Hudbay Minerals
Annual Report 2018

Plain-text annual report

WHAT GUIDES US 2018 ANNUAL AND CSR REPORT Hudbay 2018 Annual and CSR Report TABLE OF CONTENTS CEO Message CEO Message Our Feature Stories Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance About This Report Contact Us Glossary 1 4 11 19 25 41 52 63 72 98 100 101 Hudbay strives to create sustainable value; it’s a goal we have met for more than 90 years. In everything we do, we are guided by our mission, our experience, our values and our people. This guidance enabled our performance in 2018 and is why today we look forward to an era of transformative development that will deliver value for years to come. OUR FEATURE STORIES Rosemont Project: Planning for the Future Reed Mine: A Culture of Stewardship from Construction to Closure Constancia Land Package: Expanding Our Pipeline 4 7 9 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CEO Message 1 CEO MESSAGE A RECORD YEAR IN PERU We achieved record mill throughput at Constancia in 2018 and, as a result of metallurgical initiatives, we were also able to deliver record-level copper recoveries. Over the course of the year, Peru produced 122,178 tonnes of copper and 63,187 ounces of gold- precious metals. The molybdenum plant, operating at a significantly higher rate than previous years, produced 904 tonnes of molybdenum. All of this was done while keeping a close eye on costs. Among its peers, including some that are two or three times its size, Constancia is currently the lowest cost open pit copper sulphide mine in South America.1 Another defining strength of our operations in Peru is strong relations with our employees. We have a three- year labour agreement with the union in Peru, where one-year agreements are typical. This helps us manage both risks and costs. Good labour relations are an outgrowth of good community relations, which have been a priority at Constancia from day one. Building strong, trust-based relationships with the people and communities adjacent to our operations, and with all levels of government, has provided us with labour peace (which not all mines in the region enjoy) and will provide a strong foundation for expanding our activities in the area. We delivered these results while maintaining strong safety performance at all of our operations. In Manitoba, our safety record improved compared to the previous year, with our lost time accident (LTA) frequency and lost time accident severity both down by 0.2. At our Peru Business Unit, we had only two lost time accidents, related to hand injuries sustained by contractors. However, good results are not perfect results, and with safety that is our goal; we continue to invest in incident reviews, in enhanced systems and in better training to improve our safety performance. At year’s end, we had generated $479.6 million in cash and reduced our net debt to $465.5 million. We were able to achieve these results while maintaining strong safety performance at all of our mines, which is always a priority for Hudbay. ROSEMONT REACHES A MILESTONE On March 8, 2019, we were very pleased to announce that the US Army Corps of Engineers had issued a Section 404 Water Permit (the 404 Permit) for Hudbay’s Rosemont project. This was the last milestone in a permitting process that involved 17 co-operating agencies at various levels of government, 16 hearings, over 1,000 studies and 245 days of public comment resulting in more than 43,000 comments. On March 21, the US Forest Service, which had already issued its Final Record of Decision in favour of the project, officially approved Rosemont’s Mine Plan of Operations. With the Mine Plan of Operations in hand, we can move forward with developing a modern mine that will fulfill the requirements of its permits, create jobs and provide benefits for all of our stakeholders. Once it is fully operational, Rosemont is expected to account for 10% of US copper production. It will be a long-life, low-cost mine, built and operated by Hudbay, that perfectly embodies our strategy and our strengths. In 2018, Hudbay delivered strong operational results, including copper production that exceeded our guidance range for the year. We were also able to incorporate process improvements at each of our operating business units that drove additional efficiencies in our operations. 1 Source: Wood Mackenzie dataset. GRI 102-10 | 102-14 | 102-15 | 103-2 Hudbay 2018 Annual and CSR Report | CEO Message 2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance This is vital, because in 2018 we consolidated the mineral rights around the Constancia mine, giving us mineral claims to some very prospective properties that were of interest to the Company even before we acquired the Constancia property in 2011. Currently, we are in discussion with various community groups concerning surface rights in areas around Pampacancha and Constancia. These discussions are proceeding amicably, and we have already reached agreements with two communities. In addition to our exploration activities, we are also pursuing opportunities in Chile, the world’s leading copper-producing nation and a highly attractive jurisdiction for miners. CHANGING FOCUS IN MANITOBA In Manitoba, we were confronted by some operating challenges at the beginning of the year, but we were able to address them and achieve our 2018 production guidance for copper, zinc and precious metals. In October, we completed the closure of