Hudbay Minerals
Annual Report 2016

Plain-text annual report

1Hudbay 2016 Annual and CSR ReportThe Nature of Mining2016 Annual and CSR ReportOur Company 06 Business and Financial Review 16 CSR Approach 21 Our People 37 Social Impact 46 Environment 58 CSR Performance Data 73 About This Report 118 Contact Us 122 Glossary 123 2 Hudbay 2016 Annual and CSR ReportHudbay 2016 Annual and CSR Report 1 Commodities advance and commodities decline.Demand and prices were both low for much of 2016.That’s the nature of mining. As a company, Hudbayfocuses on what we can control – efficiency,sustainability and productivity – so when the cycleturns, we’re positioned to capitalize on it. That’s thenature of Hudbay.To succeed during a down cycle, Hudbay draws on internal resources, includingexperience, expertise and a company-wide commitment to controlling costswhile getting the most out of every mine.At every mine, in every jurisdiction, we make sustainability and responsibilityjust as important as production.To keep building strong community relations, we operate safely andsustainably while making sure that the communities near our operationsparticipate in the benefits of a well-run mine.Hudbay 2016 Annual and CSR Report 2 The ebb and flow of demand – and the rise and fall of prices – have always been part of mining. This meansthat Hudbay has been successfully managing price cycles in the metals markets for close to 90 years. Thathistory, combined with the experience of our leadership team, provided useful perspective and insightthroughout the low copper price environment of the last few years.When Hudbay incorporated in 1927, our operations were based in Manitoba and our primary market wasNorth America. Today, our company is international and our market is global. Over the last 10 years, demandfor copper was largely driven by economic and industrial growth in China. In recent years, China’s economyhas slowed, and growth in the world’s other major markets has also been largely muted.At the same time, as a result of investment earlier in the decade, a number of new sources of copper –including our Constancia mine – came on stream and global production grew. As a natural consequence ofincreased supply and slower demand growth, the price for copper dropped, hitting a multi-year low inJanuary 2016.We responded to these events by focusing our efforts where we could make a difference – on improvingefficiencies, strengthening our balance sheet and managing costs at all of our operations.As Alan Hair, Hudbay’s President and Chief Executive Officer, observed at the Company’s year-end town hallstaff meeting: “We began January with copper at a multi-year low price, and the upside of 2016 is how theorganization responded. We delivered cost reductions at our operations, while still meeting guidance. Wealso restructured our credit facilities, positioning the Company for an even tougher pricing environmentthan turned out to be the case. Most importantly, we showed we could weather the storm while still movingforward.”Toward the end of the year, the copper price improved, and our focus on cost control and generating cashflow from operations meant we were able to begin devoting resources to plans for growth and exploration.Unlike many in the copper sector, Hudbay had maintained core exploration teams. Our capacity to respondeffectively to near-term challenges, while continuing to build and plan for the long term, is the key todelivering positive performance.Dealing with the Inevitable:Managing Price CyclicalityHudbay 2016 Annual and CSR Report 3 Mining is of tremendous importance to Peru. In 2015, it accounted for 17.6% of the country’s GDP androughly half of its exports. Mining brings tax revenue, jobs, investment, infrastructure and other importantbenefits. Understandably, it can also prompt questions and concern from local communities.In 2016, our Constancia mine saw a protest march, a roadblock and a brief occupation. For safety reasons,the occupation led to a temporary suspension of operations. The occupiers were from communities that hadall signed co-operation and development agreements with Hudbay and with local and national governments.For various reasons, they were dissatisfied with the scope of the agreements and the pace of theirimplementation – and they voiced their concerns through protests such as these, which are commonlyemployed tactics in rural and outlying districts of Peru.With forbearance and discipline from all sides, both legitimate protest and civil disobedience can be resolvedpeacefully, as were the three actions around Constancia. However, we know it doesn’t always happen thisway in Peru and we work very hard to maintain good relationships with our neighbours and mitigatepotential issues. We do so with the understanding that points of difference arise even in the bestrelationships. The key to maintaining those relationships is regular and open communication, and, on bothsides, a willingness to consider other points of view.Our Constancia operations have more than 17 people who focus on engaging with communities andsupporting development. They keep our neighbours informed about what we’re doing, and why, whilemaking sure we understand and acknowledge their concerns. They also work with local communities onprojects to improve infrastructure, upgrade health facilities and build capacity for sustainable economicdevelopment and growth.A Foundation for RewardingCommunity RelationshipsHudbay 2016 Annual and CSR Report 4 Nothing better defines the nature of modern mining than the commitment to operating in accordance withthe principles of environmental responsibility and sustainability. An example of this commitment can beseen every day in the hands-on, practical steps Hudbay takes to foster biodiversity.In many cases, our steps are framed out in protocols established by organizations like the Mining Associationof Canada (MAC), the International Standards Organization (ISO) and the International Finance Corporation(IFC). While the guidelines and standards set by these outside organizations play a key part in helping us be aresponsible operator, the drive to meet them comes from inside our organization.People who don’t know the industry might be surprised to discover the extensive effort companies andemployees make to ensure our activities are compatible with surrounding ecosystems. In addition to minersand engineers, we employ and partner with biologists, botanists, ecologists and environmental scientists.They understand industry’s part in society’s overall impact on the environment, but they also recognize thatsustainable mining can contribute to enhancing the quality of life around the world and they are dedicatedto making sure that Hudbay meets high standards for environmental performance.In our approach to conserving biodiversity, we’re guided by the “mitigation hierarchy”, a series of definedsteps, taken throughout the life of a project, that help limit the adverse impacts of a development onbiodiversity, and can potentially lead to a net gain. Here are a few examples:In Peru, we’re gathering, breeding, relocating and releasing two threatened animal species, an aquaticfrog in conservation status and an endemic reptile from the region to similar habitats outside of the minesite. We’re also working with members of local communities near our operations to preserve and restorewetlands, including helping area ranchers identify practical alternatives when it comes to finding placesfor feeding and watering their cattle.In Manitoba, we have an ongoing partnership with Manitoba Sustainable Development (formerlyManitoba Conservation) to help ensure that the local caribou populations are not adversely impacted byour operations. We consulted with Manitoba Sustainable Development during the planning stages of ourReed and Lalor mines to make our activities as caribou-friendly as possible, and we continue to providefinancial and practical support to help them monitor caribou populations.Managing Our Impact andSupporting BiodiversityHudbay 2016 Annual and CSR Report 5 In Arizona, we will be funding a variety of mitigation measures including aquatic and bird speciesconservation activities, salvaging and replanting agave plants that are a food source for an endangeredbat, avoiding specific sites to prevent plant species impacts, implementing jaguar and ocelot monitoringprograms, as well as providing financial support to the Forest Service to hire a biologist for the term ofconservation to manage funds and monitor results.Biodiversity conservation is integral to modern mining, and one of the cornerstones of our approach tobuilding a business that is sustainable and successful.Hudbay 2016 Annual and CSR Report 6 Our CompanyHudbay is an integrated mining company that produces copper concentrate (containingcopper, gold and silver) and zinc metal. We are headquartered in Toronto, Ontario, Canada,and listed on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores deLima under the symbol “HBM”.LalorManitoba100% ownershipLong-life, undergroundzinc/gold/silver/copper mineStall concentrator processesLalor ore777Manitoba100% ownershipUndergroundcopper/zinc/gold/silver mineFlin Flon concentratorHydrometallurgical zinc plantReedManitoba70% ownershipUnderground copper mineRosemontArizona92.05% ownership*Open pit copper projectConstanciaPeru100% ownershipOpen pit copper mine andconcentrator* 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 mayearn up to a 20% interest.Hudbay 2016 Annual and CSR Report 7 Our CompanyCEO Message2016 is perhaps best described as “a year of two halves”.In the first half of the year, the copper price went from bad to worse, and virtually every mining company saw closescrutiny and tough questions about its balance sheet and liquidity. At Hudbay, we took decisive action to reducediscretionary spending while maintaining, above all else, our focus on safety.From a safety-first starting point, we deferred capital expenditures, we worked wherever possible with our banksand other sources of finance to restructure our credit facilities, and we ensured that we had clear plans in place toweather any further turbulence in commodity prices.During the second half, thanks to strong business performance and an improving price environment toward the endof the year, we were in a position to move the business forward. This included reintroducing certain growthinitiatives, such as incorporating Pampacancha into the Constancia mine plan as of the end of 2018, working toexpand operations at Lalor, further advancing permitting at Rosemont and looking at exploration opportunities inChile.For all of the challenges, I can confidently say that in 2016, Hudbay met both its performance and strategic goals andpositioned the Company for growth in 2017 and beyond.DISCIPLINED PERFORMANCEIn 2016, Constancia completed its ramp up to full production, delivering exceptional results, with copper andprecious metals production exceeding the high end of the 2016 guidance range.Importantly, our South America Business Unit and the team at Constancia worked closely with communities in thearea of our operations and transportation routes. By keeping the lines of communication open, striving to mitigateany mine-related impacts that concern communities, and ensuring those communities benefit from our activities, theteam made an essential contribution to our successful results in Peru. The foundation they’ve built with ourneighbours and in the region was instrumental in helping us overcome many of the challenges encountered this pastyear.Our three mines in Manitoba – Lalor, Reed and 777 – met their production guidance goals for 2016 as well. Duringthe year, we welcomed André Lauzon as the new head of the Manitoba Business Unit. André has worked in mines allaround the world, and we benefit from his long experience and fresh perspective. He immediately began working toimprove overall productivity in Manitoba, with a particular focus on ways to increase production at Lalor.“Copper and zinc are essential elementsfor modern life. Mobile devices, medicine,housing, transportation and renewableenergy all draw on these naturalresources, and demand will increase asglobal production declines.”Hudbay 2016 Annual and CSR Report 8 André is also tasked to lead the business unit through an inevitable phase of mining: closure. Exploration has notrevealed any alternatives that could extend the life of the 777 mine, which is expected to close in 2020, or the Reedmine, which will close as anticipated in 2018. We’re working with the communities and government representativesof Flin Flon, Creighton and Denare Beach as they prepare for the mines’ closures. We also launched a collaborativeeffort with employees to explore ways to sustain operations at the Flin Flon zinc plant, which will be affected by thereduced ore feed in the Flin Flon area.At our Arizona business unit, Pat Merrin and his team continued to move the Rosemont project through permitting.During 2016, Rosemont received the final biological opinion from the US Fish and Wildlife Service, a key step towardreceiving final federal permits. Additionally, legal challenges relating to the project were resolved with rulings thatupheld both regulatory decisions and our understanding of applicable regulations. In our experience, permitting isnot a process for the impatient, but we know that it supports the construction and operation of a good mine.LOOKING AHEADCopper and zinc are essential elements for modern life. Mobile devices, medicine, housing, transportation andrenewable energy all draw on these natural resources, and demand will increase as global production declines.Within this context, Hudbay has distinct strengths. Constancia and Lalor are low-cost, long-term properties, still inthe early stages of their operating lives, offering strong growth potential. Rosemont can significantly increase ourcopper production and be a showcase for sustainable mining. Hudbay has proven capabilities as a mine builder andoperator and we are proud of our record of managing costs and delivering results. The positive response to our bondissue in December 2016 proves that the market shares this opinion.Hudbay enters 2017 having met or exceeded all of our production and operating guidance for 2016. Our balancesheet is stronger and we are positioned to both pursue and deliver growth in the year ahead. Regardless of wherethe mining cycle may be, Hudbay, its operations and its people are well positioned for the future.In closing, I would like to thank the Board and my colleagues at Hudbay for their continued support andcommitment. Throughout the year and across the Company, we identified our goals and pulled together to achievethem. That’s the nature of Hudbay.Sincerely,Alan HairPresident and Chief Executive OfficerHudbay 2016 Annual and CSR Report 9 W. Warren Holmes*ChairmanCorporate Governance andNominating Committee(Chair)Alan HairPresident and ChiefExecutive OfficerIgor Gonzales*Technical CommitteeEnvironmental, Health,Safety and SustainabilityCommitteeTom A. Goodman*Environmental, Health,Safety and SustainabilityCommittee (Chair)Audit CommitteeAlan R. Hibben*Corporate Governance andNominating Committee(Chair)Sarah B. Kavanagh*Audit Committee (Chair)Corporate Governance andNominating CommitteeOur CompanyCorporate GovernanceHudbay’s Board of Directors and management believe good governance supports our company’s strongperformance and long-term success. We strive to follow best practices and meet or exceed regulatory requirements.The Board oversees the Company’s business and provides guidance to management to help meet corporateobjectives and maximize shareholder value. The Board fulfills its responsibilities directly and through fivecommittees:AuditCompensationCorporate Governance and NominatingEnvironmental, Health, Safety and SustainabilityTechnicalBoard members are selected based on criteria that include: judgment, character, expertise, skills and knowledgeuseful to the oversight of the Company’s business; diversity of viewpoints, backgrounds, experiences and otherdemographics including gender; business or other relevant experience; and the overall composition of the Board.See our 2017 Management Information Circular to learn more.BOARD OF DIRECTORSHudbay 2016 Annual and CSR Report 10 Alan J. Lenczner*Audit CommitteeCompensation CommitteeKenneth G. Stowe*Technical Committee (Chair)Compensation CommitteeMichael T. Waites*1Audit CommitteeTechnical CommitteeCarin S. Knickel*Compensation Committee(Chair)Environmental, Health,Safety and SustainabilityCommittee* Independent1. Michael T. Waites, who has been a director of Hudbay since 2014, is not standing for re-election to the Board at our Annual Meeting of Shareholders on May 4, 2017. We would liketo thank Mr. Waites for his dedicated service to the Board and to Hudbay generally. In connection with the departure of Mr. Waites, the Corporate Governance and NominatingCommittee recommended and the Board has nominated Carol T. Banducci for election to the Board. Ms. Banducci’s extensive experience as Chief Financial Officer of a publicly tradedmining company, her experience as a board member for other mining companies, and her more than 25 years of financial management and strategic leadership experience with leadingglobal companies, including other mining companies, will be of great value to the Board.LEARN MOREGovernance policies, committees, documentsManagement Information CircularHudbay 2016 Annual and CSR Report 11 Our CompanyBusiness ConductHonesty, integrity and compliance with the law are central to the way we do business. We recognize that bribery andcorruption can pose degrees of risk wherever we operate, and we are very clear about our standards andexpectations.Our Code of Business Conduct and Ethics (the “Code”) and related policies set out principles for directors, officersand employees on matters like compliance with law, conflicts of interest, confidential information, protection andproper use of Hudbay assets, and the reporting of illegal and unethical behaviour.On joining the Company, all board members and employees are expected to sign a declaration confirming that theyunderstand and will comply with the Code. The Board requires every director and executive officer to disclose anydirect or indirect conflict of interest, and to confirm compliance with the Code annually. Formal, annual confirmationof compliance with the Code and the Confidentiality and Insider Trading Policy is also required from individuals,including directors, officers, and employees above a certain level of responsibility, those whose duties include thetransfer of responsibility, those whose duties include the transfer of funds, those in community and governmentrelations areas, and those who may be reasonably expected to interact with government officials over the course oftheir duties.In 2016, we refreshed our Statement on Anti-Corruption to include anti-bribery and anti-corruption provisions forsuppliers. Suppliers were notified of our new expectations through a specific email communication.COMPLIANCE TRAININGOur Legal department is responsible for providing compliance training on the Code and related policies, and on theCanadian Corruption of Foreign Public Officials Act (CFPOA) and the US Foreign Corrupt Practices Act (FCPA), to specificgroups or across the organization as it deems appropriate. Training in 2016 included:Anti-bribery and anti-corruption refresher training for the Board and senior managementAnti-bribery and anti-corruption training largely delivered by a third-party organization for groups in PeruCorruption fraud training for the supply chain group in Manitoba“Sole source” training in Arizona (training focused on when procurement of goods or services on a sole-sourcedbasis is justifiable versus when a competitive bid process should be used)ISSUES OR COMPLAINTSThe majority of complaints received through our third-party whistleblower reporting service involve operationalmatters and employee relations. Seven incidents were reported in 2016, all of which were investigated and resolvedwith corrective action where necessary. While none of these incidents involved significant allegations of fraud orviolations of our Code of Business Conduct and Ethics, there were allegations related to business, health, safety andenvironmental practices; inappropriate behaviour or violation of a company policy or procedure; and conflicts ofinterest.  