Financial Review > OperationsG4-14Whether and how the precautionary approach orprinciple is addressed by the organizationNoCSR Approach > CSR GovernanceG4-15Externally developed economic, environmental andsocial charters, principles or other initiatives to whichthe organization subscribes or which it endorsesNoCSR Approach > CSR GovernanceG4-16Memberships of associations and national orinternational advocacy organizationsNoCSR Approach > CSR GovernanceHudbay 2015 Annual and CSR Report 132 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIESGeneral Standard DisclosuresExternalAssuranceG4-17Entities included in the organization’s consolidatedfinancial statementsNoAbout This ReportAIFG4-18Process for defining report contentNoCSR Approach > Materiality2014 Annual and CSR ReportG4-19Material aspects identified in the process for definingreport contentNoCSR Approach > MaterialityG4-20Aspect boundary within the organizationNoCSR Approach > MaterialityCSR Performance Data > GRI IndexG4-21Aspect boundary outside of the organizationNoCSR Approach > MaterialityCSR Performance Data > GRI IndexG4-22Effect of any restatement of information in previousreportsNoCSR Performance DataHudbay 2015 Annual and CSR Report 133 General Standard DisclosuresExternalAssuranceSTAKEHOLDER ENGAGEMENTGeneral Standard DisclosuresExternalAssuranceG4-23Significant changes from previous reporting in scopeof prioritiesNoCSR Performance DataG4-24List of stakeholder groupsNoCSR Approach > Stakeholder EngagementG4-25Basis for identifying and selecting stakeholdersNoCSR Approach > Stakeholder EngagementHudbay 2015 Annual and CSR Report 134 General Standard DisclosuresExternalAssuranceREPORT PROFILEGeneral Standard DisclosuresExternalAssuranceG4-26Approach to stakeholder engagementNoCSR Approach > Stakeholder EngagementOur People > Health and SafetyOur People > Our WorkplaceSocial Impact > Community DevelopmentSocial Impact > Community RelationsG4-27Topics raised through stakeholder engagement andresponseNoCSR Approach > Stakeholder EngagementOur People > Health and SafetyOur People > Our WorkplaceSocial Impact > Community DevelopmentSocial Impact > Community RelationsG4-28Reporting periodNoAbout This ReportG4-29Date of most recent reportNoAbout This ReportG4-30Reporting cycleNoAbout This ReportHudbay 2015 Annual and CSR Report 135 General Standard DisclosuresExternalAssuranceGOVERNANCEGeneral Standard DisclosuresExternalAssuranceG4-31ContactNoContact UsG4-32In accordance optionNoAbout This ReportG4-33External assurance policyNoAbout This ReportNote: Our external report is not externally assured, andwe do not have a policy around external assurance. Thefinancial data comprising EC1 is externally assuredthrough the auditing of our Financials.G4-34Governance structureNoCSR Approach > CSR GovernanceManagement Information CircularG4-37Process for consultation between stakeholders andhighest governance body on economic, social andenvironmental topicsNoOur Company > Business ConductWebsite – GovernanceHudbay 2015 Annual and CSR Report 136 General Standard DisclosuresExternalAssuranceG4-38Composition of the highest governance bodyNoOur Company > Corporate GovernanceWebsite – GovernanceAIFG4-39Indicate whether the Chair of the highest governancebody is also an executive officerNoOur Company > Corporate GovernanceG4-40Nomination and selection process for the highestgovernance body and its committeesNoWebsite – GovernanceG4-41Process for the highest governance body to ensureconflicts of interest are avoided and managedNoOur Company > Business ConductCSR Approach > CSR GovernanceAIFG4-44Process for evaluation of the highest governancebody’s performanceNoWebsite – GovernanceHudbay 2015 Annual and CSR Report 137 General Standard DisclosuresExternalAssuranceG4-45Highest governance body’s role in the identification ofeconomic, social and environmental impacts, risks andopportunitiesNoOur Company > Corporate GovernanceCSR Approach > CSR GovernanceG4-47Frequency of the highest governance body’s review ofeconomic, environmental and social impacts, risks andopportunitiesNoCSR Approach > CSR GovernanceG4-49Process for communicating critical concerns to thehighest governance bodyNoOur Company > Business ConductG4-51Remuneration policies for the highest governancebody and senior executivesNoManagement Information CircularG4-54Ratio of the annual total compensation for theorganization’s highest paid individual in each countryof significant operation to the median annual totalcompensation for all employeesNoCSR Performance DataHudbay 2015 Annual and CSR Report 138 ETHICS AND INTEGRITYGeneral Standard DisclosuresExternalAssuranceECONOMICSpecific Standard DisclosuresExternalAssuranceImpactBoundariesG4-56Organization’s values, principles, standards and normsof behaviourNoOur Company > Business ConductCSR Approach > CSR GovernanceOur PeopleSocial Impact > Local PurchasingSocial Impact > Resettlement and Land UseWebsite – About UsWebsite – Code of ConductAspect: Economic PerformanceDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our Company > CEO MessageOur Company > Corporate