the Reed mine, under budget and ahead of schedule. From start to finish, Reed can serve as a model for successful, sustainable mining in an environmentally sensitive area. We also announced the closure date for several key operations in Flin Flon as well as the transition of our operational focus to Lalor and the Snow Lake belt. At Lalor, we released a new mine plan and updated reserves and resources incorporating the gold zone and the reopening of the New Britannia mill. We completed several trade-off studies and conducted test mining of the gold zone to confirm our understanding of the deposit, and we concluded that refurbishing New Britannia is the most efficient and cost-effective choice for processing the Lalor gold and copper-gold zones. Related to these efforts, we advanced sampling and survey efforts to better understand the opportunities for copper and gold exploration available to us in the Snow Lake belt. GRI 103-2 We recently discovered a new deposit located between the Lalor mine and the old Chisel North mine in the Chisel basin in Snow Lake. The deposit has high-grade zinc and gold intersections, which demonstrates the regional potential in Manitoba and our strong exploration expertise. We are committed to supporting Flin Flon throughout this process and to being open and transparent every step of the way. Our relationship with the town goes back over 90 years, a remarkable achievement in any industry, but especially in the resource sector. Our ties to Flin Flon are both deep and personal, and we are determined to do our best by the community and its people. SUPPORTING TRANSITIONS IN FLIN FLON We informed our employees that the 777 mine would close in 2022, along with operations at the Flin Flon mill and the zinc plant. We made exhaustive efforts to find options that would allow us to continue operations, but they were not successful. Consequently, our focus becomes reducing the impact of these closures; finding opportunities for Flin Flon employees at Lalor and Snow Lake; and helping both employees and the community manage this transition. BUILDING OUR DEVELOPMENT PIPELINE One of the biggest challenges for any company in the resource sector is building a robust development pipeline. The acquisition of the Ann Mason deposit, a high-quality copper resource in Nevada, the consolidation of prospective properties around Constancia, and our efforts in other regions all help position Hudbay to meet the long-term needs of the Company and its stakeholders with a development Hudbay 2018 Annual and CSR Report | CEO Message 3 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance pipeline that exceeds 800,000 hectares under management. Our exploration budget for 2019 is $40 million, and we are pursuing exploration activities in Manitoba, British Columbia, Nevada, Peru and Chile. Demand for copper is expected to increase in the coming  years, and, at present, there is not adequate supply to meet that demand. With the assets we have in production, in early development or awaiting development, Hudbay is well placed to meet the future’s growing need for copper. ADDRESSING CONCERNS I must also note that, in the fall, a shareholder raised a series of concerns that led to a proxy contest prior to our recent annual general meeting. Following the achievement of a number of business milestones and based on the input of many of our shareholders, we reached a settlement agreement with the shareholder that provided for a continuation of our ongoing board refreshment process. I am pleased with the strong support that shareholders expressed for our management team and Hudbay’s strategy, and am confident that we are well placed to continue to deliver value for all of our stakeholders. STRENGTHENING OUR ORGANIZATION The management theorist Peter Drucker once remarked that “culture eats strategy for breakfast.” Over the last several years, Hudbay has been working in a variety of ways to strengthen and enhance our organizational culture, across all of our operations, so that it better supports the execution of our strategy through our people. These efforts include the establishment of a requisite organizational structure at Hudbay, and led to the introduction of a refreshed mission and vision supported by our values of dignity and respect, caring, openness and trustworthiness. These values guide our decisions from the perspectives of both our internal and external stakeholders. We also believe that inclusiveness and diversity make us a better company by providing Hudbay with access to the full range of talent available to us. We have community outreach efforts everywhere we operate as well as programs aimed at helping our employees improve and expand their skills. We are also signatories to the 30% Club and the Catalyst Accord, and share their goal of having at least 30% female representation at the board and C-suite levels by 2022. impact. Our focus on community in both Manitoba and Peru has allowed Hudbay to enjoy productive relationships with our neighbours. Collectively, these steps help benefit society at large; they also benefit Hudbay directly by making us a better investment, a better partner, a better employer and a better company. LOOKING FORWARD The receipt of the 404 Permit allows us to start 2019 on a high note. It also reminds us to have confidence both in our capabilities and in the permitting process. Drawing upon skills and knowledge gained in Manitoba and