Hudbay Minerals
Annual Report 2017

Plain-text annual report

Positioned for Growth2017 Annual and CSR ReportIn 2017, a rising demand for copper and zinc, a foundation of long-life assets and a robust development platform combined to ensure that Hudbay was positioned for growth.Our StoriesGrowing Demand: Meeting the Demand for Responsible Copper and Zinc 1 Responsible Growth: The Permitting Process at Rosemont 4Organizing for Growth: Creating an Agile and Effective Organization 7CSR ApproachReducing Human Rights Risks in the Supply Chain 33 Building Trust as We Grow Responsibly 34 Our PeopleEffective Systems and Strong Culture Translate to Excellent Performance 54 Working Together to Build a Successful Future 55 Social ImpactAddressing the Economic and Social Impact of Mine Closures 65 Engaging Stakeholders on Mine Expansion 66 EnvironmentStrengthening Tailings Management 77 Working Toward No Net Loss of Biodiversity 78Our Company 9Business and Financial Review 25CSR Approach 32Our People 53Social Impact 64Environment 76CSR Performance 89About This Report 131 Contact Us 135 Glossary 136Hudbay 2017 Annual and CSR Report 1 Several trends are driving the renewed demand for copper: improvedperformance in the overall global economy, national infrastructureinitiatives, and global efforts to reduce the carbon footprint generated byenergy production, energy usage and transportation.After a cyclical downturn, which began in 2011, prices for copper and zinc began to recover inthe second half of 2016. At present, prices and demand for both metals, particularly copper, areexpected to continue rising.Several trends are driving the renewed demand for copper. Improved performance in theoverall global economy is creating broader demand for products that use copper. Nationalinfrastructure initiatives, notably in China, are also fueling demand. Finally, increased demandcan also be tied to global efforts to reduce the carbon footprint generated by energyproduction, energy usage and transportation.Copper will be essential to global carbon reduction initiatives. The typical battery-poweredelectric vehicle requires approximately four times the copper used in a conventional internalcombustion engine vehicle. Copper is a key component of the cables that carry the energygenerated by wind turbines and solar panels. It helps to reduce energy loss in electric motorsand air conditioners, making them more efficient. It is integral to electric batteries, notablythose used in electric vehicles.Growing Demand: Meeting theDemand for Responsible Copperand ZincHudbay 2017 Annual and CSR Report 2 Copper is also essential to high-tech equipment, from computers and servers to tablets andsmartphones. Your phone contains more copper than any other metal, and copper comprises12% of your phone’s total weight1. Increasingly, it is replacing aluminum in the manufacture ofcomputer chips, in part because it delivers faster operating speeds. Like copper, zinc has a range of applications across many industries, including agriculture,construction, pharmaceuticals and transportation. Approximately half of the world’s supplygoes toward making corrosion-proof galvanized steel, which is widely used in infrastructureprojects. Zinc sheeting is used for cladding, roofing and gutter systems. Zinc-coated steel is alsowidely used for building framing, bridge construction and the reinforcing bar in concretestructures. Because of its anti-corrosive properties, zinc can make a crucial contribution toinfrastructure projects, and in recent years there has been a steady demand for galvanized steelfrom China.During the downturn, many mining companies held off on developing or expanding their assets.Exploration was also curtailed. And while sentiment, demand and market fundamentals arechanging, it could take years – given the time required to locate and transform a viable resourceinto a permitted operating mine – to close the gap between supply and demand.Hudbay is well positioned to take advantage of these favourable supply-demand fundamentals.The Company operates long-life mines and has a robust exploration program. Its Rosemontproject has reached the final stages of permitting, and development is expected to commencenot long after the conclusion of that process. Once it becomes fully operational, Rosemont isexpected to account for roughly 10% of US copper production.“Improved performance in the overall global economy is creating broaderdemand for products that use copper. Hudbay is well positioned to takeadvantage of these favourable supply-demand fundamentals.”Hudbay 2017 Annual and CSR Report 3 Hudbay operates responsibly and sustainably, in accordance with local laws and internationalcommitments, such as the Towards Sustainable Mining (TSM) initiative developed by the MiningAssociation of Canada (MAC). Rosemont, in particular, will be a showcase for sustainable mining.The mine will take an innovative approach to tailings and water conservation. It will feature anoutdoor light management program, designed to comply with Arizona’s Dark Sky commitmentto preserving the nighttime environment. There’s even a workforce bus transit plan in place tominimize traffic and air quality impacts.As yet, no established framework exists for demonstrating the provenance of copper and zincused in goods and materials. Nonetheless, we believe that ensuring copper and zinc areresponsibly mined and sourced will be increasingly important to consumers and investors. It is achallenge and an opportunity that Hudbay is well prepared to meet.1. http://www.coppermatters.org/copper-factsHudbay 2017 Annual and CSR Report 4 Hudbay is in business to mine copper and other metals – efficiently,profitably and responsibly. Participating in a comprehensive, thoughtfulpermitting process, as we are at Rosemont, makes an essentialcontribution to achieving that goal.Robust permit processes make good projects.That belief has been our guide throughout the permitting process for our Rosemont project,which we expect will receive its final outstanding approval, the Section 404 Water Permit fromthe US Army Corps of Engineers, shortly.The Rosemont project has a projected life of 19 years. When in full production, it is expected tobe the third-largest producer of copper in the United States. The project is located in Arizona, ajurisdiction that upholds among the highest standards for safety, labour practices,environmental protection and social responsibility.Responsible Growth: The PermittingProcess at RosemontHudbay 2017 Annual and CSR Report 5 We believe these features make the Rosemont project a good fit for Hudbay. We also firmlybelieve that the permitting process, which began in 2007, has been – and needs to be –comprehensive and rigorous.The federal agency leading the review process is the US Forest Service, supported by the USArmy Corps of Engineers. In total, 17 different federal and state agencies (including the ArizonaDepartment of Environmental Quality) played a role in the process, generating requests forclarifications and mitigations that Hudbay responded to in our Mine Plan of Operation (MPO),which is now over 4,000 pages long and comprises four separate volumes. In accordance withstate practice, costs associated with permitting – including for staffing and any required studies,tests and additional consultants – are all paid by the applicant, Hudbay.The MPO is our blueprint for Rosemont, and responding to mandated changes and mitigationsthat have arisen during the permitting process has helped make our project better. For example,guided by the process, we reduced the footprint of our mine site plant, which made ouroperation more efficient. We will also be using haul trucks with best-in-class diesel engines thatmeet the Tier 4 exhaust emission standards. While there is a notable upfront cost, we expectthat Rosemont, as a long-life asset, will provide a dependable return on investment for manyyears.Additionally, we will be pursuing a number of innovative approaches and usage agreements thatwill enable us to significantly reduce the amount of water that an operation like Rosemontwould have consumed historically. These include using dry-stack tailings to manage our orewaste. Dry stack, in which dewatered tailings are piled to form very stable deposits, uses muchless water than traditional tailings management approaches, and approximately 75% to 80% ofthe water that is used can be recycled. When fully operational, Rosemont will host the largestfiltered tailings facility in North America.While there is a notable upfront cost to some of these solutions, we expect that Rosemont, as along-life asset, will provide a dependable return on investment for many years.“We expect that Rosemont, as a long-life asset, will provide a dependablereturn on investment for many years.”Hudbay 2017 Annual and CSR Report 6 The permitting process delivers benefits that extend even beyond our operations. To gain ouroperating licence, we worked with consultants and manufacturers to develop innovative, LED-based lighting systems that meet Arizona’s Dark Sky commitments. When another mine faced asimilar challenge, we were pleased to share what we had learned. Wide adoption helps lowercosts on the technologies involved, expands the use of those technologies, and also reflects ourdesire to support sustainable, responsible mining throughout our industry.Hudbay is in business to mine copper and other metals – efficiently, profitably and responsibly.Participating in a comprehensive, thoughtful permitting process, as we are at Rosemont, makesan essential contribution to achieving that goal.Hudbay 2017 Annual and CSR Report 7 This initiative, OneHudbay, touches upon our values, our culture, ourstructure and our organizational approach. While comprehensive andwide ranging, it can be neatly captured in a single phrase:“How we work”.Over the past decade, we have grown from a company anchored in northern Manitoba tobecome an international miner. Today, Hudbay is primarily a copper producer, focused onbuilding and operating mines in the Americas, with operations and projects in Canada, Peru andthe United States. Once our Rosemont project in Arizona comes online, it will be one ofAmerica’s largest copper producers. We also have an active exploration program. In short, drivenby rising demand, we foresee a future of growth.Organizing for Growth: Creating anAgile and Effective Organization“We are working toward a common culture, a shared understanding of goalsand strong guiding values that will empower our employees.”Hudbay 2017 Annual and CSR Report 8 To prepare for that growth, we recognized that we needed to look at how we functioned andhow we were structured. While we have always had sound management systems in place, whenwe were a smaller organization, it was comparatively easy to identify and solve a range ofproblems as they arose. To meet the challenge of becoming a large, multinational company, werealized that we needed to revisit the systems and structures we had in place to ensureorganizational effectiveness at any scale.We call this initiative OneHudbay, and it touches upon our values, our culture, our structure andour organizational approach. While comprehensive and wide ranging, it can be neatly capturedin a single phrase: “How we work”. OneHudbay is directed by our CEO and led by the VicePresident, Organizational Effectiveness. In this newly created role, the VP, OrganizationalEffectiveness supports Hudbay’s growth by designing and implementing systems to maximizeorganizational effectiveness, and by leading projects, which consider both people and thetechnological aspects of the business, for transformational change.OneHudbay is based in many respects on Requisite Organization (RO), a management theorythat looks at organizations in terms of structures and systems. Through the RO lens, employeesgenerally do not fail a company; more often, it is the other way around. To address this, ROmandates clear management accountability, defining employee responsibilities, establishingstructures to support employees and their development, and carefully determiningmanagement layers.While ensuring we maintain necessary management oversight, we are planning to put moreemphasis on developing employees through coaching and talent development. Simply put, wewant to make it easier for employees at all levels to understand what is expected of them, andthen support them in achieving their goals.We put a renewed emphasis on mission, strategy, values and culture. As OneHudbay, we choosenot to impose uniformity. We are working toward a common culture, a shared understanding ofgoals and strong guiding values that will empower our employees – wherever they are located –to meet challenges, move swiftly, make decisions and help our company grow, today andtomorrow.Hudbay 2017 Annual and CSR Report 9 OurCompanyHudbay is an integrated mining company that produces copper concentrate (containing copper, gold andsilver), zinc concentrate and zinc metal. We are headquartered in Toronto, Ontario, Canada, and listed onthe Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima under the symbol“HBM”.Hudbay 2017 Annual and CSR Report 10 Manitoba, Canada: Flin Flon100%ownershipUndergroundcopper • zincgold • silver mineFlin FlonconcentratorHydrometallurgicalzinc plantManitoba, Canada: Reed70%ownershipUndergroundcopper mineHudbay 2017 Annual and CSR Report 11 Manitoba, Canada: Lalor100%ownershipLong-life, undergroundzinc • goldsilver • coppermineStall and Flin Flonconcentrators processLalor oreArizona, USA: Rosemont92.05%ownership*Open pitcopper project* Our ownership in Rosemont is subject to an earn-in agreement with United Copper and Moly LLC (UCM) pursuant to which UCM has earned a 7.95%interest in the project and may earn up to a 20% interest.Hudbay 2017 Annual and CSR Report 12 Constancia, Peru: Constancia100%ownershipOpen pitcopper mine and concentratorChile: Exploration PropertiesGreenfieldexploration targetsChilean exploration properties areamong thoseowned or optionedby Hudbay over the last two yearsHudbay 2017 Annual and CSR Report 13 Vision:We will be a responsible top-tier operatorof long-life, low-cost mines in theAmericas.Mission:We create sustainable value through theacquisition, development and operationof high-quality, long-life deposits withexploration potential in jurisdictions thatsupport responsible mining. The regionsand communities in which we operatebenefit from our presence.Hudbay 2017 Annual and CSR Report 14 CEOMessagePositioned for Growth: Our Story and Our Focus in 2017Hudbay’s strategic objective for 2017 was to make sure we’re positioned for growth – but, as always, safety remainsour top priority.So I’m pleased to report that we achieved a strong safety record across all of our operations. We maintained orimproved performance with respect to the severity of lost time accidents and total recordable incident frequencyin our Manitoba and Peru business units. In particular, at Constancia, we achieved an excellent safety record, withno mining-related lost time accidents (LTAs) for the year.Going into 2017, we maintained the fiscal discipline that served us so well in the previous year. As 2016 came to aclose, we were able to refinance debt that was scheduled to mature in 2020. In 2017, we were able to pay off oursecured credit facility in full. Our strengthened financial position, coupled with an increasingly favourableenvironment for metal prices, gave us the capacity to shift our focus from the balance sheet to an extended periodof growth – one that will have an impact across all of our business units.“Our strengthened financial position, coupled with an increasinglyfavourable environment for metal prices, gave us the capacity to shift ourfocus from the balance sheet to an extended period of growth – one thatwill have an impact across all of our business units.”Hudbay 2017 Annual and CSR Report 15 Meanwhile, Hudbay has made significant progress with the permitting process for the Rosemont project in Arizona.Last June, the US Forest Service issued a favourable Final Record of Decision, and we anticipate receiving theSection 404 Water Permit from the US Army Corps in 2018. We look forward to moving ahead with construction onthis outstanding project, and we are well positioned to fund the bulk of Rosemont’s expenditures from ouroperating cash flow.We have also taken important steps to expand our development pipeline. These included successful negotiationsthat concluded in January 2018 with the acquisition of three properties near our Constancia mine in Peru. Weundertook exploration activities in Manitoba, British Columbia, Peru and Chile, and we re-established the positionof Vice President of Exploration.Preparing for the FutureAcross our operations, Hudbay’s copper production exceeded our 2017 guidance ranges, and our production of zincand precious metals was in line with our 2017 guidance.At Constancia, the team made substantial progress in ramping up ore production, after some challenges in early2017. Now that operations are running well, our technical teams are pursuing metallurgical methods to furtherenhance ore recovery.As noted earlier, we made important strides toward consolidating our land package around Constancia, and we arecurrently involved in amicable negotiations for the Pampacancha surface rights.  At every stage of Constancia’sdevelopment and operations, we have prioritized maintaining good community relations and operating in asustainable, responsible manner. This approach, which we apply everywhere we operate, has been essential to ourefforts to expand our mining footprint in Peru. Another significant achievement for the year was our introduction of automation at Constancia. Automating thecontrols that feed our grinding circuit contributed directly to enhancing our efficiency and increasing production.As we introduced automation, we engaged proactively with employees to help them understand the benefits andopportunities it would create. Their support has been crucial to this initiative.While our progress in automation has been rewarding, the key to our success remains the committed, motivatedpeople on the Hudbay team, wherever we operate. A notable achievement at Constancia in 2017 was the three-year collective bargaining agreement we negotiated with our unions in Peru. This agreement represents anevolution from the initial one-year agreement, which is more typical across the mining industry in Peru. Werecognize and appreciate the essential contribution that the unions in Peru made toward achieving theseagreements.Similarly, we successfully negotiated three-year collective bargaining agreements with the seven unions thatrepresent our employees in Manitoba. We reached this agreement with no work interruptions, and it provides asolid ground for us to move forward.Hudbay has its roots in northern Manitoba, which is one of the reasons we focus so strongly on planning for ourfuture in the region.Hudbay 2017 Annual and CSR Report 16 At Lalor, we increased average production to 4,000 tonnes per day, putting us on track to reach our goal ofprocessing 4,500 tonnes per day in 2018. The mine plan at Lalor for 2018 includes some mining of the gold zone forprocessing at Flin Flon, which will enable a better understanding of the gold zone characteristics and better informthe evaluation of options for processing Lalor gold.We also introduced a new level of automation at Lalor, in the form of load-haul-dump vehicles (LHDs). Workingunderground and remotely guided by a human operator on the surface, LHDs load, haul and dump ore to feed ourgrinding circuit. Throughout this process, we kept our employees and their unions fully informed, and their supportand co-operation has helped make the introduction of these autonomous vehicles a success.At Reed, we continued to prepare for the mine’s scheduled closure in 2018. As soon as the last ore has been mined,we plan to initiate closure and simultaneously begin the remediation process. From end to end, Reed will serve asan example of how a responsible mine can access resources efficiently with minimal impact on the environment.As Hudbay plans for growth, Flin Flon remains an important consideration, since we anticipate the closure of 777 in2021. Nonetheless, we recognize that the region is one of the most mineral rich on earth. We have committed$50 million toward exploration in 2018, and a significant portion of those funds will be focused on opportunitiesnear our existing operations, including the Flin Flon area. Consequently, exploration is still a relevant theme for FlinFlon, and we remain optimistic about the future. Although the closure of 777 is inevitable, we continue to workwith employees and the community to achieve the best possible outcome for Flin Flon.Organizational EffectivenessIn our industry and others, many companies have struggled to manage the challenge of growth. To prepare Hudbayfor the future, we implemented a number of measures in 2017 – including appointing a Vice President ofOrganizational Effectiveness – all aimed at ensuring that we have the values, processes and accountabilities weneed to support our growth.This initiative, which we have named OneHudbay, will develop our employees’ talents while assessing andenhancing our effectiveness across all levels of the organization. Our goal is to make Hudbay stronger, by equippingour people with a better understanding of their roles and accountabilities. We will then provide the support theyneed to accomplish their goals and reach their full potential. Ensuring that all of our employees understand howtheir performance connects to our mission will help us to achieve our objectives for responsible, sustainablegrowth.Hudbay 2017 Annual and CSR Report 17 A Growing DemandWe feel confident that Hudbay is poised to enjoy a period of sustained growth, in both the scale of our operationsand the value we create for our stakeholders.A stronger global economy, a renewed interest in large-scale infrastructure projects (notably in China), and copper’skey role as a component of the sustainable economy are combining to drive increased demand for both copper andzinc. This surge in demand follows a long period of minimal exploration and development of new supply. Againstthis background, Hudbay – which operates long-life mines in Manitoba and Peru and has a world-class copperproject going through the final stages of permitting in Arizona, along with an active exploration program – is wellpositioned to meet this demand, now and over the long term.While Hudbay looks ahead to a period of sustained growth, I want to thank our Board for the guidance theyprovided in 2017. I also want to thank our contractors, our community partners and my colleagues across theorganization. Their support, throughout the year and in the years ahead, is what makes our growth and our successpossible.Sincerely,Alan Hair President and Chief Executive OfficerHudbay 2017 Annual and CSR Report 18 CorporateGovernanceGood governance is essential for our long-term success and ability to grow. We strive to follow best practices andmeet or exceed regulatory requirements.Hudbay’s Board of Directors supervises the Company’s management and business affairs while maintaining thehighest standards of ethical conduct and acting in the best interests of the Company and its shareholders. TheBoard fulfills its