Hudbay 2016 Annual and CSR Report 12 To Report an IssueContact our Board of Directors by mail or email at chairman@hudbay.com.To make a confidential report to the Chair of Hudbay’s Audit Committee about a perceived violation of theCompany’s internal and accounting controls, auditing matters or violations of the Company’s Code of BusinessConduct and Ethics, call +1 877 457-7318 or visit www.clearviewconnects.com. Reports are handled under ourWhistleblower Policy, and the Chair of the Audit Committee is responsible for ensuring that they areappropriately investigated.The Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor is a resource available forconstructively resolving conflicts between project-affected communities and Canadian extractive sectorcompanies outside of Canada. The CSR Counsellor can be reached by emailat 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 and Development (OECD)provides a forum where multinational enterprises, Canadian businesses, non-governmental organizations andlabour organizations can voice their views and concerns. Canada’s NCP can be reached by emailat ncp.pcn@international.gc.ca or by telephone at +1 343 203-2341.The majority of complaints received through our third-party whistleblower reporting service involve operationalmatters and employee relations. Thirty-four incidents were reported in 2015, all of which were investigated andresolved with corrective action where necessary. While none of these incidents involved significant allegations offraud or violations of our Code of Business Conduct and Ethics, there were issues related to business, health,safety and environmental practices; inappropriate behaviour or violation of a Company policy or procedure; andconflicts of interest.We also have grievance processes set up at our projects and operating sites to address community concerns.See Community Relations for details.Hudbay 2016 Annual and CSR Report 13 Our CompanyRisk ManagementRisk management is essential for effective governance and to achieve our business objectives. Our risk managementpolicy defines our approach to enterprise risk management and establishes a framework within which specializedpolicies and practices are developed and regularly refined. Through this policy, we aim to embed risk managementinto our corporate culture, systems and processes.All Hudbay executives are responsible for integrating risk management into their strategic business planning, budgetand resource allocation, operating performance, and human resource, financial and compliance processes. Theframework requires practices for risk identification, assessment, measurement, monitoring, reporting andtreatment.While risk is specific to the nature of each business area, the framework and standard guidelines facilitate quarterlyconsolidation of risk information for reporting to executive management and the Board of Directors.The Board of Directors is ultimately responsible for overseeing the risk management function, and the AuditCommittee of the Board is mandated to assist in this regard. The Vice President, Risk Management, and the Director,Risk Management, lead the enterprise risk management program.LEARN MOREOur 2017 Annual Information Form describes key corporate risks and their potential business impacts.Hudbay 2016 Annual and CSR Report 14 Alan HairPresident and ChiefExecutive OfficerDavid BrysonSenior Vice Presidentand Chief FinancialOfficerCashel MeagherSenior Vice Presidentand Chief OperatingOfficerEugene LeiSenior Vice President,Corporate Developmentand StrategyJavier Del RíoVice President, SouthAmerica Business UnitDavid ClarryVice President,Corporate SocialResponsibilityPatrick DonnellyVice President andGeneral CounselJon DouglasVice President andTreasurerElizabeth GitajnVice President, RiskManagementOur CompanyManagement TeamOur management team sets the tone for a culture of integrity and compliance and is responsible for establishing andimplementing the Company’s long-range goals, strategies, plans and policies, subject to the Board’s direction andoversight.Hudbay 2016 Annual and CSR Report 15 André LauzonVice President,Manitoba Business UnitTerry LindeVice President, Projectand Technical ServicesPatrick MerrinVice President, ArizonaBusiness UnitMary-Lynn OkeVice President, FinanceHudbay 2016 Annual and CSR Report 16 Business andFinancial ReviewIn a year that started with a volatile metal price environment, we drew on our experience,focused on our strategy and met our performance objectives.KEY ACCOMPLISHMENTSMaintained safety performance consistent with performance during 2015. Regardless of what is happening in theexternal environment, we must act and operate safely and responsibly.Met or exceeded all production and operating cost guidance.Delivered low-cost production growth in copper, zinc and precious metals, with strong performance inConstancia’s first full year of commercial production and higher throughput levels at Lalor.Improved our liquidity position by reducing costs wherever possible, ultimately identifying over $100 million inoperating and capital cost savings, and renegotiating debt repayments.Successfully completed the refinancing of senior unsecured notes, resulting in lower interest costs, extendedmaturities and more flexible financial covenants.Maintained our growth pipeline and moved to advance in-house brownfield projects.2016 SummaryOPERATIONS SUMMARYFor the years ended December 3120162015* Metal reported in concentrate is prior to refining losses or deductions associated with smelter contract terms.FINANCIAL SUMMARYFinancial condition (in $000s)Dec. 31, 2016Dec. 31, 2015Production (contained metal in concentrate)*Copper (000 tonnes)174.4147.3Zinc (000 tonnes)111.0102.9Gold (000 ounces)114.3100.2Silver (000 ounces)3,756.02,791.5Cash and cash equivalents$146, 864$58,852Working capital121,53957,613Total assets4,456,5564,479,585Total long-term debt1,232,1641,274,880Equity1,763,2121,787,290Hudbay 2016 Annual and CSR Report 17 Financial performance(in $000s, except per share and cash cost amounts)Dec. 31, 2016Dec. 31, 2015Attributable to owners of the Company.1. Metal reported in concentrate is prior to deductions associated with smelter contract terms.2. Revenue$1,128,678$886,051Profit (loss) before tax5,605(399,041)Basic and diluted (loss) earnings per share1(0.15)(1.41)Profit (loss)(35,193)(331,428)ProductionContained metal in concentrate2Copper (tonnes)174,491147,280Gold (ounces)114,296100,177Silver (ounces)3,755,8962,791,536Zinc (tonnes)110,582102,919Metal soldPayable in metal in concentrateCopper (tonnes)171,451134,600Gold (ounces)92,52793,779Silver (ounces)3,181,7591,873,176Refined zinc (tonnes)103,453101,920Hudbay 2016 Annual and CSR Report 18 Business and Financial ReviewStrategyHudbay’s mission is to create sustainable value for our shareholders through acquiring, developing and operatinghigh-quality, long-life deposits with exploration potential in mining-friendly jurisdictions.Long experience has taught us the best way to create shareholder value in the mining sector is through discoveringnew mineral deposits and then developing the facilities to mine those deposits profitably. We believe the successfuldevelopment, ramp-up and operation of our Constancia mine in Peru, and our many decades of experience of miningin northern Manitoba, give Hudbay a competitive edge relative to our peers.We plan to grow the Company by exploring and developing properties we already control, like our Rosemont projectin Arizona. We may also acquire other properties that align with our strategic criteria, and we continually work tooptimize the value of our producing assets through efficient and safe operations.To make sure we deliver shareholder value with our acquisitions, our criteria for evaluating every opportunityincludes the following:Potential acquisitions should be in politically stable, mining-friendly jurisdictions in the Americas.We must be able to leverage our expertise in exploring and developing volcanogenic massive sulphide andporphyry mineral deposits.We look for assets that offer significant potential for exploration, development and optimization.Large, transformational mergers or acquisitions in the mining industry tend to be risky and potentially valuedestructive; so, unless exceptional opportunities present themselves, we generally focus on specific high-quality(low cost, long life) mines, development projects and early-stage projects.Before any acquisition, we make sure we understand how we can add value to the property by applying our social,technical, operational and project execution expertise, or through providing the required financial capacity andother optimization opportunities.Acquisitions should be accretive to Hudbay on a per share basis.FINANCIAL AND BUSINESS OBJECTIVES FOR 2017Continue pursuing efficiency improvements in our operations so we can sustain the cost reductions achieved in2016, while generating incremental free cash flow and increasing net asset value.Move ahead on high-return, in-house brownfield opportunities to increase throughput from the Lalor mine andrelated milling facilities, and to incrementally add zinc and gold production in the near and medium term.Advance the development of the high-grade Pampacancha deposit so that we can begin mining it in late 2018.Advance permitting and technical work at the Rosemont project.Use free cash flow generation to reduce debt and further reduce our cost of capital.Continue to evaluate exploration and acquisition opportunities that meet our criteria, and pursue those that wefeel are in the best interest of the Company and our stakeholders.Hudbay 2016 Annual and CSR Report 19 Business and Financial ReviewOperationsIn 2016, we focused on making our operations even more cost efficient while still achieving strong productionresults and maintaining our longstanding priority and focus on safety. Our efforts were rewarded both with positivefree cash flow generation in a year of cyclical low copper prices, and by successfully meeting or surpassing ourstrategic and performance goals. As the pricing environment improved over the year, Hudbay ended 2016 in a strongposition to pursue organic growth at existing operations and to consider exploration opportunities in Chile.2016 Performance HighlightsIncreased production of all metals year-over-year, reflecting the first full year of commercial production atConstancia and higher throughput levels at Lalor.Achieved cost reduction initiatives in 2016 with consolidated cash cost of $0.93 per pound copper, andconsolidated all-in sustaining cash costs of $1.52 per pound copper, lower than 2015 levels by 19% and 30%,respectively.Safety performance broadly consistent with 2015.MANITOBAAndré Lauzon hired as new head of the Manitoba Business Unit.Ore processed at the Stall concentrator was 17% higher than in 2015 as a result of higher production at Lalor.11% reduction in unit operating costs over 2015.Initiated study into potential for sustaining operations at the Flin Flon zinc plant.PERUIn its first full year of commercial operation, Constancia mined over 26.5 million tonnes of ore and produced527,296 tonnes of copper concentrate.  Full year production of copper, gold and silver was 26%, 39% and 39% higher than 2015, respectively, all aboveConstancia guidance ranges in 2016.Driven by ongoing cost optimization efforts and improved maintenance timing, cash cost per pound of copperproduced, net of by-product credits, for 2016 was $1.09, a decrease of 6% over the previous year.Hudbay 2016 Annual and CSR Report 20 PDF !PDF !Business and Financial ReviewFinancialsPrice cyclicality is part of the mining cycle, one that Hudbay has been managing successfully for over nine decades. In2016, we were able to draw on that history to meet or exceed all of our production targets, while our actualsustaining capital spending was 20% lower than our 2016 guidance. Our revenue for the year was $1,128.7 million,$242.6 million higher than in 2015. Faced with both a challenging price environment and lower copper salesvolumes, we were able to hold our cash cost per pound of copper produced, net of by-product credits, steady at$1.46 per pound.*Consolidated Financial StatementsManagement’s Discussion and Analysis* Operating cash flow per share and cash cost per pound of copper produced, net of by-product credits, are non-IFRS financial performance measures with no standardized definitionunder IFRS. For further information and a detailed reconciliation, please see the discussion under “Non-IFRS Financial Performance Measures” beginning on page 40 of Hudbay’sManagement‘s Discussion and Analysis filed February 22, 2017.Hudbay 2016 Annual and CSR Report 21 CSR ApproachOur commitment to corporate social responsibility and sustainability applies to everyoperation and project. The nature of modern mining demands it. So do we. That commitmentis simply the way we do business.Grade AOur Manitoba facilitiesreceived a TowardsSustainable Mining (TSM)Leadership Award forachieving externallyverified A-level grades orhigher across all TSMindicators.ResponsibleCorporate Leader inCanadaFor the second year in arow, Hudbay wasrecognized by CorporateKnights magazine as anemerging responsiblecorporate leader amongsmall- to mid-capCanadian companies.CSR Best PracticeOur Constanciaoperations werepresented withcommunity relations andenvironmental awardsfor their work.Hudbay 2016 Annual and CSR Report 22 Hudbay was a significant supporter of a human rights video developed by the Canadian Centre forExcellence in Corporate Social Responsibility for the Extractive Sector. The video introduces miningemployees to the Universal Declaration of Human Rights and what they and their companies should do torespect and protect human rights. Produced with support from Global Affairs Canada, Natural ResourcesCanada and the Mining Association of Canada and its members, the video is publicly available on YouTube.Human Rights Primer for MiningPersonnelHudbay 2016 Annual and CSR Report 23 As a member of the Mining Association of Canada (MAC), Hudbay participates in the Towards SustainableMining (TSM) initiative, which requires mining companies to annually assess their facilities’ performanceacross six important areas:Tailings managementAboriginal and community outreachSafety and healthBiodiversity conservationCrisis managementEnergy use and greenhouse gas emissions managementThe results are freely available to the public and externally verified every three years.Every year, two or three companies that have recently undergone external verification are asked toparticipate in a Post-Verification Review (PVR). Led by a multi-stakeholder Community of Interest (COI)Advisory Panel, the PVR helps the panel analyze activities that contribute to TSM results and promotecontinuous improvement in the environmental and social practices of the mining industry. We were pleasedto participate in a PVR in 2016 as a way of improving our own performance and helping raise industrystandards.As part of the PVR, we submitted background information about Hudbay’s sustainability and TSMperformance, presented to the COI Advisory Panel via webinar and then participated in a face-to-facedialogue in Ottawa. The Panel’s summary of findings are published on the MAC website.Post-Verification Review DrivesImprovementHudbay 2016 Annual and CSR Report 24 CSR ApproachCSR GovernanceWe view responsible corporate behaviour as integral to the successful execution of our business strategy,particularly for maintaining a good reputation with regulators and communities and being able to bring that goodreputation to new communities and jurisdictions as we grow.Hudbay’s Environmental, Health, Safety and Sustainability (EHSS) Board committee oversees the Company’s humanrights, environmental, health and safety policies, programs and systems. The Committee meets quarterly to reviewperformance and management of key EHSS risks. The Committee also tracks the validation of Hudbay managementsystems through the external ISO 14001 and OHSAS 18001 certifications. Day-to-day management of Hudbay’s CSRprogram is the responsibility of line management at each of our operations, supported by our Vice President,Corporate Social Responsibility.CSR MANAGEMENT FRAMEWORKHudbay 2016 Annual and CSR Report 25 Our Code of Business Conduct and Ethics, Human Rights Policy and Environmental Health and Safety Policy codifyour commitment to corporate social responsibility.Corporate and site-specific management systems support decision-making and performance. Operating sites arerequired to maintain certification under the ISO 14001 (environmental) and OHSAS 18001 (health and safety)management system standards. New sites are expected to achieve certification within two years of start ofcommercial operation or acquisition by Hudbay. Our Manitoba Business Unit maintained ISO 14001 andOHSAS 18001 throughout the year, and our Peru operation achieved certification in March 2017.We use an integrated software management system to capture, track and report health, safety and environmentalincidents and corrective actions at all sites. In 2016, we also began to use the system to chronicle stakeholderengagement.As a member of the Mining Association of Canada (MAC), we participate in the Towards Sustainable Mining (TSM)program. TSM has gained international recognition and been adopted by national mining associations in Argentinaand Finland as well. TSM requirements are incorporated into Hudbay’s overall management system and companystandards. We are currently implementing TSM at our Constancia mine.INTERNATIONAL BEST PRACTICE STANDARDSHudbay has adopted international best practice standards that are particularly relevant to its business: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 – the Mining Association of Canada’s (MAC) set of tools and indicators to driveperformance and ensure key mining risks are managed responsibly. TSM is a requirement of MAC members attheir sites in Canada. Hudbay applies these standards internationally as wellVoluntary Principles on Security and Human Rights – an operating framework that ensures security practicesinclude respect for human rightsGlobal Reporting Initiative (GRI) – the generally accepted framework for reporting on an organization’s economic,environmental and social performanceCDP (formerly called the Carbon Disclosure Project) – thousands of organizations globally measure and disclosetheir greenhouse gas emissions, water use and climate change strategies through CDP and CDP WaterExtractive Industries Transparency Initiative (EITI) – Hudbay is an official supporting company of the EITI. HudbayPeru is a member of the Peruvian Mining Society, which is fully committed to the EITI process in PeruIFC Performance Standards – Hudbay follows IFC Performance Standards at our Constancia site. Part of the WorldBank Group, the International Finance Corporation (IFC) is the largest development institution in the world that isfocused exclusively on the private sector in developing countriesHudbay 2016 Annual and CSR Report 26 PRECAUTIONARY APPROACHThrough the life of a mine, Hudbay operates under the precautionary principle: the duty to prevent harm, when it iswithin our power to do so, working with a balance of probabilities if a scientific conclusion is not yet available. Weuse baseline environmental and social impact studies to evaluate how to avoid, mitigate or control potentiallysignificant impacts; implement appropriate monitoring and management systems; and address the need for mineclosure. In all cases, provision is made for public consultation and input.Industry InvolvementHudbay participates in industry associations and multi-stakeholder groups through membership, funding, provisionof expertise and participation in committees and working groups. Memberships include the following:Aboriginal Chamber of Commerce (Manitoba)AIME – Society of Mining EngineersAlliance of Construction Trades (Arizona)American Exploration and Mining AssociationArizona Small Business AssociationArizona Tax Research AssociationArizona Trail AssociationAsociación Vida Perú (non-profit organization that donates medical equipment and medicines)Cámara de Comercio Canadá–PerúCanadian Council for Aboriginal BusinessCanadian Dam AssociationCanadian Institute of Mining, Metallurgy and Petroleum and relevant societiesSeveral Arizona-based Chambers of Commerce – Benson San Pedro Valley, Greater Oro Valley, Greater Vail Area,Nogales-Santa Cruz, Sierra Vista Area, Tucson Hispanic, Tucson MetroConfederación Nacional de Instituciones Empresariales Privadas, CONFIEP (National Confederation of PrivateBusiness Institutions in Peru)Cusco Chamber of CommerceDevonshire Initiative (a Canadian forum for leading international development NGOs and mining companies toengage on mining and community development issues)EITI – Extractive Industries Transparency InitiativeEmpresarios por la Educación (a Peruvian private sector organization to promote and develop educationalprojects)Green Valley Sahuarita Chamber of CommerceHudbay 2016 Annual and CSR Report 27 Grupo de Diálogo, Minería y Desarrollo Sostenible (multi-stakeholder group promoting open and transparentdialogue on mining, environmental protection and sustainable development in Peru)Iniciativa para la Transparencia de las Industrias Extractivas en Perú, EITI–Perú (Extractive Industries TransparencyInitiative, Peru)International Zinc AssociationManitoba Employers CouncilMarana Chamber of CommerceMetropolitan Pima AllianceMining Association of CanadaMining Association of ManitobaMining Foundation of the Southwest (US)National Mining Association (US)Southeast Arizona Economic Development GroupSoutheastern Arizona Contractors AssociationSouthern Arizona Business CoalitionSouthern Arizona Leadership Council Hudbay 2016 Annual and CSR Report 28 CSR ApproachHuman Rights and SecurityGovernments have the primary responsibility for protecting human rights, and business has the duty to respectthese rights. Together with our Code of Business Conduct and Ethics, Hudbay’s Human Rights Policy spells out ourcommitment to human rights, and draws on internationally accepted standards for business and labour practices,community participation and security measures.In the workplace, all individuals are to be treated with respect and dignity. We do not tolerate discrimination on thebasis of race, colour, religion, gender, national origin, age, sexual orientation, or disability (or any other categoryprotected by applicable laws).Individuals are encouraged to report any real or perceived human rights concerns by contacting the Hudbay Board ofDirectors directly through our corporate website, through the third-party ethics hotline or through site grievancemechanisms.SECURITY PRACTICESIn keeping with our Human Rights Policy, we follow the Voluntary Principles on Security and Human Rights, anoperating framework that ensures security practices include respect for human rights. Our approach is rooted in thebelief that effective security is built through trust-based relationships with neighbouring communities and principle-based professional conduct by our employees and security contractors.As required based on risk assessments, we train security personnel on the United Nations (UN) Code of Conduct forLaw Enforcement Officials and the UN Basic Principles on the Use of Force and Firearms by Law EnforcementOfficials. There is an extensive ongoing training program in Peru. Security supervisors and contracted security staffthere are unarmed except for government-mandated armed security guards at the explosive storage area.In Peru, we regularly audit security policies and practices, and conduct gap analyses against the Voluntary Principles.Following a competitive bid process, we renewed our contract with the security firm at Constancia in 2016, whichresulted in all equipment, vehicles, radios, personal kits and uniforms being upgraded, and a much lower turnoverrate among security personnel. We also upgraded the communication system in the Operations Centre, whichproved to be helpful during protest situations.Security personnel work closely with Constancia’s Community Relations team to maintain open lines ofcommunication with communities and mitigate potential issues. Their efforts helped resolve three communityincidents safely and peacefully during the year. In each case, the Peruvian National Police intervened becausenational laws were being violated. Constancia security supervisors followed established procedures for working withthe police, which included briefings on our commitments to uphold the Voluntary Principles, the UN Code ofConduct for Law Enforcement Officials and the UN Basic Principles on the Use of Force and Firearms by LawEnforcement Officials.Because periodic social unrest affected certain mining projects in southern Peru in 2016, the Constancia securitysuperintendent met on five occasions with security managers from neighbouring mines. The security group, knownas SEMSUR, discusses best practices, experiences and emerging issues. Hudbay has also used these meetings toexplain our commitment to, and share our experience with, the Voluntary Principles on Security and Human Rights.Hudbay 2016 Annual and CSR Report 29 In Arizona, we hired a security manager, who has developed security procedures for our facilities and plans foreventual construction and operations. The new security manager also worked with local law enforcement andemergency response agencies to create the Rosemont Safety and Security Work Group. The group meets to discusslatest project