GovernanceBusiness and Financial Review > StrategyBusiness and Financial Review > OperationsOur People > Our WorkplaceSocial Impact > Economic ContributionsSocial Impact > Community DevelopmentAIFHudbay 2015 Annual and CSR Report 139 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-EC1Direct economic value generated anddistributedYesBusiness and Financial ReviewBusiness and Financial Review > OperationsOur PeopleSocial ImpactSocial Impact > Economic ContributionsG4-EC2Financial implications and other risks andopportunities for the organization’s activitiesdue to climate changeNoCDP WebsiteG4-EC3Coverage of the organization’s defined benefitplan obligationsNoAIFAspect: Indirect Economic ImpactsDMADisclosure of Management ApproachNo1, 2, 3, 6, 8,9, 10, 11CSR Approach > Supply Chain StewardshipSocial Impact > Economic ContributionsSocial Impact > Community DevelopmentSocial Impact > Local Hiring and SkillsDevelopmentSocial Impact > Local PurchasingNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.Hudbay 2015 Annual and CSR Report 140 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-EC7Development and impact of infrastructureinvestments and services supportedNoOur Company > CEO MessageSocial Impact > Economic ContributionsSocial Impact > Community DevelopmentG4-EC8Significant indirect economic impacts, includingthe extent of impactsNoCSR Approach > Supply Chain StewardshipSocial Impact > Economic ContributionsSocial Impact > Local Hiring and SkillsDevelopmentSocial Impact > Local PurchasingAspect: Procurement PracticesDMADisclosure of Management ApproachNo1, 3, 4, 9,10, 11CSR Approach > Supply Chain StewardshipSocial Impact > Local PurchasingG4-EC9Proportion of spending on local suppliers atsignificant locations of operationNoCSR Approach > Supply Chain StewardshipHudbay 2015 Annual and CSR Report 141 ENVIRONMENTALSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: WaterDMADisclosure of Management ApproachNo3, 6, 8, 11Environment > WaterNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.G4-EN8Total water withdrawal by sourceNoCSR Performance DataG4-EN10Percentage and total volume of water recycledand reusedNoCSR Performance DataAspect: BiodiversityDMADisclosure of Management ApproachNo3, 7, 8, 10,11Environment > Land and BiodiversityG4-EN13Habitats protected or restoredNoEnvironment > Land and BiodiversityCSR Performance DataHudbay 2015 Annual and CSR Report 142 Specific Standard DisclosuresExternalAssuranceImpactBoundariesMM1Amount of land disturbed or rehabilitatedNoEnvironment > Land and BiodiversityCSR Performance DataMM2The number and percentage of total sitesidentified as requiring biodiversitymanagement plans according to stated criteria,and the number (percentage) of those siteswith plans in placeNoCSR Performance DataG4-EN14Total number of IUCN Red List species andnational conservation list species with habitatsin areas affected by operations, by level ofextinction riskNoCSR Performance DataAspect: Effluents and WasteDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,8, 10, 11Environment > WaterEnvironment > Waste and TailingsG4-EN22Total water discharge by quality anddestinationNoCSR Performance DataHudbay 2015 Annual and CSR Report 143 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-EN24Total number and volume of significant spillsNoCSR Performance DataMM3Total amount of overburden, rock, tailings andsludges and their associated risksNoCSR Performance DataG4-EN25Weight of transported, imported, exported ortreated waste deemed hazardous under theterms of the Basel Convention (2) Annex I, II, IIIand VIII, and percentage of transported wasteshipped internationallyNoCSR Performance DataAspect: Environmental Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 6, 8,11CSR Approach > Stakeholder EngagementCSR Approach > MaterialitySocial Impact > Community RelationsG4-EN34Number of grievances about environmentalimpacts filed, addressed and resolved throughformal grievance mechanismsNoSocial Impact > Community RelationsCSR Performance DataHudbay 2015 Annual and CSR Report 144 SOCIAL: LABOUR PRACTICES AND DECENT WORKSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: EmploymentDMADisclosure of Management ApproachNo1, 3, 5, 11Our PeopleOur People > Our WorkplaceG4-LA1Total number and rates of new employee hiresand employee turnover by age group, genderand regionNoOur People > Our WorkplaceCSR Performance DataG4-LA2Benefits provided to full-time employees thatare not provided to temporary or part-timeemployees, by significant locations of operationNoCSR Performance DataAspect: Labour/Management RelationsDMADisclosure of Management ApproachNo1, 3, 5, 11Our People > Our WorkplaceG4-LA4Minimum notice periods regarding operationalchanges, including whether these are specifiedin collective agreementsNoOur People > Our WorkplaceHudbay 2015 Annual and CSR Report 145 Specific Standard DisclosuresExternalAssuranceImpactBoundariesMM4Number of strikes and lock-outs exceeding oneweek’s duration, by countryNoCSR Approach > Human Rights and SecurityCSR Performance DataAspect: Occupational Health and SafetyDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our People > Health and SafetyWebsite – Environmental Health and Safety PolicyG4-LA5Percentage of total workforce represented informal joint management–worker health andsafety committees that help monitor and adviseon occupational health and safety programsNoCSR Performance DataG4-LA6Type of injury and rates of injury, occupationaldiseases, lost days and absenteeism, and totalnumber of work-related fatalities, by region andby genderNoCSR Performance DataHudbay 2015 Annual and CSR Report 146 SOCIAL: HUMAN RIGHTSSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Non-DiscriminationDMADisclosure of Management ApproachNo1, 5, 11Our People > Our WorkplaceNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.G4-HR3Total number of incidents of discrimination andcorrective actions takenNoCSR Performance DataAspect: Freedom of Association and Collective BargainingDMADisclosure of Management ApproachNo1, 5, 8Our People > Our WorkplaceNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.G4-HR4Operations and suppliers identified in which theright to exercise freedom of association andcollective bargaining may be violated or atsignificant risk, and measures taken to supportthese rightsNoOur People > Our WorkplaceHudbay 2015 Annual and CSR Report 147 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Security PracticesDMADisclosure of Management ApproachNo1, 2, 3, 11CSR Approach > Human Rights and SecurityG4-HR7Percentage of security personnel trained in theorganization’s human rights policies orprocedures that are relevant to operationsNoCSR Performance DataAspect: Indigenous RightsDMADisclosure of Management ApproachNo3, 7, 8, 10,11CSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementSocial Impact > Community RelationsG4-HR8Total number of incidents of violationsinvolving rights of indigenous peoples andactions takenNoCSR Approach > Human Rights and SecurityNote: There were 0 violations in 2015.MM5Total number of operations taking place in oradjacent to indigenous peoples’ territories, andnumber and percentage of operations or siteswhere there are formal agreements withindigenous peoples’ communitiesNoCSR Performance DataHudbay 2015 Annual and CSR Report 148 Specific Standard DisclosuresExternalAssuranceImpactBoundariesSOCIAL: SOCIETYSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Human Rights Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 4, 7, 8,9, 10, 11CSR Approach > MaterialitySocial Impact > Community RelationsNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.G4-HR12Number of grievances about human rightsimpacts filed, addressed and resolved throughformal grievance mechanismsNoCSR Performance DataAspect: Anti-CorruptionDMADisclosure of Management ApproachNo1, 2, 6, 8, 9Our Company > Business ConductOur People > Our WorkplaceHudbay 2015 Annual and CSR Report 149 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-SO4Communication and training on anti-corruptionpolicies and proceduresNoCSR Performance DataAspect: ResettlementDMADisclosure of Management ApproachNo3, 8, 6, 10,11Social Impact > Resettlement and Land UseMM9Sites where resettlements took place, thenumber of households resettled in each, andhow their livelihoods were affected in theprocessNoCSR Performance DataAspect: Closure PlanningDMADisclosure of Management ApproachNo1, 2, 3, 6, 7,8, 10Environment > Closure and ReclamationMM10Number and percentage of operations withclosure plansNoCSR Performance DataHudbay 2015 Annual and CSR Report 150 Specific Standard DisclosuresExternalAssuranceImpactBoundariesImpact Boundaries LegendEmployees and contractors1. Business partners (JVs)2. Local communities3. Consumers4. Labour unions5. Shareholders and investor groups6. Industry peers and associations7. Government and regulators8. Suppliers9. Community organizations and NGOs10. Indigenous communities11. Aspect: Grievance Mechanisms for Impacts on SocietyDMADisclosure of Management ApproachNo1, 3, 5, 6,11CSR Approach > MaterialitySocial Impact > Community RelationsNote: We re-evaluate our management approachevery three years as part of our materiality reviewprocess, which was last conducted in 2014.G4-SO11Number of grievances about impacts on societyfiled, addressed and resolved through formalgrievance mechanismsNoCSR Performance DataHudbay 2015 Annual and CSR Report 151 ABOUTTHIS REPORTThis is the second year in which we have combined our annual report and our corporate socialresponsibility (CSR) report. Recognizing that social performance is as important as financial andoperating performance, we believe combining the reports presents a truly representative account ofthe Company’s activities in 2015.We published our Management’s Discussion and Analysis of Results of Operations and FinancialCondition and the consolidated financial statements for the year ended December 31, 2015, onFebruary 24, 2016. Copies are posted to our website. The Business and Financial Review section ofthis report covers the content normally included in our annual report.This is the 12th year that we have produced