responsibilities directly and through five committees:AuditCompensation and Human ResourcesCorporate 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 Management Information Circular to learn more.Hudbay 2017 Annual and CSR Report 19 Alan R.Hibben*Chair CorporateGovernance andNominatingCommittee (Chair)Carol T.Banducci*Audit CommitteeIgor Gonzales*TechnicalCommittee Environmental,Health, Safety andSustainabilityCommitteeTom A.GoodmanEnvironmental,Health, Safety andSustainabilityCommittee (Chair) Audit CommitteeAlan HairPresident and ChiefExecutive OfficerW. WarrenHolmes*Chairman CorporateGovernance andNominatingCommittee TechnicalCommitteeSarah B.Kavanagh*Audit Committee(Chair) CorporateGovernance andNominatingCommitteeCarin S.Knickel*Compensation andHuman ResourcesCommittee (Chair) Environmental,Health, Safety andSustainabilityCommitteeAlan J.Lenczner*Audit Committee Compensation andHuman ResourcesCommitteeKenneth G.Stowe*TechnicalCommittee (Chair) Compensation andHuman ResourcesCommitteeBoard of Directors* Independent** Tom A. Goodman, who has been a director since 2012, is not standing for re-election at our Annual and Special Meeting of Shareholders onMay 3, 2018. We would like to thank Mr. Goodman for his dedicated service to the Board since 2012 and to Hudbay generally for over 40 years.In connection with the departure of Mr. Goodman, the Corporate Governance and Nominating Committee recommended, and the Board hasnominated, Colin Osborne for election to the Board. Mr. Osborne’s 20 years of broad experience in the metals and manufacturing industry willincrease the depth of technical, mining and operations expertise on the Board and be of great value as we continue to seek to optimize ouroperations and grow the business.Learn MoreGovernance policies, standards, guidelines and committee chartersManagement Information Circular* **Hudbay 2017 Annual and CSR Report 20 BusinessConductHonesty, integrity, transparency and compliance with the law are essential for building trust and supporting ourability to grow.Our Code of Business Conduct and Ethics (the “Code”) states our commitment on matters related to compliancewith laws and regulations, conflicts of interest, government payments, confidential information, protection andproper use of Hudbay assets, and the reporting of illegal and unethical behaviour. The Code applies to all directors,officers and employees.On joining the Company, board members and employees sign a declaration confirming that they understand andwill comply with the Code. The Board requires every director and executive officer to disclose any direct or indirectconflict of interest. Formal annual confirmation of compliance with the Code, the Confidentiality and InsiderTrading Policy and our Statement on Anti-Corruption is also required from all directors, officers, and employeeswith a Hudbay email address.Personnel who report concerns about unethical or illegal behaviour are protected by our Whistleblower Policy,which expressly prohibits discrimination, harassment and retaliation against anyone reporting conduct they believeis in violation of our Code or any laws.Our Code includes a prohibition against making any political contributions on Hudbay’s behalf without prior writtenapproval of our Chief Executive Officer.Our Supplier Code of Conduct and Ethics, which we implemented in 2017, sets out minimum standards ofconduct expected of suppliers who wish to do business with Hudbay. Suppliers with a major contract will be askedto read, accept and comply with the Supplier Code of Conduct as a condition to doing business with Hudbay.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), tospecific groups or across the organization as the Company deems appropriate.Hudbay 2017 Annual and CSR Report 21 On an annual basis, all Board directors, officers and employees with a Hudbay email address must certify that theyhave read and understood our Code. For 2017, we conducted an online campaign that asked individuals to certifyby e-signature their adherence to key compliance policies, and to complete a training program in respect of suchpolicies. 100% of individuals required to certify and participate in training (representing 55% of our workforce)completed the requirement. For individuals who failed to comply, the Company suspended their email access untilthey completed the courses.Other courses in 2017 included anti-bribery and anti-corruption refresher training for the Board.Risks, Issues or ComplaintsBased on an assessment of corruption risks at our three business units and our corporate office, we identified thatviolation of the CFPOA and the FCPA constitutes a significant risk in Peru, due to difficulties in monitoring thecompliance of contractors and agents (and potentially employees as the Company grows), as well as the increasedenforcement of anti-corruption legislation.No incidents of corruption were reported in 2017, and no incidents of corruption involving employees, businesspartners or legal cases were brought against the Company. Through our third-party whistleblower reportingservice, 17 incidents were reported in 2017, all of which were investigated and resolved with corrective actionwhere necessary. While none of these incidents involved significant allegations of fraud or violations of our Code,some allegations were brought forward related to business, health, safety and environmental practices;inappropriate behaviour or violation of company policies or procedures; and conflicts of interest.To Report an Issue Contact 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.During 2017, the Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor was the agencythat helped resolve conflicts between project-affected communities and Canadian extractive sector companiesoperating outside of Canada. On January 17, 2018, the Government of Canada announced the creation of anindependent Canadian Ombudsperson for Responsible Enterprise (CORE). The CORE replaces the CSRCounsellor in investigating human rights complaints of Canadian companies operating overseas. Moreinformation about the CORE’s roles and responsibilities is available on the Government of Canada’s website.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-governmentalorganizations and labour organizations can voice their views and concerns. Canada’s NCP can be reached byemail at ncp.pcn@international.gc.ca or by telephone at +1 343 203-2341.To address community concerns, each site makes the relevant contact information available locally.Hudbay 2017 Annual and CSR Report 22 RiskManagementRisk management is essential to effective governance and to achieving our business objectives. Our riskmanagement policy defines our approach to enterprise risk management and establishes a framework forembedding effective risk management practices and tools into our culture, systems and processes.All Hudbay executives are responsible for integrating risk management into their strategic business planning,budget and resource allocation, operating performance, and human resource, financial and compliance processes.This framework 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 responsible for assisting in this regard. The Vice President, Risk Management, and theDirector, Risk Management, lead the enterprise risk management program.We discuss long-term and emerging risks in the Risk Factors section of our Annual Information Form.Learn MoreOur 2018 Annual Information Form describes key corporate risks and their potential business impacts.Hudbay 2017 Annual and CSR Report 23 ManagementTeamAlan HairPresident and ChiefExecutive OfficerDavid BrysonSenior VicePresident and ChiefFinancial OfficerCashelMeagherSenior VicePresident and ChiefOperating OfficerEugene LeiSenior VicePresident,CorporateDevelopment andStrategyRobertAssabguiVice President,Technical ServicesAdrienneBlazoVice President,OrganizationalEffectivenessDavid ClarryVice President,Corporate SocialResponsibilityJavier Del RíoVice President,South AmericaBusiness UnitPatrickDonnellyVice President andGeneral CounselJon DouglasVice President andTreasurerOur management team sets the tone for a culture of integrity and compliance, and it is responsible for establishingand implementing the Company’s long-range goals, strategies, plans and policies, subject to the Board’s directionand oversight.Hudbay 2017 Annual and CSR Report 24 ElizabethGitajnVice President, RiskManagementAndré LauzonVice President,Manitoba BusinessUnitOlivierTavchandjianVice President,Exploration andGeologyLearn MoreManagement team biographiesHudbay 2017 Annual and CSR Report 25 Business andFinancial ReviewIn 2017, we paid down all of our short-term debt, as well as our secured credit facility, through a combination of animproved metal price environment and our consistently disciplined approach to managing finances. This hasallowed us to switch our focus from right-sizing our balance sheet to growing our company. We received the FinalRecord of Decision from the US Forest Service in 2017 and look forward to receiving the Section 404 Water Permitfrom the US Army Corps of Engineers and finalizing the Mine Plan of Operations shortly. We can then moveforward with the development of Rosemont, and expect to finance the initial phases with cash generated by ouroperations. At the same time, we have committed $50 million to exploration activities, both near our mines andgreenfield properties, which will allow us to identify new deposits and enhance the value and mine life of existingprojects.Key AccomplishmentsMaintained effective cost discipline while delivering growth, as consolidated metals production met or exceeded2017 guidance rangesLeveraged an increasingly favourable metals price environment to drive debt reduction and generate strongcash flow Improved total available liquidity to $778 million, which includes $356 million in cashReduced net debt position by $462 million during full-year 2017Advanced permitting activities at Rosemont, receiving the Final Record of Decision from the US Forest Service inJune 2017Expanded our pipeline of growth opportunities by committing $50 million to exploration near existingprocessing infrastructure in Manitoba and Peru, as well as greenfield exploration properties in Chile and BritishColumbiaHudbay 2017 Annual and CSR Report 26 2017 SummaryOPERATIONS SUMMARYFor the years ended December 3120172016* Metal reported in concentrate is prior to refining losses or deductions associated with smelter contract terms.FINANCIAL SUMMARYFinancial condition (in $000s)Dec. 31, 2017Dec. 31, 2016Financial performance (in $000s, except per share and cash cost amounts)Dec. 31, 2017Dec. 31, 20161. Attributable to owners of the Company.2. Metal reported in concentrate is prior to deductions associated with smelter contract terms.Production (contained metal in concentrate)*Copper (000 tonnes)159.2174.4Zinc (000 tonnes)135.2111.0Gold (000 ounces)108.6114.3Silver (000 ounces)3,487.33,756.0Cash and cash equivalents$356,499$146, 864Working capital308,675121,539Total assets4,648,7294,456,556Total long-term debt979,5751,232,164Equity2,144,2551,763,212Revenue$1,362,553$1,128,678Profit before tax198,7285,605Basic and diluted earnings (loss) per share10.67(0.15)Profit (loss)163,899(35,193)Operating cash flows before change in non-cash working capital530,561387,868ProductionContained metal in concentrate2Copper (tonnes)159,192174,491Gold (ounces)108,593114,296Silver (ounces)3,487,2583,755,896Zinc (tonnes)135,156110,582Metal soldPayable in metal in concentrate2Copper (tonnes)148,655171,451Gold (ounces)109,77095,527Silver (ounces)3,060,2693,181,759Refined zinc (tonnes)116,377103,453Hudbay 2017 Annual and CSR Report 27 Business and Financial ReviewStrategyOur mission is to create sustainable value for our shareholders by acquiring, developing and operating high-quality,long-life deposits with exploration potential in mining-friendly jurisdictions.We recognize that to consistently deliver value in the mining sector, a company needs to maintain its developmentpipeline by investing in discovering new mineral deposits and building the facilities, infrastructure and teamsrequired to mine those deposits profitably. Our long history of successfully finding assets, our in-depth miningexpertise in both open pit and underground mining, and our successful track record for developing and operatingmines in northern Manitoba and Peru provide Hudbay with a demonstrable competitive advantage relative to ourpeers in the industry.Our strategy for growth is to first explore and develop properties we already control, such as Constancia, Lalor andRosemont. Hudbay will also pursue exploration in new prospective territories and may acquire properties that alignwith our strategic criteria. Additionally, we always seek to create value by managing costs at all of our operationswhile optimizing efficiency and safety.To ensure that our acquisitions create value for shareholders, we evaluate opportunities by the following criteria: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. Unless exceptional opportunities present themselves, we generally focus on specific high-qualitymines (low cost, long life), development projects and early-stage projects.Before any acquisition, we make sure we understand how we can add value to the property by applying oursocial, technical, operational and project execution expertise, or through providing the required financialcapacity and other optimization opportunities.Acquisitions should be accretive to Hudbay on a per share basis.Hudbay 2017 Annual and CSR Report 28 Financial and Business Objectives for 2018Maintain our focus on generating free cash flow and increase net asset values.Advance in-house brownfield growth opportunities, includingComplete the Lalor paste plant and ramp up base metal ore throughput from Lalor to 4,500 tonnes per day.Move toward mining of high-grade Pampacancha satellite deposit near Constancia.Proceed with mining Lalor gold zone.Advance permitting and technical work at Rosemont.Test promising exploration targets near Constancia and Lalor, and at greenfield sites in Peru, Chile and Canada.Hudbay 2017 Annual and CSR Report 29 Business and Financial ReviewBusiness ActivitiesIn 2017, we stayed focused on costs at all of our operations, while delivering solid performance in terms ofproduction, exceeding our guidance on copper and delivering zinc and precious metals production within guidanceranges. Aided by a favourable pricing environment, we generated positive free cash flow throughout the year. Inboth Manitoba and Peru, we signed three-year collective bargaining agreements, which contribute to a strongplatform for growth over the next several years.2017 Performance HighlightsCompany-wide, produced 159,192 tonnes of copper in concentrate, 135,156 tonnes of zinc in concentrate and158,411 ounces of precious metals in concentrateMaintained cost discipline with a consolidated cash cost of $0.84 per pound copper, compared to $0.93 perpound in 2016, and an all-in sustaining cash cost of $1.52 per poundMANITOBA BUSINESS UNITProgressed with efforts to ramp up ore production at Lalor; on track for an expanded 4,500 tonnes-per-day mineplan by the third quarter of 2018Employed Flin Flon concentrator to process Lalor production that exceeded the Stall concentrator’s capacity Moved forward on plan to begin mining Lalor gold zone in 2018Introduced autonomous, long-haul-dump (LHD) vehicles to operations at LalorDetermined to keep Flin Flon processing assets on care and maintenance after anticipated Reed (2018) and 777(2020) mine closures to maintain regional optionalityTeams from Flin Flon and Snow Lake finished first and second, respectively, in the 2017 Manitoba Provincial MineRescue CompetitionHudbay 2017 Annual and CSR Report 30 SOUTH AMERICAN BUSINESS UNITReported zero lost time accidents related to mine site operations at ConstanciaUndertook negotiations, completed in January 2018, to acquire three mining properties near our ConstanciaoperationsInitiated a project to automate controls that feed our Constancia grinding circuit, which will not impact jobs andwill help to optimize productionProceeded with plans to mine high-grade Pampacancha satellite, commencing in 2018Achieved 100% of the objectives laid out in the 2017 Biodiversity Action Plan for ConstanciaCORPORATE EXPLORATIONReported zero lost time accidents related to exploration carried out in northern ChileExpanded land tenure in Chile through new staking and option agreementsApplied innovative techniques for exploration under covered areas at our project in northern ChileHudbay 2017 Annual and CSR Report 31 Business and Financial ReviewFinancialsPDF PDF In 2017, Hudbay was again able to meet or exceed our guidance ranges for the year, on a consolidated basis, andwe continued to generate free cash flow. Combined unit operating costs at Manitoba and Peru exceeded our 2017guidance, primarily due to increased operating costs and lower than expected mill throughput. Buoyed by afavourable metals pricing environment, our revenue for the year was $1,362.6 million, a 21% increase over 2016.We were able to achieve an all-in sustaining cash cost for copper produced, net of byproduct credits, of $1.52 perpound*.Consolidated Financial StatementsManagement’s Discussion and Analysis* Operating cash flow per share and cash cost per pound of copper produced, net of byproduct credits, are non-IFRS financial performancemeasures with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the discussion under“Non-IFRS Financial Performance Measures” beginning on page 39 of Hudbay’s Management’s Discussion and Analysis filed February 21, 2018.Hudbay 2017 Annual and CSR Report 32 CSRApproachOur ability to grow our business and produce the metals and minerals today’s society increasingly needsrequires that we effectively manage a wide range of social, political and environmental risks andopportunities. Through the policies, systems and practices we have in place at every operation andproject, we demonstrate our commitment to responsible, sustainable development.90thCelebrated the 90thanniversary of Hudbay’sfounding Recognized for leadershipin creating a diverse andinclusive workplace atCanada’s 2017 EmploymentEquity Achievement Awards99%of Hudbay and contractorsecurity personnel trainedin human rights policies andproceduresHudbay 2017 Annual and CSR Report 33 As a member of the Mining Association of Canada (MAC) and a participant in its Towards Sustainable Mining (TSM)program, Hudbay aims to deliver positive outcomes in the host countries and communities where we operate.In 2017, MAC strengthened TSM with the addition of a commitment that all MAC members contribute to the globalefforts to respect the rights of workers and prevent forced or child labour. While Hudbay has vigorous controls inplace to avoid such abuses, the two new components will increase accountability and transparency, supporting thebroader goal to ensure responsible production and management of minerals and metals. Independent verificationswill ensure that operations comply with this commitment.This addition demonstrates the industry’s dedication to continuous improvement, and it addresses requirementsfrom organizations and companies, such as the Responsible Business Alliance and Apple, to verify that such labourpractices do not exist in their supply chains.Reducing Human Rights Risks inthe Supply ChainHudbay 2017 Annual and CSR Report 34 An important part of Hudbay’s strategy is to grow organically through a proven track record of exploration andmine development. During the downturn in metal prices, we acquired near-mine properties in Manitoba and Peruand greenfield properties in Chile and British Columbia.At our exploration project in Chile, we engage with families and communities near the exploration camps to discusstheir needs and their expectations of us and our activities. We have repaired roads, water wells and othercommunity facilities, and we have hired local people for that work. Community members are invited to visit thecamp at any time to observe our activities, ask questions or just use the camp’s Wi-Fi. The end objective is to build arelationship and level of comfort with the community, so they feel well informed about our activities andcomfortable approaching us with any questions or concerns.As we enter new jurisdictions, our exploration personnel often establish the first contact with local communities,and these interactions can have long-term implications. During this stage of mine development, it is crucial thateveryone who works directly for Hudbay or on our behalf demonstrates leadership in safety, ethical conduct, socialresponsibility and environmental stewardship.Building Trust as We GrowResponsiblyHudbay 2017 Annual and CSR Report 35 CSR ApproachCSR GovernanceResponsible corporate behaviour and strong governance increase accountability, minimize risk and build trust – allof which are integral to executing Hudbay’s business strategy, protecting our reputation with our stakeholders andearning the licence to grow.Our Board of Directors has five committees to assist in the management of its duties. The Environmental, Health,Safety and Sustainability (EHSS) Committee provides oversight of the Company’s human rights, environmental,health and safety policies, programs and systems. The Committee meets quarterly to review the Company’sperformance and management of key EHSS risks. It also tracks the effectiveness of Hudbay’s management systemsthrough the external ISO 14001 and OHSAS 18001 certification and TSM performance assessment processes. Day-to-day oversight of Hudbay’s CSR program at each of our operations is the responsibility of management,supported by our Vice President, Corporate Social Responsibility.Hudbay 2017 Annual and CSR Report 36 CSR Management FrameworkHudbay’s Code of Business Conduct and Ethics, Human Rights Policy, Environmental Health and SafetyPolicy and Supplier Code of Conduct and Ethics state our social, environmental and ethical commitments acrossour business, including our supply chain.