Peru, Rosemont will be a transformational project for Hudbay. It is expected to increase our copper-equivalent production by 50% in the next five years. It will also enable Hudbay to set a new bar for sustainable mine building and operation. We end 2018 and begin 2019 very well positioned for the future. In closing, I would like to thank our Board and my colleagues throughout Hudbay for their support of our strategy and their hard work and commitment throughout the year. THE BENEFITS OF RESPONSIBLE MINING Sincerely, Hudbay has a long history of operating in a socially responsible way. This approach aligns with the values that define our culture and is essential for the continued success of our business. Increasingly, we are seeing that large institutional investors are only interested in companies with strong records in the areas of environmental, social and governance (ESG) performance. Our commitment to ESG was demonstrated when Hudbay was placed among the top 50 in The Globe and Mail’s 2018 Board Games Corporate Governance Ranking. The plan for our Rosemont project includes many sector-leading innovations to reduce its environmental Alan Hair President and Chief Executive Officer GRI 102-10 | 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our Feature Stories 4 STORY ROSEMONT PROJECT: PLANNING FOR THE FUTURE On March 8, 2019, the US Army Corps of Engineers issued a Section 404 Water Permit for Hudbay’s Rosemont copper project near Tucson, Arizona. Receipt of the permit marks a major milestone in an exceptionally thorough permitting and public review process that took place over the course of 12 years and involved 17 governmental agencies, more than 1,000 studies, and an extensive public comment period that generated more than 43,000 comments. Having received, on March 21, approval from the US Forest Service of Rosemont’s Mine Plan of Operations – which reflect the positive impact the review process has had on the mine’s layout and operational plan – Hudbay can now begin developing the mine. Once fully operational, Rosemont will be the third-largest copper mine in the United States, accounting for 10% of the country’s annual copper production. Over a projected life of mine, currently estimated at 19 years, Rosemont is expected to produce approximately 127,000 tonnes of copper annually. GRI 102-10 | 103-2 Rosemont’s final environmental impact statement (EIS) exceeded 2,600 pages, detailing the specific requirements necessary to mitigate the project’s impacts. The subsequent Mine Plan of Operations, at more than 4,000 pages, details the sound environmental management practices and advanced mining techniques Rosemont will operate under with respect to sustainability, notably in the areas of managing water and tailings, monitoring and mitigating environmental impacts, and making a positive and lasting contribution to communities near Rosemont. Our goal, and our expectation, is that Rosemont will establish a new standard in the industry for how to more sustainably mine copper – a metal that is essential to sustaining and improving society. Replacing 100% of the Water Used Water is a precious resource in the American Southwest, and it is also essential for many mining processes. Our water management approach at Rosemont is guided by the principles of “reduce, reuse and replace”, and is expected to result in water consumption that will be among the lowest in the world per pound of copper produced. We have voluntarily committed to replace all the water used at the operation, and, as of the end of 2018, we have already purchased and stored approximately nine years’ worth of water (around 45,000 acre-feet) in the Avra Valley and Lower Santa Cruz storage facilities of the Tucson Active Management Area. This water will be returned to the Rosemont-area aquifer, via recharge of the Central Arizona Project (CAP) water. Rosemont is supporting a $28 million project with Community Water Company of Green Valley to build an eight-mile pipeline and water recharge facility that will bring CAP water to the region. Hudbay 2018 Annual and CSR Report | Our Feature Stories 5 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Rosemont will also be a zero-discharge site, meaning the water used in processing will remain on site to be recycled and reused. Among the initiatives and commitments related to water quality are programs to protect residential wells for those living within the vicinity of the project and those near production wells operating for Rosemont. In addition to monitoring area wells and surface water, Rosemont will carefully evaluate and manage stormwater and runoff water from our operations to minimize any adverse impacts. Rosemont will employ numerous technologies and processes to reduce its water consumption, with one of the more innovative being the use of dry-stack tailings. Dry-Stack Tailings – Reduces Water Consumption, Footprint and Risk After copper-bearing ore has been mined, it goes through a series of processes – grinding, crushing and mixing with water – to separate the copper from the rest of the rock. After the copper has been extracted, what remains looks like fine mud or silt, called “tailings”. Managing tailings in a responsible, sustainable way is a key consideration for every mine. At Rosemont, instead of conventional tailings ponds, we will use dry-stack tailings. This approach, ideally suited for a dry climate like Arizona’s, uses 50% to 60% less