a CSR report, and our eighth report based on the GlobalReporting Initiative (GRI) Sustainability Reporting Guidelines. Our most recent previous report wasreleased in May 2015. This report is not in accordance with the G4 Guidelines, but we are workingtoward the Core level option for future reports.Our report covers all operating and project locations reported in Our Company, as well as our Tomand Jason properties in the Yukon, and exploration activities managed by Hudbay in Chile during the2015 calendar year. CSR report content has been defined based on our materiality analysis andaspects identification process, which applied to all of Hudbay’s operating assets.More information on the scope of our reporting is available in the CSR Performance section.BASIS OF REPORTINGAll financial information is presented in US dollars except where otherwise noted. All operating datais reported using the metric system unless otherwise noted. Some metrics are reported on both anabsolute basis and an intensity basis against kilotonnes of metal processed. Safety data frequencyrates are measured per 200,000 hours worked.QUALIFIED PERSONThe technical and scientific information in this annual report related to the Constancia project hasbeen approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief OperatingOfficer. The technical and scientific information related to all other sites and projects contained inthis annual report has been approved by Robert Carter, P. Eng, Hudbay’s Director, BusinessDevelopment and Technical Services, at our Manitoba Business Unit. Messrs. Meagher and Carter arequalified persons pursuant to NI 43-101. For a description of the key assumptions, parameters andHudbay 2015 Annual and CSR Report 152 methods used to estimate mineral reserves and resources, as well as data verification proceduresand a general discussion of the extent to which the estimates of scientific and technical informationmay be affected by any known environmental, permitting, legal title, taxation, sociopolitical,marketing or other relevant factors, please see the Technical Reports for Hudbay’s materialproperties as filed by Hudbay on SEDAR at www.sedar.com.FORWARD-LOOKING INFORMATIONThis report contains “forward-looking statements” and “forward-looking information” (collectively,“forward-looking information”) within the meaning of applicable Canadian and United Statessecurities legislation. All information contained in this report, other than statements of current andhistorical fact, is forward-looking information. Often, but not always, forward-looking informationcan be identified by the use of words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”,“estimates”, “forecasts”, “strategy”, “target”, “intends”, “objective”, “goal”, “understands”,“anticipates” and “believes” (and variations of these or similar words) and statements that certainactions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or “willbe taken” (and variations of these or similar expressions). All of the forward-looking information inthis report is qualified by this cautionary note.Forward-looking information includes, but is not limited to, production, cost and capital andexploration expenditure guidance, including anticipated capital and operating cost savings,anticipated production at Hudbay’s mines and processing facilities, events that may affect itsoperations and development projects, anticipated cash flows from operations and related liquidityrequirements, the anticipated effect of external factors on revenue, such as commodity prices,estimation of mineral reserves and resources, mine life projections, reclamation costs, economicoutlook, government regulation of mining operations, and business and acquisition strategies.Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analysesthat, while considered reasonable by Hudbay at the date the forward-looking information isprovided, inherently are subject to significant risks, uncertainties, contingencies and other factorsthat may cause actual results and events to be materially different from those expressed or impliedby the forward-looking information. The material factors or assumptions that Hudbay identified and were applied by the Company indrawing conclusions or making forecasts or projections set out in the forward-looking informationinclude, but are not limited to:the success of mining, processing, exploration and development activities;the success of Hudbay’s cost reduction initiatives;Hudbay 2015 Annual and CSR Report 153 the accuracy of geological, mining and metallurgical estimates;anticipated metals prices and the costs of production;the supply and demand for metals that Hudbay produces;the supply and availability of concentrate for Hudbay’s processing facilities;the supply and availability of third-party processing facilities for Hudbay’s concentrate;the supply and availability of all forms of energy and fuels at reasonable prices;the availability of transportation services at reasonable prices;no significant unanticipated operational or technical difficulties;the execution of Hudbay’s business and