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)standards. New sites are expected to achieve certification within two years of the start of commercial operations oracquisition by Hudbay. Our Manitoba Business Unit maintained ISO 14001 and OHSAS 18001 throughout the year,and our Peru operation achieved certification in March 2017.We use an integrated company-wide software system to track health, safety and environmental incidents, capturestakeholder engagement activities and commitments, and document corrective actions at all sites.Hudbay 2017 Annual and CSR Report 37 As a member of the Mining Association of Canada (MAC), Hudbay participates in the Towards Sustainable Mining(TSM) program. TSM is based on a set of guiding principles that are supported by protocols and indicators that aimto drive performance and ensure key risks are managed responsibly. These protocols and frameworks areincorporated into our overall management system and company standards. Although we are only required, asmembers, to implement the program at our Canadian operations, we are implementing the program at all of ouroperations. Our Constancia mine in Peru has implemented all six protocols, achieving or exceeding a level A ranking(and “yes” in crisis management and communications planning) for all indicators. In 2017, TSM added a seventhprotocol: Preventing Child and Forced Labour. Verifications of our compliance with this new protocol will beginfor 2018 performance assessments.Results of our annual TSM assessment are available on the MAC website.International Best Practice StandardsTo inform our sustainability programs and improve our performance, we apply the following international bestpractice standards: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. While TSM is a requirement for MACmembers at their 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’seconomic, 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. InPeru, we are a member of the Peruvian Mining Society, which is committed to the EITI process in PeruIFC Performance Standards – the International Finance Corporation (IFC), part of the World Bank Group, is thelargest global development institution focused exclusively on the private sector in developing countries. Hudbayfollows the IFC’s Performance Standards on Environmental and Social Sustainability at our Constancia site inPeruHudbay 2017 Annual and CSR Report 38 Precautionary ApproachOver the life of a mine, Hudbay operates under the precautionary principle: the duty to prevent harm, when it iswithin our power to do so and when harm is scientifically plausible but uncertain. We use baseline environmentaland social impact studies to evaluate how to avoid, mitigate or control potentially significant impacts; weimplement appropriate monitoring and management systems; and we address the need for mine closure. In allcases, we make provisions for public consultation and input.Industry Involvement Hudbay 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 Mining AssociationArizona Small Business AssociationArizona Tax Research AssociationArizona Trail AssociationAsociación Vida Perú (a non-profit organization that donates medical equipment and medicines)Business for Social Responsibility (BSR) (a non-profit business network and consultancy dedicated tosustainability)Cámara de Comercio Canadá PerúCanadian Council for Aboriginal BusinessCanadian Institute of Mining, Metallurgy and Petroleum and relevant societiesSeveral Arizona Chambers of Commerce – Benson San Pedro Valley, Greater Oro Valley, Greater Vail Area, GreenValley/Sahuarita, Marana, 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 CommerceHudbay 2017 Annual and CSR Report 39 Devonshire 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)Flin Flon Chamber of CommerceGrupo 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)International Zinc AssociationManitoba Employers CouncilMetropolitan Pima AllianceMining Association of CanadaMining Association of Manitoba Inc.Mining Foundation of the Southwest (US)Mining Safety Round Table (a collaborative group of safety-committed mining companies that share experiencesand identify best practices)National Mining Association (US)Saskatchewan Mining AssociationSnow Lake Chamber of CommerceSoutheast Arizona Economic Development GroupSoutheastern Arizona Contractors AssociationSouthern Arizona Business CoalitionSouthern Arizona Leadership Council Hudbay 2017 Annual and CSR Report 40 CSR ApproachHuman Rights and SecurityWe recognize our duty to respect the rights of the people who work on our behalf and those who live in thecommunities near our operations. Our Code of Business Conduct and Ethics and Human Rights Policy state oursupport for the principles of the Universal Declaration of Human Rights, and they affirm our respect for humanrights through our business conduct and management practices.We respect the dignity of all people, along with their cultural traditions and values. Our fair labour practices includezero tolerance for forced, compulsory and child labour, and we work to prevent any violations within our sphereof influence.To more closely align our human rights due diligence with the UN Guiding Principles on Business and Human Rights,we are developing guidance on integrating risk assessments and processes for managing human rights, social riskand security risks. At the operational level, these policies and guidance aim to link human rights risk management toour business success.Any concerns about human rights issues within our business can be raised by contacting the Hudbay Board ofDirectors directly via our corporate website, through the third-party ethics hotline or via site grievance mechanisms.In 2017, one human rights issue was raised or reported through our Board, hotline or site grievance mechanisms. Atour Constancia operation in Peru, the treasurer of a rural community close to the mine reported a concern relatedto the treatment of the community’s workforce by a member of Hudbay’s Human Resources department. TheCompany conducted a fair, independent and impartial process to address the complaint and worked with allinvolved parties to resolve the matter.Security PracticesHudbay is committed to respecting the human rights of our neighbouring communities while providing a secureenvironment for our employees and contractors.The operations, projects and exploration sites where we employ security personnel apply the Voluntary Principleson Security and Human Rights (the VPs), which provide a guide for maintaining safety and security within anoperating framework that ensures respect for human rights and fundamental freedoms.Hudbay 2017 Annual and CSR Report 41 Our human rights risk assessments, management of private security and relationships with public security areguided by the VPs as well as the UN Guidelines on Business and Human Rights. As a member of the MiningAssociation of Canada (MAC), our implementation of the VPs will be reported on annually in MAC’s TSM ProgressReport.At Constancia, we conduct ongoing, in-depth training for our security supervisors and contracted security staff,who are unarmed (except for government-mandated armed guards at the explosive storage area). Securitypersonnel receive training based on the UN Code of Conduct for Law Enforcement Officials and the UN BasicPrinciples on the Use of Force and Firearms by Law Enforcement Officials. The VPs are also promoted withsite security personnel and with the local national police and community security teams.Approximately three times a year, we conduct audits of our security policies and practices in Peru against the VPs.The audit results are reported to site and executive leadership, including the Chief Executive Officer.Security personnel work closely with Constancia’s Community Relations team to facilitate open communicationswith the local people and mitigate potential issues. Their efforts helped to safely and peacefully resolve one minorconfrontation involving our negotiations with Chumbivilcas.Because periodic social unrest has affected certain mining projects in southern Peru, Hudbay participates in multi-stakeholder initiatives. We engage with national government officials, local authorities and community leaders toaddress local concerns and issues before they become larger conflicts. Throughout the year, our Constanciasecurity superintendent meets with security managers from neighbouring mines. The security group, known asSEMSUR, discusses best practices, experiences and emerging issues. We have used these meetings as opportunitiesto explain our commitment to, and our experience with implementing, the VPs.At our Rosemont project in Arizona, we have a security superintendent on site and procedures in place inpreparation for entering the construction and operations phases. Through the Rosemont Safety and Security WorkGroup, we engage with local law enforcement and emergency response agencies on project developments, safetyand security incidents, and how to coordinate efforts should an emergency arise. During 2017, the Rosemont teamdeveloped a crisis management manual and held workshops to define responsibilities and test the procedures.Separately, we conducted a security review of our Manitoba facilities and corporate office.Guatemala Civil LawsuitsHudbay is named in three civil lawsuits relating to alleged events prior to 2010 in Guatemala, where the Companyowned a controlling interest in Compañía Guatemalteca de Níquel (CGN). Information about the litigation is postedon our website.Hudbay 2017 Annual and CSR Report 42 CSR ApproachStakeholder EngagementEngaging with our stakeholders in a transparent manner builds our understanding of concerns and opportunities,informs our decision-making and helps us continuously improve. We consider all individuals and groups who havean interest in, may be affected by, or believe they may be affected by our activities and business decisions to be astakeholder. This includes our relationships with all levels of government.Our Stakeholder Engagement Standard and the supporting guidance document detail the requirements andexpectations for strengthening relationships and reducing risks, and our Shareholder Engagement Policypromotes open and sustained dialogue between our Board of Directors and shareholders.We engage with our stakeholder groups in formal and informal settings, depending on the stakeholder and thetopic or concern. We also participate in industry associations and multi-stakeholder initiatives that bringtogether the expertise of many organizations and individuals, so we can collectively work on issues and solutions.2017 Engagement Activities and TopicsThe following table lists key stakeholders and how we engaged with them in 2017:Stakeholder groupHow we engaged in 2017Priorities and concernsShareholders, investors andanalystsConferences (14 events)Investor meetings andconference calls (more than450 events)Annual Meeting ofShareholdersInvestor perception surveyUpcoming Reed and 777 mine closuresRosemont permitting Hudbay 2017 Annual and CSR Report 43 Stakeholder groupHow we engaged in 2017Priorities and concernsEmployees and contractorsQuarterly CEO emailmessagesSenior management sitevisits“Town hall” meetingsOrientation and trainingprogramsAboriginal cultural awarenessworkshopsOne-on-one and small groupmanager/staff meetingsVideo messagesHealth and wellnesscommittees and activitiesHudbay IntranetHealth and safetyWork processesBusiness performanceUnderstanding of compensation and benefitsOpportunities for personal developmentEnvironmental requirementsTraining for policies, permits or otherrequirementsUnionsMeetings with union leaderson outstanding issuesFormal grievance processesJoint health and safetycommitteesMobilitySeniorityOutstanding grievancesLocal communities andAboriginal/NativeAmerican/indigenous groupsCommunity information andconsultationmeetings/dialogue tablesCommunity partnershipsSite tours and open housesSite grievance/communityresponse processesCommunity relations officesCultural awarenessworkshops and other trainingDevelopment project updatesCommunity and area activities andinvestmentSafety and environmental concernsLand useWater use and qualityLocal employment and procurementTraining programs for community membersCultural protection, awareness anddisseminationEducating employees on interculturalcompetency, conflict resolution, humanrights, and anti-racismCustomersDirect contactIndustry and business forumsAchieving agreed terms of delivery forproductsProvision of information on product safetyand product originCompliance with environmentally and sociallyresponsible performance and riskmanagementHudbay 2017 Annual and CSR Report 44 CSR ApproachMaterialityIn 2017, we carried out a review of our priorities in relation to what we are hearing from our key stakeholdergroups. The conclusion was that there is no significant change to our current materiality model. The reviewevaluated the environment, health, safety and community (EHSC) issues that are most significant to Hudbay interms of business impact and degree of stakeholder interest.Materiality MatrixDuring the 2014 materiality assessment, 11 priority issues were identified. Click on each issue in the diagram belowto learn how we are managing it and how we performed in 2017.Hudbay 2017 Annual and CSR Report 45 This table indicates how our priority issues align with the Global Reporting Initiative (GRI) G4 aspects reported inour GRI index:Priority issueGRI (G4) aspectsEthicsEthics and integrityAnti-corruptionHuman rightsSecurity practicesHuman rights grievance mechanismsStakeholder 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 2017 Annual and CSR Report 46 BoundariesWe conducted the materiality review 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. Based on stakeholderexpectations and business risk, the following exceptions were deemed appropriate:Safety statistics are tracked and reported for all contractor activities under Hudbay contracts and supervision;Environmental incidents related to transportation between Hudbay locations and local supplier activities aregenerally tracked, reviewed and reported by Hudbay;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.Exploration sites have special considerations in our reporting:Sites for which we do not maintain managerial control are excluded;Corporate exploration with managerial control over the site is included and reported individually; andBusiness unit exploration with managerial control over the site is included and embedded in the business unitnumbers.Hudbay 2017 Annual and CSR Report 47 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 from which theyare shipped (in Manitoba at the plant gate, and in Peru at the port loading facility).Suppliers are often viewed by stakeholders as an extension of our business. Any unethical, unlawful or irresponsibleacts and behaviours by them can exert a high cost on Hudbay’s reputation and ability to sustain and grow thebusiness. Our internal audit process includes supplier due diligence, and to further address these risks, in 2017 weadopted a Supplier Code of Conduct and Ethics, which states the minimum standards of conduct expected byour suppliers. These include:Reading, accepting and complying with the Supplier Code of Conduct and all applicable policies;Complying with all applicable laws, rules and regulations;Conducting business honestly, ethically and in accordance with social codes;Complying with anti-corruption laws and informing Hudbay of any conflicts of interest;Protecting confidential information;Respecting human rights and observing Hudbay’s Human Rights Policy;Establishing practices and procedures that protect the health and safety of workers and the environment;Accepting Hudbay’s supplier due diligence process; andReporting suspected violations of the Supplier Code of Conduct and applicable compliance policies by anysupplier or Hudbay personnel.Hudbay 2017 Annual and CSR Report 48 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, who provide operating and maintenance supplies, energy and fuels, and capitalgoods:In Peru, our top 50 suppliers accounted for 84% of our spending, and 95% of our spending was with suppliers basedin Peru.In Manitoba, our supplier base relates to production operations and capital projects. Our top 50 suppliersrepresented 58% of our spending in 2016, and 90.6% of spending was with suppliers in Canada. These suppliersprovided goods and services such as engineering services, electricity, spare parts for equipment, underground haultrucks and other capital equipment.Hudbay’s top 10 suppliers in 2017, representing 38% of procured value, were (in alphabetical order):ProductsThe two main products we produce are copper and zinc. Copper is essential for today’s society. It is a vitalcomponent in electronics and electrical transmission. In health care, new applications for copper are beingidentified due to its ability to kill bacteria. Zinc is vital to the endurance of metals in manufacturing. Both metals areimportant to the renewable energy industry.Our copper concentrate and zinc metal are produced at operations in Canada and Peru:Hudbay sold 58% of its copper concentrate to traders and smelters that delivered to customers in Asia (includingIndia) and 42% to traders and smelters in the Americas and Europe. From there, several stages of smelting andrefining the copper content ultimately result in 99.99% pure copper, the building block for many of life’sessentials.We ship cast zinc metal produced at our Flin Flon zinc plant by rail and truck to industrial customers throughoutNorth America (primarily to galvanizers who use it to protect steel from corrosion).Auramet International LLCManitoba HydroCN (CAD)Moly-Cop Adesur S.A.Corporacion Primax S.A.Servosa Cargo S.A.C.Enel Generacion Peru S.A.A.Stracon GYM S.A.Ferreyros Sociedad AnonimaZamine Services Peru S.A.C.Hudbay 2017 Annual and CSR Report 49 The safety data sheets (SDS) that accompany copper and zinc products provide details of their composition,toxicology, handling, storage and exposure issues. We further meet our product stewardship commitments bycollaborating with governments and industry associations, including the International Zinc Association and theEuropean Copper Institute, to guide our compliance with international requirements such as those provided by theInternational Maritime Organization (IMO).The IMO specifies hazard classification criteria for bulk cargoes, and the International Convention for thePrevention of Pollution from Ships (MARPOL) imposes restrictions on the disposal of bulk cargo residues classifiedas “harmful to the marine environment” (HME) under the amended Annex V of the MARPOL convention. Hudbayengaged the European Copper Institute (ECI) to determine the MARPOL classification for Constancia’s copperconcentrates. From this study and others, all Hudbay copper concentrates have been determined to not be HME.Hudbay 2017 Annual and CSR Report 50 CSR ApproachUN Sustainable Development GoalsHudbay recognizes the opportunity the mining industry has to contribute to the UN Sustainable DevelopmentGoals (SDGs). There are a number of SDGs for which we consider the industry a natural fit for taking on a leadershiprole (for example, SDG 8: Decent work and economic growth), and others where – in aligning with the priorities ofour local communities – we feel our company can play a supporting role alongside government. Taking this intoconsideration, the following table outlines the most relevant SDGs to our business and where the topics arediscussed in this report.Sustainable Development GoalsLink to topicBusiness and Financial Review Our People Social Impact > Our ApproachLocal Hiring and ProcurementSocial Impact > PeruStrengthening and Diversifying Local CommunitiesCSR Approach > CSR GovernanceInternational Best Practice StandardsIndustry InvolvementHudbay 2017 Annual and CSR Report 51 Sustainable Development GoalsLink to topicOur People > Our ApproachEmployment Equity Achievement AwardKey Performance Data Table (Employees)Workforce DiversityEnvironment > Our ApproachWaterResponsible Supply ChainSupply Chain PerformanceProductsEnvironmentWorking Toward No Net Loss of BiodiversityEnvironment > Our ApproachLand and BiodiversityClosure and ReclamationEnvironment > ManitobaProtecting SpeciesEnvironment > PeruPlanning for No Net Loss of BiodiversityKey Performance Data Table (Environment)Land UseSites Requiring Biodiversity Management PlansHabitats Protected or RestoredIUCN Red List SpeciesCSR Approach > Human Rights and SecuritySecurity PracticesHudbay 2017 Annual and CSR Report 52 Sustainable Development GoalsLink to topicRecognizing that the SDGs represent national-level governmental commitments, we will continue to work to designour activities with relevant goals and to help connect national processes to local needs as represented in SDG 17.Our PeopleEffective Systems and Strong Culture Translate to ExcellentPerformanceOur People > Our ApproachHealth and SafetyEnvironmentTotal Greenhouse Gas Emissions ChartEnvironment > Our ApproachEnergy Use and Greenhouse GasHudbay 2017 Annual and CSR Report 53 OurPeopleBy working safely, ethically and responsibly, the people who work for Hudbay have been instrumental increating opportunities and positioning the Company for growth.Total Recordable InjuryFrequency(lost time accidents per 200,000hours worked)Total Recordable InjurySeverity(days lost per 200,000 hoursworked)11%Aboriginal employmentin Manitoba59.4%of full-time employeesrepresented by tradeunions18.2%overall femaleemploymentHudbay 2017 Annual and CSR Report 54 From the very beginning, throughout its construction and since entering commercial production in 2015, ourConstancia operation has believed that “Producción Segura y Responsible”(safe and responsible production) ismore than just a saying – it is the way we work.In 2017, Hudbay Peru recorded one lost time accident, with injury frequency and severity rates well below its targetfor the year.Contributing to the site’s excellent safety performance is a comprehensive occupational health and safety programthat focuses on five objectives:Prevent fatalities by identifying the critical tasks and controls that must be in place before a task is completed,and by conducting the Visible Felt Leadership program with directors, managers and superintendents.Comply with legal and regulatory requirements through monthly inspections and audits, monthly meetings withleaders to monitor compliance, and daily communications with work teams.Prevent occupational diseases by reducing hazardous exposures and managing other workplace health risks.Manage contractor health and safety by implementing our Occupational Health and Safety Management Manualfor Contractors and ensuring compliance with the manual’s requirements through field monitoring, validationsand monthly meetings with contractor managers.Implement action plans to correct any non-conformances with our fatality prevention programs or ouroccupational health and safety management system.To further strengthen a culture of safety, the site holds “Formando Cultura” (creating culture) meetings withemployees and contractors on the first and last Saturday of each month.Effective Systems and StrongCulture Translate to ExcellentPerformanceHudbay 2017 Annual and CSR Report 55 In 2017, Hudbay reached agreements on three-year contracts with six unions representing 78% of employees inManitoba, and with the one union representing 36% of employees in Peru.In Manitoba, all seven agreements were reached without labour action – a welcome outcome for all partiesinvolved in the negotiations. With Reed closing in 2018 and 777 set to close in 2020, management and unionrepresentatives worked together to discuss challenges and find solutions, such as reducing the number ofcontractors to increase opportunities for employees affected by the mine closures. In addition, we strengthenedour resolve to address outstanding grievances, reducing two years of binding arbitration down to one.