developments, safety or security incidents or plans at the property, and how to coordinate effortsshould an emergency arise.GUATEMALA CIVIL LAWSUITSHudbay is named in three civil lawsuits relating to alleged events in Guatemala prior to 2010, where the Companyowned a controlling interest in Compañía Guatemalteca de Níquel (CGN). Information about the litigation is postedto our website.Hudbay 2016 Annual and CSR Report 30 CSR ApproachStakeholder EngagementStakeholder engagement is essential for building trust, strengthening relationships, reducing social risk andimproving opportunities to create value for the Company and our stakeholders.Hudbay’s corporate Stakeholder Engagement and Community Response standards and guidance documents provideclear direction on our expectations. Each business unit is expected to use engagement practices that reflect localcontext but remain consistent with Hudbay’s objectives.In 2016, our Board adopted a Shareholder Engagement Policy to encourage open and sustained dialogue withshareholders. The policy outlines ways to contact Hudbay’s Board and senior management and lists relevant topicsto discuss with each group.We use our integrated software management system to log stakeholder engagement activities. We plan to expandthis application in the coming year and use it for documenting stakeholder commitments and associated actionplans, and tracking donation requests and decisions.2016 ENGAGEMENT ACTIVITIES AND TOPICSTypical stakeholder priorities and concerns are listed below. Additional information on many of the topics can beaccessed by clicking on the relevant links.Stakeholder groupHow we engaged in 2016Priorities and concernsShareholders, investors andanalystsConferences (10 events)Investor meetings andconference calls (more than 580events)Annual and Special Meetings ofshareholdersAnalyst and investor site visitsInvestor perception surveyUpcoming 777 and Reed mineclosuresExploration in northern Manitoba Employees and contractorsQuarterly CEO email messagesSenior management site visitsCompany-wide “town hall”meetings via video conferenceOrientation and trainingprogramsOne-on-one and small groupmanager/staff meetingsHealth and wellness committeesand activitiesHudbay IntranetHealth and safetyWork processesBusiness performanceUnderstanding of compensationand benefitsOpportunities for personaldevelopmentEnvironmental requirementsTraining for policies, permits orother requirementsHudbay 2016 Annual and CSR Report 31 Stakeholder groupHow we engaged in 2016Priorities and concernsUnionsMeetings with union leaders onoutstanding issuesFormal grievance processesJoint health and safetycommitteesMobilitySeniorityOutstanding grievancesLocal communities andAboriginal/NativeAmerican/indigenous groupsCommunity information andconsultation meetings/dialoguetablesCommunity partnershipsSite tours and open housesSite grievance/communityresponse processesCommunity relations officesCultural awareness workshopsand other trainingDevelopment project updatesCommunity and area activities andinvestmentSafety and environmentalconcernsLand useWater use and qualityCultural protection, awarenessand disseminationLocal employment andprocurementTraining programs for communitymembersGovernmentMeetings with local, regional,provincial and federalgovernment officials andregulatorsJoint initiativesPermittingEnvironmental and legalcompliance/mitigationAboriginal/indigenous/tribalrelations (where applicable)Economic contributionsCommunity and workforcedevelopmentCustomersDirect contactIndustry and business forumsAchieving agreed terms ofdelivery for productsProvision of information onproduct safety and product originCompliance with environmentallyand socially responsibleperformance and riskmanagementHudbay 2016 Annual and CSR Report 32 CSR ApproachMaterialityOnce every three years, we conduct a combined materiality, hazard and aspect assessment to guide our CSRreporting and management priorities. The assessment considers the environment, health, safety and community(EHSC) issues that are most significant to Hudbay in terms of business impact and degree of stakeholder interest.Our last assessment was conducted in 2014. Please see our 2014 report to learn more about our process.MATERIALITY MATRIXEleven priority issues were identified during the 2014 materiality assessment. Click on the issue in the diagram belowfor details on how it is being managed and our 2016 performance.Hudbay 2016 Annual and CSR Report 33 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 wasteHudbay 2016 Annual and CSR Report 34 BOUNDARIESThe materiality review was conducted on the initial boundary assumption of activities and facilities within Hudbay’smanagement control (as described in the Our Company section of this report). Participants in the review processwere then asked for cases in which boundary limits should be adjusted for specific aspects. The exceptions that wereagreed to be appropriate based on stakeholder expectations and business risk are as follows:Safety statistics are tracked and reported for all contractor activities that are under Hudbay contracts andsupervision;Environmental incidents related to transportation between Hudbay locations and local supplier activities aregenerally tracked and reviewed by Hudbay, but are not included in performance reporting in this report;Grievances are accepted and investigated with respect to local contractors and security activities related toHudbay, and are included in grievance numbers and characterization in this report; andScope 2 greenhouse gas emissions are calculated and reported.Hudbay 2016 Annual and CSR Report 35 CSR ApproachResponsible Supply ChainMining is the first stage of a long supply chain that converts mineral resources into products that meet the needs ofeveryday life.We focus our supply chain responsibility efforts on activities where we can have the greatest influence – our ownoperations, contractors working at our sites, local suppliers and Hudbay products up to the point at which they areshipped (in Manitoba, the plant gate, and in Peru, the port loading facility).We are committed to conducting our own business honestly and ethically, in compliance with the law, and in keepingwith our Code of Business Conduct and Ethics.  We expect our suppliers and service providers to do the same.Supplier standards include the following:All contractors working at our sites are expected to meet the Company’s environmental, health and safety, andhuman rights standards.Our Statement on Anti-Corruption, updated in 2016, includes anti-bribery and anti-corruption provisions forsuppliers.Our corporate Local Procurement and Employment Standard is aimed at supporting and utilizing local workforceskills and business capacity to provide goods and services.SUPPLY CHAIN PERFORMANCEThe direct supply chain for our copper concentrate and zinc metal products originates in Hudbay’s own mines innorthern Manitoba and Peru.The indirect supply chain for energy, goods and services used in transforming ore and concentrate into productsincludes thousands of suppliers. This supply chain includes operating supplies, maintenance supplies, energy andfuels as well as capital goods:In Peru, our top 50 suppliers accounted for 88% of our spending, and 95% of our spending was with suppliersbased in Peru.In Manitoba, our supplier base relates to production operations and capital projects. Our top 50 suppliersrepresented 50% of our spending in 2016, and 95% of spending was with suppliers in Canada. These suppliersprovided goods and services such as engineering services, electricity, spare parts for equipment, undergroundhaul trucks and other capital equipment.Hudbay’s top 10 suppliers in 2016, representing 47% of procured value, were (in alphabetical order):Cementation Canada Inc.Manitoba HydroCN (CAD)Moly-Cop Adesur S.A.Corporacion Primax S.A.Servosa Cargo S.A.C.Enel Generación Perú S.A.A.STRACON GyM S.A.FLSmidth S.A.C.Terminal Internacional del SurHudbay 2016 Annual and CSR Report 36 PRODUCTSCopper is an essential component in electronics and electrical transmission. Applications for copper use areincreasingly being identified in health care facilities, public transport and airports because of its powerful ability tokill bacteria. Zinc is vital to the endurance of metals in manufacturing.Our two main products, copper concentrate and zinc metal, come from our own mines in Canada and Peru:40% of Hudbay’s copper concentrate was sold to smelters in the Americas and Europe, and 60% to smelters inAsia. From there, several stages of smelting and refining the copper content ultimately result in 99.99% purecopper, 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 industrial customers (primarilygalvanizers who use it to protect steel from corrosion) throughout North America.Copper and zinc products are accompanied by material safety data sheets that provide details on productcomposition, toxicology, handling, storage and exposure issues. We also meet our product stewardshipcommitments by collaborating with governments and industry associations such as the International Zinc Associationand the European Copper Institute to help guide our compliance with international requirements such as thoseprovided by the International Maritime Organization (IMO).The IMO has established hazard classification criteria for bulk cargoes, and the International Convention for thePrevention of Pollution from Ships (MARPOL) has imposed restrictions on the disposal of bulk cargo residues whichhave been classified as “harmful to the marine environment” (HME) under the amended Annex V of the MARPOLconvention. Hudbay engaged the European Copper Institute (ECI) to determine the MARPOL classification forConstancia’s copper concentrates. From this study and others, all Hudbay copper concentrates have beendetermined to not be HME.Hudbay 2016 Annual and CSR Report 37 Lost Time AccidentFrequency(lost time accidents per200,000 hours worked)Lost Time AccidentSeverity(days lost per 200,000 hoursworked)Our PeopleIt’s the nature of an international company that its employees bring different languages,histories and experiences to their roles and responsibilities. For Hudbay, that diversity opensthe door to insight, innovation and opportunity.13%of our Manitobaworkforce self-identifiesas Aboriginal2,084People employed acrossHudbay in permanent,contractor and co-op andsummer student jobs67.7%of full-time employeesrepresented by tradeunionsHudbay 2016 Annual and CSR Report 38 Recognizing the importance of leadership in creating a positive safety culture, we introduced a company-wide Visible Felt Leadership (VFL) program for all levels of management including the CEO. VFL guidesleaders to conduct regular safety-focused workplace visits and to engage constructively with employees atall levels of operations. It’s a way of demonstrating to employees the importance we place on their safetyand well-being, and to engage positively around safety issues.As part of the corporate VFL procedure, senior leaders complete a form each time they conduct a workplacevisit. They document who they talked with and all safe acts and at-risk behaviours or conditions theyobserved. They also establish responsibilities and timelines for follow-up on safety concerns. Each businessunit has implemented its own VFL procedure tailored to its workplace and used by its business unit leaders.“Employee conversations are an essential part of the program,” says Ian Cooper, Manager, Health and Safety.“They provide an opportunity for employees and leaders to have meaningful one-on-one or small groupdiscussions about safety performance and concerns in their workplace, which leads to a greater sense ofpersonal accountability for safe work practices and ultimately to better results.”Safety Accountability Starts at theTopHudbay 2016 Annual and CSR Report 39 Over the next three years, we’ll be rolling out a global leadership initiative aimed at building sustainableleadership bench strength throughout Hudbay. An important part of it will be training courses offered atintroductory, intermediate and advanced levels. Introductory level courses will be held locally, whileintermediate courses will bring people from different business units together at rotating locations, andadvanced courses will be customized to individual needs.As a starting point, we created a leadership model with business input that articulates what we consider tobe Hudbay’s core leadership competencies. The competencies fall into three main categories: growingpeople, growing the Company and growing oneself.According to Amanda Abballe, Human Resources Manager: “Growing people is important becauseexperienced and talented people are the basis for our company’s success and we are responsible fordeveloping a skilled workforce. Growing Hudbay is important for being an adaptable and focusedorganization positioned to succeed in an ever-changing environment. Growing oneself builds confidence inone’s abilities and a desire to continuously improve, which are building blocks for personal success.”Course content will be finalized in 2017 and we expect to begin delivering the program to the first cohortbefore year-end.Building Leaders from WithinHudbay 2016 Annual and CSR Report 40 Our PeopleOur ApproachOur business depends on qualified employees who share our values and are committed to achieving our goals. Weemphasize communication, health and safety, training and development, and respect for one another, as means ofattracting, engaging and retaining talented people and fostering healthy labour relations.HEALTH AND SAFETYWe seek a culture of zero harm and make fatality prevention our first priority. It is essential that employees andcontractors at our 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.Consistent with Hudbay’s management systems approach, operations are required to have management systemscertified to the OHSAS 18001 health and safety management standard within two years of start-up.  We also committo following the Mining Association of Canada’s Towards Sustainable Mining (TSM) health and safety protocol.Conformance with these standards requires regular monitoring, self-assessments and third-party audits. We’reputting increased attention on assessing our management systems to ensure they’re efficient and effective inhelping us achieve the health, safety, community and environmental performance we want and maintain theexternally recognized certifications.In addition to introducing the Visible Felt Leadership program in 2016, we focused on learning from severe and high-potential close call safety incidents by ensuring uniform application of incident criteria, investigation processes andcorrective action. Our procedure for high-potential incidents includes requirements that they be reviewed by seniormanagement and investigated using the incident cause analysis method (ICAM) or an equivalent process. More than30 people in Manitoba have been trained in ICAM, and training has begun in Peru. To encourage reporting andlearning from high-potential incidents, we focus on the speed of investigation and corrective action rather than thenumber of incidents.In 2016, we began implementing critical risk and critical control (CRCC) management as part of our fatalityprevention focus. Both our Manitoba and Peru operations are putting in place processes to prioritize theidentification of key risks that could lead to fatalities and key controls to manage those risks.At operating sites, we maintain health monitoring programs that include hearing and lung function testing andbiological monitoring for employees who may be exposed to hazardous metals in the workplace.Our integrated management software system supports the process of recording, investigating and tracking all typesof health and safety incidents and non-conformances across the Company.EMPLOYEE RELATIONSWe promote a OneHudbay culture across all sites, characterized by open communications, high engagement levelsand healthy employee–management relations.To do so, we offer safe and meaningful work and competitive pay and benefits wherever we operate. Employees areactively involved in projects aimed at driving operational efficiencies and cost savings. Wellness programs are run byemployee committees, which organize lunch and learns, competitions and targeted campaigns for common topicslike managing stress and healthy eating. Information sharing and knowledge transfer across our operations isencouraged through short- and long-term international assignments, a vibrant intranet and online tools, andfrequent senior management visits and communications.Hudbay 2016 Annual and CSR Report 41 We respect the rights of workers to join unions and engage in collective bargaining without interference or fear ofretaliation, and we work to build productive relationships with these unions in order to collaborate on key matters.Approximately 67.7% of our workforce (1,121 employees) is represented by a union.TRAINING AND DEVELOPMENTTraining programs are offered at every career stage, including career readiness and tutoring, recent graduateprograms and apprenticeship programs. In 2016, we launched a global leadership initiative aimed at building asustainable leadership pipeline from within.Hudbay 2016 Annual and CSR Report 42 Our PeopleManitobaThe majority of our employees work in our Manitoba Business Unit. We employed 1,036 people at the Flin Flon andReed operations, and 306 at Snow Lake at year-end 2016. There was a notable shift during the year as almost anequal number of people at Flin Flon retired as were hired at Lalor. With the 777 mine at Flin Flon nearing closure,many of the vacated positions were not backfilled.Our workforce in Manitoba is more diverse and multi-faceted than might be expected. Approximately 13% self-identify as Aboriginal. Since many of our Aboriginal hires have limited experience in the workforce, our AboriginalLiaison Officer works with new hires to support their integration into the workplace. At Lalor, women in senior rolesinclude the chief geologist, chief mine engineer and Stall Mill superintendent. Women in production roles operateeverything from underground mine equipment to the hoists that transport people, equipment and ore betweenworking areas as much as a kilometre below the ground and the surface.There were three dominant themes in the Manitoba Business Unit in 2016: safety, cost reduction and workforcetransition.STRENGTHENING OUR SAFETY CULTURESafety performance in 2016 was similar to the previous year in terms of lost time accident frequency and severity,but there were a number of high-potential incidents (safety incidents that had the potential to be very serious) andthis was a matter of concern. At one point, we brought all mining crews to the surface for workshops reinforcingsafety concepts around vehicle interactions. Incident cause analysis method (ICAM) investigations were conductedafter each incident to identify root causes, and corrective actions related to communications, underground lighting,equipment and training were implemented.Through the investigations and subsequent management meetings, it became clear that while we may have hadgood safety policies and procedures in place, we needed to achieve more consistent application. As a result, weworked to strengthen our safety culture and ensure that people follow the rules and take accountability for theiractions. The Visible Felt Leadership program was introduced as part of this effort.COST CONTROL AND OPERATIONAL EFFICIENCYOur Manitoba operations stepped up their cost control and operational efficiency efforts in response to low metalprices. Through their great work, we met our cost reduction goals and production targets.A prime example of an improvement initiative was the redesign of ground support at the Lalor mine. Ground controlis critical for the safety of personnel and carries significant operating costs. Analysis of several ground controlincidents that occurred early in the year (fortunately with no injuries) led to a redesign of ground support methodsthat both increased safety and reduced overall costs. In 2017, we’ll continue to engage with employees and work toimprove productivity, efficiency and safety.WORKFORCE IN TRANSITIONWith the 777 and Reed mines nearing the end of their operating lives, several teams are assessing future options forthe Flin Flon metallurgical complex in the hopes of finding an opportunity to sustain some of those operations andjobs, in a way that also provides an appropriate return to our shareholders.At the same time, we need to plan for the closure of these mines and continued expansion of the Lalor operations. In2016, we began drafting a plan outlining our future workforce needs and how we can transition employees from FlinFlon to Snow Lake. We also began meeting with union leaders to engage them in this work.Hudbay 2016 Annual and CSR Report 43  We continue to support our apprenticeship program, which covers a wide range of trades including electrician,boilermaker/welder, mechanic, machinist, pipefitter and carpenter. If selected for the program, candidates follow aprescribed program that includes working with a journeyman and attending school at the Company’s expense. Fourpeople graduated in 2016 and 35 remain enrolled.Our Flin Flon team placed second overall inthe 2016 Manitoba Provincial Mine RescueCompetition and the Snow Lake team wonthe firefighting competition. Mine rescuecompetitions test a variety of skills includingemergency response plans andcompetencies of response personnel.Hudbay 2016 Annual and CSR Report 44 Our PeoplePeruAt the start of Constancia operations, we drew on the expertise of Stracon GyM to mine on a contract basis. Sincethen, we’ve accumulated sufficient experience to bring mine operation in-house and transfer employees fromStracon GyM to Hudbay. Transferred individuals are put on the Company’s pay and benefits system and participate inour orientation process.At year-end, we directly employed 593 people in Peru, in either full-time or contract positions. Of this total, sevenpositions are held by expatriate staff.HEALTHY AND ENGAGING WORKPLACEWe believe in maintaining a positive, healthy and engaging work environment. With many workers staying on-site atcompany-provided accommodations for eight to 14 days at a time, we offer a variety of health and wellness services,including a medical centre, massage therapy, chiropractic services and sports programs. In 2016, we initiated townhall and small group meetings for business unit leaders to share operating results and challenges. We also startedthe HR Now newsletter to keep people informed of site activities and build social cohesion.As is typical with large Peruvian mining operations following start-up, some of the employees at Constancia haveformed a labour union. An initial collective agreement was signed with the union in 2017.SAFETY RECORDOur 2016 lost time accident frequency of 0.1 was consistent with 2015 performance. Notably, we achieved an 83%reduction in