growth strategies, including the success of its strategicinvestments and initiatives;the availability of additional financing, if needed;the ability to complete project targets on time and on budget and other events that may affectHudbay’s ability to develop its projects;the timing and receipt of various regulatory and governmental approvals;the availability of personnel for Hudbay’s exploration, development and operational projects andongoing employee relations;the ability to secure required land rights to develop the Pampacancha deposit;maintaining good relations with the communities in which Hudbay operates, including thecommunities surrounding its Constancia mine and Rosemont project and First Nationscommunities surrounding its Lalor and Reed mines;no significant unanticipated challenges with stakeholders at Hudbay’s various projects;no significant unanticipated events or changes relating to regulatory, environmental, health andsafety matters;no contests over title to Hudbay’s properties, including as a result of rights or claimed rights ofAboriginal peoples;the timing and possible outcome of pending litigation and no significant unanticipated litigation;certain tax matters, including, but not limited to, current tax laws and regulations and the refundof certain value-added taxes from the Canadian and Peruvian governments; andno significant and continuing adverse changes in general economic conditions or conditions in thefinancial markets (including commodity prices and foreign exchange rates).Hudbay 2015 Annual and CSR Report 154 The risks, uncertainties, contingencies and other factors that may cause actual results to differmaterially from those expressed or implied by the forward-looking information may include, but arenot limited to, risks generally associated with the mining industry, such as economic factors(including future commodity prices, currency fluctuations, energy prices and general cost escalation),uncertainties related to the development and operation of Hudbay’s projects (including risksassociated with the economics and permitting of the Rosemont project and related legal challenges),risks related to the maturing nature of Hudbay’s 777 mine and its impact on the related Flin Flonmetallurgical complex, dependence on key personnel and employee and union relations, risks relatedto political or social unrest or change (including in relation to the Peruvian national elections), risks inrespect of Aboriginal and community relations, rights and title claims, operational risks and hazards,including unanticipated environmental, industrial and geological events and developments and theinability to insure against all risks, failure of plant, equipment, processes, transportation and otherinfrastructure to operate as anticipated, planned infrastructure improvements in Peru (including theexpansion of the port in Matarani) not being completed on schedule or as planned, compliance withgovernment and environmental regulations, including permitting requirements and anti-briberylegislation, depletion of the Company’s reserves, volatile financial markets that may affect Hudbay’sability to obtain additional financing on acceptable terms, the permitting and development of theRosemont project not occurring as planned, the failure to obtain required approvals or clearancesfrom government authorities on a timely basis, uncertainties related to the geology, continuity,grade and estimates of mineral reserves and resources, and the potential for variations in grade andrecovery rates, uncertain costs of reclamation activities, the Company’s ability to comply with itspension and other post-retirement obligations, Hudbay’s ability to abide by the covenants in its debtinstruments and other material contracts, tax refunds, hedging transactions, as well as the risksdiscussed under the heading “Risk Factors” in the Company’s most recent Annual Information Form.Should one or more risk, uncertainty, contingency or other factor materialize or should any factor orassumption prove incorrect, actual results could vary materially from those expressed or implied inthe forward-looking information. Accordingly, you should not place undue reliance on forward-looking information. Hudbay does not assume any obligation to update or revise any forward-lookinginformation after the date of this report or to explain any material difference between subsequentactual events and any forward-looking information, except as required by applicable law.NOTE TO UNITED STATES INVESTORSThis report has been prepared in accordance with the requirements of the securities laws in effect inCanada, which may differ materially from the requirements of United States securities lawsapplicable to US issuers.Information concerning Hudbay’s mineral properties has been prepared in accordance with therequirements of Canadian securities laws, which differ in material respects from the requirements ofHudbay 2015 Annual and CSR Report 155 the Securities and Exchange Commission (the “SEC”) set forth in Industry Guide 7. Under the SEC’sIndustry Guide 7, mineralization may not be