“I want to thank the union leaders for their good-faith negotiations, and for sharing Hudbay’s long-term view and acommitment to our future success,” said President and Chief Executive Officer Alan Hair. “These agreementsprovide stability for the Company, and they will ultimately benefit hundreds of our hard-working employees.”At Constancia, we reached an agreement with the Unified Workers Union of Constancia Hudbay (SUTRAMICOH).This was our second collective agreement, but it was especially notable because three-year terms in Peru areunusual. The respectful, collaborative negotiation reflected a shared commitment to Hudbay’s values and a desireto build a more productive, positive relationship between the Company and the union.Working Together to Build aSuccessful FutureHudbay 2017 Annual and CSR Report 56 Our PeopleOur ApproachHudbay’s employees are the key to our success. Through their experience, energy and dedication, and theirembodiment of our values, they enable us to grow and develop our business. Our commitment to the people whowork on our behalf is to provide a safe, healthy work environment and the opportunity for each employee to thriveas a member of our team.Health and SafetyWe make it a priority to always protect the health and safety of our employees and contractors, and the peoplewho live near our operations. Building a culture dedicated to zero harm begins with ensuring everyone who works at our sites has the necessaryknowledge, skills and equipment needed to work safely, and having leaders who empower their teams andencourage them to speak up.Our Environmental Health and Safety Policy states we will manage risks in a manner that provides a safe, healthyworkplace. Within two years of reaching commercial production, all operations are required to be certified toOHSAS 18001, an internationally accepted standard for occupational health and safety management systems. Weapply the Towards Sustainable Mining (TSM) Safety and Health assessment protocol of the Mining Association ofCanada, which we also use to assess and measure our performance. Regular monitoring, self-assessments and tri-annual third-party audits ensure operations remain in compliance with these standards and protocols throughoutthe life of the operation.Our safety programs provide specifically structured training for the activities undertaken, whether at an operation,exploration site, office location, or for visitors to the mine site. Emergency response teams receive specializedtraining that prepares them to mobilize quickly during an event at a mine site.While no workplace fatalities have occurred at any of our operations, projects or exploration sites in recent years,our focus on fatality prevention remains steadfast. Through critical risk and critical control (CRCC) managementplans, our operations identify top fatality risks and the key controls for managing them.Hudbay 2017 Annual and CSR Report 57 We record, investigate and analyze incidents and conformance to our standards using an integrated softwaresystem. Significant incidents, based on criteria set by the Board, are reported to our Board quarterly. Incidents thatcould have resulted in a fatality are identified in our systems and require more in-depth investigations andcorrective actions.Our efforts to continuously improve our safety and health performance are supported by: the Visible FeltLeadership program, where leaders engage with employees and take accountability for their teams’ safety; ourhigh-potential incident investigation process; and our occupational health programs, which monitor exposures tohealth risks such as hearing loss and illnesses caused by airborne agents. As an active member of the Mining SafetyRound Table, we engage with other mining companies to share lessons learned and best practices, with the aim ofraising the safety performance of the entire industry.Employee RelationsWe are dedicated to making Hudbay an employer of choice.Our Code of Conduct states our commitment to fostering a work environment that treats all individuals withdignity and respect and one that does not discriminate or tolerate harassment or violence. We are an equalopportunity employer, and we offer competitive pay and benefits at all our operating sites and locations. Withmore than three-quarters of our workforce (approximately 1,300 employees) represented by a union, we work toconstructively engage with the eight unions that represent our employees, and to partner with them on solutionsthat create mutual benefit.Fostering a diverse, inclusive workplace is another important and growing focus. Our mine sites aim to hire aworkforce that mirrors the community in which they operate, and we are committed to increasing opportunities forwomen. We support the Catalyst Accord 2022 and the 30% Club, both of which call for the advancement of womenin business. Female representation on our Board of Directors has achieved the 30% or higher target, and we areworking to increase the percentage of women in management. In 2017, Hudbay received the Government ofCanada’s 2017 Employment Equity Achievement Award in recognition of our efforts to achieve employment equityin the workplace.We use numerous channels and tools to engage employees and keep them informed about important businessmatters. These include town hall meetings, internal emails from senior leaders, and an internal intranet withemployee-focused news and updates.With a large number of employees eligible for retirement, especially in our Manitoba Business Unit, our retirementreadiness programs provide information and tools that prepare employees for success once they leave theworkforce.Hudbay 2017 Annual and CSR Report 58 Organizational DevelopmentAt the beginning of the year, we launched a company-wide strategic approach to develop clear, effectiveorganizational systems and structures that will support our successful growth. This comprehensive system,which forms the foundation of our OneHudbay culture, will support our talent development efforts by aligningpeople with the roles that best suit their abilities, talents and interests. In addition, the project will better measureour effectiveness and define accountabilities so that everyone can contribute to growing and developing thebusiness.During the year, we made progress on some important components of this approach. We completed organizationaldesign work and talent reviews at the corporate office and at the Manitoba and Peru business units. We developeda more comprehensive process for talent development and succession planning. Other elements include a revisedperformance management and measurement system and a managerial coaching program.In addition to hiring a Vice President of Organizational Effectiveness to advance the project, we hired a VicePresident of Exploration and a Vice President of Technical Services to support the growth strategy, optimize ourportfolio and develop our project pipeline.Hudbay 2017 Annual and CSR Report 59 Our PeopleManitobaOur Manitoba Business Unit employs nearly 80% of our total employee population. With the Reed mine closing in2018, the 777 operation nearing the end of its mine life and the Lalor mine ramping up production, the workforcenumbers continued to adjust to the business unit’s changing production profile. At year-end, Reed and 777employed 344 people, and Lalor employed 277, up 5% and 12%, respectively, compared to 2016, reflecting theshift taking place at our operations.To better match our workforce to the diversity of the region, in 2017 we adjusted our hiring practices to increaseopportunities for Aboriginal people and for women. 14% of our employees in Manitoba identify as Aboriginal and15% are women.Working Together on SolutionsAt the end of 2017, we marked the 90th anniversary of Hudbay’s founding. Meanwhile, we faced uncertainties asthe Reed and 777 mines approach closure. To keep everyone informed about changes in the organization, wedeveloped a video series featuring updates from business unit leader André Lauzon, who was joined by othercompany leaders at points, including CEO Alan Hair. The videos were followed by a live presentation from siteleaders, and an opportunity that enabled employees to ask questions and contribute to solutions.The videos, which were shown at the beginning of each shift, articulated the strategic plan, and the changesneeded to keep the Flin Flon zinc plant open and prevent hundreds of job losses. Each video discussed progressagainst the three pillars of the plan – increase ore output at Lalor, expand processing at Lalor’s Stall mill, and reduceoperating costs from the zinc plant and powerhouse. The consistent, transparent messaging and the opportunitiesfor feedback and input about the plan were key to achieving employee support and reaching new workforceagreements with the seven unions that represent Hudbay employees in Manitoba. Additional videos and face-to-face sessions are planned as we explore all options to sustain our presence in Flin Flon.Strengthening the Safety CultureOutreach to employees is always an opportunity to reinforce the importance of working together to create astrong safety culture.Hudbay 2017 Annual and CSR Report 60 During the year, we focused on driving further improvements in safety performance. We took an honest look at ourenforcement of safety procedures and rules, and we found instances where we could be much more consistent. Forexample, we have a requirement that workers be clean shaven to ensure equipment, such as respirators, worksproperly, but this was not being enforced consistently. We launched an initiative to help supervisors become morecomfortable communicating and enforcing the rules with their teams, and to do so in a manner that treatseveryone with respect.Other activities during the year included a new contractor safety management program to ensure effectivecontrols, processes and systems are in place and are implemented throughout the lifecycle of the contractor. Ourannual training program transitioned to an online format, with an in-depth course for contractors and employeesand a separate abbreviated course for visitors. We also launched an initiative around proper risk assessments andstopping work and implementing safer procedures when issues are identified.Our updated drug and alcohol policy now includes testing for reasonable cause post-incident, if necessary, andduring the year we rolled out the revised policy across the business unit.Preparing for ChangesA key pillar of the strategic plan to potentially extend the life of the zinc plant is streamlining the organization tosupport a lower cost structure. Because the mine closures will inevitably result in a smaller workforce, wecommenced an initiative to identify opportunities to place those affected by eliminating most contractors by thetime 777 closes in 2020.With the Reed mine as the first to close, we worked with affected employees to identify options at both the 777and Lalor operations.We stepped up our recruiting and training efforts to address the growing number of employees eligible forretirement, to ensure that we have the right people with the right skills in place as we execute our strategic planfor the region.At the 2017 Manitoba Provincial Mine Rescue Competition, Hudbay’s FlinFlon team won the competition, and Snow Lake finished second. The minerescue competition tested five teams on a variety of mental and physicalemergency and rescue skills. Participants took a written test and wereevaluated on emergency response plans and the competencies of responsepersonnel.Hudbay 2017 Annual and CSR Report 61 Our PeoplePeruThe Constancia mine is located in a remote part of southern Peru. Because many of the operating and supportpersonnel live some distance away, most of them work eight- or 14-day shifts, staying at the Company’s Constanciaaccommodation camp during their rotation. The camp amenities include a dining hall, a medical centre andrecreational facilities. The Peru Business Unit also includes staff at our Lima office.At the end of 2017, the Peru Business Unit had 748 employees, including 444 term employees (defined as thosewith contracts that end on a specific date). Of our full-time employees, 100% are from Peru, 82 employees are fromthe local communities and 16% are women. Nearly all (430) of the term employees are from the local communities.Promoting Safety and HealthOur Peru Business Unit’s safety performance in 2017 was very strong, with no lost time accidents (LTA) at theConstancia mine site and only one in the Lima office. The one recorded event at the office served as a crucialreminder of the potential safety hazards that exist in all environments.Safety campaigns – including Stop, Think and Act Safe, Eyes and Minds on Task, and How Do You Drive? – werelaunched to emphasize the importance of staying alert and concentrating on the task at hand to reduce andeliminate injuries. In July, the site inaugurated a new medical clinic that delivers triage, first aid, pharmacy and othermedical services to those working at the mine.Employees and contractors completed more than 36,000 hours of health and safety induction training and nearly112,700 hours toward the annual occupational health and safety training requirement. We conducted more than9,600 medical examinations to ensure that personnel were fit for duty.Sharing a Vision for the FutureAfter a group of employees at Constancia formed a labour union, we signed an initial one-year collective agreementwith the union in early 2017. In the second half of 2017, we began a collaborative negotiation process with theunion, which resulted in a three-year collective bargaining agreement that covers approximately270 employees.Hudbay 2017 Annual and CSR Report 62 Somos HudbayIn mid-2017, the team in Peru launched Somos Hudbay (“We Are Hudbay”), an internal magazine featuring the latestachievements, information and progress in our Peru Business Unit. Each edition publishes interviews with siteleadership and employees, updates about new services and benefits, highlights from company events and photosof community activities.We engaged with employees and provided updates on the business at town halls. During 2017, we held a meetingwith them after every earnings report. In addition to discussing the update from the business unit’s perspective,the town halls served as an opportunity to communicate near-term priorities and emphasize company values, suchas the importance of conducting work in a safe, responsible manner.Hudbay 2017 Annual and CSR Report 63 Our PeopleArizonaAt the end of 2017, we had 35 employees in our Arizona Business Unit, and we re-established the core team forproject delivery after receiving the Record of Decision from the US Forest Service. With the final permit tocommence construction still outstanding, our Arizona Human Resources team focused on employee retention andengagement programs, including community fundraisers and wellness events such as fitness walks.When construction begins, we plan to hire as many workers as possible from within the local communities, and wewill engage with the local business community about our efforts. According to an economic study conducted byArizona State University, in addition to the approximately 400 direct jobs during operations, Rosemont willstimulate another 1,700 indirect jobs, resulting in total personal income generation of $3.3 billion over the life ofthe mine.No lost time accidents occurred during 2017, although a wildfire that swept through the site in April broughtincreased attention to the site’s exposure to wildfire risks. Afterwards, we developed a wildfire protection andprevention guidance document, which requires biannual audits of the property, structures and utilities to ensuresurvivable space around those structures, and includes an assessment by the local fire department. During the year,we discussed site design and planning with the US Mine Safety and Health Administration (MSHA).Hudbay 2017 Annual and CSR Report 64 SocialImpactFor 90 years, Hudbay has worked toward the goal of translating responsible mining into positivelyimpacting people’s lives, local communities and broader regional economies. Our experience in buildingstrong relationships and making a valuable contribution wherever we do business guides us as weexpand our presence in the Americas.Community Investmentsand Charitable Donations($ millions)$221.5million paid in employeewages and benefits51%increase in communityinvestments20 public hearings, 450public comment days and43,000 comments to dateincluded in thepermitting process forthe proposed RosemontmineHudbay 2017 Annual and CSR Report 65 Hudbay was founded in 1927 when mining began on the Flin Flon ore body. Since then, Hudbay has been theprimary industry for what are now the communities of Flin Flon and Creighton, with the current operations – Reedand 777 – producing on average 25,000 tonnes of copper and 51,000 tonnes of zinc annually.With Reed closing in 2018 and 777 by 2020, we are consulting with the local communities to help them prosperafterwards. We intend to conduct the closures in a way that protects the environment, and preserves opportunitiesto use the mineral processing infrastructure for possible future mines.As we explore all options to maximize our existing assets in Flin Flon – including processing ore from Lalor at theFlin Flon Concentrator as Lalor ramps up production – we are supporting efforts to diversify the local economies. In2016, we engaged a community-planning expert who held workshops in 2016 and 2017 with the communities toidentify opportunities for jobs and sustained economic growth. We are working closely with the mayors andmunicipal administrators of Flin Flon, Creighton and Denare Beach to assist with the social and economic transitionand encourage economic diversification.Addressing the Economic andSocial Impact of Mine ClosuresHudbay 2017 Annual and CSR Report 66 The Pampacancha satellite deposit near our Constancia mine in Peru was identified in May 2008, with exploratorydrilling started later that year. Negotiations with the Chilloroya community to secure surface rights over the depositstarted in 2017.We worked to take a constructive and collaborative approach, and we were able to receive permission to access theland and conduct early-works activities. Negotiations were ongoing as of early 2018. However, we have beenencouraged with the progress so far, and we are confident that by working together with the communities, we willreach an agreement that supports the goals and objectives of both the community and Hudbay.Engaging Stakeholders on MineExpansionHudbay 2017 Annual and CSR Report 67 Social ImpactOur ApproachAlong with providing the minerals and metals that are essential to everyday life, we work to build meaningfulrelationships with communities and other stakeholders and to maximize our positive impact on local development.Economic ContributionsWe contribute to the regions and communities where we operate through the jobs we provide, the goods andservices we procure from local businesses, and the taxes and royalties we pay to governments. In somecommunities, we make contributions related to land use and other co-operation agreements, and we invest intraining, infrastructure and the development of sustainable economies and livelihoods.Our Code of Business Conduct and Ethics and Statement on Anti-corruption require that all payments togovernments comply with the laws of the jurisdictions in which we operate, including the Corruption of ForeignPublic Officials Act in Canada and the Foreign Corrupt Practices Act in the US. We support the Extractive IndustriesTransparency Initiative (EITI), a global standard that enhances revenue transparency and accountability in theextractive sector. As a member of the Peruvian Mining Society, we support the EITI process in Peru, where thegovernment has implemented significant aspects of the EITI requirements and is fulfilling the broader objectives.In 2015, the Canadian government enacted the Extractive Sector Transparency Measures Act (ESTMA), which aims toincrease revenue transparency and deter corruption in the resource exploration and extractive sector. Inaccordance with the Act, in May 2017 we filed our first ESTMA report, which details our government payments forthe 2016 fiscal year.Community RelationsBy proactively understanding and responding to community members’ views, we strive to build relationships basedon trust so that together we can grow and thrive.We invest in programs, infrastructure and socio-economic development initiatives that build resiliency and advancesustainable livelihoods. This helps communities avoid dependency on the mine during operations and after closure.Hudbay 2017 Annual and CSR Report 68 Our Stakeholder Engagement Standard details the processes and requirements for strengthening relationshipsthroughout the life of the mine. Each exploration site, development project and operation must identify relevantstakeholders, conduct an analysis, and create a stakeholder engagement plan that establishes mutually acceptableprocesses with key stakeholders. Through our community response mechanisms, which are accessible to all localstakeholders, we record complaints and grievances, investigate such matters, and endeavour to provide timelyresolutions and remedies, as appropriate.Our integrated software system supports recording and monitoring engagement activities, stakeholdercommitments, community investments and action plans.Indigenous EngagementWe work to respect the cultures and heritage of all communities near our locations of operation, and to ensure werecognize the special rights and circumstances of indigenous peoples.We engage as appropriate on cultural resource mitigation measures, such as archaeological monitoring plans andcultural resource preservation plans, to identify and protect any cultural artifacts found. We conduct culturalheritage and awareness training for employees, contractors and community members.As a member of the Mining Association of Canada (MAC), we apply the Towards Sustainable Mining (TSM)Aboriginal and Community Outreach assessment protocol, which we use to assess and measure our performance.The protocol seeks to ensure we engage communities of interest, including Aboriginal groups, in meaningfuldialogue and decision-making.Local Hiring and ProcurementLocal employment and sourcing are often identified as a high priority for stakeholders, and they benefit theCompany as well. Jobs and opportunities for local businesses generate significant economic benefits and createstronger relationships with the communities near our operations.Our Local Procurement and Employment (LP&E) Standard requires each site to identify opportunities for localhiring and sourcing of goods and services. LP&E provisions are included in community agreements that aredeveloped in collaboration with local representatives. Ongoing engagement ensures these opportunities align withstakeholder expectations.Building the local talent pool also involves skills development programs conducted by Hudbay and throughpartnerships with universities, technical institutes and other organizations. We support programs that help diversifythe local economy via training and capacity development for other livelihoods that are suitable for the community.Community DevelopmentOur goal is to serve as a catalyst for sustainable social and economic development in the communities near ouroperations.We support programs and invest in infrastructure and development initiatives that build capacity and ensuresustainable livelihoods, improve the quality of the natural environment, and contribute to social cohesion andcommunity spirit.Hudbay 2017 Annual and CSR Report 69 Understanding the social and economic priorities of each community begins as soon as we enter a region. As well aslocal employment and business opportunities with the mine, we support and collaborate with the communities oncommunity development initiatives. In some jurisdictions, we have formal