accident severity.As part of the Visible Felt Leadership program, business unit leaders made a point of going out into the operationsand engaging with employees on safety. We also began a process of identifying the top five risks in each area ofoperations and ensuring that appropriate controls are in place and broadly understood and followed.We’ve put in place hearing, respiratory protection and biological monitoring programs. Employees who arepotentially exposed to occupational health hazards as a function of their regular duties are tested and trained oncontrol measures and procedures, such as the proper use and care of personal protective equipment.In 2016, we continued our safety program with the trucking contractors whose drivers haul concentrate along the470-kilometre route from Constancia to the port at Matarani. The program includes driver training and competencytesting as well as education on fatigue management and aggressive driving. There are control points en route tocheck driver compliance and allow drivers to rest if tired. In addition, trucks are linked to a GPS monitoring systemthat tracks location and driving speed.CONTINUOUS LEARNINGAcross the business unit, each person received an average of 25 hours of training. Training included an effectiveleadership practice program, attended by more than 50 people, which was designed to help leaders put ourcorporate values into action in their everyday work.We also completed a trainee program that saw 16 recently graduated students from Peruvian universities work inthe process plant for a one-year period. Five of the participants were hired to full-time roles at the end of the year.Hudbay 2016 Annual and CSR Report 45 Our PeopleArizonaOur Arizona Human Resources (HR) team spent the year putting the final touches on people management systemsand policies that will be needed once Rosemont is approved for construction. This included finalizing a drug andalcohol policy and implementing the OneHudbay online goal setting module to ensure that all employees havemeaningful performance goals in place, which then become the basis of their annual performance evaluations.We promoted employee engagement through a variety of health and wellness, educational, social and communityinitiatives. The employee wellness committee organized walks and hikes, including a three-mile Rosemont ranch hikein the spring, and lunch and learns on health topics. In 2016, employees were invited on a tour of a neighbouringmine to get a better feel for what it’s like to work at an operating mine.Hudbay 2016 Annual and CSR Report 46 Social ImpactA well-run mine creates a lasting, beneficial impact for people and communities where itoperates. That’s a natural expectation of the people who live there, and a firm commitmentfor Hudbay.Community Investmentand CharitableDonations($ millions)$177.5 millionpaid in employee wagesand benefits43,000+public commentsreceived by permittingagencies throughhearings, letters, emailsand phone calls relatedto the Rosemont project90%+of spending in Canadaand Peru was fromsuppliers based in thesecountriesHudbay 2016 Annual and CSR Report 47 Hudbay achieved a Bronze level standing in the Progressive Aboriginal Relations (PAR) program of theCanadian Council for Aboriginal Business (CCAB) in 2016. The PAR program supports improvement incorporate performance in Aboriginal relations in Canada through benchmarking against a broad set ofcriteria in the areas of employment, business development, community investment, communityengagement and company strategy. The certification process confirms performance through an extensivequestionnaire that is assessed by an independent third-party verifier who reviews the responses and meetswith Aboriginal stakeholders and company personnel to validate the responses. Final determination at theBronze, Silver or Gold level is by a jury comprised of Aboriginal business people.In each of the past three years, Hudbay completed the PAR questionnaire for our Canadian operations, andeach year the verifier’s report provided guidance to improve our program. In 2016, the report was thenreviewed by a jury of Aboriginal business leaders who determined that Hudbay met the requirements forBronze level in the PAR program.Thirty-one of the 123 CCAB member companies are PAR certified, and six of these companies are at theBronze level. For Hudbay, achieving Bronze level represents important progress in our efforts to includeAboriginal communities in our business. “It’s important to us as a company that we deliver on thiscommitment with Aboriginal communities. This achievement shows that we’re on the right track,” said PamMarsden, Aboriginal Liaison Officer, Manitoba Business Unit.Benchmarking Hudbay’s Efforts inAboriginal InclusionHudbay 2016 Annual and CSR Report 48 As part of our development-focused relationship with the regional government, Hudbay Peru sponsored theconstruction of a modern dairy plant in the Chumbivilcas region. The Cullahuata dairy currently processes4,000 litres of milk per day and expects to increase production to 12,000 litres in the near future. It alsoproduces several varieties of cheese, yogurt and butter.The long-term goal is to establish a “dairy corridor” in the region. In 2016, Harmony Organic dairy inKincardine, Ontario, stepped up to help, establishing a mentoring relationship with the Cullahuata dairy.Harmony Organic came to know the dairy through one of the Global Indigenous Development Trust tripsthat Hudbay had sponsored.Harmony Organic’s CEO visited the Cullahuata dairy and is helping it become certified as organic. As part ofthat effort, two farmers from Chumbivilcas were invited to Kincardine to work at Harmony for a term andlearn by doing. Two more will go in 2017. The knowledge they bring back – about farming, animalmanagement and dairy operation – will be important in establishing the region’s first certified organic dairy.In August 2016, at the third annual Community Relations International Conference in Peru, Hudbay washonoured to receive a community relations award for its work in the construction and management of theCullahuata dairy plant.From Peru to Ontario – An OrganicOpportunityHudbay 2016 Annual and CSR Report 49 Social ImpactOur ApproachResponsible companies strive to make a positive difference in society. Hudbay seeks to maximize the benefits wecreate, minimize any adverse impacts, and build long-term, mutually beneficial relationships.ECONOMIC CONTRIBUTIONSOur primary contributions to the regions where we operate are economic, through jobs, training, and the purchaseof goods and services from local businesses. We pay municipal taxes and grants, and in some cases provide fundingto communities under land use agreements or other co-operation agreements. Importantly, we also contributefunding and expertise to support the development of sustainable communities and livelihoods.Hudbay is a supporting company of the Extractive Industries Transparency Initiative (EITI) in its efforts to establish aglobal standard for transparency regarding host country governance of natural resources and full disclosure ofgovernment revenues from its extractive sector. Our Peruvian subsidiary, Hudbay Peru SAC, as a member of thePeruvian Mining Society, is supporting the EITI process in Peru.In Canada, the Extractive Sector Transparency Measures Act (ESTMA) was proclaimed into force on June 1, 2015, andrequires businesses involved in the resource exploration and extractive sector to file reports on certain types ofpayments to foreign governments. Hudbay will be filing its first ESTMA report in May 2017 for the 2016 fiscal year.COMMUNITY RELATIONSThrough engagement, we strive to understand and address community members’ concerns and priorities andestablish relationships based on mutual respect and trust.As defined in our Stakeholder Engagement Standard, each business unit conducts its own stakeholder analysis andimplements a stakeholder engagement plan tailored to local needs. In addition to sharing information about ourbusiness, sites actively seek out and respond to community member feedback, and work together with communitieson joint committees and projects to solve issues and promote social, economic and environmental sustainability.Stakeholder priorities and concerns in 2016 are listed in the Stakeholder Engagement section of this report.Our company-wide Community Response Standard (also known as a grievance process) ensures that complaints ateach site are documented, investigated and addressed.In addition to operational and environmental considerations, mine closure planning takes into account social impactsand the prosperity and resiliency of communities after operations cease. These activities underline the importance ofbuilding community capacity and helping communities avoid dependency on operations throughout the life of themine.INDIGENOUS ENGAGEMENTWe seek to build mutual understanding and positive relationships with indigenous peoples through activeengagement and collaboration on exploration, environment, skills development, employment and businessopportunities.Hudbay 2016 Annual and CSR Report 50 We demonstrate our respect and support for social and cultural practices by funding and participating in indigenouscommunity activities, training our employees in cultural awareness and implementing cultural resource preservationplans. In Manitoba, we have a full-time Aboriginal Liaison Officer (ALO) who is a permanent bridge betweenManitoba’s and Saskatchewan’s First Nations communities and Hudbay. The ALO works within the Company topromote understanding of First Nation protocols vis-à-vis proposed projects and share information on opportunitiesfor these communities at Hudbay.LOCAL HIRING AND PROCUREMENTWe prioritize local hiring, skills development and sourcing. Local procurement and employment, in particular, areoften identified as high priorities for stakeholders.Our corporate Local Procurement and Employment (LP&E) Standard requires each site to:Identify opportunities for supporting and utilizing local workforce skillsIdentify opportunities for local business to provide goods and servicesInclude LP&E provisions when negotiating community agreementsIntegrate LP&E into ongoing business processesOur approach is guided by five principles: mutual benefit; fairness, competitiveness and transparency; targetedcapacity development; informed and integrated decision-making; and collaboration with community representativesand supporting organizations.Local skills development is aimed not just at developing a talent pool for our own operations, but also at buildingtransferrable skills for employment at places other than the mine. It includes supporting existing livelihoods, likeranching or farming, as well as providing scholarships and funding for technical training at universities and colleges.COMMUNITY DEVELOPMENTIn most cases, our mines are catalysts for development in nearby communities. We support community developmentefforts focused on:Helping communities build capacity to ensure sustained prosperitySupporting community efforts to improve the quality of the natural environmentContributing to social cohesion and community spiritWhen we enter a region, we engage with communities to understand their social and economic needs and priorities.From there, we seek to create employment and business opportunities and programs. In some cases, our communitydevelopment commitments are spelled out in formal agreements with the communities. Frequently, we helpcommunities through the process of requesting government funding for their projects.Our Community Giving and Investment Standard outlines the strategic approach that Hudbay sites are expected tofollow for voluntary support, contributions and investments in local communities. It emphasizes communityinvolvement, mutual benefit, partnerships, sustainability and capacity development.Hudbay 2016 Annual and CSR Report 51 RESETTLEMENT AND LAND USEIn the development of a project, resettlement is sometimes necessary. When it is (as was the case for thedevelopment of the Constancia mine), we follow negotiation processes that adhere to international standards forfairness and transparency (including the IFC Performance Standards) and commit to providing equal or betterhousing.In situations where mining extends to land used for livelihoods, households or communities, we explore alternativesto minimize disturbances and implement measures to protect human rights and cultural heritage.Hudbay 2016 Annual and CSR Report 52 Social ImpactManitobaThe Lalor mine resources and exploration potential provide a foundation for growth in the town of Snow Lake, andcontinued operations in Manitoba for a currently estimated 10.5 years. However, a mine cannot last forever – this isinherent in the nature of mining, and we recognize the impact of closure on local employees and communities.PLANNING FOR CLOSUREWith production at the 777 and Reed mines ending in the next few years, we’re assessing future options for the FlinFlon metallurgical complex in the hope of identifying operations that can continue to contribute an acceptablereturn to shareholders. We’re also participating in the efforts of the mayors and municipal administrators of Flin Flon, Creighton and DenareBeach, who have joined forces to support a smooth social and economic transition and encourage economicdiversification of the region. In 2016, Hudbay engaged a community planning consultant who held two planningworkshops with community leaders on this topic. We participated in the workshops at the request of thecommunities.BUILDING RELATIONS IN SNOW LAKEIn Snow Lake, we initiated quarterly meetings with the mayor and town council and participated in two communitymeetings during the year. Two key topics of discussion were the accommodation camp we maintain at the site andthe annual grant-in-lieu (GIL) payment made to the Town of Snow Lake.With the continued expansion of the Lalor mine, and the need to recruit skilled workers from across the region, wehave had to keep the camp open longer than anticipated. Many employees are choosing to commute to work andstay at the camp during their shifts rather than move their families. We understand the concerns of the Snow Lakecommunity and expect to work through the issue with them over time in a way that suits our employees and thecommunity.While we pay municipal taxes for facilities situated within the Town of Snow Lake, our mining operations are locatedoutside the town proper and are covered by an annual negotiated grant-in-lieu payment to the Town. Despiteextended negotiations, we were unable to resolve the amount of the 2016 GIL by year-end. In order to maintain ourlongstanding commitment, we made a payment just before year-end, which represented a 5.3% increase over thepayments made in the two previous years, and committed to continuing negotiations in 2017.PROGRESSIVE ABORIGINAL RELATIONSThe Aboriginal communities near our operations include Opaskwayak Cree Nation, Mosakahiken Cree Nation andMathias Colomb 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 and collaborating on jointinitiatives (usually related to employment), we work to maintain constructive relationships.Our Aboriginal Liaison Officer (ALO) spearheads our efforts. In 2016, this work culminated in our achieving theCanadian Council of Aboriginal Business bronze level standing in the Progressive Aboriginal Relations program.The ALO assists Aboriginal job candidates throughout the recruiting, interviewing and onboarding process,recognizing the challenges they may encounter as they enter an industrial work environment for the first time andthe need for Hudbay to be flexible and accommodating. The mentoring process includes personal, financial andpolicy advisement from the ALO and continues for as long as needed.Hudbay 2016 Annual and CSR Report 53 In response to the Truth and Reconciliation Commission of Canada Recommendations, particularly Recommendation#92, which is a call to action to businesses, we hosted a presentation on the intergenerational effects of residentialschools, together with the Flin Flon Aboriginal Friendship Centre, the Opaskwayak Cree Nation and the Flin FlonChamber of Commerce. Elders, community members and Hudbay employees were on hand to hear a movingpersonal account by a second-generation residential school survivor.We also partnered with the Flin Flon Aboriginal Friendship Centre to create a unified understanding of the MinoPimatisiwin (sweat lodge ceremony) on the eve of the Fall Equinox. The intention of the ceremony was to makepeace with past activity and build on respectful relationships with teachings from the past that are conducted incontemporary time. Several individuals gathered to pray, sing and share a feast. The Elder shared teachings onmeanings behind the ceremony before, during and after the event. We plan to hold a similar event in the spring of2017.Other activities included cultural awareness workshops for Hudbay employees and separately for committeemembers from the Saskatchewan government and the Peter Ballantyne Cree Nation communities; youth outreachrelated to careers in mining; and the start of quarterly economic development meetings to inform First Nationscommunities of business opportunities at Hudbay.At the corporate level, Hudbay made a third annual donation of $25,000 to the Indspire Building Bright FuturesBursaries, Scholarships and Awards program in 2016. Our contribution supported 15 Aboriginal students fromManitoba enrolled in post-secondary education programs in Canada in 2016.SUPPORTING OUR NEIGHBOURSHudbay donated approximately C$160,000 to community initiatives and university research benefiting the FlinFlon/Snow Lake area, primarily in the areas of health, education, environment, culture and sports. Majorcontributions ($10,000 or more) included:Flin Flon Community Adult Learning Centre sponsorshipFlin Flon Bombers junior hockey teamGreen Project – a multi-year project aimed at accelerating restoration of forest land around Flin Flon andCreightonNW Regional Caribou Research and Management CommitteeIn addition, our employees contributed more than 200 hours to community projects, such as helping out at the FlinFlon School Division Science Fair and with Operation Red Nose, a safe ride home service for area residents during theholiday season.COMMUNITY HOTLINEWe invite community members to report any concerns or complaints through our concern/alert email and phoneline. There were four complaints registered in 2016, relating to one contractor’s safety, another contractor’senvironmental performance, lake safety and a visual annoyance.Hudbay 2016 Annual and CSR Report 54 Social ImpactPeruOur growing track record of addressing concerns and tangibly improving the lives of local stakeholders is enabling usto build goodwill in communities in Peru. While we cannot fulfill every stakeholder interest, we are known for ourstrong commitment to transparency and communication.Efforts are spearheaded by our Government and Community Relations teams. The Community Relations team hasoffices open to the public in both communities in our direct area of influence and engages with the public andauthorities along the concentrate transportation route. Their work was key to helping us peacefully resolve threepotentially serious community incidents in 2016.OUR CLOSEST NEIGHBOURSThe two communities closest to the Constancia operations are Uchucarco and Chilloroya. We have life of mine landuse agreements with both communities, letting us use portions of their community-owned land.As part of the agreements, we made specific commitments to local employment and use of local suppliers and toinvestments in health, education and social development. Multi-sectorial committees for development (CMDs),comprising Hudbay and community representatives, approve and oversee the projects being carried out using theproceeds of the agreements. The funds were used in 2016 to purchase ambulances for the health centres in eachcommunity and to fund a telemedicine project that will improve access to quality health care throughtelecommunications technology.SUPPORTING COMMUNITY DEVELOPMENTBeyond our immediate neighbours, we support community development throughout the region in a variety of ways.We’ve signed co-operation agreements with nine communities and districts in our indirect area of influence,committing to work together on social development projects within a specified budget provided by Hudbay. Infulfilling these agreements, we also engage with various levels of government and implement some projects aspublic-private partnerships. We’ve completed four projects under the Peruvian Works for Taxes program, whichallows a company to pay up to half of its income tax through contributions to public infrastructure projects.In 2016, we reached an agreement with the district of Livitaca that will bring major improvements to water andsanitation services, and signed a co-operation agreement with the district of Velille just before the end of the year.Under a co-operation agreement with the district of Chamaca, Hudbay funded a forestation program for the10 communities. The program included 12 tree nurseries, warehouses in each community for storing equipment,technical training and promotional events. During the year, Hudbay Peru and the district of Chamaca alsoinaugurated the first liquid nitrogen plant in the province of Chumbivilcas, which we funded as part of an agrariandevelopment project. The facility is used for breeding cattle, using practices that promote genetic improvementsthat will in turn enhance milk and meat production.We’ve signed co-operation agreements with three communities on the transportation route from Constancia to theport at Matarani. Under these agreements, Hudbay commits to exploring how we can help with developmentprojects. This can be as simple as providing seeds and equipment for farming community crops, or as extensive asoffering the services of our Technical Assistance Office to act as an advocate for the communities in applying forpublic and private funding of projects.Hudbay 2016 Annual and CSR Report 55 BUILDING COMMUNITY CAPACITYConstancia employed 644 local people (employees and contractors) in 2016, mostly from the communities ofUchucarco and Chilloroya. About 90 people work in advanced jobs, operating heavy equipment or providing technicalassistance in the processing plant, after having completed technical training funded by Hudbay. The remainingemployees work as general labourers in operations and logistics, and in hospitality jobs at the camp. Whatever therole, these are new, secure, well-paying jobs that otherwise would not exist in the area.We have two ongoing technical training programs for community members of Uchucarco and Chilloroya. A jointventure with Stracon GyM provides four months of basic operator training. Thirty-five people completed theprogram in 2016 and worked for Stracon GyM for several months thereafter.A program with Servosa, our