water than similarly sized mines, has a smaller footprint, is more stable, poses no threat to groundwater through seepage and allows for easier land reclamation and rehabilitation. With the dry-stack method, about 85% of the water is mechanically filtered out of the tailings, leaving a material that resembles damp sand. The water extracted through this process will be reclaimed and reused for mining purposes. GRI 103-2 Waste rock (the non–ore bearing rock) will be used to construct a buttress around the dry-stack tailings facility. Tailings are spread out on the prepared storage area, and as new tailings are generated, they are spread or stacked on existing tailings, forming an exceptionally stable bed. As this bed rises, the height of the waste rock barrier will also be increased to contain it. When mining operations cease, the dry-stack enclosure will be completely covered with waste rock and soil, and then contoured and planted so that the enclosure blends with the surrounding natural landscape. Conservation Tailored for the Distinct Area The Rosemont project will take innovative steps to preserve and protect local plant and animal populations. For example, we will conduct “camera trapping”, covering a 200-square-kilometre site with sensor- equipped cameras that are capable of capturing animal movements day and night. Images from the cameras will be reviewed regularly by a trained biologist, and the findings will be shared with Hudbay and the relevant regulatory agencies. To minimize visual impacts from the road and surrounding areas and support ongoing reclamation, the remaining waste rock will be stored behind a buttress near the facility. The barrier will be covered with soil and revegetated with plants native to the area. Habitat restoration programs for birds and aquatic animals include monitoring the range of an Arizona- specific breed of orchid and the habitat it relies on, protecting bat roosts, providing US$4.25 million in funding to agencies to create or maintain habitat on public lands nearby, and numerous other activities that contribute to species preservation and biodiversity. Hudbay 2018 Annual and CSR Report | Our Feature Stories 6 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Designed to Protect the Past and the Future Once we begin developing Rosemont, archaeologists will come to the site before any construction activities commence, and they will support the operation throughout its mine life to ensure we catalogue and manage any historically and culturally significant findings or sites on the property. The robust permitting and public comment period for Rosemont provided us with a greater understanding of nearby communities’ priorities, and these are reflected in Rosemont’s numerous commitments to contribute to the region’s long-term economic prosperity and well- being. Examples include an annual contribution of US$500,000 to support community giving and a $25 million trust dedicated to conservation, recreation, cultural and environmental projects and education. We highlight these features and more in a video on the Rosemont project that is available on the home page of our website at hudbay.com. For over a century, Arizona has been a favourite spot for both amateur and professional astronomers. To avoid impacts on the state’s astronomy industry while ensuring employee safety, Rosemont will implement a technologically advanced lighting system. Our lighting plan was developed in consultation with an International Dark-Sky Association board member, and features include filtered LED fixtures, colour rendering to avoid blue-spectrum lights, and shielding/beam control on non-fixed lights to reduce direct uplight. A unique air quality measure we will employ at the site involves using equipment with tier 4 engines. Tier 4 diesel engines have the highest EPA emissions standards for off-highway vehicles, delivering a 90% reduction in particulate matter and a 50% reduction in nitrogen oxides emissions. We will also use a wide range of innovative approaches to ensure no dust leaves the site during the construction and operation of Rosemont. Our processing equipment will feature cartridge-style dust collectors. The conveyors will be covered, and water-sprays situated along the transfer points will keep dust down. Road watering and road binders, as required, will cut down on dust generated by mine traffic. Once the mine is operational, we will also use natural gas–powered buses to transport employees to and from the mine site, which will help reduce emissions and traffic along State Route 83. GRI 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our Feature Stories 7 STORY REED MINE: A CULTURE OF STEWARDSHIP FROM CONSTRUCTION TO CLOSURE In 2012, Hudbay began construction on the Reed copper mine in northwestern Manitoba, and in July 2018 the last ore was mined and the mine’s operations came to an end. Reed was unique in that it offered a high-grade concentrated deposit, but it was small; it had an estimated mine life of only five years. The plan included designing the mine to have a very limited environmental impact due to its location in an environmentally sensitive area. Small, Tidy Footprint The permitting process for Reed was rigorous given the location of the mine and concerns about environmental impacts. Hudbay made every effort to not just meet the requirements in the permits, but to exceed them when possible. For example, while Hudbay had