community agreements that detail ourcommitments. For example, in Peru the land use agreements with the Uchucarco and Chilloroya communities stateour commitment to invest in health, education and social development. Multi-sectorial committees, which includeHudbay and local representatives, approve and oversee the carrying out of the projects specified in theagreements. Most of these initiatives include engagement with higher levels of government and other partners tomake them more sustainable.Our Community Giving and Investment Standard outlines the required process for voluntary support, contributionsand investments in local communities. It emphasizes community involvement, mutual benefit, partnerships,sustainability and capacity development.Resettlement and Land UseWhenever possible, we seek to avoid resettlement. Due to the nature of locations where ore bodies are found,when resettlement is unavoidable we follow a process that adheres to international standards, including IFCPerformance Standard 5. This ensures that affected people are engaged, adverse impacts are minimized, and thelivelihoods and living conditions of those displaced are improved or restored.When resettlement of 36 families was required at our Constancia mine in Peru, we acquired resettlement land thatsupported their ranching livelihood, built reservoirs and other critical public infrastructure and offered improvedhousing. Final agreements were negotiated directly with each household to ensure we followed a fair andtransparent process.Hudbay 2017 Annual and CSR Report 70 Social ImpactManitobaIn Manitoba, the Reed mine is scheduled for closure in 2018, the 777 mine is approaching the end of its mine life,and the Lalor mine near Snow Lake is expanding. Planning for both growth and closure requires extensiveengagement with the communities and other stakeholders affected by our activities.Engaging on ClosureIn April, we provided greater clarity about the expected closure date of the 777 mine, confirming that operationswould continue through late 2020. To support the Flin Flon/Creighton region of northern Manitoba andSaskatchewan, we discussed closure plan options with the communities and are supporting their efforts toidentify economic diversification opportunities.Working Together on GrowthWith growth in our Manitoba region shifting to the Lalor mine and exploration activities near Snow Lake, wecontinued to consult actively with community stakeholders. During the year, we began trucking ore from SnowLake to Flin Flon. Discussion topics included road maintenance and other potential impacts, such as environmentalspills and accidents, from the increased road traffic. We met with the mayor and town council on numerousoccasions to review other key topics, including the annual grant in lieu (GIL) of taxes, and financing opportunitiesfor critical infrastructure upgrades.The added mining activity has brought a welcome economic boost to the Snow Lake area. At the same time,community members have expressed concerns over how the growing operation will impact town amenities andinfrastructure. One issue discussed with community members is the plan for the camp, given the increasedproduction at Lalor and their concerns about parts of the camp transitioning from a temporary to a morepermanent status.A notable community project during 2017 was restructuring the rental requirements for an apartment complexowned by Hudbay, to make it more affordable for seniors and enable it to serve as a retirement complex well intothe future.Aboriginal RelationsOur operations in Manitoba are located near the Opaskwayak Cree Nation, Mosakahiken Cree Nation and MathiasColomb Cree Nation Aboriginal communities in Manitoba, and the Pelican Narrows, Deschambault Lake and SandyLake communities from the Peter Ballantyne Cree Nation in Saskatchewan.Hudbay 2017 Annual and CSR Report 71 Hudbay Manitoba’s Aboriginal Liaison Officer (ALO) works to build mutual understanding and positive relationshipsbetween Hudbay and the First Nations communities. The ALO helps bridge cultural gaps through meetings and jobfairs, support for indigenous community activities, mine tours and events; cultural awareness training foremployees; and conflict resolution. All Manitoba operations have stakeholder engagement plans, and the ALOensures that those plans are carried out. During the year, we expanded our approach through the development of anew Aboriginal engagement strategy that applies to all exploration projects in the region.Along with providing employment opportunities, we work to support Aboriginal businesses. We hosted a series ofeconomic development workshops with First Nations communities that explained our procurement procedures andavailable opportunities, and advised them on how to participate in the bidding process. In 2017, payments tosuppliers in northern Manitoba and northwest Saskatchewan totalled over $42 million, of which approximately$840,000 was awarded to Aboriginal businesses.We held and participated in a number of events throughout the year to continue building cultural awareness andmutual understanding. On National Indigenous Peoples Day, employee volunteers provided support for the FlinFlon Aboriginal Friendship Centre celebration. Some employees expanded their knowledge about seeking mino-pimatisiwin – an Aboriginal approach to wellness – by participating in a sweatlodge ceremony. The participation inthese and other cultural events addresses Call to Action No. 92 under the Truth and Reconciliation Commission’scall for businesses to play a role in reconciliation.For the fourth year in a row, we completed the questionnaire for the Canadian Council of Aboriginal Business’s(CCAB) Progressive Aboriginal Relations (PAR) program and maintained our bronze certification level. The PARprogram verifies and benchmarks corporate performance in Aboriginal relations in Canada in four key areas:employment, business development, community investment and community engagement.Hudbay is an ongoing supporter of Indspire, an indigenous-led charitable organization that invests in education forindigenous people. Our annual contribution to Indspire has provided scholarships to 14 indigenous students fromOntario and Manitoba. At the 2017 Indspire Awards, which celebrate the achievements of indigenous Canadians,Jerry Asp was recognized for his success in business and commerce. He is a former Chief in the Tahltan Nation inBritish Columbia and a co-founder of Global Indigenous Trust, an organization that empowers and transformsAboriginal communities. Hudbay has been a long-time supporter of the Trust.2017 PerformanceWe invested $287,500 to support a wide range of community programs. Major contributions (above $10,000)during the year included:$25,000 toward university and college scholarships for Aboriginal youth in northern Manitoba$105,000 toward the Flin Flon and District Assessment and Referral Service, which provides employmentcounselling services$23,000 to the Flin Flon Junior Bombers, the town’s junior ice hockey teamThere were a total of 107 complaints registered in 2017, of which 101 were union labour grievances.  Labourgrievances related to collective agreements are managed through separate processes from community grievances.Starting with our 2017 report, we are including these grievances in our reporting.Hudbay 2017 Annual and CSR Report 72 Social ImpactPeruAt our Constancia operation in Peru, our commitment to transparency, open communications, ongoing andfrequent engagement, and addressing concerns in a timely, respectful manner has resulted in strong relationshipswith local stakeholders – including peasant communities – and it has helped us grow our business through newland agreements.We have offices open to the public in the two communities in our direct area of influence, and we conduct frequentengagement with the communities and authorities along the 449-kilometre concentrate transportation routebetween the mine and the port.Strengthening and Diversifying Local CommunitiesDuring the year, we signed two significant community investment agreements. At Chamaca, a district in theChumbivilcas region, we will invest more than $1 million in sustainable development projects that range fromforestation to livestock and dairy production. The agreement establishes a development committee to monitor andevaluate the investments and oversee project funding.We partnered with the Regional Education Directorate of Cusco (DREC) and Northern College in Timmins, Ontario,to conduct an analysis to establish educational priorities, which will inform a proposal for presentation to theInternational Cooperation Agencies in Canada.As part of ongoing efforts to support economic diversification, we joined the mayor of Chamaca for theinauguration of the community’s first liquid nitrogen plant. The facility will strengthen the livelihoods of agrarianproducers in Chamaca and the surrounding areas by increasing their meat and dairy production.We support the Global Indigenous Trust – an organization based in Toronto – and its efforts to build cross-countryrelationships such as learning exchanges between indigenous leaders in Canada and Peru. During the year, wecontinued to work with the Trust on its programs in Chumbivilcas, near Constancia.Hudbay 2017 Annual and CSR Report 73 2017 PerformanceOur total payments to local suppliers were $16.7 million, and we invested more than $5.9 million to support a widerange of community programs. Major contributions during the year included:In response to the catastrophic flooding that hit Peru during the 2017 rainy season, killing 100 people andcausing more than $3 billion in damage, we donated $200,000, delivered two tonnes of humanitarian aid, andtogether with other sector companies delivered 30,000 rations of donated food.Together with the Provincial Municipality of Chumbivilcas, we delivered 120 tons of medical equipment, suppliesand medicine to 35 health care facilities around the province. This delivery was part of a larger program thatsupports construction of new hospitals and health care facilities.We committed more than $135,000 and delivered 80 female alpacas to the Municipal District of Condoroma.We partnered with Wheaton Precious Metals to develop a $1.7 million project to improve the quality of localmilk production. Launched in August 2017, the project aims to enhance income-generation opportunities forfour communities.To expand the agricultural boundaries in the districts of Velille and Chamaca, we donated tractors.We also executed several community development projects in Livitaca, including the construction of track andtrails in the district capital and a sanitation project in the community of Huaylla Huaylla.There were four complaints registered in 2017. While no serious community incidents occurred during the year, dueto complaints from Chilloroya community members, we suspended mining at the Cerro Negro quarry and usedinstead the Tajo 2 quarry located near the Constancia pit. In December, community members from the CoporaqueDistrict protested against Hudbay, expressing concerns about when projects outlined in the agreement betweenthe community and the Company would be delivered. Representatives from Hudbay and the community met onthe day of the protest, and the Company provided an update on the implementation of the projects. In theChamaca District, Hudbay and the community have had an overarching agreement related to communityinvestments, jobs and other commitments since 2013, and in May 2017, we entered into a supplementalagreement related to specific public investment projects in the district worth up to nearly $1.1 million. Somemembers of the community claimed that the district had not received the investments. In response and as part ofour commitment to good-faith negotiations, we established a round table to negotiate another specific agreement,which is chaired by representatives from Peru’s Ministry of Energy and Mines (MINEM) and includes members of thecommunity and the Company. As of the publication of this report, negotiations were ongoing.Hudbay 2017 Annual and CSR Report 74 Social ImpactArizonaOur Rosemont copper project’s relatively close proximity to Tucson, Arizona, provides a number of benefits –including access to a large pool of skilled workers, leading universities and research institutions – as well aschallenges, such as numerous stakeholder groups with diverse, and at times conflicting, interests. Our goal is toensure all viewpoints are heard and understood, and that our decision-making process is fair and in the bestinterest of as many stakeholders as possible. Once developed, the Rosemont project is expected to be the third-largest copper producer in the US, contributing significantly to the local economy through hundreds of jobs, taxpayments and support for community programs.Reaching an Important MilestoneFor more than 10 years, federal, state and local officials and several stakeholders have been involved in Rosemont’splanning and permitting process. After more than 1,000 studies, 16 days of public hearings and 245 days of publiccomment for the US Forest Service process alone, in 2017 the Forest Service issued the Final Record ofDecision (ROD) for Rosemont. With receipt of the final ROD, we are one milestone closer to developing the project,with just one federal permit outstanding – the Section 404 Permit from the US Army Corps of Engineers (USACE).We continue to engage with the USACE to address any concerns and questions about our plans to build a state-of-the-art mine.Preparing for the Construction PhaseAt Rosemont, we have a community relations plan in place that guides our efforts to build constructiverelationships by communicating with stakeholders in a timely, accurate and consistent manner.In addition to engaging with relevant agencies about the permitting process, during the year we continued to meetwith elected officials and attend community events. We also updated our procurement website so we could pre-qualify local suppliers before the construction phase begins.Hudbay 2017 Annual and CSR Report 75 The Native American tribes nearest to the planned operation – including the Tohono O’odham, Pascua Yaqui, Hopiand various Apache tribes – are another key group. Through recognition of their rights within the regulatoryframeworks, the Forest Service led consultation starting in 2005, meeting with the tribes, developing a TraditionalCultural Property designation for the Santa Rita Mountains, directing the development of ethnohistory reviews andcultural evaluations at the site as well as including them in the EIS process. In addition to supporting theconsultation in the permitting process (including participating in meetings and tours, and providing projectinformation when we have been invited to do so), we have conducted outreach and worked to engage with thetribes to build trust, which we hope will develop into mutually beneficial working relationships. Rosemont signed aMemorandum of Agreement associated with the consultation that specified commitments for performance ofwork and treatment of artifacts and other historic articles, as well as training and reporting. Rosemont also workedwith the tribes to develop agreements that included such items as grant availability, scholarships and travel fundsfor plant collection and blessing activities, which were ultimately signed by one of the tribes.Once the construction phase of the project is initiated, we will establish and maintain a public website that includesquarterly and annual reports of the findings from our environmental monitoring efforts.In addition, when we commence production we will contribute $500,000 per year during operations towardconservation and other community needs. In addition, contributions will be made to an endowment fund that willestablish a stable funding source ($25 million) for community projects after operations cease. A Board of Trusteeswill manage the fund.2017 PerformanceOur total payments to local suppliers were $3.7 million, and in Arizona the total is over $10 million. We invested$177,000 to support a wide range of community programs. Important contributions during the year included:$5,000 to the University of Arizona Natural Resources Users Law and Policy CenterOver $16,000 in scholarships to the 4-H clubs in Pima and Santa Cruz countiesThrough our school grants program, which awards between $500 and $5,000 to local public schools, we granteda total of nearly $10,000, including a $5,000 grant to the Joint Technical Education District, which will helpensure that non–college bound students are given an opportunity to learn a trade and have careersThere were three complaints registered in 2017. All of them were the same complaint, which one person filed inthree places: Hudbay’s Toronto office, the Pima County Environment Department and the Forest Service. Theconcern was about unauthorized blasting at the Rosemont site. However, the noise was due to the Air Forcecompleting training runs in the area, causing sonic booms that were mistaken for blasting.Hudbay 2017 Annual and CSR Report 76  EnvironmentOur ability to operate and grow our business requires us to responsibly manage our impacts on theenvironment and to remain steadfast in our commitment to develop the mineral resources society needsin a manner that protects the environment.Total Greenhouse Gas Emissions(kilotonnes of CO2-equivalent and intensity)Direct EnergyConsumption byPrimary EnergySource(terajoules)1.5%of land we own, lease or manage is usedfor Hudbay activities (the rest is left in itsnatural state) The Professional School of Biologists ofPeru recognized our Peru team for itsbiodiversity effortsHudbay 2017 Annual and CSR Report 77 In late 2017, the Mining Association of Canada (MAC) further improved on best practices by issuing an updatedGuide to the Management of Tailings Facilities. A representative from Hudbay was actively involved in bothdeveloping the enhanced guide and training industry leaders on how to implement the changes. The guide hasbeen incorporated into an updated TSM Tailings Management Protocol, and as a member of MAC we commit toapply the protocol by 2019.The new edition incorporates recommendations from leading experts in the field, and suggested improvementsfrom studies related to the tailings dam failures at the Mount Polley mine in British Columbia and the Samarco minein Brazil.The updated guide builds on the continual improvement process for tailings management to achieve the goal ofzero catastrophic failures of tailings facilities and no significant adverse effects on human health and theenvironment. Among the enhancements is an increased emphasis on technical aspects that are critical to thephysical and chemical stability of tailings facilities. It also strengthens and introduces key concepts related to riskassessments, critical controls and independent reviews.Strengthening TailingsManagementHudbay 2017 Annual and CSR Report 78 At our Constancia mine in Peru, the objective is no net loss of biodiversity. To reach this goal, the site has developeda biodiversity action plan (BAP) and measures its annual performance against six key objectives with specific actionplans for 2017.In 2017, the site performed 100% of the actions set forth in its annual plan.The objectives are:1. Actively manage, avoid and minimize the impacts of mine operations on biodiversity and ecosystem services.2. Rehabilitate and improve biodiversity and ecosystem services within the Hudbay property.3. Effectively engage stakeholders to promote their participation through joint actions that foster continuousimprovement in the identification, assessment and management of biodiversity and ecosystem services.4. Execute compensation measures to address residual impacts, ensuring a net neutral or positive impact.5. Follow up and monitor the state of biodiversity conservation in the ecosystems identified in the land study areawithin the Hudbay property, by quantifying, describing and recording species and habitats.6. Maximize knowledge of biodiversity and ecosystem services in the land study area to ensure continuousimprovement in the management objectives of this plan.Working Toward No Net Loss ofBiodiversityHudbay 2017 Annual and CSR Report 79 EnvironmentOur ApproachFrom exploration through closure and reclamation, we apply environmental management best practices to reduceour environmental footprint and contribute to sustainability and biodiversity.Our Environmental Health and Safety Policy states our commitment to explore for, mine and produce metals inan environmentally responsible manner, and to continually measure and improve our systems and performance. All our operations are required to comply with federal, state, provincial and local laws and regulations, and theymust have in place an environmental management system that is certified to the ISO 14001 international standard.As a member of the Mining Association of Canada (MAC), we require every operation to apply the TowardsSustainable Mining (TSM) environmental protocols and frameworks and annually assess its facilities’ performanceagainst the protocols. New or recently acquired operations are required to achieve a level A or higher (on a five-point scale, from level C to AAA) for all protocols within two years of reaching commercial production or beginningoperations under Hudbay’s control.Land and BiodiversityBiological diversity is essential for maintaining healthy ecosystems and sustaining life. Effectively balancing how ouroperations can impact biodiversity, ecosystems and other land uses plays a part in our ability to grow our businessand strengthen relationships. Our Biodiversity Conservation Standard requires each site to identify environmental conditions – such asthreatened and endangered species, protected areas and critical habitat – and the potential impacts Hudbay’sactivities may have on biodiversity and ecosystem services. Site-specific biodiversity and ecosystem servicesmanagement plans must apply the following four sequential key steps of the mitigation hierarchy:1. Avoid impacts by locating facilities and access routes away from natural and critical habitats.2. Minimize impacts through the use of appropriate management systems and mine plan designs that limit landdisturbance throughout the mine life.Hudbay 2017 Annual and CSR Report 80 3. Restore ecosystems by progressively rehabilitating affected areas during operations and at closure with a goalof eliminating the impact over time through preservation or maintenance.4. Offset residual impacts through programs to compensate for biodiversity losses when long-term residualimpacts cannot be avoided.Our standard aligns to, and supports our implementation of, the TSM Biodiversity Conservation ManagementFramework and Protocol. Included in the framework are commitments to contribute positively to biodiversityconservation throughout the mine lifecycle, to engage with communities of interest about biodiversity policies andpractices, and to not explore or mine in World Heritage sites.Through monitoring programs, we track the effectiveness of our management plans and adjust our activitiesaccordingly to continuously improve our performance.Energy Use and Greenhouse GasTo improve our energy efficiency and reduce our greenhouse gas (GHG) emissions, our Manitoba and Peru businessunits establish annual GHG