main transportation provider, offers six weeks of professional driver training. Fivepeople completed the course in 2016 and joined Servosa’s workforce. At the request of the communities, we alsoconducted reinforcement training for people who had not passed the first time.In addition, the Constancia Operations team provides ad hoc training to community members when positionsbecome available. In total, 20 people from Uchucarco and Chilloroya participated in this type of training in 2016.Hudbay also works with the Global Indigenous Development Trust to promote community capacity building. We’vesponsored several trips that bring people from communities near Constancia to Canadian towns, particularly miningcommunities. They see how mining and sustainable development can co-exist and thrive, and hear directly fromCanadian community, municipal and business leaders about their experiences.LOCAL COMPANIES PROVIDE VALUABLE SERVICESThere were 75 local community companies registered in our database in 2016. Our purchases from them totaledapproximately $8.7 million. This is a significant decrease from the $25.9 million spent the previous year, mainly dueto the fact that fewer services are required during the operation phase than the construction phase.Most local companies are focused on trucking or hospitality. We collaborated with the CMD in Uchucarco in 2015 tobuy trucks they could rent to local contractors to transport Constancia concentrate to the port of Matarani. This hasworked well and they are providing a valuable service to us. We’re in discussions with the community of Chilloroyaabout hospitality services they can provide to both our accommodation camp and those of nearby mines.5,000-YEAR-OLD REMINDERS OF THE PASTWe opened an exhibit this past year at the Fortunia accommodation camp, which displays the archaeological findingsmade during the exploration and construction of Constancia. Some of the artifacts date back nearly 5,000 years,including spearheads that were used for hunting and gathering food.COMMUNITY COMPLAINTS AND CONCERNSThere were 28 complaints or concerns registered through the Constancia grievance mechanism in 2016. Of the total,82% related to local employment and were typically investigated and resolved through co-ordination with therelevant functions within Hudbay.Hudbay 2016 Annual and CSR Report 56 Social ImpactArizonaThe Rosemont project site is located 48 kilometres (30 miles) southeast of Tucson, Arizona’s second largest city.Including the surrounding areas, the diverse population totals close to one million people. There are numerous localstakeholder groups with varying areas of interest. A number have followed the Rosemont project closely for manyyears. Most eagerly await Rosemont’s construction, given its potential to generate jobs and boost the local economy.A smaller number are vocal opponents of the project, often on an environmental basis. Rosemont is committed tounderstanding the interests of all stakeholder groups and constructively engaging with them to ensure that they’reinformed of our plans and that we understand their concerns.PERMITTING AND STAKEHOLDER CONSULTATIONThe Rosemont project has been going through the permit approval process for more than nine years. By year-end2016, the process had included 17 government agencies, more than 450 studies and more than 43,000 publiccomments to the agencies through hearings, letters, emails and phone calls.Stakeholder concerns have related primarily to environmental impacts, but also to worries about noise, traffic,cultural heritage and recreational use impacts. Our plan to design, build and operate a unique mine incorporatessome of the most advanced thinking in mining. At Rosemont, we will implement more than $60 million in mitigationmeasures to balance the presence of the mine with the natural elements around it. These are detailed in theRosemont Environmental Impact Statement prepared by the United States Department of Agriculture Forest Serviceand the Rosemont Biological Opinion from the US Fish and Wildlife Service. There are 114 individual mitigation andmonitoring requirements within the Forest Service requirements alone, which add up to hundreds of millions ofdollars in further expenditures for mitigation and monitoring obligations over the life of the mine. These include:A well owners’ protection programMonitoring a jaguar for the life of the project plus five yearsConservation activities for aquatic and bird speciesDark skies monitoring for the life of the projectRelocation of 10.6 miles of the Arizona Trail, in collaboration with the Arizona Trail AssociationAnnual community donations of $500,000 per year during operationsAn endowment fund to support cultural, recreational, education and conservation community goals afteroperationSee the Arizona Environment page of this report to learn more about the mitigation measures planned forRosemont.BUILDING MEANINGFUL RELATIONSHIPSWe’ve put in place a community relations (CR) plan with a stated mission of building constructive relationships withstakeholders based on integrity and mutual respect by communicating timely, accurate and consistent messages.The plan includes tools and systems developed to proactively identify, assess and mitigate risks associated withplanned activities and new developments related to Rosemont that may affect community relations.Hudbay 2016 Annual and CSR Report 57 As permitting advanced, we refined our plans in 2016 to address how we intend to keep stakeholders informed onceconstruction begins. We want to make sure that stakeholders know well in advance what to expect at each stage. Wealso conducted an in-depth stakeholder mapping exercise with outside expertise to help us identify our keystakeholders and better understand their interests and level of influence.Separately, we had an audit performed of our community giving process to identify opportunities to improvetransparency and ensure that all donations are in accordance with the business unit’s community giving priorities. Asa result, we now have a Community Giving Review Committee that meets monthly and reviews all requests forfunding against our priorities and budget. Decisions are documented and distributed among business unit leadersbefore final approval.WORK CONTINUES ON CAP WATER PIPELINEA significant part of our Rosemont community investment is the construction of a pipeline to carry Central ArizonaProject (CAP) water to the Green Valley area. It’s part of a commitment made to the community that allows theCommunity Water Company of Green Valley to make use of its CAP allocation and offset groundwater drawdownwithin its service area. In 2016, approximately 2,000 feet of 54-inch pipeline was installed under the interstate highway (I-19) near theterminus station at a cost of just over $1 million. This section of pipe is the second segment of the nearly eight-mile-long pipeline that will be installed at an estimated overall cost of $25 million.HELPING HAND IN THE COMMUNITYWe’re committed to providing financial support to local, non-profit organizations that provide services and programsin five prioritized areas: education (in particular, science, technology, engineering, environment, agriculture andmathematics initiatives); social services; military and veterans support; job training; and infrastructure projects.Our school grants program awards between $500 and $5,000 to local public schools. Grants totaling $10,000 weregiven in 2016, including a $1,500 grant to Flowing Wells School District to expand its First Tech Challenge program,where students work in teams to build robots and then face off in competitions against other schools.As part of the 2016 United Way campaign, employees were given a day off to volunteer at one of two communityprojects. They either did landscaping and moved furniture at a women’s shelter or washed windows and blinds at anassisted living building for seniors.Hudbay 2016 Annual and CSR Report 58 Total Greenhouse Gas Emissions(kilotonnes of CO2-equivalent and intensity)Direct EnergyConsumption byPrimary EnergySource(terajoules)EnvironmentAt Hudbay, science, skill, experience and personal commitment guide our actions, mitigateour environmental impact and ensure that we operate sustainably.2.8%of the land we own,lease or manage is usedfor Hudbay activities (therest is left in its naturalstate)Hudbay Peru wasrecognized by theSNMPE (National Societyof Mining, Petroleumand Energy) forinnovative reclamationpractices involving localcommunities19%improvement in waterconsumption intensityand 3.8% reduction ingreenhouse gas (GHG)emissions at ourManitoba operationsHudbay 2016 Annual and CSR Report 59 Hudbay Peru received an SNMPE (National Society of Mining, Petroleum and Energy) SustainableDevelopment Award in the environmental management category for its progressive reclamation practices.In keeping with environmental best practices, we try to return land to its original state as soon as it’s nolonger required as part of production. At Constancia, we implemented a program that paid communitymembers for collecting native grass seed for reclamation purposes and helping plant the seeds and erecterosion control structures.The response to the program by the local communities of Chilloroya, Uchucarco, Casa Blanca, Collana Altaand Huaylla Huaylla was overwhelmingly positive, with 2.2 tonnes of native seeds collected, and over 26hectares of land revegetated in less than a year.Six community members work with us on an ongoing basis, managing our tree nursery and doingreclamation work. We’re planning to conduct a larger-scale forestation program in 2017 and will hireadditional workers for that.Awarded for ReclamationHudbay 2016 Annual and CSR Report 60 Maintaining dark skies is important to scientific astronomy in Arizona, but must be aligned with the need tomeet employee safety requirements of the Mine Safety and Health Administration (MSHA). To achieve bothgoals, the Rosemont project will implement a groundbreaking, technologically advanced lighting system.We updated our lighting plan in 2016 in consultation with an International Dark Sky Association boardmember. Features include the use of filtered LED fixtures, colour rendering to avoid blue-spectrum lights(which are among the most harmful to dark skies), and shielding/beam control on non-fixed lights to reducedirect uplight. All of these measures will minimize the effects artificial lighting can have on the night sky. Inaddition, we plan to implement a variety of dust control measures that will aid in reducing potential lightdispersion.The impact of these new measures will be significant – reducing output from 21,815,355 lumens in theoriginal engineering plans to 6,529,184 lumens.Our other commitments include annual funding to the Smithsonian Institution at the Whipple Observatoryto measure light and light effects and implement additional ground-based monitoring sites. Duringoperations, light emissions will continue to be monitored by STEM Labs, a non-profit organization dedicatedto understanding the effects of maintaining dark skies for astronomy and environmental impacts.Once Rosemont’s permits are received, a Sky Brightness Monitoring Plan Oversight Committee will becreated to monitor all pertinent data from the operations. Should any impacts exceed expectations, theCommittee will make recommendations for corrective action. The committee will be comprised of expertsfrom the astronomy community and the lighting industry and representatives from both the Forest Serviceand Rosemont.Maintaining Dark SkiesHudbay 2016 Annual and CSR Report 61 We’ve done a lot in the interest of the Coleman’s coralroot (Hexalectris colmaneii), a rare orchid foundgrowing in southwestern New Mexico and southern Arizona, in part near the site of the proposed Rosemontmine.Rosemont is contributing to the science and understanding of the plant.Extensive surveys conducted by Rosemont have expanded the known distribution of the species to over 15locations in seven distinct mountain ranges in southeastern Arizona.Originally the Coleman’s coralroot orchid was thought to have a very specialized habitat, occurring only inthe bottoms of shaded canyons with dense oaks and then only in a few canyons in three mountain ranges insoutheastern Arizona.Rosemont has redesigned the mine plant site to avoid one location where large numbers of Coleman’scoralroot spikes have consistently been observed.  The area will be fenced to limit potential impacts fromdisturbance.  The dry stack tailings position has also been realigned to avoid a second population known tooccur in the vicinity of the project. Consequently, the project will directly impact small numbers of Coleman’scoralroot.Overall, our surveys since 2010 have greatly increased the understanding of the habitat, range and relativeabundance of orchid spikes known to exist. These surveys have also greatly expanded understanding ofwhat is habitat for Coleman’s coralroot by documenting the orchid in areas that are strikingly different fromthe large drainages originally thought to be a requirement for the species. Surveys commissioned byRosemont have also documented several locations of a similar species, Hexalectris arizonica, that had notbeen known previously, as well as a species of orchid, Hexalectris parviflora, that was not previously known tooccur in the US.Studies in OrchidsHudbay 2016 Annual and CSR Report 62 Rosemont continues to survey areas in the vicinity of the Rosemont Copper Project to document thepersistence of known locations of Hexalectris species and search for additional locations. Rosemont has alsocontinued to monitor three locations where large numbers of orchid spikes are consistently found in orderto provide long-term data to look for trends in orchid numbers and correlations with climate and habitatvariables.  Hudbay 2016 Annual and CSR Report 63 EnvironmentOur ApproachA number of environmental considerations govern our activity. We are accountable under extensive environmentalcommitments, and to ourselves as well. We know that mining must balance mineral development and thesurrounding environment.Our strategies include:Planning and acting to minimize our environmental footprint at every stage of operation, from exploration todecommissioning and closureMaintaining ISO 14001 environmental management system certification at all operating facilities and complyingwith Towards Sustainable Mining (TSM) environmental protocols and third-party verification processesRehabilitating disturbed land to accelerate natural reclamationSupporting community projects to minimize the aesthetic impact of our activitiesOur environmental management program consists of a corporate Environmental Health and Safety Policy, and ateach site, codes of practice, regular audits, the integration of environmental procedures with operating procedures,employee training and emergency prevention and response procedures. Dedicated teams are charged withmanaging our environmental activities and compliance with applicable environmental standards and regulations.Each operating facility both in Canada and abroad must apply and participate in the TSM program. For all locationsand activities where Hudbay has operating control, the management system must incorporate the elements of allTSM protocols relevant to its phase of the mine lifecycle. At operating sites, this means achieving Level A or higherfor all protocols within two years of start-up.LAND AND BIODIVERSITYEach site develops its own biodiversity management plan specific to its location. The plans apply the biodiversitymitigation hierarchy, a set of prioritized steps to alleviate environmental harm as much as possible. The four keysteps are as follows:Step 1: Avoid impacts by locating facilities and access routes away from natural and critical habitats.Step 2: Minimize impacts through the use of appropriate management systems and mine plan designs that limitland disturbance throughout the mine life.Step 3: Restore ecosystems by progressively rehabilitating affected areas during operations and at closure with agoal of eliminating the impact over time through preservation or maintenance.Step 4 (if needed): Offset residual impacts through programs to compensate for biodiversity losses when long-term residual impacts cannot be avoided.Hudbay’s Biodiversity Conservation Standard sets out the minimum requirements for identifying environmentalconditions and managing biodiversity conservation and ecosystem services. The standard is consistent with ourcommitment to implement the TSM Biodiversity Conservation Management Framework and Protocol.Hudbay 2016 Annual and CSR Report 64 ENERGY USE AND GREENHOUSE GASWe use fossil fuels to extract and transport ore, and electricity to run our processing plants.  Our operations tracktheir energy consumption and associated GHG emissions. We strive to reduce our impact by using energy asefficiently as possible – for example, by installing LED lighting or on-demand ventilation systems that only run whenneeded.AIRWe monitor and report air emissions to comply with air quality laws and regulations in the countries where weoperate.WATEROur commitment to continuous improvement leads us to identifying opportunities related to water managementand to updating our water-related risk assessments.We design water-efficient operations and continuously monitor our consumption and discharge, while maintainingour commitments to local users and regulatory agencies within the jurisdictions where we operate.Each of our sites – and each community in which we operate – has different water needs and challenges dependingon the supply, demand and water quality in the area. Prior to developing a project, we assess water quality andavailability as part of our feasibility and environmental impact studies. These assessments also consider the waterneeds of local communities. Mining site designs and management plans incorporate water considerationsthroughout the entire mine lifecycle.Hudbay submits an annual water report to the CDP (formerly called the Carbon Disclosure Project), which can beaccessed from the CDP website.WASTE AND TAILINGSAll Hudbay operations have waste management plans to reduce, reuse, recycle and responsibly dispose of waste.Waste rock from our mines and tailings from processing plants are a particular priority.Waste rock (mined rock that does not have economic value) is managed on-site according to strict and detailedenvironmental regulations and industry standards. Wherever possible, it is reused as fill in underground operations,to construct tailings containment structures, and for site rehabilitation.Tailings are the finely ground rock, trace metals and process chemicals remaining after ore has been processed. Weadhere to the TSM protocol for managing tailings. Where water is plentiful, tailings have historically been piped intosecure engineered impoundments contained by tailings dams. TSM guidelines address best practices for thelocation, design, construction, operation and closure of tailings facilities so that structures are stable and complywith industry and government standards, and solids and water are properly managed. In accordance with the TSMprotocol, our tailings management design and practices in Saskatchewan and Manitoba and at Constancia are subjectto independent review processes ranging from dam safety reviews every five years to bi-annual independent peerreview board assessments.Rosemont plans to construct a state-of-the-art, dry-stack tailings facility, which can significantly reduceenvironmental impacts compared to traditional tailings facilities. Learn more about dry-stack tailings on our ArizonaEnvironment page.Hudbay 2016 Annual and CSR Report 65 CLOSURE AND RECLAMATIONIn all jurisdictions where Hudbay operates, mining companies are required to plan for closure before the start ofoperations and provide financial assurance to relevant regulatory agencies for proposed mine reclamation activities.Once mining is finished, we aim to leave behind land that will support natural ecosystems and productive uses. Wefollow the guidelines set out in the TSM framework on mine closure, which consists of eight key elements, rangingfrom effective and sustainable closure planning, to consultation with communities, continuous improvement, andmonitoring of reclamation programs.In addition to the TSM framework, Hudbay’s mine closure planning in Peru is guided by IFC Performance Standardsand by Peruvian mine closure regulations.Closed mine site activities are tailored to applicable regulatory requirements and the characteristics of each site.They can include monitoring activities and adaptive management strategies to ensure the effectiveness of thereclamation activities until such time as reclamation objectives are determined, in consultation with regulators, to becomplete.Hudbay 2016 Annual and CSR Report 66 EnvironmentManitobaOur Manitoba operations are located in the Canadian Shield, in a sparsely populated region of bedrock, bush, lakesand swamps. Recognized worldwide for its mineral deposits, the region is treasured by many for its stark and ruggedbeauty. Throughout Hudbay’s history, we have carefully closed and remediated 19 mines in the region, returningmost of the land to the way it was long before we arrived.MINIMIZING OUR FOOTPRINTFrom exploration to closure, we seek to keep our environmental footprint as small as possible.One of the best examples is our Reed mine. The mine is located within the boundary of a Manitoba provincial park.By design, there is no mill or tailings facility. From the start, we collaborated with the Manitoba authorities to ensurethe mine did not affect the local caribou habitat – including only clearing trees on seven of the 14 hectares ourpermit allowed. Even then, trees were removed selectively and the wood was given to the provincial park for use asfirewood. The main fan was installed underground and sound-reducing enclosures were built for generators,compressors and the ventilation heater. Reed employees are trained on how to avoid scaring caribou and we haveimplemented Manitoba Sustainable Development’s postcard system for reporting caribou sightings to supportresearch efforts.As mining progresses at Reed, we will need backfill material to stabilize the underground workings. We have anagreement with provincial authorities to use acid-generating waste rock from a nearby former mine site. By movingthis material to our site and then underground, the potentially negative environmental impacts of this material willbe mitigated.USING RESOURCES WISELYWhile fresh water and clean hydroelectricity are abundantly available in the region, we strive to use water andenergy as efficiently as possible. For the past several years, our Manitoba operations have worked towards a 1% year-over-year reduction in both water consumption intensity and GHG emissions intensity (water consumption and GHGemissions per tonne of production), using 2014 as the base year.Water usage is managed through water rights