classified as a “reserve” unless the determination hasbeen made that the mineralization could be economically and legally produced or extracted at thetime of the reserve determination, and the SEC does not recognize the reporting of mineral depositswhich do not meet the SEC Industry Guide 7 definition of “Reserve”. In accordance with NationalInstrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) of the CanadianSecurities Administrators, the terms “mineral reserve”, “proven mineral reserve”, “probable mineralreserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and“inferred mineral resource” are defined in the Canadian Institute of Mining, Metallurgy andPetroleum (the “CIM”) Definition Standards for Mineral Resources and Mineral Reserves adopted bythe CIM Council on May 10, 2014. While the terms “mineral resource”, “measured mineral resource”,“indicated mineral resource” and “inferred mineral resource” are recognized and required byNI 43-101, the SEC does not recognize them. You are cautioned that, except for that portion ofmineral resources classified as mineral reserves, mineral resources do not have demonstratedeconomic value. Inferred mineral resources have a high degree of uncertainty as to their existenceand as to whether they can be economically or legally mined. It cannot be assumed that all or anypart of an inferred mineral resource will ever be upgraded to a higher category. Therefore, you arecautioned not to assume that all or any part of an inferred mineral resource exists, that it can beeconomically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you arecautioned not to assume that all or any part of measured or indicated mineral resources will ever beupgraded into mineral reserves.Hudbay 2015 Annual and CSR Report 156 CONTACT USWe invite your comments and questions about this report.For investor relations matters, please contact Candace Brulé, Director, Investor Relations,416 362-8181, investor.relations@hudbayminerals.com.For CSR matters, please contact David Clarry, Vice President, Corporate Social Responsibility,416 362-7364, david.clarry@hudbayminerals.com.Annual and Special Meeting of ShareholdersMay 19, 2016, 10:00 a.m. ETToronto, OntarioHudbay 2015 Annual and CSR Report 157 GLOSSARYAccident frequency – number of injuries (recordable or lost time) multiplied by 200,000, divided bytotal hours workedBiodiversity – short for “biological diversity”; the variety of living organisms, genetic diversity andhabitat diversity that creates and sustains variation in the environmentCommunity investment – voluntary investment of funds in the broader community, including forphysical infrastructure and social programsConflict-free minerals – mineral production that does not contribute to serious human rights abusesin regions of armed conflict (drawing on the definitions provided in the Dodd–Frank Act)Contractor – one who agrees to perform work or supply items at a certain price or rateDodd–Frank – refers to the Dodd–Frank Wall Street Reform and Consumer Protection Act, whichrequires entities involved in the commercial development of oil, gas and minerals to provideinformation in annual reports about the type and total amount of payments made to governments(Section 1504), and also identifies requirements for tracking conflict minerals in product supplychains (Section 1502)Donations – contributions to charitiesEmployee – a person directly employed by Hudbay and/or its subsidiariesG4 indicators – performance indicators contained in the G4 Guidelines of the Global ReportingInitiative. The G4 Guidelines – Core option provide the framework for this reportGHG emissions – greenhouse gas emissionsGlobal Reporting Initiative (GRI) – an independent institution whose mission is to develop anddisseminate globally applicable sustainability reporting guidelines. For more information, visitwww.globalreporting.orgGrant in lieu – an amount paid instead of property taxesLost time accident (LTA) – a work-related injury that causes the injured person to be unable to returnto work on his/her next scheduled workday after the day of the injury, because he/she is unfit toperform any dutiesMAC – Mining Association of CanadaMaterial information – a fact or a change to the Company that could reasonably be expected to havea significant effect on the market price or value of the securities of the CompanyHudbay 2015 Annual and CSR Report 158 N/ap – not applicableN/av – not availableRestricted work – a work-related injury where a licensed health care provider or the employerrecommends that the employee not perform one or more of the routine functions of the job or notwork the full workday that the employee would have otherwise workedTailings – the fine waste rock that remains after separating the valuable minerals from the ore duringmining and processing of mineral resources. Tailings may contain trace quantities of metals found inthe host ore, as well as added compounds used to extract the mineralsTSM – Towards Sustainable Mining – an initiative of the Mining Association of Canada

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