approval to clear trees on 14 hectares for the site, it only needed half the area. The site team explored ways to keep as many trees as possible by trimming branches instead of cutting trees down and modifying road routes if it meant fewer trees would need to be removed. Rather than clearing a distinct rectangle for the site, islands and peninsulas of trees and vegetation were left untouched to accelerate reclamation and revegetation once the site closed. The Company minimized the number of buildings and facilities needed by trucking ore to the concentrator at Flin Flon. With the five-year life of mine timeframe in mind, all buildings were either portable (e.g., trailers) or built to be easily dismantled. The truck shop was the only facility built on a concrete foundation. All other buildings sat on crushed limestone. The site’s personnel also did their part to limit impacts by recycling and hauling waste and used materials off the site as soon as possible, and by keeping the site free of any kind of litter, including used cigarettes. Environmental Challenges Met One of the biggest environmental issues faced by the team at Reed was that the mine was built below a major aquifer. If it was accidentally pierced, water from the aquifer would have poured into the mine at a rate of more than 1,200 gallons per minute. To mitigate the risk and reduce the amount of water that needed to be pumped out of the mine, a “grout curtain”, requiring 19,000 bags of cement, was built, keeping water seepage to a manageable six to 10 gallons per minute. GRI 103-2 Hudbay 2018 Annual and CSR Report | Our Feature Stories 8 A key contributor to the successful closure of Reed was that there was a continuity of personnel and shared knowledge that delivered top expertise and first-rate execution during every stage of the mine lifecycle. Regarding expectations for the site’s future, Jay Cooper, Director of Environment for Hudbay’s Manitoba Business Unit, says, “Five years from now, people walking through the site will notice that the vegetation looks a little different – more grasses and younger trees – but they won’t know there once was a mine there.” CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance The team treated all waste rock as potentially acid generating when brought to the surface. When closure activities commenced, the waste rock was then returned to the underground mine to fill voids and improve stability. Another concern was the mine’s impact on local animal populations, particularly caribou. Hudbay’s longstanding support for Manitoba’s Boreal Woodland Caribou Recovery Strategy – a multi-year plan that supports recovery efforts and protection of the woodland caribou in northern Manitoba – provided crucial data for tracking migration routes near the mine site and assessing any impacts. A number of on-site staff members participated in the caribou monitoring program. The site also avoided establishing straight roads or other linear features that give an advantage to caribou predators, used quiet generators to mitigate noise impacts and placed venting fans underground. Designed for Closure As soon as operations ceased in July of 2018, the team moved into the closure phase. The attention to detail the site team employed during the operating phase allowed them to achieve numerous closure milestones by the end of the year. All buildings have been removed, many of them being repurposed or sold. Soil that had been disturbed during construction and set aside was used to contour the land to the original topography and drainage patterns. Viable seeds from plants on-site will be planted to help revegetate the area. In consultation with Manitoba Sustainable Development officials, the team will continue environmental reclamation and monitoring, evaluating every square inch of the site to confirm it has been cleaned up and is ready for revegetation. GRI 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our Feature Stories 9 STORY CONSTANCIA LAND PACKAGE: EXPANDING OUR PIPELINE Hudbay has a long, proven history of successfully exploring and developing new mines, and our Constancia operation in Peru demonstrates our best-in-class approach. Constancia’s timeline from feasibility (determining if the mineral resource can be mined economically) to first production and the ramp-up to full, steady-state production was the fastest among recent, similar-sized projects. Constancia is also the lowest cost open pit copper sulphide mine in South America. Reaching commercial production in 2015, Constancia was a greenfield project in a new jurisdiction for Hudbay. One of the biggest challenges in developing the mine was a cultural one, and Hudbay was committed to learning about the language and values of the Peruvian people and integrating the operation into its culture. By acting honestly, ethically and transparently with government officials and nearby communities, Hudbay has built strong, positive relationships. Expanding Operations through Exploration Constancia is in an area that is highly prospective for copper, and through continued exploration activities led by Hudbay’s exploration team, we have identified opportunities to maintain the operation’s efficiencies and potentially extend Constancia’s mine life. The Pampacancha deposit is a small, high-grade orebody located only four kilometres from the Constancia mill. Because Constancia is a porphyry copper deposit, ore grades will likely decline