intensity reduction targets to demonstrate our commitment to continually improve ourperformance.Our operations are energy intensive, from the diesel fuel that powers our fleet to the electricity sourced frompower grids in the jurisdictions where we operate. In alignment with the TSM Energy and GHG EmissionManagement protocol, we have processes and management systems in place and clear accountabilities. In additionto the disclosures in this report and the assessments available on the MAC website, we report our global GHGemissions data and performance to CDP. Compared to the prior year, our direct and indirect energy consumption increased 5.2% and 7.4%, respectively, andour energy intensity increased 3.7%. Our total GHG emissions increased 9.6%, and GHG intensity increased 6.4%.The higher use of propane during the winter months in Manitoba and transporting ore from deeper depthscontributed to the increase.AirOur air emissions are primarily forms of dust (formally, particulate matter), generated by activities includingblasting and excavating ore and vehicles travelling on unpaved roads.To ensure the air quality on and near our sites is safe for people and the environment, we implement dustmanagement plans, conduct monitoring, and report our air emissions to ensure full compliance with air quality lawsand regulations in the countries where we operate.Our total particulate emissions increased 33.9% compared to 2016 due to our Manitoba Business Unit experiencingan increase in road dust during a very dry summer and more trucks travelling on unpaved haul roads.Hudbay 2017 Annual and CSR Report 81 WaterWater is essential to our operations, and our ability to operate water-efficient mines and protect local sources is agrowing area of interest for our stakeholders. Our Manitoba and Peru operations set annual fresh waterconsumption intensity reduction targets to drive improvements in our water efficiency efforts.Our sites have different water needs and challenges. Developed during the feasibility stage as part of a site’senvironmental impact studies, our comprehensive site-specific water management plans assess quality, quantityand availability and consider the needs of local communities. This approach ensures that water risks andconsiderations are assessed throughout the mine lifecycle.As a member of MAC, we endorse the TSM framework on water, which includes 13 commitments to waterstewardship. These commitments go beyond legal compliance and include identifying and managing water-relatedrisks, collaborating with communities of interest, ensuring water use decisions consider other users and ecosystemneeds, and publicly reporting on our performance.Since 2010, we have disclosed our water management performance in CDP’s annual Global Water Report.Total water withdrawn increased 12.9% and water discharged increased 1.1% compared to 2016. Total waterrecycled or reused was approximately 220% of our total water use. Above-average temperatures in the summer,resulting in a higher rate of evaporation, contributed to the increase in water use.Waste and TailingsMining and ore processing activities produce waste byproducts including waste rock (overburden that has noeconomic value) and tailings (the material that remains after the minerals have been extracted from the crushedore).All Hudbay operations have plans in place to reduce, reuse, recycle and responsibly dispose of hazardous and non-hazardous waste, with a particular focus on managing waste rock and tailings.Sites must manage waste rock in accordance with environmental regulations and industry standards and in amanner that minimizes the potential for acid rock drainage (ARD), which is caused by a chemical reaction whencertain minerals in some rock are exposed to air and water. To minimize environmental impacts and prevent ARDfrom occurring, wherever possible, we reuse waste rock to fill voids in underground operations, construct tailingscontainment structures, backfill open pits and rehabilitate sites.Responsibly managing tailings and the associated storage facilities is crucial for preventing impacts to humanhealth and the environment. To manage these risks effectively, we adhere to TSM’s Tailings Management Protocol,which builds on technical standards to ensure that a responsible tailings management system is in place and isapplied consistently and effectively. Under the protocol, accountability for tailings management is assigned to thehighest governance body, which is our Board of Directors. We conduct annual reviews of our tailings managementsystems, and more in-depth independent reviews of processes, such as dam safety reviews every five years andindependent peer review board assessments annually. We have begun implementing the requirements in theupdated protocol and will report against it beginning with our 2019 assessment.Hudbay 2017 Annual and CSR Report 82 Our proposed Rosemont project in Arizona gives us the opportunity to construct a state-of-the-art dry-stack (orfiltered) tailings facility. Among the advantages of a dry-stack tailings facility are minimized water consumption,reduced land requirements and greater stability.During the year, we generated 36.6% less overburden waste, 36.9% less waste rock and 5.4% more tailingscompared to the previous year. Reduced stripping and increased production at the Lalor operation contributed tothe lower amount of overburden and waste rock and the generation of a higher amount of tailings.Closure and ReclamationIn alignment with TSM’s Mine Closure Framework and the laws and regulations in each jurisdiction where weoperate, planning for mine closure begins during the design phase of a project’s development and continuesthroughout the mine’s lifecycle.A key element of our closure planning is consultation and engagement with stakeholders – in particular, thecommunities closest to our mines – to develop closure and reclamation objectives that address their needs andvalues. This includes working together on long-term economic development strategies and plans that mitigate thesocio-economic impacts of closure. To the extent practicable, we rehabilitate the former mine site to an agreed-upon beneficial post-mining use.Our closure plans include identifying opportunities to conduct progressive rehabilitation once the areas are nolonger needed for mining. Post-closure activities include maintenance and monitoring to meet closure objectives.Hudbay 2017 Annual and CSR Report 83 EnvironmentManitobaContinuing to Reduce ImpactsOur Manitoba business continued to work toward its target for reducing greenhouse gas (GHG) intensity and freshwater consumption intensity by 1%. Our intensity metrics measure the GHGs emitted and the amount of waterconsumed per tonne of production.The Manitoba Business Unit’s total water consumption increased by 3.9% compared to 2016, which could beexplained by increased production. Water consumption intensity increased by 8.7%.Our carbon intensity is relatively low, primarily due to the fact that much of the electricity used to run ourprocessing plants is renewable hydroelectricity sourced from Manitoba Hydro. We do use propane for heating anddiesel to run the equipment vehicles that extract and transport ore. As our 777 and Reed operations near the endof their mine life, their energy consumption increases due to the need to mine deeper and haul material farther.Efforts to offset these higher energy requirements include lowering temperatures in the Reed mine by fourdegrees in the winter months, turning off ventilation systems in the welding shop when not in use, and installingceiling fans to recirculate warmer air in the sheds used to thaw concentrate.Despite our best efforts, our overall energy usage and energy intensity increased by 5.2% and 4.0%, respectively,compared to 2016, with higher use of propane during the winter months and production ramp-up at Lalor beinglikely contributors to the increase. We did not meet our annual GHG target of reducing emissions by 1%.New Plant Improves Backfill ManagementAt Lalor, we began construction on a new paste plant, which is a key element for growing our Lalor operation.Tailings from the Stall mill will be diverted from the Anderson tailings impoundment area and pumped to the Lalorpaste plant. The tailings will be dewatered and blended with stabilizers, such as cement, to create a paste-likematerial that will be used in the underground mine to backfill the voids created during the mining process. Thepaste plant, which is expected to begin pumping paste in 2018, will support the production ramp-up at Lalor andreduce the costs and land used by diverting the waste stream from the tailings impoundment area and convertingit into a structurally strong backfill material.Hudbay 2017 Annual and CSR Report 84 In managing our material air emissions in 2017, we experienced a significant dusting event similar to one in 2016,where high winds blew the sandy material from the Flin Flon tailings facility toward nearby communities. Althoughour ambient monitors did indicate elevated metal levels, these remained below the relevant air quality guidelines.Our dust management plan includes placing straw over the dusted tails to prevent dust flare-ups, and we begantesting other methods, such as the use of bonding agents, to better control dust generation during high-windweather events.As part of our Federal Performance Agreement, we began an air-sampling program to measure and verify howmany kilograms of zinc per tonne of metal produced were emitted into the atmosphere.Protecting SpeciesAlong with controlling dust, we have biodiversity management plans in place to protect waterfowl and othermigratory birds from the areas around our tailings facilities. Although these storage ponds pose a minimal risk,prior to freezing over and when they begin to thaw, we use several deterrent methods, such as propane cannons,to keep birds away from any potentially hazardous areas.We have continued our financial backing of Manitoba’s provincial Woodland Caribou Recovery Strategy. Thecomprehensive multi-year plan supports recovery efforts and protection of the woodland caribou in northernManitoba. Our participation in the plan helps us to assess any impacts of our exploration and mine developmentactivities on the species.Achieving Successful Mine ClosureThroughout our 90 years of operations in the northern Manitoba region, we have responsibly closed andremediated 19 mines, returning most of the land to its natural state.At our Reed operation, which is located within a provincial park, closure activities will begin immediately after thelast ore is mined in mid-2018. One of the first priorities for the closure plan will be to make sure the site is safe byremoving buildings that are no longer needed and ensuring any voids, entrances and holes are filled or secured. Theplan calls for the site to be indistinguishable from other public-use areas in the park, such as campsites.Close to Reed in the provincial park is Spruce Point, a mine we closed in the 1990s. During operations at Reed, weagreed to conduct further remediation at the Spruce Point site. We engaged experts to define how best toremediate Spruce Point and, as a result, beginning in 2018 we will remove the waste rock and transfer it to one ofour operating sites for further management.Hudbay 2017 Annual and CSR Report 85 EnvironmentPeruStrengthening Our Water Management ApproachOur Peru Business Unit met its internal water performance targets for consumption and quality, as well as its publictarget to reduce fresh water consumption intensity by 5% at Constancia’s accommodation camp. We haveimproved our understanding of water use at the camp, and we will look to implement other improvements, such aslow-flow faucets, to continue reducing consumption on both an intensity and a per-person basis.Compared to the previous year, overall total water consumption increased by 14%, and water consumptionintensity increased by 25%. The Constancia operation’s surface and groundwater consumption was 47% less thanthe amount authorized by the licences that govern the site’s water use.We conducted extensive water quality monitoring of the nearby streams and rivers to assess any impacts ouractivities may have on the water sources. In 2017, results showed elevated levels of nitrogen at the stationmonitoring discharges from the wastewater treatment plant. The levels were within national limits but exceededIFC standards, so improvements were implemented at the plant to ensure conformity to water quality standardsand requirements.Energy and EmissionsWe met our target to reduce our greenhouse gas emissions intensity at the accommodation camp by 5%.Programs, such as installing energy meters at camps and awareness campaigns, helped to drive the year-over-yeardecline.Our overall energy usage in Peru increased by 8%, and our energy intensity increased by 20% compared to theprevious year. We initiated a program to convert the lighting systems at the processing plant to LEDs, whichreduced the plant’s GHG emissions by 25%.We completed implementation of the TSM Energy and GHG Emission Management protocol at Constancia at a levelof A or higher. Validation of the protocol’s implementation confirmed all indicators within this protocol achievedthe level A target.Hudbay 2017 Annual and CSR Report 86 Planning for No Net Loss of BiodiversityThe biodiversity management plan for Constancia aims for no net loss of biodiversity as a result of mining activities.In 2017, we achieved all the objectives in our 2017 biodiversity action plan. Highlights for the year include:We installed eight trap cameras in the mine’s area of influence. The cameras are a valuable tool for studyingspecies and collecting data on biodiversity trends.More than 670 Hudbay personnel received biodiversity management training.Through our revegetation and forestation programs, we rehabilitated more than 16 hectares, planted nearly17,000 native trees and produced 17,800 seedlings at our nursery.We engaged with stakeholders and promoted responsible biodiversity management practices through animalhealth training with members of the Chilloroya community, presentations at Peruvian universities, andcontributions to scientific papers and publications.At Constancia’s tailings facility and bog deposit area, we tested bird repellent methods to keep birds a safedistance from the ponds.During the year, we implemented the three indicators in the TSM Biodiversity Conservation Management Protocol,reaching an AAA level (the highest) for all three indicators within the protocol. Verification is expected in early2018.Hudbay 2017 Annual and CSR Report 87 EnvironmentArizonaIn June 2017, we moved closer to building a modern mine that showcases state-of-the-art techniques andsustainable environmental practices when the US Forest Service issued a Final Record of Decision (ROD), one of thelast two permits needed to develop our Rosemont project in southwest Arizona.Soon after receiving the ROD, we submitted our mine plan of operations (MPO). Once the Forest Service approvesthe MPO, it becomes the permit for the project. We are awaiting the final permit from the Army Corp of Engineers,which we hope to receive in 2018.Minimizing Our FootprintOf the five scenarios presented, the ROD sanctioned the “Barrel Alternative”, which impacts the fewest acres ofland, addresses air quality concerns, protects a Native American ball court feature, and protects biologicallysensitive areas and critical habitat. Under the Rosemont MPO, we will employ technologies and practices thatgenerate a higher yield of copper and impact half the amount of land for a typical copper mine. In addition,reclamation work will start during the first year of operations to further minimize adverse impacts.Due to the filter tailings technology, our water conservation and recycling approach will allow us to reduce ourwater use by half compared to similar copper operations in Arizona that employ conventional tailings management.We will construct an eight-mile-long, 36-inch-diameter pipeline to transport water from the Central Arizona Project(CAP) terminus to the Green Valley area. The pipeline will allow the Green Valley community’s water utility to use itsCAP allocation and offset its groundwater withdrawals. It will also allow Rosemont to recharge water near itsproduction wells.Hudbay 2017 Annual and CSR Report 88 Comprehensive Mitigation and MonitoringWith the majority of stakeholder concerns related to environmental impacts, we plan to implement more than$50 million in monitoring and mitigation measures to address potential impacts.The ROD includes more than 100 monitoring and mitigation requirements. Along with standard mitigationmeasures to manage potential impacts to water, soil, air and biodiversity, we will fund specialized programs,including camera studies for large feline predators, management and removal of harmful non-native aquaticspecies, habitat improvement for the western yellow-billed cuckoo and the southwestern willow flycatcher, andground-based sky brightness monitoring. As part of an agreement with the Arizona Trail Association, we will pay torelocate approximately 10 miles of the Arizona National Scenic Trail.Once operations begin, we will establish and maintain a public website where we will post the latest monitoringreports in a timely manner.Hudbay 2017 Annual and CSR Report 89 CSRPerformanceBasis 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 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 localgrids. Utility grid statistics are therefore used to compile GHG numbers related to purchased electricity. Wegenerate electricity at one of our sites (Reed), and this energy is reflected in fuel consumption, while GHG numbersare calculated based on conversion factors.Data for the indicators is collected and compiled using information submitted on a standard template by each site.We provide instruction and criteria for GRI G4 and Towards Sustainable Mining (TSM), and we supply a GHGemissions worksheet developed by the Mining Association of Canada (MAC).Hudbay 2017 Annual and CSR Report 90 Key Performance DataECONOMIC2017201620152014Direct economic value generated and distributed(in $ millions) (EC1)Profit (loss) before tax$198.7$5.6$(331.4)$13.9Revenues$1,362.6$1,128.7$923.1$507.5Operating costsCanada439.0358.9(408.5)(428.6)US0.50.6(5.7)(7.6)Peru297.7298.5(186.0)(8.7)Chile3.92.2(0.5)(1.9)Colombia0.00.0(0.4)(0.8)Total$741.1$660.2$(601.1)$(447.6)Employee wages and benefitsCanada174.0147.2157.1156.5US5.77.89.34.6Peru41.827.522.420.6Chile0.02.20.00.0Colombia0.00.00.20.2Total$221.5$177.5$189.0$181.9Payments to governmentTaxes paidCanada9.16.66.1(21.1)US0.20.00.00.1Peru23.538.928.05.8Chile0.00.00.00.0Colombia0.00.00.00.0Total$32.8$45.5$34.1$(15.2)Municipal taxes and grantsCanada6.96.86.77.8US0.10.00.10.5Peru3.50.00.00.0Chile0.00.00.00.0Colombia0.00.00.00.01Hudbay 2017 Annual and CSR Report 91 2017201620152014Total$10.5$6.8$6.8$8.3Penalties and interest paidCanada0.00.00.10.0US0.00.00.00.3Peru0.40.30.00.2Chile0.00.00.00.0Colombia0.00.00.00.0Total$0.4$0.3$0.1$0.5Payments to providers of capitalDividends paid$3.7$3.6$3.6$3.8Interest payments made to providers of loans$52.7$126.5$108.6$82.1Financing fees paid Canada6.649.41.30.9Peru20.020.11.24.6Total$26.6$69.5$2.5$5.5Other interest paidCanada0.00.00.00.0Peru0.00.00.00.0Total$0.0$0.0$0.0$0.0Capital expenditures – cash flow basis$249.8$192.8$490.6$890.9Cash and cash equivalents$356.5$146.9$53.9$178.7Payments – Local communities for land use (in$000s)Canada0.00.00.00.0US0.00.00.00.0Peru2,149.01,829.3579.51,684.5Total land use payments$2,149.0$1,829.3$579.5$1,684.5Public benefitCommunity investments and charitabledonations (in $000s)Canada287.5345.1307.1602.8US178.7147.163.5212.9Peru5,941.23,738.32,435.73,103.0Chile0.00.00.00.0Colombia0.00.00.00.0Total community investments and donations$6,407.4$4,230.5$2,806.3$3,918.7Hudbay 2017 Annual and CSR Report 92 20172016201520141. For 2016, management only included wages and benefits that were recorded to the statements of income; however, for 2017, all wages andbenefits are included in this figure, including those that are recorded as property, plant and equipment assets.Resettlement investment (Peru) (in $000s)$98.0$1,081.5$957.5$7,857.0Production (contained metal in concentrate)Copper (000 tonnes)159.2174.5147.3 37.6Zinc (000 tonnes)135.2110.6102.9 82.5Gold (000 troy ounces)108.6114.3100.2 73.4Silver (000 troy ounces)3,487.33,755.92,791.5 745.9Metal productionZinc metal (000 tonnes)107.9102.6101.9105.1Hudbay 2017 Annual and CSR Report 93 EMPLOYEES2017201620152014Total workforce (G4-10)Full-time employeesMBU1,3321,3191,3991,391Ontario70676861Arizona35405034Peru304230183174Chile0000Total full-time employees1,7411,6561,7001,668EmploymentPart-time employees MBU2010214Ontario0000Arizona4222Peru0000Chile0000Total part-time employees2412418Contract (term) employees MBU1913718Ontario2151Arizona1000Peru444363187138Chile50810Total contract employees516385200158Co-op and summer students hiredMBU26214041Ontario3232Arizona1020Peru128126Chile0000Total co-op/summer students42315749Employees represented by collective bargainingagreements (G4-11)1,3131,1211,0531,091Percentage of employees represented by tradeunions (includes all full-time, part-time and Perucontract employees)59.4%67.7%61.9%65.4%Hudbay 2017 Annual and CSR Report 94 2017201620152014Operational changes (LA4)Minimum number of weeks provided beforeoperational changes (MBU only)2222Negotiated into collective agreements (MBU only)YesYesYesYesNumber of strikes or lockouts exceeding one week(MM4)0010Employee turnover (includes all full-timeemployees and Peru contract employees) (LA1)RegionMBU192201206118Corporate81157ABU81691Peru128643253Chile0000Total336292252179Age distribution<3020.2%20.2%23.4%18.4%30–5044.9%39.0%40.5%50.3%>5034.8%40.8%36.1%31.8%GenderMale79.2%80.1%75.4%82.7%Female20.8%19.9%24.6%17.9%Voluntary turnover rate (Hudbay total)12.8%13.0%11.4%7.4%Involuntary turnover rate (Hudbay total)6.5%4.6%3.6%3.4%New employee hiresRegionMBU220141221155Corporate133127ABU632336Peru238280160183Chile0000Total477427416381Age distribution<3038.8%32.8%40.6%22.6%30–5052.4%54.6%47.4%64.0%>508.8%12.6%12.0%13.6%GenderMale80.7%83.4%79.3%82.9%1Hudbay 2017 Annual and CSR Report 95 2017201620152014Female19.3%16.6%20.7%17.3%Net number of full-time employees added(decreased)Canada16(81)1527US(5)(10)832Peru7447917ColombiaN/ap00(1)Chile000(1)Total85(44)3274Senior management hired from local community(EC6)592N/avNumber of contractor full-time equivalent staff(G4-10)Manitoba284175274245Peru2,7802,9744,3379,595Arizona91555N/apOther2213454Person-hours of work (including contractors)(LA1)North America3,232,3793,073,6463,245,8823,359,663South America7,867,9397,589,5019,907,70520,458,806Total person-hours11,100,31810,663,14713,158,58723,818,469Employees receiving regular performance andcareer development reviews (includes all full-time employees) (LA11)Percentage reviewed40%20%41%22%Hudbay total workforce age distribution(includes all full-time employees) (LA12)<3014.6%14.2%13.0%13.8%30–5052.6%53.0%47.9%47.8%>5033.1%32.2%39.6%36.6%Composition of governance bodies andbreakdown of employeesWorkforce diversity (includes all full-timeemployees)Female (Hudbay)MBU195189187182Ontario33323227Arizona17172415Peru76602835Hudbay 2017 Annual and CSR Report 96 2017201620152014ChileN/apN/apN/ap0Percentage