licences and related reporting. Discharge is managed at four dischargepoints using site-specific water treatment technologies and extensive water quality monitoring. Our environmentdepartment tracks water quality data and reports to management on an exception basis.The Manitoba Business Unit’s total water consumption declined by 2.8% compared to 2015, despite increasedproduction. Water consumption intensity declined by 19%, a good sign that our efforts to stress environmentalawareness and promote the reduced use of water, materials and other resources are taking hold.We started working on water recycling projects to further reduce our use of fresh water. The projects would enableus to draw water from the clarification pond and from the tailings facility to use in the Flin Flon mill.Hudbay 2016 Annual and CSR Report 67 Water ConsumptionIntensity(m3/tonne of production)While we use renewable hydroelectricity to run theprocessing plants, we need propane and diesel in themines for heating and for extracting and transporting ore.In older mines, reducing fuel consumption becomes moredifficult because of the need to dig deeper and haulmaterial further, which also means more undergroundworkings and ventilation are required.Despite the challenges, we reduced our overall energyusage by 2.7% and our energy intensity by 3.2% comparedto the 2014 base year. We also met our annual GHGtarget, reducing emissions by 3.2% (from 59,965 tonnesCO2-e in 2015 to 58,065 tonnes CO2-e in 2016).Change often comes in increments through simpleimprovements. For example, in 2016 there was aconcerted effort to improve equipment productivity byimplementing “hot changes”. This means that when adriver of a vehicle vacates his or her seat for a lunch breakor the end of a shift, somebody else immediately replacesthe person, rather than have the vehicle idle. Vehicles are also shut off when they are not being used. This focus hadthe spin-off benefit of reducing GHG emissions per tonne of product moved.ADDED RESPONSIBILITIES AT SNOW LAKEWith Lalor mining and processing operations in full swing and potentially expanding, our environmentalresponsibilities have grown, and will continue to do so. In 2016, we hired environmental specialists at Snow Lake tooversee activities and manage regulatory compliance.Permitting is underway for an expansion of the Anderson tailings impoundment area near Snow Lake. We conductedcommunity consultations in 2015 and filed our application with the provincial government in 2016. We hope to beginconstruction in early 2018.We’re planning to build a paste backfill plant that would enable us to use Stall Mill tailings as backfill in the Lalormine, rather than sending them to the Anderson tailings impoundment area. This is considered an environmentalbest practice that would help with water quality on the Anderson tailings and reduce the expansion requirements ofthe tailings facility. Government approval to proceed with this project was received in January 2017.Hudbay assumed additional environmental responsibilities with our 2015 acquisition of the New Britannia gold mill,which is currently on care and maintenance. There is ongoing active treatment of the tailings on site, and monitoringand sampling requirements have been added, which are being managed by our new environmental specialists.Hudbay 2016 Annual and CSR Report 68 DUST FLARE-UP PROMPTS ACTIONAir emissions from our Manitoba operations in Flin Flon are typically minor and related to vent and fugitive dustemissions. A dust management plan has been honed over many years and ensures that particulates remain belowregulatory limits.In 2016, highly unusual weather conditions created a tailings dust flare-up in Flin Flon. The situation did not breachprovincial health standards or reach the community. Hudbay Manitoba took immediate action to contain the flare-upand notify relevant authorities. Snow and dust fencing was installed and wooden pallets were placed over theaffected area. We also called neighbours to see if they were impacted in any way. Since then, we’ve taken theprecaution of installing geotextile material over future potential dust sources.Later in the year, the Saskatchewan government conducted a legal compliance audit for our past five years ofoperation at Flin Flon, which included the 2016 dusting event. In their findings, the auditors commended Hudbay forour effective dust management plans and actions taken during unusual weather events.Hudbay 2016 Annual and CSR Report 69 EnvironmentPeruOur Constancia operations are located high in the Andes Mountains of southern Peru, in a region renowned for itsrich mix of minable materials.FOCUS ON WATERMining operations need water – as do communities and ecosystems. To support efficient water use, we run studies to understand how much water enters the watershed and how muchwe can use for our operations without interfering with the requirements and needs of the communities and thenatural environment. We also monitor the water quality of the rivers near Constancia to assess any impact that ouractivities may have on the environment. This is particularly important during the rainy season when water volumesincrease.In 2016, we strengthened our water management systems and controls. This included implementing flow metresand standard methodologies for measuring rainwater to improve compliance reporting. To prevent leaks towaterways, we took a close look at critical parts throughout the mine and processing operations and put in placeadditional engineering controls where needed. In preparation for the rainy season (normally from November to lateMarch/early April), all sediment management controls were inspected to ensure that everything was in good workingorder.Water balance studies conducted in 2016 revealed that there was enough water to meet our commitments withoutthe reservoir. At the same time, the communities were asking for additional assistance because of recent droughtconditions. We are developing an action plan to address these needs.ENERGY EFFICIENCY IMPROVEMENTSAs a first step toward setting environmental targets, we rigorously tracked energy use, water use and GHG emissionsin 2016 to establish baseline data sets.When it comes to energy use and GHG emissions, the main challenge is that the amount of energy needed variessignificantly depending on the type of ore being mined at any given time – making it difficult to meet targets. As aresult, we’re focusing our initial reduction efforts at the worker accommodation camp, where we have more controlover consumption. One of the first actions will be to retrofit lighting to energy-efficient LED technology.PUTTING WASTE TO GOOD USEThe camp is also where we plan to implement water reduction targets and organic waste diversion projects. Wecurrently compost organic waste for use in our revegetation and forestation programs and are studying otherdiversion options.Hudbay 2016 Annual and CSR Report 70 PARTNERS IN BIODIVERSITY CONSERVATIONIn Peru, we’re committed to ensuring there is no net loss of biodiversity as a result of our activities. Our biodiversityaction plan (BAP) was developed in line with international standards (Towards Sustainable Mining and IFC) forprotecting and conserving biodiversity. The plan covers management of protected plant species, rescue andrelocation of threatened animal species, wetlands management and revegetation programs. Most of the activitiesare done in partnership with the local communities and integrate ancestral know-how where possible.For the past two years, we’ve hired sustainability consultants to work with community users as part of a bogmanagement and sustainable use plan designed to promote the conservation of the land. The team has helpedfarmers plant oats on dry land plots so their cattle can graze there during the dry season, instead of using thewetlands. They’ve also built irrigation trenches for grasslands outside the bog area and improved water catchmentstructures and systems. In 2016, they started training the farmers on how to care for the cattle in this newenvironment.During 2015, we implemented a program in which community members are paid for collecting native grass seedsand helping with progressive reclamation of disturbed areas. Our efforts were recognized in 2016 by SNMPE(National Society of Mining, Petroleum and Energy) as an innovative, progressive reclamation practice.TAKING ACTION ON DUSTKeeping dust levels down on our property and along the concentrate transportation route is important to us and toour community stakeholders. At times, we’ve used water to suppress dust but have not found it to be as effective asdust suppressants. In 2016, we initiated a competitive bid process for a dust suppressor contractor to meet ourneeds during the 2017 dry season.Hudbay 2016 Annual and CSR Report 71 EnvironmentArizonaThe Rosemont project is located in southwest Arizona in the Santa Rita Mountain range and is intended to be ashowcase for sustainable mining once built.WATER CONSERVATIONWater is a concern in Arizona, and the importance of good water management has been prioritized in the Rosemontproject design.We will employ state-of-the-art techniques and processing technologies, including process water recovery and thedevelopment of “dry-stack” tailings. With dry-stack tailings, tailings are dewatered through filtering and built intodense, durable, dry stacks that do not require a dam for retention. Dry-stack is a proven tailings technology that usesabout 50% less water and less land than conventional tailings containment design, and reduces the potential ofenvironmental impacts to groundwater by nearly 90%.To further conserve water resources and biodiversity, we established the Rosemont Copper Conservation LandsProgram. This program includes mitigation proposed in the permitting process as well as additional areas thatHudbay has set aside for conservation purposes. Hudbay Arizona will permanently conserve more than 4,827 acresof open land and allocate more than 1.9 billion gallons per year of private surface water rights to the public. Oncefinalized, this program will establish secure, sustainable habitat for bats, birds, fish, frogs and other animals,including some endangered species.PROTECTING ENDANGERED AND SPECIAL STATUS SPECIESWe’ve committed to funding a variety of mitigation measures detailed in the Rosemont Environmental ImpactStatement and the Rosemont Biological Opinion to protect endangered and special status species. This includesaquatic and bird species conservation activities, salvaging and replanting agave plants (a food source for anendangered bat), avoiding specific sites to prevent plant species impacts, implementing jaguar and ocelotmonitoring programs, and providing financial support to the Forest Service to hire a biologist for the term ofconservation to manage funds and monitor results. See the Arizona Social Impact page to learn about our financialcommitments related to these efforts.In 2011, a wild jaguar was observed in the Santa Rita Mountains near the Rosemont property and there havesubsequently been intermittent sightings of a lone jaguar in the mountain range, with the most recent beingOctober 2015. The US Fish and Wildlife Service has designated approximately 764,207 acres in Arizona and NewMexico as critical jaguar habitat. The Rosemont project would take up less than 0.7% of that land and only one-eighth of that amount would be occupied by the actual mine.We engaged large felid (big cat) experts to guide us in developing a plan for surveying and monitoring for thepresence of jaguars. Covering a 200 square kilometre (77 square mile) area, these efforts include the use of 150cameras (approximately one to three camera sets for every 2.6 square kilometres (1.0 square mile)), trail plots andspecially trained dogs with their handlers. Monitoring will commence before any significant surface work begins atRosemont and continue for up to five years after the life of the project.In issuing its final biological opinion in 2016, the US Fish and Wildlife Service noted that the Rosemont project wouldnot jeopardize the existence of 12 species living on or near the proposed mine site.Hudbay 2016 Annual and CSR Report 72 HEALTHY AIRUse of leading-edge technology will help control dust and air emissions and ensure compliance with all federal andstate air quality standards for particulates and air pollutants. Our air quality permit issued by the Arizona Departmentof Environmental Quality in 2013 and upheld by the Arizona Court of Appeals in 2016 includes enforceable limits forregulated air pollutants, equipment testing and opacity measurements, as well as extensive monitoring andreporting requirements.We plan to use haul trucks and mining equipment that meet the highest emissions standards (Tier IV) and high-efficiency dust collectors at process plant emissions points. We also plan to pave access and plant roads, enforcespeed limits, transport employees to the mine in natural-gas buses and conduct concurrent reclamation of perimeterbuttresses and disturbed areas in order to minimize dust and protect air quality.Read about our updated plan for maintaining dark skies that will reduce lighting output by 70%.Hudbay 2016 Annual and CSR Report 73 CSR Performance DataBASIS OF REPORTINGAll financial information is presented in US dollars except where otherwise indicated. All operating data is reportedusing the metric system. Some metrics are reported on both an absolute basis and an intensity basis againstkilotonnes of metal processed. Safety data frequency rates are measured per 200,000 hours worked.DATA MEASUREMENT TECHNIQUESData is measured or estimated, and operations are asked to explain significant deviations in year-over-year trends.The performance data is reported at a mix of operational and corporate levels. Data is checked and approved at thesite level, and also reviewed for consistency by the corporate data collection team.We provide safety and environmental incident definitions so that all operations report incidents consistently. Wecalculate 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 electricity from local grids.Utility grid statistics are therefore used to compile purchased electricity-related GHG numbers. We generateelectricity at some of our project sites (such as Constancia and Reed) and this energy is reflected in fuelconsumption, while GHG numbers are calculated based on conversion factors.Data for the indicators is collected and compiled using information submitted by each site on a standard template.We provide instruction and criteria for GRI G4 and Towards Sustainable Mining (TSM), and also supply a GHGemissions worksheet developed by the Mining Association of Canada (MAC).KEY PERFORMANCE DATAECONOMIC2016201520142013Direct economic value generated anddistributed (in $ millions) (EC1)Profit (loss) before tax$5.6$(331.4)$13.9$(53.7)Revenues$1,128.7$923.1$507.5$500.9Operating costsCanada358.9(408.5)(428.6)(399.7)US0.6(5.7)(7.6)(1.8)Peru298.5(186.0)(8.7)(9.7)Chile2.2(0.5)(1.9)(2.7)Colombia0.0(0.4)(0.8)(3.9)Total$660.2$(601.1)$(447.6)$(417.8)Hudbay 2016 Annual and CSR Report 74 2016201520142013Employee wages and benefitsCanada147.2157.1156.5160.8US0.69.34.61.1Peru27.522.420.615.7Chile2.20.00.01.2Colombia0.00.20.21.2Total$177.5$189.0$181.9$179.9Payments to governmentTaxes paidCanada6.66.1(21.1)5.6US0.00.00.10.0Peru38.928.05.81.5Chile0.00.00.00.0Colombia0.00.00.00.0Total$45.5$34.1$(15.2)$7.1Municipal taxes and grantsCanada6.86.77.87.6US0.00.10.50.7Peru0.00.00.00.0Chile0.00.00.00.0Colombia0.00.00.00.0Total$6.8$6.8$8.3$8.3Penalties and interest paidCanada0.00.10.00.0US0.00.00.30.0Peru0.30.00.20.0Chile0.00.00.00.0Colombia0.00.00.00.0Total$0.3$0.1$0.5$0.0Hudbay 2016 Annual and CSR Report 75 2016201520142013Payments to providers of capitalDividends paid$3.6$3.6$3.8$18.5Interest payments made to providers of loans$126.5$108.6$82.1$56.8Financing fees paid Canada49.41.30.92.8Peru20.11.24.60.0Total$69.5$2.5$5.5$2.8Other interest paidCanada0.00.00.00.0Peru0.00.00.00.0Total$0.0$0.0$0.0$0.0Capital expenditures – cash flow basis$192.8$490.6$890.9$878.7Cash and cash equivalents$146.9$53.9$178.7$593.7Payments – Local communities for land use(in $000s)Canada0.00.00.00.0US0.00.00.00.0Peru1,829.3579.51,684.510,647.1Total land use payments$1,829.3$579.5$1,684.5$10,647.1Public benefitCommunity investment and charitabledonations (in $000s)Canada345.1307.1602.8650.6US147.163.5212.948.4Peru3,738.32,435.73,103.03,952.0Chile0.00.00.00.0Colombia0.00.00.00.0Total community investments and donations$4,230.5$2,806.3$3,918.7$4,651.0Resettlement investment (Peru) (in $000s)$1,081.5$957.5$7,857.0$16,429.9321Hudbay 2016 Annual and CSR Report 76 2016201520142013This increase is mostly the result of a call premium paid to facilitate the early redemption of our senior unsecured notes.1. This increase relates to the payments of withholding taxes on loans and other revolver facility fees.2. Political donations are included in this total; however, in accordance with Hudbay policy, political donations were $0.3. Production (contained metal in concentrate)Copper (000 tonnes)174.5147.3 37.629.9Zinc (000 tonnes)110.6102.9 82.586.5Gold (000 troy ounces)114.3100.2 73.479.2Silver (000 troy ounces)3,755.92,791.5 745.9772.5Metal productionZinc metal (000 tonnes)102.6101.9105.196.3Hudbay 2016 Annual and CSR Report 77 EMPLOYEES2016201520142013Total workforce (G4-10)Number of full-time employeesMBU1,3191,3991,3911,373Ontario67686152Arizona405034N/apPeru230183174157Colombia0001Chile0001Total full-time employees1,6561,7001,6681,594EmploymentNumber of part-time employees MBU10214N/av – Seetotal belowOntario000Arizona222Peru000Chile000Total part-time employees1241852Number of contract (term) employees MBU13718N/av – Seetotal belowOntario151Arizona000Peru363187138Chile810Total contract employees385200158231Hudbay 2016 Annual and CSR Report 78 2016201520142013Number of co-op and summer students hiredMBU214041N/av – Seetotal belowOntario232Arizona020Peru8126Chile000Total co-op/summer students31574943Number of employees represented bycollective bargaining agreements (G4-11)1,1211,0531,0911,047Percentage of full-time employeesrepresented by trade unions67.7%61.9%65.4%65.7%Operational changes (LA4)Minimum number of weeks provided beforeoperational changes (MBU only)2222Negotiated into collective agreements(MBU only)YesYesYesYesNumber of strikes or lockouts exceeding oneweek (MM4)0100Employee turnover (LA1)RegionMBU201206118N/avCorporate1157N/avABU1691N/avPeru643253N/avChile000N/avTotal292252179N/av1Hudbay 2016 Annual and CSR Report 79 2016201520142013Age distribution<3020.2%23.4%18.4%N/av30–5039.0%40.5%50.3%N/av>5040.8%36.1%31.8%N/avGenderMale80.1%75.4%82.7%N/avFemale19.9%24.6%17.9%N/avVoluntary turnover rate (Hudbay total)13.0%11.4%7.4%4.3%Involuntary turnover rate (Hudbay total)4.6%3.6%3.4%4.1%New employee hiresRegionMBU141221155N/avCorporate3127N/avABU32336N/avPeru280160183N/avChile000N/avTotal427416381N/avAge distribution<3032.8%40.6%22.6%N/av30–5054.6%47.4%64.0%N/av>5012.6%12.0%13.6%N/avGenderMale83.4%79.3%82.9%N/avFemale16.6%20.7%17.3%N/avNet number of full-time employees added(decreased)Canada(81)152779US(10)8320Peru4791726Colombia00(1) (14)Chile00(1) (13)Total(44)327478Senior management hired from localcommunity (EC6)92N/avN/avHudbay 2016 Annual and CSR Report 80 2016201520142013Number of contractor full-time equivalentstaff (G4-10)Manitoba175274245316Peru2,9744,3379,5956,438Arizona1555N/apN/apOther1345425Person-hours of work (including contractors)(LA1)North America3,073,6463,245,8823,359,6633,245,625South America7,589,5019,907,70520,458,80613,781,606Total person-hours10,663,14713,158,58723,818,46917,027,231Employees receiving regular performanceand career development reviews (LA11)Percentage reviewed20%41%22%26%Hudbay total workforce age distribution(LA12)<3014.2%13.0%13.8%11.4%30–5053.0%47.9%47.8%47.4%>5032.2%39.6%36.6%41.2%Hudbay 2016 Annual and CSR Report 81 2016201520142013Composition of governance bodies andbreakdown of employeesWorkforce diversityFemale (Hudbay)MBU189187182N/avOntario323227N/avArizona172415N/avNew York000N/avPeru602835N/avChileN/apN/ap0N/avPercentage of total workforce that is female18%16%16%17%Aboriginal (MBU only)N/av13%12%13%Disabled (MBU only)N/av5%6%5%Visible minorities (MBU only)N/av6%6%5%Composition of executive management andcorporate governance bodiesBoard of Directors (ratio male to female)4:14:110:19:1Age distribution <300%0%0%0%30–500%0%10%10%>50100%100%90%90%Executive management (ratio male to female)5.5:15.5:110:110:1Age distribution<300%0%0%0%30–5053%64%72%64%>5046%36%27%36%Ratio of annual compensation of highestpaid individual to mean total compensation(G4-54)Canada (Manitoba Business Unit, excludingCorporate office)4.9:16.5:16.1:18.9:1Canada (including Corporate office)24.1:116.4:129.8:123.5:1Peru9.2:110.0:19.5:111.3:1United States (Arizona Business Unit)4.3:14.2:13.1:1N/av43222Hudbay 2016 Annual and CSR Report 82 2016201520142013Workforce represented in formal jointmanagement-worker Health and SafetyCommittees (LA5)Percentage represented100%100%100%100%Health and safety performance (per200,000 hours worked, except where noted)(LA6)Lost time accident frequency (LTA)Manitoba1.11.01.00.7Manitoba contractors0.00.70.80.3Peru0.10.70.00.0Peru contractors0.00.10.00.2Arizona0.00.0N/apN/apArizona contractors0.00.0N/apN/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not includingMBU and ABU)0.00.00.00.0South America (not including Peru)0.00.00.00.0South America contractors (not includingPeru)0.00.00.044.1Total0.30.30.10.4Lost time accident severity (SEV)   Manitoba37.335.236.034.4Manitoba contractors0.014.823.00.3Peru2.022.00.00.0Peru contractors0.63.60.27.1Arizona0.00.0N/apN/apArizona contractors0.00.0N/apN/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not includingMBU and ABU)0.00.00.00.0South America (not including Peru)0.00.00.00.0South America contractors (not includingPeru)0.00.00.0163.0Total  9.311.44.711.0Hudbay 2016 Annual and CSR Report 83 2016201520142013Restricted work case frequency (RWC)   Manitoba1.11.82.21.6Manitoba contractors0.50.00.40.6Peru0.00.20.00.0Peru contractors0.00.00.00.4Arizona0.00.0N/apN/apArizona contractors0.00.0N/apN/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not includingMBU and ABU)0.00.00.00.0South America (not including Peru)0.00.00.00.0South America contractors (not includingPeru)0.00.00.00.0Total 0.30.40.30.6Medical aid frequency (MA)    Manitoba11.811.012.812.1Manitoba contractors5.512.312.98.8Peru0.02.30.00.6Peru contractors0.20.20.50.9Arizona0.04.9N/apN/apArizona contractors0.05.3N/apN/apNorth America (not including MBU and ABU)0.00.01.20.0North America contractors (not includingMBU and ABU)0.00.02.10.0South America (not including Peru)0.00.00.00.0South America contractors (not includingPeru)0.00.00.070.5Total 3.03.02.13.0Hudbay 2016 Annual and CSR Report 84 2016201520142013First aid frequency (FA)   Manitoba22.622.128.526.0Manitoba contractors4.46.08.23.7Peru0.94.80.41.8Peru contractors0.40.61.32.4Arizona0.017.2N/apN/apArizona contractors0.05.3N/apN/apNorth America (not including MBU and ABU)0.00.03.70.0North America contractors (not includingMBU and ABU)0.00.08.30.0South America (not including Peru)0.00.00.028.1South America contractors (not includingPeru)0.00.00.0136.6Total5.75.24.46.2Fatality (number)0000Absentee rate (as a % of hours scheduled tobe worked)N/avN/avN/avN/avReportable occurrences (defined as EHSincidents required by Hudbay policy to bereported to our Board of Directors)79141811275Hudbay 2016 Annual and CSR Report 85 BENEFITSCorporateMBUFull timePart timeFull timePeruABUFull timePart timeFull timePart timeIncludes a union covering 90 employees organized in Peru in October, but negotiations did not begin until 2017.1. This information is not made available until June; therefore, we are a year behind in our public reporting.2. Drop in ratio is due to the time period in 2016 when there was no VP of the Manitoba Business Unit.3. Increase in ratio is due to the higher share price and the vesting of bonuses in 2016.4. In Q4 2016, we adopted revised Board reporting criteria that reduced the number of incidents reported to the Board in order to better focus discussion.5. Life insuranceYesNoYesHealth careYesNoYesDisability and invalidity coverageYesNoYesParental leaveYesNoYesRetirement provisionYesNoYesStock ownershipYesNoYesOther – Critical illness insuranceYesNoManagement onlyOther – Accidental death anddismemberment insuranceYesNoYesLife insuranceYesN/apYesNoHealth careYesN/apYesNoDisability and invalidity coverageYesN/apYesNoParental leaveYesN/ap00Retirement provisionYesN/apYes (401k)NoStock ownershipYesN/apYesNoOther – Critical illness insuranceYesN/apNoNoOther – Accidental death anddismemberment insuranceYesN/apYesNoHudbay 2016 Annual and CSR Report 86 SOCIETY2016201520142013Total number of incidents of discrimination(and actions taken) (HR3)1000Land use disputes (MM6)3032Resettlements (MM9)Number of households03600Number of individuals015000Employees trained in anti-corruptionpolicies (SO4)Number66360182336Percentage of workforce4%21%10%21%Percentage of Board and management giventraining100%91%N/avN/avEmployees that anti-corruption policies havebeen communicated toNumber – management534229412N/av – SeeabovePercentage100%98%0%N/av – SeeaboveNumber – non-management418560485N/av – SeeabovePercentage27%100%0%N/av – SeeaboveGovernance body members that anti-corruption policies have beencommunicated toNumber101010N/avPercentage100%100%100%N/avGovernance body members that receivedtraining on anti-corruptionNumber101010N/avPercentage100%100%100%N/av21Hudbay 2016 Annual and CSR Report 87 2016201520142013Average hours of training (Peru and ArizonaBusiness Units only) (LA9)Males in management6.8619.65N/avN/avFemales in management9.3650.17N/avN/avMales in non-management9.5951.86N/avN/avFemales in non-management14.1136.71N/avN/avSecurity practices (security personneltraining) (HR7)Hudbay security personnel trained in humanrights policies and proceduresNumber141515N/av – NotpreviouslyreportedPercentage100%98%100%N/av – NotpreviouslyreportedContractor security personnel trained inhuman rights policies and proceduresNumber7175158N/av – NotpreviouslyreportedPercentage100%99%92%N/av – NotpreviouslyreportedValue of fines or sanctions for non-compliance with laws and regulations (SO8)$0$5,000$3,352$1,277Grievances about impacts on society (SO11)Number filed through formal grievancemechanisms326778110Number addressed during reporting period326778110Number resolved during reporting period126567103Number filed prior to the reporting periodthat were resolved during the reportingperiod3632N/avNumber of other concerns78704Environment (EN34)14N/av – See aboveLabour and commercial practices (LA16)2454N/av – See aboveResettlement/livelihood12N/av – See aboveHuman rights11N/av – See aboveOther46N/av – See aboveHudbay 2016 Annual and CSR Report 88 2016201520142013This incident was filed in 2015 by a former employee alleging discrimination based on gender. The case is still ongoing.1. Added to reflect G4 reporting guidelines. SO4 was not broken down into these subsections in reporting years prior to 2014; therefore, data for the previous year is not available(N/av).2. Closure plans (MM10)Total number of operations578N/avNumber of company operations that haveclosure plans810106Percentage of total operations that haveclosure plans160%125%125%100%Number of advanced exploration projects thathave closure plans1014Percentage of advanced exploration projectsthat have closure plans100%N/ap100%100%Overall financial provision representing thepresent value of future cash flows relating toestimated closure costs per Canadiangenerally accepted accounting principles(in $000s)$177,296$147,027$185,395$141,566Hudbay 2016 Annual and CSR Report 89 ENVIRONMENT2016201520142013Direct energy consumption by primaryenergy source (terajoules) (EN3)Heavy oil0000Propane579629700580Natural gas0000Diesel1,9412,0341,9931,346Light oil0046Gasoline14111211Biofuel0000Ethanol0000Hydrogen0000Other0100Total2,5332,6752,7091,943Indirect energy consumption by primaryenergy source (terajoules)Total electricity consumed5,2634,9323,3223,048Indirect energy sold/credits (terajoules)Electricity0.50.4N/avN/avTotal indirect energy consumed byorganization (terajoules)5,2624,936N/avN/avEnergy intensity (terajoules per kilotonneof metal in concentrate)(EN5)27.330.950.242.9Total direct and indirect greenhouse gasemissions (kilotonnes of CO2-equivalent)Direct carbon dioxide emissions (EN15)170.96188.08182.28133.26Indirect carbon dioxide emissions (EN16)322.31277.806.914.84Total349.66455.30189.19138.10GHG intensity (EN18)1.231.821.571.19Hudbay 2016 Annual and CSR Report 90 2016201520142013NOx, SOx and other significant airemissions (in kilotonnes) (EN21)Sulphur dioxide emissions0.00.00.00.0Particulate0.440.160.170.16Total water withdrawal (000 cubic metres)(EN8)Surface water10,63211,54911,28710,789Ground water3,5312,698930441Rainwater collected directly and stored by theorganization7,1437,1684,048N/avWaste water from another organization00N/avN/avMunicipal water supplies0010.01Total water withdrawal21,30621,41516,26611,230Percentage and total volume of waterrecycled and reused (EN10)Total volume (megalitres)56,291.7416,944.37N/avN/avPercentage50.58%7.91%N/avN/avTotal water discharged (000 cubic metres)(EN22)To Flin Flon Creek/Ross Lake/Schist Lake14,35310,54610,81912,418To Anderson Creek/Wekusko Lake8,0254,5943,9394,180To Woosey Creek/Morgan Lake2,1421,1061,1841,123Herblet Lake926N/apN/apN/apTown of Snow Lake Sewer008N/apTo ground24721718735To land (irrigation using treated water inPeru)000139To Chilloroya River (Peru)1882,623737N/apWater treated (000 cubic metres)25,91119,08619,88719,867Total number of significant spills (EN24)99125Volume (m3)516.5382.0103.03.8Hazardous waste disposed of at externalfacility (tonnes) (EN25)1,520.31,508.5658.5522.321Hudbay 2016 Annual and CSR Report 91 2016201520142013Total waste (tonnes) (MM3)Overburden2,053,659.9N/avN/avN/avWaste rock51,426,208.842,764,760.0N/avN/avTailings28,968,944.024,780,081.6N/avN/avNumber of fines or sanctions for non-compliance with environmental laws andregulations (EN29)0000Land use (hectares) – Mineral tenure(controlled) (MM1)Manitoba122,639.4137,832.4135,068.4226,679.4Saskatchewan133,339.1135,352.1139,316.2136,887.5Ontario0.00.00.00.0Yukon5,823.45,823.45,823.45,823.4Nunavut21.021.021.021.0Total Canada261,822.9279,028.9280,229.0369,411.2New York0.00.031,532.331,570.2Michigan0.00.00.03,161.8Arizona7,284.07,284.00.0N/apTotal USA7,284.07,284.031,532.334,732.0Chile68,826.01,531.01,531.01,531.0Colombia0.00.00.05,210.8Peru5,187.043,669.50.026,932.5Total South/Central America74,013.045,200.51,531.033,674.3Total343,119.8331,513.4313,292.3437,817.5Land use (hectares) – Surface tenure(disturbed)Manitoba7,314.17,314.16,130.36,115.8Saskatchewan531.4535.2744.5744.5Ontario0.00.00.00.0Yukon120.7120.7120.7120.7Nunavut0.00.00.00.0Total Canada7,966.27,969.96,995.56,981.0New York0.00.057.757.7Michigan0.00.00.0571.0Hudbay 2016 Annual and CSR Report 92 2016201520142013Increase is due to an increase in the amount of water available for reuse.1. Of these nine spills, eight were in Manitoba and one was in Peru. In Manitoba, there were three chemical spills, one oil spill, three waste spills, and one “other”. There were no majorimpacts to the environment from these spills. In Peru, the spill was sludge from the open pit mine, which contaminated a water body with sediment and sludge.2. In Peru, we have a revegetation program. Revegetation was conducted using three types of native grass seeds. The 2015 revegetation program was monitored and we observed arecovery of original biodiversity, achieving landscape integration in 95% of the intervened area. These areas are in the monitoring phase.3. In Peru, we are partnered with UB Constancia, Hudbay Property – Taludes del DM3.4. Arizona0.00.00.0N/apTotal USA0.00.057.7628.7Chile0.30.00.00.0Colombia0.00.00.00.0Peru1,568.45,187.00.04,225.8Total South/Central America1,568.75,187.00.04,225.8Total9,534.813,156.97,053.211,835.5Percent land used vs. controlled2.8%4.0%2.3%2.7%Sites requiring biodiversity managementplans (MM2/EN12)Number of sites legally requiring plans1100Percentage of sites with legally requiredplans in place100%100%N/apN/apNumber of sites with voluntary plans in place1112Habitats protected or restored (hectares)(EN13)Protected0000Restored51.930.62222.8Partnerships existYesYesN/avN/avStatus at close of reporting periodMonitoringMonitoringN/avN/avIUCN Red List species and NationalConservation List species (EN14)Critically endangered33N/avN/avEndangered88N/avN/avVulnerable1214N/avN/avNear threatened119N/avN/avLeast concern66N/avN/av43Hudbay 2016 Annual and CSR Report 93 CSR Performance Data2016 Targets and AchievementsTargetAchievementDetailsHEALTH AND SAFETY  Improve on our current three-year averagelost time accident severity of 8.3Not achievedSee Employee Performance Data.Improve on our three-year total recordableinjury frequency average of 3.2Not achievedAs of December 31, 2016, our three-yearaverage total recordable injuryfrequency was 3.6.Implement a Visible Felt Leadership programfor managementAchievedSee Safety Accountability Starts at theTop.Sustain our focus on learning from severe andhigh-potential incidents by ensuring uniformapplication of incident criteria, investigationprocess and corrective action follow-up at allbusiness unitsAchievedSee Our Approach to Health and Safety.COMMUNITY  Implement a program to achieve company-wide exposure to the human rightsintroductory video being developed with MACand the Canadian government, and connect itto Hudbay policies and standardsNot achievedDelayed waiting for a Spanish version ofthe human rights video.Complete gap analysis for recently approvedCommunity Giving and Investment Standardand Local Procurement and EmploymentStandard at each operating location andidentify business unit defined action plansPartiallyachievedCarried out in Peru, but not yet inManitoba.Achieve Canadian Council for AboriginalBusiness PAR (Progressive AboriginalRelations) Bronze level or higher at ourManitoba Business UnitAchievedSee Benchmarking Hudbay’s Efforts inAboriginal Inclusion.Hudbay 2016 Annual and CSR Report 94 TargetAchievementDetailsENVIRONMENT  Achieve a 1% greenhouse gas emissionsintensity reduction in ManitobaAchievedSee Environment – Manitoba.Achieve a 1% fresh water consumptionintensity reduction in ManitobaAchievedSee Environment – Manitoba.Set Constancia environmental benchmark andimprovement targets for 2017AchievedSee Environment – Peru.GOVERNANCE  Conduct anti-bribery and anti-corruptionrefresher training for board membersAchievedSee Business Conduct.Adopt Shareholder Engagement Policyencouraging shareholders to communicatedirectly with the Board of DirectorsAchievedSee Stakeholder Engagement.Achieve ISO 14001 and OHSAS 18001management system certification for theConstancia operationAchievedSee CSR Governance.FINANCIAL EXCELLENCE/GROWTH TARGETS  Through efficiency improvements, combinedwith cost containment efforts, achieve 2016capital expenditure and operating costreductions of more than $100 million,compared to 2016 guidance, whilemaintaining or improving on productionguidanceAchievedSee Business and Financial Review.Enhance Hudbay’s liquidity position in thecurrent commodity price environment byconsolidating the lender groups, andrestructure Hudbay’s two secured creditfacilities2016 objectiveachieved infirst quarter of2017See Business and Financial Review.Build on the 2015 technical and permittingwork at the Rosemont project to complete theDefinitive Feasibility Study and continueprogress on the outstanding permitsAchievedHudbay 2016 Annual and CSR Report 95 CSR Performance Data2017 TargetsHEALTH AND SAFETYImprove on our current three-year average lost time accident severity of 7.5Improve on our three-year total recordable injury frequency average of 3.1Progress our focus on fatality prevention by implementing our Critical Control Framework at each siteImprove our performance benchmarking by moving to ICMM classification and boundary criteriaCOMMUNITYImplement a program to achieve company-wide exposure to the human rights introductory video beingdeveloped with MAC and the Canadian government, and connect it to Hudbay policies and standardsENVIRONMENTAchieve a 1% greenhouse gas emissions intensity reduction in ManitobaAchieve a 1% fresh water consumption intensity reduction in ManitobaAchieve a 5% greenhouse gas emissions intensity reduction at camp in PeruAchieve a 5% fresh water consumption intensity reduction at camp in PeruGOVERNANCEAdopt new compliance management system to facilitate employee training on policies and proceduresAdopt and roll out new Supplier Code of Conduct and EthicsConduct organizational review intended to ensure Hudbay is well positioned to achieve its growth objectivesFINANCIAL EXCELLENCE/GROWTH TARGETSContinue to pursue efficiency improvements in our operations to sustain cost reductions achieved in 2016 andgenerate incremental free cash flow and increase net asset valueAdvance high-return in-house brownfield opportunities to increase throughput from the Lalor mine and relatedmilling facilities, incrementally adding zinc and gold production in the near and medium term, respectivelyDeliver on plans to advance the development of the high-grade Pampacancha deposit so that it can start to bemined late in 2018Advance permitting and technical work at the Rosemont projectUtilize free cash flow generation to reduce debt and further reduce our cost of capitalContinue to evaluate exploration and acquisition opportunities that meet our criteria described above, andpursue those opportunities that we determine to be in the best interest of the company and our stakeholdersHudbay 2016 Annual and CSR Report 96 CSR Performance DataGRI IndexSTRATEGY 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 Review > StrategyBusiness and Financial Review > OperationsCSR Approach > Responsible Supply ChainG4-5Location of the organization’s headquartersNoOur CompanyHudbay 2016 Annual and CSR Report 97 General Standard DisclosuresExternalAssuranceG4-6Number of countries where the organization operates, andnames of countries where the organization has significantoperations or that are specifically relevant to the sustainabilitytopics covered in the reportNoOur CompanyBusiness and Financial Review > OperationsG4-7Nature of ownership and legal formNoOur CompanyWebsite > About Us > At-a-GlanceAnnual Information FormG4-8Markets servedNoCSR Approach > Responsible Supply ChainStory > Dealing with the Inevitable: Managing Price CyclicalityG4-9Scale of the organizationNoOur CompanyBusiness and Financial ReviewBusiness and Financial Review > FinancialsCSR Performance DataG4-10Employee/workforce detailsNoCSR Performance DataWorkforce details are not currently provided by gender. Therewere no significant variations in employment numbers.G4-11Percentage of total employees covered by collectivebargaining agreementsNoOur People > Our ApproachHudbay 2016 Annual and CSR Report 98 General Standard DisclosuresExternalAssuranceG4-12Describe the organization’s supply chainNoCSR Approach > Responsible Supply ChainG4-13Significant changes during the reporting period regarding theorganization’s size, structure, ownership or supply chainNoOur CompanyOur Company > CEO MessageBusiness and Financial ReviewBusiness and Financial Review > OperationsG4-14Whether and how the precautionary approach or principle isaddressed by the organizationNoCSR Approach > CSR GovernanceG4-15Externally developed economic, environmental and socialcharters, principles or other initiatives to which theorganization subscribes or which it endorsesNoCSR Approach > CSR GovernanceG4-16Memberships of associations and national or internationaladvocacy organizationsNoCSR Approach > CSR GovernanceHudbay 2016 Annual and CSR Report 99 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIESGeneral Standard DisclosuresExternalAssuranceG4-17Entities included in the organization’s consolidated financialstatementsNoAbout This ReportAnnual Information FormG4-18Process for defining report contentNoCSR Approach > Materiality2014 Annual and CSR ReportG4-19Material aspects identified in the process for defining reportcontentNoCSR 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 previous reportsNoThere are no restatements of information from previous reports.Hudbay 2016 Annual and CSR Report 100 General Standard DisclosuresExternalAssuranceSTAKEHOLDER ENGAGEMENTGeneral Standard DisclosuresExternalAssuranceG4-23Significant changes from previous reporting in scope ofprioritiesNoThere are no significant changes from previous reporting in scopeof priorities.G4-24List of stakeholder groupsNoCSR Approach > Stakeholder EngagementG4-25Basis for identifying and selecting stakeholdersNoCSR Approach > Stakeholder EngagementStakeholders are defined as entities or individuals that canreasonably be expected to be significantly affected by ouractivities, and whose actions can reasonably be expected to affectour ability to successfully implement our strategies and achieveour objectives.G4-26Approach to stakeholder engagementNoCSR Approach > Stakeholder EngagementOur People > Our ApproachOur People > ManitobaOur People > PeruOur People > ArizonaSocial Impact > Story > Benchmarking Hudbay’s Efforts inAboriginal InclusionSocial Impact > Our ApproachSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaHudbay 2016 Annual and CSR Report 101 General Standard DisclosuresExternalAssuranceREPORT PROFILEGeneral Standard DisclosuresExternalAssuranceG4-27Topics raised through stakeholder engagement and responseNoCSR Approach > Stakeholder EngagementOur People > Our ApproachOur People > ManitobaOur People > PeruOur People > ArizonaSocial Impact > Story > Benchmarking Hudbay’s Efforts inAboriginal InclusionSocial Impact > Our ApproachSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaG4-28Reporting periodNoAbout This ReportG4-29Date of most recent reportNoAbout This ReportG4-30Reporting cycleNoAbout This ReportG4-31ContactNoContact UsHudbay 2016 Annual and CSR Report 102 General Standard DisclosuresExternalAssuranceGOVERNANCEGeneral Standard DisclosuresExternalAssuranceG4-32In accordance optionNoAbout This ReportG4-33External assurance policyNoAbout This ReportOur external report is not externally assured, and we do not havea policy around external assurance. The financial data comprisingEC1 is externally assured through the auditing of our Financials.G4-34Governance structureNoCSR Approach > CSR GovernanceManagement Information CircularG4-37Process for consultation between stakeholders and highestgovernance body on economic, social and environmental topicsNoOur Company > Business ConductCSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementSocial Impact > Our ApproachWebsite > Governance (Corporate Governance Guidelines)G4-38Composition of the highest governance bodyNoOur Company > Corporate GovernanceOur Company > Management TeamManagement Information CircularWebsite > Governance (Corporate Governance Guidelines)Hudbay 2016 Annual and CSR Report 103 General Standard DisclosuresExternalAssuranceG4-39Indicate whether the Chair of the highest governance body isalso an executive officerNoOur Company > Corporate GovernanceG4-40Nomination and selection process for the highest governancebody and its committeesNoManagement Information CircularWebsite > Governance (Corporate Governance Guidelines)G4-41Process for the highest governance body to ensure conflicts ofinterest are avoided and managedNoOur Company > Business ConductCSR Approach > CSR GovernanceAnnual Information FormG4-44Process for evaluation of the highest governance body’sperformanceNoWebsite > Governance (Corporate Governance Guidelines)G4-45Highest 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 GovernanceHudbay 2016 Annual and CSR Report 104 General Standard DisclosuresExternalAssuranceETHICS AND INTEGRITYGeneral Standard DisclosuresExternalAssuranceG4-49Process for communicating critical concerns to the highestgovernance bodyNoOur Company > Business ConductCSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementG4-51Remuneration policies for the highest governance body andsenior executivesNoManagement Information CircularWebsite > Governance (Corporate Governance Guidelines)G4-54Ratio of the annual total compensation for the organization’shighest paid individual in each country of significant operationto the median annual total compensation for all employeesNoCSR Performance DataG4-56Organization’s values, principles, standards and norms ofbehaviourNoOur Company > Business ConductCSR Approach > CSR GovernanceCSR Approach > Responsible Supply ChainOur People > Our ApproachSocial Impact > Our ApproachEnvironment > Our ApproachWebsite > About UsWebsite > Code of Business Conduct and EthicsHudbay 2016 Annual and CSR Report 105 ECONOMICSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Economic PerformanceDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our Company > CEO MessageOur Company > Corporate GovernanceOur Company > Risk ManagementBusiness and Financial Review > StrategyBusiness and Financial Review > OperationsBusiness and Financial Review > FinancialsSocial Impact > Our ApproachAnnual Information FormG4-EC1Direct economic value generated and distributedYesBusiness and Financial ReviewBusiness and Financial Review > FinancialsSocial ImpactCSR Performance DataG4-EC2Financial implications and other risks and opportunitiesfor the organization’s activities due to climate changeNoCDP WebsiteG4-EC3Coverage of the organization’s defined benefit planobligationsNoAnnual Information FormHudbay 2016 Annual and CSR Report 106 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Indirect Economic ImpactsDMADisclosure of Management ApproachNo1, 2, 3, 6, 8,9, 10, 11CSR Approach > Stakeholder EngagementCSR Approach > MaterialityCSR Approach > Responsible Supply ChainSocial ImpactSocial Impact > Our ApproachSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-EC7Development and impact of infrastructure investmentsand services supportedNoStory > A Foundation for Rewarding CommunityRelationshipsOur Company > CEO MessageSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaG4-EC8Significant indirect economic impacts, including theextent of impactsNoCSR Approach > Responsible Supply ChainSocial ImpactSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaAspect: Procurement PracticesDMADisclosure of Management ApproachNo1, 3, 4, 9,10, 11CSR Approach > Responsible Supply ChainHudbay 2016 Annual and CSR Report 107 Specific Standard DisclosuresExternalAssuranceImpactBoundariesENVIRONMENTALSpecific Standard DisclosuresExternalAssuranceImpactBoundariesG4-EC9Proportion of spending on local suppliers at significantlocations of operationNoCSR Approach > Responsible Supply ChainSocial Impact > ManitobaSocial Impact > PeruSocial Impact > ArizonaAspect: WaterDMADisclosure of Management ApproachNo3, 6, 8, 11Environment > Our ApproachEnvironment > ManitobaEnvironment > PeruEnvironment > ArizonaCDP WebsiteNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-EN8Total water withdrawal by sourceNoCSR Performance DataG4-EN10Percentage and total volume of water recycled and reusedNoCSR Performance DataHudbay 2016 Annual and CSR Report 108 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: BiodiversityDMADisclosure of Management ApproachNo3, 7, 8, 10,11Environment > Our ApproachEnvironment > ManitobaEnvironment > PeruEnvironment > ArizonaStory > Managing Our Impact and Supporting BiodiversityG4-EN13Habitats protected or restoredNoCSR Performance DataNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.MM1Amount of land disturbed or rehabilitatedNoCSR Performance DataMM2The number and percentage of total sites identified asrequiring biodiversity management plans according tostated criteria, and the number (percentage) of thosesites with plans in placeNoCSR Performance DataG4-EN14Total number of IUCN Red List species and nationalconservation list species with habitats in areas affected byoperations, by level of extinction riskNoCSR Performance DataHudbay 2016 Annual and CSR Report 109 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Effluents and WasteDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,8, 10, 11Environment > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-EN24Total number and volume of significant spillsNoCSR Performance DataMM3Total amount of overburden, rock, tailings and sludgesand their associated risksNoCSR Performance DataAspect: Environmental Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 6, 8,11CSR Approach > Stakeholder EngagementCSR Approach > MaterialitySocial Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-EN34Number of grievances about environmental impacts filed,addressed and resolved through formal grievancemechanismsNoSocial Impact > Our ApproachCSR Performance DataHudbay reports on the main topics raised from grievancesand has not segmented those that have been filed,addressed and/or resolved based specifically onenvironmental impacts.Hudbay 2016 Annual and CSR Report 110 SOCIAL: LABOUR PRACTICES AND DECENT WORKSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: EmploymentDMADisclosure of Management ApproachNo1, 3, 5, 11Our PeopleOur People > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-LA1Total number and rates of new employee hires andemployee turnover by age group, gender and regionNoCSR Performance DataG4-LA2Benefits provided to full-time employees that are notprovided to temporary or part-time employees, bysignificant locations of operationNoCSR Performance DataAspect: Labour/Management RelationsDMADisclosure of Management ApproachNo1, 3, 5, 11Our PeopleOur People > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-LA4Minimum notice periods regarding operational changes,including whether these are specified in collectiveagreementsNoOur People > Our ApproachCSR Performance DataHudbay 2016 Annual and CSR Report 111 Specific Standard DisclosuresExternalAssuranceImpactBoundariesMM4Number of strikes and lock-outs exceeding one week’sduration, by countryNoCSR Performance DataAspect: Occupational Health and SafetyDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our People > Our ApproachWebsite > Environmental Health and Safety PolicyNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-LA5Percentage of total workforce represented in formal jointmanagement–worker health and safety committees thathelp monitor and advise on occupational health and safetyprogramsNoCSR Performance DataG4-LA6Type of injury and rates of injury, occupational diseases,lost days and absenteeism, and total number of work-related fatalities, by region and by genderNoOur PeopleCSR Performance DataHudbay does not currently track gender-specific datarelating to this disclosure as it is not applicable to ourcompany.Hudbay 2016 Annual and CSR Report 112 SOCIAL: HUMAN RIGHTSSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Non-DiscriminationDMADisclosure of Management ApproachNo1, 5, 11CSR Approach > Human Rights and SecurityOur People > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-HR3Total number of incidents of discrimination and correctiveactions takenNoCSR Performance DataAspect: Freedom of Association and Collective BargainingDMADisclosure of Management ApproachNo1, 5, 8Our People > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-HR4Operations and suppliers identified in which the right toexercise freedom of association and collective bargainingmay be violated or at significant risk, and measures takento support these rightsNoOur People > Our ApproachHudbay 2016 Annual and CSR Report 113 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Security PracticesDMADisclosure of Management ApproachNo1, 2, 3, 11CSR Approach > Human Rights and SecurityNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-HR7Percentage of security personnel trained in theorganization’s human rights policies or procedures thatare relevant to operationsNoCSR Performance DataAspect: Indigenous RightsDMADisclosure of Management ApproachNo3, 7, 8, 10,11CSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementSocial Impact > Story > Benchmarking Hudbay’s Efforts inAboriginal InclusionSocial Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-HR8Total number of incidents of violations involving rights ofindigenous peoples and actions takenNoNote: There were 0 violations in 2015.MM5Total number of operations taking place in or adjacent toindigenous peoples’ territories, and number andpercentage of operations or sites where there are formalagreements with indigenous peoples’ communitiesNoCSR Performance DataHudbay 2016 Annual and CSR Report 114 Specific Standard DisclosuresExternalAssuranceImpactBoundariesSOCIAL: SOCIETYSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Human Rights Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 4, 7, 8,9, 10, 11CSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementCSR Approach > MaterialitySocial Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-HR12Number of grievances about human rights impacts filed,addressed and resolved through formal grievancemechanismsNoCSR Performance DataHudbay reports on the main topics raised from grievancesand has not segmented those that have been filed,addressed and/or resolved based specifically on humanrights impacts.Aspect: Local Communities*MM6Number and description of significant disputes relating toland use, customary rights of local communities andindigenous peoplesNoCSR Performance DataHudbay 2016 Annual and CSR Report 115 Specific Standard DisclosuresExternalAssuranceImpactBoundariesMM7The extent to which grievance mechanisms were used toresolve disputes relating to land use, customary rights oflocal communities and indigenous peoples, and theoutcomesNoCSR Performance DataAspect: Anti-CorruptionDMADisclosure of Management ApproachNo1, 2, 6, 8, 9Our Company > Business ConductCSR Approach > Responsible Supply ChainOur People > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.G4-SO4Communication and training on anti-corruption policiesand proceduresNoCSR Performance DataAspect: Grievance Mechanisms for Impacts on SocietyDMADisclosure of Management ApproachNo1, 3, 5, 6,11CSR Approach > Human Rights and SecurityCSR Approach > Stakeholder EngagementCSR Approach > MaterialitySocial Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.Hudbay 2016 Annual and CSR Report 116 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-SO11Number of grievances about impacts on society filed,addressed and resolved through formal grievancemechanismsNoCSR Performance DataHudbay reports on the main topics raised from grievancesand has not segmented those that have been filed,addressed and/or resolved based specifically on impacts onsociety.Aspect: Artisanal and Small-Scale Mining*MM8Number and percentage of company operating siteswhere artisanal and small-scale mining (ASM) takes placeon, or adjacent to, the site, the associated risks and theactions taken to manage and mitigate these risksNoCSR Performance DataAspect: ResettlementDMADisclosure of Management ApproachNo3, 8, 6, 10,11Social Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.MM9Sites where resettlements took place, the number ofhouseholds resettled in each, and how their livelihoodswere affected in the processNoCSR Performance DataAspect: Closure PlanningDMADisclosure of Management ApproachNo1, 2, 3, 6, 7,8, 10Social Impact > Our ApproachNote: We re-evaluate our management approach every threeyears as part of our materiality review process, which waslast conducted in 2014.Hudbay 2016 Annual and CSR Report 117 Specific Standard DisclosuresExternalAssuranceImpactBoundaries* Aspect is not material but is included in the Mining and Minerals Sector Disclosure.Impact 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. MM10Number and percentage of operations with closure plansNoCSR Performance DataHudbay 2016 Annual and CSR Report 118 About This ReportThis is the third year in which we’ve combined our annual report and our corporate social responsibility (CSR) report.We believe that social performance is as important as financial and operating performance and that combining thereports presents a truly representative account of the Company’s activities in 2016.We published our Management’s Discussion and Analysis of Results of Operations and Financial Condition and theconsolidated financial statements for the year ended December 31, 2016, on February 22, 2017. Copies are postedto our website. The Business and Financial Review section of this report covers the content normally included in ourannual report.This is the 13th year that we have produced a CSR report, and this is our ninth report based on the Global ReportingInitiative (GRI) Sustainability Reporting Guidelines. Our most recent previous report was released in May 2016. Thisreport contains standard disclosures from the GRI G4 guidelines, prepared largely in accordance with the Coreoption.Our report covers all operating and project locations reported in Our Company, as well as our Tom and Jasonproperties in the Yukon, and exploration activities managed by Hudbay in Chile during the 2016 calendar year. CSRreport content has been defined based on our materiality analysis and aspects identification process, which appliedto all of Hudbay’s operating assets.More information on the scope of our reporting is available in the CSR Performance Data section of this report.BASIS OF REPORTINGAll financial information is presented in US dollars except where otherwise noted. All operating data is reportedusing the metric system unless otherwise noted. Some metrics are reported on both an absolute basis and anintensity basis against kilotonnes of metal processed. Safety data frequency rates are measured per 200,000 hoursworked.QUALIFIED PERSONThe technical and scientific information in this annual report related to the Constancia mine and Rosemont projecthas been approved by Cashel Meagher, P. Geo, Hudbay’s Senior Vice President and Chief Operating Officer. Thetechnical and scientific information related to the Manitoba sites and projects contained in this annual report hasbeen approved by Robert Carter, P. Eng, Hudbay’s Lalor Mine Manager. Messrs. Meagher and Carter are qualifiedpersons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimatemineral reserves and resources, as well as data verification procedures and a general discussion of the extent towhich the estimates of scientific and technical information may be affected by any known environmental,permitting, legal title, taxation, sociopolitical, marketing or other relevant factors, please see the Technical Reportsfor the company’s material properties as filed by Hudbay on SEDAR at www.sedar.com.Hudbay 2016 Annual and CSR Report 119 FORWARD-LOOKING INFORMATIONThis annual report contains forward-looking information within the meaning of applicable Canadian and UnitedStates securities legislation. All information contained in this annual report, other than statements of current andhistorical fact, is forward-looking information. Often, but not always, forward-looking information can be identifiedby 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 theseor similar words) and statements that certain actions, events or results “may”, “could”, “would”, “should”, “might”“occur” or “be achieved” or "will be taken" (and variations of these or similar expressions). All of the forward-lookinginformation in this annual report is qualified by this cautionary note.Forward-looking information includes, but is not limited to, production, cost and capital and exploration expenditureguidance, anticipated production at the company’s mines and processing facilities, the anticipated timing, cost andbenefits of developing the Rosemont project, Pampacancha deposit and Lalor growth projects, anticipated mineplans, anticipated metals prices and the anticipated sensitivity of the company’s financial performance to metalsprices, events that may affect its operations and development projects, the permitting, development and financingof the Rosemont project, the potential to increase throughput at the Stall mill and to refurbish the New Britanniamill and utilize it to process ore from the Lalor mine, anticipated cash flows from operations and related liquidityrequirements, the anticipated effect of external factors on revenue, such as commodity prices, estimation of mineralreserves and resources, mine life projections, reclamation costs, economic outlook, government regulation of miningoperations, and business and acquisition strategies. Forward-looking information is not, and cannot be, a guaranteeof future results or events. Forward-looking information is based on, among other things, opinions, assumptions,estimates and analyses that, while considered reasonable by Hudbay at the date the forward-looking information isprovided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may causeactual results and events to be materially different from those expressed or implied by the forward-lookinginformation.The material factors or assumptions that Hudbay identified and were applied by the company in drawing conclusionsor making forecasts or projections set out in the forward-looking information include, but are not limited to:the success of mining, processing, exploration and development activities;the scheduled maintenance and availability of Hudbay’s processing facilities;the sustainability and success of Hudbay’s cost reduction initiatives;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 all forms of energy and fuels at reasonable prices;no significant unanticipated operational or technical difficulties;the execution of Hudbay’s business and growth strategies, including the success of its strategic investments andinitiatives;the availability of additional financing, if needed;the ability to complete project targets on time and on budget and other events that may affect Hudbay’s ability todevelop its projects;the timing and receipt of various regulatory, governmental and joint venture partner approvals;Hudbay 2016 Annual and CSR Report 120 the availability of personnel for Hudbay’s exploration, development and operational projects and ongoingemployee relations;the ability to secure required land rights to develop the Pampacancha deposit;maintaining good relations with the communities in which Hudbay operates, including the communitiessurrounding its Constancia mine and Rosemont project and First Nations communities surrounding its Lalor andReed mines;no significant unanticipated challenges with stakeholders at Hudbay’s various projects;no significant unanticipated events or changes relating to regulatory, environmental, health and safety matters;no contests over title to Hudbay’s properties, including as a result of rights or claimed rights of Aboriginalpeoples;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 refund of certain value-added taxes from the Canadian and Peruvian governments; andno significant and continuing adverse changes in general economic conditions or conditions in the financialmarkets (including commodity prices and foreign exchange rates).The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from thoseexpressed or implied by the forward-looking information may include, but are not limited to, risks generallyassociated with the mining industry, such as economic factors (including future commodity prices, currencyfluctuations, energy prices and general cost escalation), uncertainties related to the development and operation ofHudbay’s projects (including risks associated with the permitting, development and economics of the Rosemontproject and related legal challenges), risks related to the maturing nature of the 777 and Reed mines and theirimpact on the related Flin Flon metallurgical complex, dependence on key personnel and employee and unionrelations, risks related to the schedule for mining the Pampacancha deposit (including the timing and cost ofacquiring the required surface rights), risks related to the cost schedule and economics of the capital projectsintended to increase processing capacity for Lalor ore, risks related to political or social unrest or change, risks inrespect of Aboriginal and community relations, rights and title claims, operational risks and hazards, includingunanticipated environmental, industrial and geological events and developments and the inability to insure againstall risks, failure of plant, equipment, processes, transportation and other infrastructure to operate as anticipated,compliance with government and environmental regulations, including permitting requirements and anti-briberylegislation, depletion of Hudbay’s reserves, volatile financial markets that may affect Hudbay’s ability to obtainadditional financing on acceptable terms, the failure to obtain required approvals or clearances from governmentauthorities on a timely basis, uncertainties related to the geology, continuity, grade and estimates of mineralreserves and resources, and the potential for variations in grade and recovery rates, uncertain costs of reclamationactivities, the company’s ability to comply with its pension and other post-retirement obligations, Hudbay’s ability toabide by the covenants in its debt instruments and other material contracts, tax refunds, hedging transactions, aswell as the risks discussed under the heading “Risk Factors” in the company’s most recent Annual Information Form.Hudbay 2016 Annual and CSR Report 121 Should one or more risk, uncertainty, contingency or other factor materialize or should any factor or assumptionprove incorrect, actual results could vary materially from those expressed or implied in the forward-lookinginformation. Accordingly, you should not place undue reliance on forward-looking information. Hudbay does notassume any obligation to update or revise any forward-looking information after the date of this annual report or toexplain any material difference between subsequent actual events and any forward-looking information, except asrequired by applicable law.NOTE TO UNITED STATES INVESTORSThis annual report has been prepared in accordance with the requirements of the securities laws in effect in Canada,which may differ materially from the requirements of United States securities laws applicable to U.S. issuers.Hudbay 2016 Annual and CSR Report 122 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@hudbay.com.For CSR matters, please contact David Clarry, Vice President, Corporate Social Responsibility, 416 362-7364,david.clarry@hudbay.com.Annual and Special Meeting of ShareholdersMay 4, 2017, 10:00 a.m. ETToronto, OntarioHudbay 2016 Annual and CSR Report 123 GlossaryAccident frequency – number of injuries (recordable or lost time) multiplied by 200,000, divided by total hoursworkedBiodiversity – short for “biological diversity”; the variety of living organisms, genetic diversity and habitat diversitythat creates and sustains variation in the environmentCommunity investment – voluntary investment of funds in the broader community, including for physicalinfrastructure and social programsConflict-free minerals – mineral production that does not contribute to serious human rights abuses in regions ofarmed 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 rateDonations – contributions to charitiesEmployee – a person directly employed by Hudbay and/or its subsidiariesG4 indicators – performance indicators contained in the G4 Guidelines of the Global Reporting Initiative. The G4Guidelines – Core option provide the framework for this reportGHG emissions – greenhouse gas emissionsGlobal Reporting Initiative (GRI) – an independent institution whose mission is to develop and disseminate globallyapplicable sustainability reporting guidelines. For more information, visit www.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 return to work onhis/her next scheduled workday after the day of the injury, because he/she is unfit to perform any dutiesMAC – Mining Association of CanadaMaterial information – a fact or a change to the Company that could reasonably be expected to have a significanteffect on the market price or value of the securities of the CompanyN/ap – not applicableN/av – not availableRestricted work – a work-related injury where a licensed health care provider or the employer recommends that theemployee not perform one or more of the routine functions of the job or not work the full workday that theemployee would have otherwise workedTailings – the fine waste rock that remains after separating the valuable minerals from the ore during mining andprocessing of mineral resources. Tailings may contain trace quantities of metals found in the host ore, as well asadded compounds used to extract the mineralsTSM – Towards Sustainable Mining – an initiative of the Mining Association of Canada

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