of total workforce that is female18.2%18.0%16.0%16%Aboriginal (MBU only)14%13%13%12%Disabled (MBU only)5%5%5%6%Visible minorities (MBU only)6%6%6%6%Composition of executive management andcorporate governance bodies (includes all full-time employees)Board of Directors (ratio male to female)2.3:14:14:110:1Age distribution <300%0%0%0%30–500%0%0%10%>50100%100%100%90%Executive management (ratio male to female)4.7:15.5:15.5:110:1Age distribution<300%0%0%0%30–5029%53%64%72%>5071%46%36%27%Ratio of annual compensation of highest paidindividual to mean total compensation (includesall full-time employees and Peru contractemployees) (G4-54)Canada (MBU, excluding Corporate office)6.8:14.9:16.5:16.1:1Canada (including Corporate office)23.4:124.1:116.4:129.8:1Peru19.5:19.2:110.0:19.5:1United States (ABU)4.8:14.3:14.2:13.1:1Workforce 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)Manitoba1.01.11.01.0Manitoba contractors0.70.00.70.8Peru0.10.10.70.0Peru contractors0.00.00.10.0Arizona0.00.00.0N/apArizona contractors0.00.00.0N/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not including MBUand ABU)0.00.00.00.02Hudbay 2017 Annual and CSR Report 97 2017201620152014South America (not including Peru)0.00.00.00.0South America contractors (not including Peru)0.00.00.00.0Total0.30.30.30.1Lost time accident severity (SEV)   Manitoba34.437.335.236.0Manitoba contractors13.90.014.823.0Peru0.52.022.00.0Peru contractors0.00.63.60.2Arizona0.00.00.0N/apArizona contractors0.00.00.0N/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not including MBUand ABU)0.00.00.00.0South America (not including Peru)0.00.00.00.0South America contractors (not including Peru)0.00.00.00.0Total  8.49.311.44.7Restricted work case frequency (RWC)   Manitoba0.71.11.82.2Manitoba contractors0.70.50.00.4Peru0.00.00.20.0Peru contractors0.00.00.00.0Arizona0.00.00.0N/apArizona contractors0.00.00.0N/apNorth America (not including MBU and ABU)0.00.00.00.0North America contractors (not including MBUand ABU)0.00.00.00.0South America (not including Peru)0.00.00.00.0South America contractors (not including Peru)0.00.00.00.0Total 0.20.30.40.3Medical aid frequency (MA)    Manitoba10.911.811.012.8Manitoba contractors5.45.512.312.9Peru0.30.02.30.0Peru contractors0.10.20.20.5Arizona3.40.04.9N/apArizona contractors0.00.05.3N/apNorth America (not including MBU and ABU)0.00.00.01.2North America contractors (not including MBUand ABU)0.00.00.02.1Hudbay 2017 Annual and CSR Report 98 2017201620152014South America (not including Peru)0.00.00.00.0South America contractors (not including Peru)0.00.00.00.0Total 2.83.03.02.1First aid frequency (FA)   Manitoba16.822.622.128.5Manitoba contractors2.44.46.08.2Peru0.90.94.80.4Peru contractors0.70.40.61.3Arizona0.00.017.2N/apArizona contractors10.50.05.3N/apNorth America (not including MBU and ABU)0.00.00.03.7North America contractors (not including MBUand ABU)0.00.00.08.3South America (not including Peru)0.00.00.00.0South America contractors (not including Peru)0.00.00.00.0Total4.35.75.24.4Fatality (number)0000Absentee rate (as a % of hours scheduled to beworked)N/avN/avN/avN/avReportable occurrences (defined as EHS incidentsrequired by Hudbay policy to be reported to ourBoard of Directors)567914181Risks to the right to collective bargaining (HR4)OntarioNoNoNoN/avManitobaNoNoNoN/avArizonaNoNoNoN/avPeruNoNoNoN/avChileNoN/avN/avN/avHudbay 2017 Annual and CSR Report 99 BENEFITSCorporateMBUFull timePart timeFull timePeruABUFull timePart timeFull timePart time1. Increase is related to a number of contracts not being renewed in Peru.2. Increase in ratio is due to the change in Hudbay Peru from a mine employing mostly contractors to a mine employing mostly full-timeemployees.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 2017 Annual and CSR Report 100 SOCIETY2017201620152014Total number of incidents of discrimination (andactions taken) (HR3)0100Land use disputes (MM6)2303Resettlements (MM9)Number of households (Peru only)00360Number of individuals (Peru only)001500Employees trained in anti-corruption policies(SO4)Number – Employees95266360182Percentage of workforce55%4%21%10%Percentage of Board and management giventraining100%100%91%N/avEmployees that anti-corruption policies havebeen communicated toNumber – Management580534229412Percentage100%100%98%0%Number – Non-management1,649418560485Percentage100%27%100%0%Governance body members that anti-corruptionpolicies have been communicated toNumber10101010Percentage100%100%100%100%Governance body members that receivedtraining on anti-corruptionNumber10101010Percentage100%100%100%100%Average hours of training (Peru and Arizonabusiness units only) (LA9)Males in management60.706.8619.65N/avFemales in management65.989.3650.17N/avMales in non-management100.099.5951.86N/avFemales in non-management85.8214.1136.71N/avAverage spend (DJSI)$362.28N/avN/avN/avSecurity practices (security personnel training)(HR7)Hudbay security personnel trained in human rightspolicies and proceduresNumber15141515Percentage100%100%98%100%21Hudbay 2017 Annual and CSR Report 101 2017201620152014Contractor security personnel trained in humanrights policies and proceduresNumber1247175158Percentage98%100%99%92%Value of fines or sanctions for non-compliancewith laws and regulations (SO8)$0$0$5,000$3,352Grievances about impacts on society (SO11)Number filed through formal grievancemechanisms20326778Number addressed during reporting period20326778Number resolved during reporting period12126567Number filed prior to the reporting period thatwere resolved during the reporting period83632Number of other concernsEnvironment (EN34)414N/avLabour and commercial practices (LA16)1132454N/avResettlement/livelihood212N/avHuman rights111N/avOther146N/avClosure plans (MM10)Total number of operations5578Number of company operations that have closureplans581010Percentage of total operations that have closureplans100%160%125%125%Number of advanced exploration projects thathave closure plans1101Percentage of advanced exploration projects thathave closure plans100%100%N/ap100%Overall financial provision representing thepresent value of future cash flows relating toestimated closure costs per Canadian generallyaccepted accounting principles (in $000s)$200,000$177,296$147,027$185,395Operation has implemented local communityengagement, impact assessments anddevelopment programs in line with theStakeholder Engagement Standard (SO1)ManitobaPartiallyYesPartiallyN/avArizonaYesYesYesN/avPeruYesYesYesN/avChileYesYesNoN/avOperation is taking place in or adjacent toindigenous peoples’ territories (MM5)ManitobaYesYesNoN/av543Hudbay 2017 Annual and CSR Report 102 20172016201520141. A discussion of these disputes can be found at Social Impact > Peru.2. We developed and rolled out a more robust Key Compliance Training program in 2017.3. The increase in this number is due to including labour grievances filed through the unions. In previous years, these were excluded from ourdefinition.4. Previously, we did not record union labour grievances in Manitoba, but we have started to in 2017. Of the 101 grievances received inManitoba, 47 were resolved and 54 remained outstanding. We signed a three-year CBA with all unions in December 2017.5. More information can be found at Human Rights and Security.6. In 2010, the Chilloroya community and Norsemont Peru (now Hudbay Peru SAC) signed an exploration and artisanal mining formalizationcontract which functioned as an agreement to help the community in the formalization process for its artisanal mining activity. This contractended on June 19, 2015.7. Artisanal mining is currently taking place on both our Farellon Sanchez and Fiel Rosita properties. At Farellon Sanchez, there are at least fiveoperations mining copper and gold veins underground, and selling ore to a government agency. At Fiel Rosita, the La Estrella mine is operatedby a local family, and sells approximately 250 tonnes of ore a month to the same government agency (Enami).ArizonaYesYesNoN/avPeruYesYesYesN/avChileYesYesNoN/avArtisanal mining (MM8)TorontoN/apN/apN/apN/apManitobaNo artisanalminingN/apN/apN/apArizonaNo artisanalminingN/avN/avN/avPeruYesYesYesN/avChileYesNoYesN/av76Hudbay 2017 Annual and CSR Report 103 ENVIRONMENT2017201620152014Direct energy consumption by primary energysource (terajoules) (EN3)Propane629579629700Diesel2,0191,9412,0341,993Light oil0004Gasoline16141112Other0010Total2,6642,5332,6752,709Indirect energy consumption by primary energysource (terajoules)Total electricity consumed5,6525,2634,9323,322Indirect energy sold/credits (terajoules)Electricity0.50.50.4N/avTotal indirect energy consumed by organization(terajoules)5,6525,2624,936N/avEnergy intensity (terajoules per kilotonne ofmetal in concentrate) (EN5)28.327.330.950.2Total direct and indirect greenhouse gasemissions (kilotonnes of CO2-equivalent)Direct carbon dioxide emissions (EN15)177.17170.96188.08182.28Indirect carbon dioxide emissions (EN16)363.48322.31277.806.91Total540.65493.27455.30189.19GHG intensity (EN18)1.841.731.821.57NOx, SOx and other significant air emissions (inkilotonnes) (EN21)Particulate0.620.440.160.17Total water withdrawal (000 cubic metres) (EN8)Surface water11,05810,63211,54911,287Groundwater2,7473,5822,698930Rainwater collected directly and stored by theorganization10,2427,1437,1684,048Waste water from another organization000N/avMunicipal water supplies0001Total water withdrawal24,04721,30621,41516,266321Hudbay 2017 Annual and CSR Report 104 2017201620152014Percentage and total volume of water recycledand reused (EN10)Total volume (000 cubic metres)53,474.4056,291.7416,944.37N/avPercentage222.37%264.20%79.12%N/avTotal water discharged (000 cubic metres) (EN22)To Flin Flon Creek/Ross Lake/Schist Lake13,94114,35310,54610,819To Anderson Creek/Wekusko Lake9,0678,0254,5943,939To Woosey Creek/Morgan Lake1,7882,1421,1061,184Namew Lake30303030Herblet Lake784926N/apN/apTown of Snow Lake Sewer0008To ground297247217187To land (irrigation using treated water in Peru)0000To Chilloroya River (Peru)2941882,623737Water treated (000 cubic metres)26,20125,91119,08619,887Total number of significant spills (EN24)39912Volume (liquid) (m3)286.0516.5382.0103.0Volume (solid) (tonnes)120.0N/avN/avN/avHazardous waste disposed of at external facility(tonnes) (EN25)1,943.51,520.31,508.5658.5Total waste (tonnes) (MM3)Overburden1,302,405.22,053,659.9N/avN/avWaste rock32,432,668.551,426,208.842,764,760.0N/avTailings30,545,163.028,968,944.024,780,081.6N/avNumber of fines or sanctions for non-compliancewith environmental laws and regulations (EN29)0000Land use (hectares) – Mineral tenure (controlled)(MM1)Manitoba121,241.4122,639.4137,832.4135,068.4Saskatchewan120,568.5133,339.1135,352.1139,316.2Yukon583.45,823.45,823.45,823.4Nunavut21.021.021.021.0Total Canada242,414.2261,822.9279,028.9280,229.0New York0.00.00.031,532.3Arizona1,200.07,284.07,284.00.0Total USA1,200.07,284.07,284.031,532.3Chile263,900.068,826.01,531.01,531.0Peru99,735.75,187.043,669.50.0654Hudbay 2017 Annual and CSR Report 105 20172016201520141. Energy produced at our test solar panel plots described in our 2015 report.2. In Manitoba, we collect and report on fugitive dust. Collection and reporting at the same level of detail is not required in Peru. Ambientmonitoring is conducted, but does not result in total particulate releases.Total South/Central America363,635.774,013.045,200.51,531.0Total607,249.9343,119.8331,513.4313,292.3Land use (hectares) – Surface tenure (disturbed)Manitoba7,314.17,314.17,314.16,130.3Saskatchewan374.7531.4535.2744.5Yukon120.0120.7120.7120.7Nunavut0.00.00.00.0Total Canada7,808.87,966.27,969.96,995.5New York0.00.00.057.7Arizona0.00.00.00.0Total USA0.00.00.057.7Chile0.00.30.00.0Peru1,518.01,568.45,187.00.0Total South/Central America1,518.01,568.75,187.00.0Total9,326.79,534.813,156.97,053.2Percent land used vs. controlled1.5%2.8%4.0%2.3%Sites requiring biodiversity management plans(MM2/EN12)Number of sites legally requiring plans2110Percentage of sites with legally required plans inplace100%100%100%N/apNumber of sites with voluntary plans in place1111Habitats protected or restored (hectares) (EN13)Protected0000Restored051.930.622Partnerships existYesYesYesN/avStatus at close of reporting periodMonitoringMonitoringMonitoringN/avIUCN Red List species and National Conservation List species (EN14)Critically endangered233N/avEndangered288N/avVulnerable191214N/avNear threatened12119N/avLeast concern466N/avHudbay 2017 Annual and CSR Report 106 3. Correction in calculation.4. Correction in calculation based on GRI G4 definition.5. All three spills were at our Manitoba Business Unit. Two were chemical spills and one was acid-generating rock. None of these spills went offHudbay property.6. This number does not include containers or light bulbs from Manitoba.Hudbay 2017 Annual and CSR Report 107 CSR Performance 2017 Targets andAchievementsTargetAchievementDetailsHEALTH AND SAFETY  Improve on our current three-year average losttime accident severity of 7.5Not achievedAs of December 31, 2017, our three-yearaverage lost time accident severity was 9.7.This increase is due to Peru’s drop in hoursfrom construction to production, from20,500 in 2014 to 8,000 in 2017. Overall, theseverity in Manitoba dropped by 1.4, whilePeru rose by only 0.6.Improve on our three-year total recordable injuryfrequency average of 3.1AchievedAs of December 31, 2017, our three-yearaverage total recordable injury frequencywas 2.8.Progress our focus on fatality prevention byimplementing our Critical Control Framework ateach siteAchievedEach business unit reviewed the top fivehazards in their hazards registers to ensurethe proper controls were in place. This fedinto our overall plan to have critical controlsin place so that we keep working toward ourongoing focus on fatality prevention.Improve our performance benchmarking bymoving to ICMM classification and boundarycriteriaAchievedWe are now collecting this data, and whenwe have three years of history, we willswitch our external reporting.Hudbay 2017 Annual and CSR Report 108 TargetAchievementDetailsCOMMUNITY  Implement a program to achieve company-wideexposure to the human rights introductory videobeing developed with MAC and the Canadiangovernment, and connect it to Hudbay policies andstandardsAchievedTraining took place in Peru to improvehuman rights and security, and we held alunch-and-learn training session in Torontoat the beginning of 2018.ENVIRONMENT  Achieve a 1% greenhouse gas emissions intensityreduction in ManitobaNot achievedSee Environment > Manitoba.Achieve a 1% fresh water consumption intensityreduction in ManitobaNot achievedSee Environment > Manitoba.Achieve a 5% greenhouse gas emissions intensityreduction at camp in PeruAchievedSee Environment > Peru.Achieve a 5% fresh water consumption intensityreduction at camp in PeruAchievedSee Environment > Peru.GOVERNANCE  Adopt a new compliance management system tofacilitate employee training on policies andproceduresAchievedSee Business Conduct.Adopt and roll out a new Supplier Code of Conductand EthicsAchievedSee Business Conduct.Conduct an organizational review intended toensure Hudbay is well positioned to achieve itsgrowth objectivesAchievedSee Organizing for Growth: Creating anAgile and Effective Organization.FINANCIAL EXCELLENCE/GROWTH TARGETS  Continue to pursue efficiency improvements in ouroperations to sustain cost reductions achieved in2016 and generate incremental free cash flow andincrease net asset valueAchievedAt Constancia, we introduced automation ofthe controls that feed our grinding circuit,and at Lalor, we deployed undergroundload-haul-dump vehicles that are remotelyguided by a human operator on the surface.Advance high-return in-house brownfieldopportunities to increase throughput from theLalor mine and related milling facilities,incrementally adding zinc and gold production inthe near and medium term, respectivelyAchievedWe successfully ramped up Lalor mineproduction and processed a test batch orefrom the Lalor gold zone, whichdemonstrated that we can achieve goodrecovery rates at the Flin Flon concentrator.Deliver on plans to advance the development ofthe high-grade Pampacancha deposit so that it canstart to be mined late in 2018Partially achievedNegotiations to secure surface rights overthe Pampacancha deposit are ongoing. Thecommunity provided Hudbay with access tothe land to carry out early-works activities.Hudbay 2017 Annual and CSR Report 109 TargetAchievementDetailsAdvance permitting and technical work at theRosemont projectAchievedWe released an updated feasibility study forRosemont in March 2017, and received theRecord of Decision from the US ForestService, one of two required federalpermits, in June 2017.Utilize free cash flow generation to reduce debtand further reduce our cost of capitalAchievedNet debt declined 43% in 2017 to$623 million, and we renegotiated our creditfacilities and equipment financings toreduce the interest rates we pay on them.Continue to evaluate exploration and acquisitionopportunities that meet our criteria describedabove, and pursue those opportunities that wedetermine to be in the best interest of theCompany and our stakeholdersAchievedIn January 2018, we announced theacquisition of interests in two propertieswithin trucking distance of Constancia thatwe believe have significant explorationpotential.Hudbay 2017 Annual and CSR Report 110 CSR Performance 2018 TargetsHealth and SafetyImprove on our current three-year average lost time accident severity of 9.7Improve on our three-year total recordable injury frequency average of 2.8CommunityFinalize human rights risk assessment framework and carry out trial for at least one locationEnvironmentEstablish improved corporate guidance and process for eco-efficiency performance tracking and site-level targetsetting that accounts for the complexity and variability of mining operations and integrates consideration ofbusiness and environmental prioritiesMaintain AA score in the MAC TSM Tailings protocol for Manitoba and PeruPeru Business Unit: maintain current energy and water consumption to occupancy ratio at the accommodationcampGovernanceCascade updated values through the organization via workshops at each Hudbay business unit, the productionof a values video by the CEO, and a face-to-face meeting at each location with the CEO to discuss companyvaluesFinancial Excellence/Growth TargetsGenerate operating cash flow at or above budget targetsImprove access to/cost of capitalGrow net asset value per share by 8%Advance the development of the high-grade Pampacancha deposit so that it can start to be mined in 2019Advance permitting and technical work at the Rosemont projectNote: With significant operational changes occurring through 2018 within the Manitoba Business Unit (including the closure of the Reed mineand ramp-up of the Lalor mine, and associated changes in ore supply to the Flin Flon and Stall mills), it was not practical to identify numericaltargets for 2018.Hudbay 2017 Annual and CSR Report 111 CSR Performance GRI IndexSTRATEGY AND ANALYSISGeneral Standard DisclosuresExternal AssuranceORGANIZATIONAL PROFILEGeneral Standard DisclosuresExternal AssuranceG4-1Statement from the most senior decision-maker of the organizationNoOur Company > CEO Message G4-3Name of the organizationNoOur Company G4-4Primary brands, products and servicesNoOur Company Business and Financial Review Business and Financial Review > Strategy Hudbay 2017 Annual and CSR Report 112 General Standard DisclosuresExternal AssuranceG4-5Location of the organization’s headquartersNoOur Company G4-6Number of countries where the organization operates, and names ofcountries where either the organization has significant operations orthat are specifically relevant to the sustainability topics covered inthe reportNoOur Company G4-7Nature of ownership and legal formNoOur Company G4-8Markets servedNoCSR Approach > Responsible Supply Chain G4-9Scale of the organizationNoBusiness and Financial Review Business and Financial Review > Financials G4-10Employee/workforce detailsNoCSR Performance Workforce details are not currently provided by gender. There were nosignificant variations in employment numbers.G4-11Percentage of total employees covered by collective bargainingagreementsNoCSR Performance Hudbay 2017 Annual and CSR Report 113 General Standard DisclosuresExternal AssuranceG4-12Describe the organization’s supply chainNoCSR Approach > Responsible Supply Chain G4-13Significant changes during the reporting period regarding theorganization’s size, structure, ownership or supply chainNoOur Company > CEO Message Business and Financial Review Business and Financial Review > Business Activities G4-14Whether and how the precautionary approach or principle isaddressed by the organizationNoCSR Approach > CSR Governance G4-15Externally developed economic, environmental and social charters,principles or other initiatives to which the organization subscribes orwhich it endorsesNoCSR Approach > CSR Governance CSR Approach > UN Sustainable Development Goals G4-16Memberships of associations and national or international advocacyorganizationsNoCSR Approach > CSR Governance Hudbay 2017 Annual and CSR Report 114 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIESGeneral Standard DisclosuresExternal AssuranceG4-17Entities included in the organization’s consolidated financialstatementsNoAbout This Report Annual Information FormG4-18Process for defining report contentNoCSR Approach > Materiality G4-19Priorities identifiedNoCSR Approach > Materiality G4-20Boundaries – InternalNoCSR Approach > Materiality CSR Performance > GRI Index G4-21Boundaries – ExternalNoCSR Approach > Materiality CSR Performance > GRI Index G4-22Effect of any restatement of information in previous reportsNoThere are no restatements of information from previous reports.G4-23Significant changes from previous reporting in scope of prioritiesNoThere are no significant changes from previous reporting in scope ofpriorities.Hudbay 2017 Annual and CSR Report 115 STAKEHOLDER ENGAGEMENTGeneral Standard DisclosuresExternal AssuranceREPORT PROFILEGeneral Standard DisclosuresExternal AssuranceG4-24List of stakeholder groupsNoCSR Approach > Stakeholder Engagement G4-25Basis for identifying and selecting stakeholdersNoCSR Approach > Stakeholder Engagement Stakeholders are defined as entities or individuals that can reasonably beexpected to be significantly affected by our activities, and whose actionscan reasonably be expected to affect our ability to successfullyimplement our strategies and achieve our objectives.G4-26Approach to stakeholder engagementNoCSR Approach > Stakeholder Engagement G4-27Topics raised through stakeholder engagement and responseNoCSR Approach > Stakeholder Engagement G4-28Reporting periodNoAbout This Report G4-29Date of most recent reportNoAbout This Report Hudbay 2017 Annual and CSR Report 116 General Standard DisclosuresExternal AssuranceGOVERNANCEGeneral Standard DisclosuresExternal AssuranceG4-30Reporting cycleNoAbout This Report G4-31ContactNoContact Us G4-32GRI Content Index and In Accordance optionNoAbout This Report G4-33External assurance policyNoAbout This Report Our external report is not externally assured, and we do not have apolicy around external assurance. The financial data comprising EC1 isexternally assured through the auditing of our Financials.G4-34Governance structureNoOur Company > Corporate Governance CSR Approach > CSR Governance Management Information Circular G4-37Process for consultation between stakeholders and highestgovernance body on economic, social and environmental topicsNoOur Company > Business Conduct CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement Social Impact > Our Approach Hudbay 2017 Annual and CSR Report 117 General Standard DisclosuresExternal AssuranceG4-38Composition of the highest governance bodyNoOur Company > Corporate Governance Management Information Circular G4-39Indicate whether the Chair of the highest governance body is also anexecutive officerNoOur Company > Corporate Governance G4-40Nomination and selection process for the highest governance bodyand its committeesNoManagement Information Circular G4-41Process for the highest governance body to ensure conflicts ofinterest are avoided and managedNoOur Company > Business Conduct CSR Approach > CSR Governance Annual Information FormG4-44Process for evaluation of the highest governance body’s performanceNoWebsite > Corporate Governance Guidelines and Board CharterG4-45Highest governance body’s role in the identification of economic,social and environmental impacts, risks and opportunitiesNoOur Company > Risk Management CSR Approach > CSR Governance G4-47Frequency of the highest governance body’s review of economic,environmental and social impacts, risks and opportunitiesNoCSR Approach > CSR Governance Hudbay 2017 Annual and CSR Report 118 General Standard DisclosuresExternal AssuranceETHICS AND INTEGRITYGeneral Standard DisclosuresExternal AssuranceG4-49Process for communicating critical concerns to the highestgovernance bodyNoOur Company > Business Conduct CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement G4-51Remuneration policies for the highest governance body and seniorexecutivesNoManagement Information Circular Website > Corporate Governance Guidelines and Board CharterG4-54Ratio of the annual total compensation for the organization’s highestpaid individual in each country of significant operation to the medianannual total compensation for all employeesNoCSR Performance G4-56Organization’s values, principles, standards and norms of behaviourNoOur Company > Business Conduct CSR Approach > CSR Governance CSR Approach > Human Rights and Security CSR Approach > Responsible Supply Chain Website > PoliciesHudbay 2017 Annual and CSR Report 119 ECONOMICSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Economic PerformanceDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our Company > CEO Message Our Company > Corporate Governance Our Company > Risk Management Business and Financial Review > Strategy Social Impact > Our Approach Annual Information FormG4-EC1Direct economic value generated and distributedNoCSR Performance G4-EC2Financial implications and other risks and opportunities for theorganization’s activities due to climate changeNoCDP Website > 2017 DisclosureG4-EC3Coverage of the organization’s defined benefit plan obligationsNoManagement’s Discussion and Analysis (Dec. 31, 2017) – pages 34and 35Aspect: Indirect Economic ImpactsDMADisclosure of Management ApproachNo1, 2, 3, 6, 8,9, 10, 11CSR Approach > Responsible Supply Chain Social Impact > Our Approach Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.Hudbay 2017 Annual and CSR Report 120 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-EC7Development and impact of infrastructure investments andservices supportedNoStory > Building Trust as We Grow Responsibly Social Impact > Peru We contribute to the development and maintenance of localinfrastructure and services in the regions where we operate.However, we have not calculated the indirect economic benefits thatflow to local and regional communities from our activities.G4-EC8Significant indirect economic impacts, including the extent ofimpactsNoCSR Approach > Responsible Supply Chain Social Impact Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona Aspect: Procurement PracticesDMADisclosure of Management ApproachNo1, 3, 4, 9,10, 11CSR Approach > Responsible Supply Chain G4-EC9Proportion of spending on local suppliers at significant locationsof operationNoCSR Approach > Responsible Supply Chain Hudbay 2017 Annual and CSR Report 121 ENVIRONMENTALSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: WaterDMADisclosure of Management ApproachNo3, 6, 8, 11Environment > Our Approach Environment > Manitoba Environment > Peru Environment > Arizona Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-EN8Total water withdrawal by sourceNoCSR Performance G4-EN10Percentage and total volume of water recycled and reusedNoCSR Performance Aspect: BiodiversityDMADisclosure of Management ApproachNo3, 7, 8, 10,11Environment > Our Approach Environment > Manitoba Environment > Peru Environment > Arizona Story > Working Toward No Net Loss of Biodiversity G4-EN12Description of significant impacts of activities, products andservices on biodiversity in protected areas and areas of highbiodiversity value outside protected areasNoCSR Performance G4-EN13Habitats protected or restoredNoCSR Performance Hudbay 2017 Annual and CSR Report 122 Specific Standard DisclosuresExternalAssuranceImpactBoundariesMM1Amount of land disturbed or rehabilitatedNoCSR Performance MM2The number and percentage of total sites identified as requiringbiodiversity management plans according to stated criteria, andthe number and percentage of those sites with a plan in placeNoCSR Performance G4-EN14Total number of IUCN Red List species and national conservationlist species with habitats in areas affected by operations, by levelof extinction riskNoCSR Performance Aspect: Effluents and WasteDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,8, 10, 11Environment > Our Approach Story > Strengthening Tailings Management Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-EN24Total number and volume of significant spillsNoCSR Performance MM3Total amount of overburden, rock, tailings and sludges and theirassociated risksNoCSR Performance Hudbay 2017 Annual and CSR Report 123 Specific Standard DisclosuresExternalAssuranceImpactBoundariesSOCIAL: LABOUR PRACTICES AND DECENT WORKSpecific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Environmental Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 6, 8,11CSR Approach > Stakeholder Engagement CSR Approach > Materiality Social Impact > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-EN34Number of grievances about environmental impacts filed,addressed and resolved through formal grievance mechanismsNoCSR Performance Hudbay reports on the main topics raised from grievances and hasnot segmented those that have been filed, addressed and/orresolved based specifically on environmental impacts.Aspect: EmploymentDMADisclosure of Management ApproachNo1, 3, 5, 11Our People > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-LA1Total number and rates of new employee hires and employeeturnover by age group, gender and regionNoCSR Performance Hudbay 2017 Annual and CSR Report 124 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-LA2Benefits provided to full-time employees that are not provided totemporary or part-time employees, by significant locations ofoperationNoCSR Performance Aspect: Labour/Management RelationsDMADisclosure of Management ApproachNo1, 3, 5, 11Our People > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-LA4Minimum notice periods regarding operational changes, includingwhether these are specified in collective agreementsNoCSR Performance MM4Number of strikes and lockouts exceeding one week’s duration, bycountryNoCSR Performance Aspect: Occupational Health and SafetyDMADisclosure of Management ApproachNo1, 2, 3, 5, 6,7, 8, 9, 10,11Our People > Our Approach Website > Environmental, Health and Safety Policy Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-LA5Percentage of total workforce represented in formal jointmanagement–worker health and safety committees that helpmonitor and advise on occupational health and safety programsNoCSR Performance Hudbay 2017 Annual and CSR Report 125 Specific Standard DisclosuresExternalAssuranceImpactBoundariesSOCIAL: HUMAN RIGHTSSpecific Standard DisclosuresExternalAssuranceImpactBoundariesG4-LA6Type of injury and rates of injury, occupational diseases, lost daysand absenteeism, and total number of work-related fatalities, byregion and by genderNoCSR Performance Hudbay does not currently track gender-specific data relating to thisdisclosure as it is not applicable to our company.Aspect: Labour Practices Grievance MechanismsDMADisclosure of Management ApproachNo1, 3, 5, 6,11CSR Approach > Stakeholder Engagement Our People > Our Approach Social Impact > Manitoba Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-LA16Number of grievances about labour practices filed, addressed andresolved through formal grievance mechanismsNoCSR Performance Aspect: Non-DiscriminationDMADisclosure of Management ApproachNo1, 5, 11CSR Approach > Human Rights and Security Our People > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.Hudbay 2017 Annual and CSR Report 126 Specific Standard DisclosuresExternalAssuranceImpactBoundariesG4-HR3Total number of incidents of discrimination and corrective actionstakenNoCSR Performance Aspect: Freedom of Association and Collective BargainingDMADisclosure of Management ApproachNo1, 5, 8Our People > Our Approach Story > Working Together to Build a Successful Future Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-HR4Operations and suppliers identified in which the right to exercisefreedom of association and collective bargaining may be violatedor at significant risk, and measures taken to support these rightsNoCSR Performance Aspect: Security PracticesDMADisclosure of Management ApproachNo1, 2, 3, 11CSR Approach > Human Rights and Security Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-HR7Percentage of security personnel trained in the organization’shuman rights policies or procedures that are relevant tooperationsNoCSR Performance Aspect: Indigenous RightsDMADisclosure of Management ApproachNo3, 7, 8, 10,11CSR Approach > Human Rights and Security Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.Hudbay 2017 Annual and CSR Report 127 Specific Standard DisclosuresExternalAssuranceImpactBoundariesSOCIAL: SOCIETYSpecific Standard DisclosuresExternalAssuranceImpactBoundariesG4-HR8Total number of incidents of violations involving rights ofindigenous peoples and actions takenNo Note: There were zero violations in 2017.MM5Total number of operations taking place in or adjacent toindigenous peoples’ territories, and number and percentage ofoperations or sites where there are formal agreements withIndigenous peoples’ communitiesNoCSR Performance Aspect: Human Rights Grievance MechanismsDMADisclosure of Management ApproachNo2, 3, 4, 6, 7,8, 9, 10, 11CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement CSR Approach > Materiality Social Impact > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-HR12Number of grievances about human rights impacts filed,addressed and resolved through formal grievance mechanismsNoCSR Performance Aspect: Local CommunitiesMM6Number and description of significant disputes relating to landuse, customary rights of local communities and indigenouspeoplesNoCSR Performance Social Impact > Peru Hudbay 2017 Annual and CSR Report 128 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Artisanal and Small-Scale MiningMM8Number and percentage of company operating sites whereartisanal and small-scale mining (ASM) takes place on, or adjacentto, the site; the associated risks and the actions taken to manageand mitigate these risksNoCSR Performance Of Hudbay’s five sites, there are two (in Peru and Chile) whereartisanal and small-scale mining is taking place.Aspect: ResettlementDMADisclosure of Management ApproachNo3, 6, 8, 10,11Social Impact > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.MM9Sites where resettlements took place, the number of householdsresettled in each, and how their livelihoods were affected in theprocessNoCSR Performance Aspect: Closure PlanningDMADisclosure of Management ApproachNo1, 2, 3, 6, 7,8, 10Social Impact > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.MM10Number and percentage of operations with closure plansNoCSR Performance 100% of Hudbay’s operations have closure plans.Hudbay 2017 Annual and CSR Report 129 Specific Standard DisclosuresExternalAssuranceImpactBoundariesAspect: Anti-CorruptionDMADisclosure of Management ApproachNo1, 2, 6, 8, 9Our Company > Business Conduct CSR Approach > Responsible Supply Chain Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-SO4Communication and training on anti-corruption policies andproceduresNoCSR Performance Hudbay 2017 Annual and CSR Report 130 Specific Standard DisclosuresExternalAssuranceImpactBoundariesImpact Boundaries Legend1. Employees and contractors2. Business partners (JVs)3. Local communities4. Consumers5. Labour unions6. Shareholders and investor groups7. Industry peers and associations8. Government and regulators9. Suppliers10. Community organizations and NGOs11. Indigenous communitiesAspect: Grievance Mechanisms for Impacts on SocietyDMADisclosure of Management ApproachNo1, 3, 5, 6,11Our Company > Business Conduct CSR Approach > Stakeholder Engagement Social Impact > Our Approach Note: We re-evaluate our management approach every three years aspart of our materiality review process; an evaluation was lastconducted in 2017.G4-SO11Number of grievances about impacts on society filed, addressedand resolved through formal grievance mechanismsNoCSR Performance Hudbay reports on the main topics raised from grievances and hasnot segmented those that have been filed, addressed and/orresolved based specifically on impacts on society.Hudbay 2017 Annual and CSR Report 131 About ThisReportSince 2014, we have combined our annual report and our corporate social responsibility (CSR) report. We believesocial performance is as important as financial and operating performance, and that combining the reportspresents a representative account of the Company’s activities in 2017.We published our Management’s Discussion and Analysis of Results of Operations and Financial Conditionand the consolidated financial statements for the year ended December 31, 2017, on February 21, 2018. Copiesare posted on our website. The Business and Financial Review section of this report covers the content usuallyincluded in our annual report.We have produced an annual CSR report every year since our 2003 report, and this is our 10th report based on theGlobal Reporting Initiative (GRI) Sustainability Reporting Guidelines. Our most recent previous report was releasedin May 2017. This report contains standard disclosures from the GRI G4 Guidelines, prepared largely in accordancewith the Core option.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 2017 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 section of this report.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, socio-political, 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 2017 Annual and CSR Report 132 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 ofthese or 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 theforward-looking information in this annual report is qualified by this cautionary note. Forward-looking information includes, but is not limited to, production, cost and capital and explorationexpenditure guidance, anticipated production at our mines and processing facilities, anticipated environmental,health and safety performance, anticipated social development programs, the anticipated timing, cost and benefitsof developing the Rosemont project, Pampacancha deposit and Lalor growth projects, the anticipated impact ofany delays to the start of mining the Pampacancha deposit, the anticipated results of litigation challenging theRosemont permitting process, anticipated exploration plans, anticipated mine plans, anticipated metals prices andthe anticipated sensitivity of our financial performance to metals prices, events that may affect our operations anddevelopment projects, the permitting, development and financing of the Rosemont project, the potential tooptimize the scale of production at Lalor and to efficiently process the excess base metals ore and initial gold zoneore production at the Flin Flon mill, anticipated cash flows from operations and related liquidity requirements, theanticipated effect of external factors on revenue, such as commodity prices, estimation of mineral reserves andresources, mine life projections, reclamation costs, economic outlook, environmental regulation and legislation andother government regulation of mining operations, and business and acquisition strategies. Forward-lookinginformation is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on,among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at thedate the forward-looking information is provided, inherently are subject to significant risks, uncertainties,contingencies and other factors that may cause actual results and events to be materially different from thoseexpressed or implied by the forward-looking information.The material factors or assumptions that we identified and were applied by us in drawing conclusions or makingforecasts 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 our processing facilities;the accuracy of geological, mining and metallurgical estimates;anticipated metals prices and the costs of production;the supply and demand for metals we produce;the supply and availability of all forms of energy and fuels at reasonable prices;no significant unanticipated operational or technical difficulties;the execution of our business and growth strategies, including the success of our strategic investments andinitiatives;Hudbay 2017 Annual and CSR Report 133 the availability of additional financing, if needed;the ability to complete project targets on time and on budget and other events that may affect our ability todevelop our projects;the timing and receipt of various regulatory, governmental and joint venture partner approvals (including thoserequired to develop the Rosemont project);the availability of personnel for our exploration, development and operational projects and ongoing employeeand union relations;the ability to secure required land rights to develop the Pampacancha deposit;maintaining good relations with the communities in which we operate, including the communities surroundingour Constancia mine and Rosemont project and First Nations communities surrounding our Lalor and Reedmines;no significant unanticipated challenges with stakeholders at our various projects;no significant unanticipated events or changes relating to regulatory, environmental or health and safetymatters;no significant unanticipated changes to the various international and national standards we adhere to;no significant unanticipated changes to our water usage, emissions intensity or energy intensity;no significant unanticipated changes in the political climate in the various jurisdictions in which we currently orplan to explore or operate;the ability to contemplate the effects of climate change at our sites, on our operations and on the extractiveindustry in general;no contests over title to our properties, including as a result of rights or claimed rights of Aboriginal peoples;the timing and possible outcome of pending litigation and no significant unanticipated litigation;certain tax matters, including, but not limited to, current tax laws and regulations and the refund of certainvalue-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).Hudbay 2017 Annual and CSR Report 134 The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially fromthose expressed 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 ofour projects (including risks associated with the permitting, development and economics of the Rosemont projectand related legal challenges), risks related to the maturing nature of our 777 mine and the pending closure of ourReed mine and their impact on the related Flin Flon metallurgical complex, dependence on key personnel andemployee and union relations, risks related to the schedule for mining the Pampacancha deposit (including thetiming and cost of acquiring the required surface rights and the cost and impact of any schedule delays), risksrelated to the cost, schedule and economics of the capital projects intended to increase processing capacity forLalor ore, risks related to political or social unrest or change, risks in respect of Aboriginal and community relations,rights and title claims, operational risks and hazards, including unanticipated environmental, industrial andgeological events and developments and the inability to insure against all risks, failure of plant, equipment,processes, transportation and other infrastructure to operate as anticipated, compliance with government andenvironmental regulations, including permitting requirements and anti-bribery legislation, depletion of ourreserves, volatile financial markets that may affect our ability to obtain additional financing on acceptable terms,the failure to obtain required approvals or clearances from government authorities on a timely basis, uncertaintiesrelated to the geology, continuity, grade and estimates of mineral reserves and resources, and the potential forvariations in grade and recovery rates, uncertain costs of reclamation activities, our ability to comply with ourpension and other post-retirement obligations, our ability to abide by the covenants in our debt instruments andother material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “RiskFactors” in our 2017 Annual Information Form (AIF), and otherwise throughout this annual report.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. We do not assumeany obligation to update or revise any forward-looking information after the date of this annual report or to explainany 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 inCanada, which may differ materially from the requirements of United States securities laws applicable to US issuers.Hudbay 2017 Annual and CSR Report 135 Contact UsWe invite your comments and questions about this report.For investor relations matters, please contact Carla Nawrocki, Director, Investor Relations, 416 362-7362,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 Shareholders May 3, 2018, 2 p.m. ET Toronto, OntarioHudbay 2017 Annual and CSR Report 136 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 provided the framework for this reportGHG emissions – greenhouse gas emissionsGlobal Reporting Initiative (GRI) – an independent institution whose mission is to develop and disseminateglobally applicable 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 prevents the injured person from returning to work onhis/her next scheduled workday after the day the injury occurred, 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 CompanyHudbay 2017 Annual and CSR Report 137 N/ap – not applicableN/av – not availableRestricted work – a work-related injury where a licensed health care provider or the employer recommends thatthe employee not perform one or more routine job functions or not work the usual full workdayTailings – 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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