as we mine deeper. However, Pampacancha’s high grades will allow us to improve the grade feeding the mill and maintain grades at Constancia for around five years. Our exploration team also believes the land around Constancia has the potential for several deposits like Pampacancha’s that would continue to improve the grade of the mill feed once mining of Pampacancha is complete. As an important step in consolidating the land package around Constancia, in early 2018 we acquired the mineral rights to three properties within 10 kilometres of Constancia that have a high probability of hosting a mineral deposit. Hudbay 2018 Annual and CSR Report | Our Feature Stories 10 Reaching Agreements with the Communities That Own the Land Peru Exploration in Action CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance While Hudbay has purchased the mineral rights to Pampacancha and the other nearby properties, the communities own the surface rights. Before we can do any exploratory drilling on the sites, we have to obtain an exploration permit and a drill permit. In Peru, we cannot apply for a drill permit until we have completed archaeological studies (to identify any native artifacts and/or sites) and an environmental impact statement for the purpose of exploration work (see infographic). And we cannot conduct the fieldwork for the studies until we have a community agreement in place. We have a history of being fair and ensuring that communities participate in the benefits from the mining of their land. Since 2012, we have reached more than 90 agreements with the local governments and communities near Constancia. These agreements include commitments related to employment and business opportunities and investments in programs (including health, education, infrastructure and socio-economic initiatives) that the community has identified as a priority. We have a land access agreement with one of the four communities holding land rights over two of the six areas. Negotiations with the other communities continue. 1. Find a prospective area: 2. Before Hudbay performs any drilling or geological sampling, a number of factors – location, history, surface-level visual evidence, aeromagnetic surveys – help determine if an area is prospective. Secure subsurface mineral rights: The Peruvian state retains the ownership of all mineral resources, and obtaining the right to undertake mining activities is negotiated with the federal government. 3. Negotiate surface-rights agreements with local communities: Hudbay works directly with local councils as well as representatives from the regional and federal governments. 4. Identify native artifacts and sites: After community agreements are reached, we conduct archaeological studies to look for indications of historic peoples and/or artifacts. These reports are submitted to the government and are used to establish protocols for treating any historically significant findings during the drilling process. 5. Assess environmental impacts: While archaeological studies are proceeding, we prepare and submit an environmental impact assessment (EIA) showing how we will manage/ mitigate the impacts of exploratory drilling. 6. Apply for permit to drill: After the EIA is accepted, Hudbay can apply for an exploratory drilling permit. Good for three years, the permit dictates where and how we can drill during the exploration phase. 7. Commence exploratory drilling: Once the drilling permit is in hand, our exploration office in Lima will set up several teams to go into the field and start drilling. The teams are made up of geologists and geophysicists as well as people from the local area who provide support. 8. Drill core samples: On each drilling platform (a few metres square in size), teams drill several holes about 500 metres deep to bring up core samples – cylindrical sections of subsurface material that provide a visual record of the rocks and ores sampled. 9. Analyze samples: The core samples are analyzed by independent experts to determine the percentage of economically worthwhile minerals (i.e., copper, zinc, silver, gold, etc.) in a given sample. 10. Determine economic viability: If samples from a given area consistently contain a suitable grade of valuable minerals, then Hudbay considers a whole range of factors – location, labour availability, environmental issues, current and expected mineral prices, etc. – to determine whether a mine is likely to be economically viable. 11. Begin development process: Once the drilling process confirms the presence of a viable resource, the process begins for conducting a comprehensive EIA and for obtaining the other permits required for building and operating a mine. Hudbay 2018 Annual and CSR Report | Our Company 11 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance OUR COMPANY Hudbay is an integrated mining company producing copper concentrate (containing copper, gold and silver), molybdenum concentrate and zinc metal. Hudbay owns three polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Chumbivilcas (Peru), and a copper project in Arizona (United States). The Company is governed by the Canada Business Corporations Act, and its shares are listed under the symbol “HBM” on the Toronto Stock Exchange, New York Stock Exchange and Bolsa de Valores de Lima. GRI 102-1 | 102-2 | 102-3 | 102-4 | 102-5 Hudbay 2018 Annual and CSR Report | Our Company 12 MANITOBA, CANADA CEO Message Lalor 777 Reed Our Feature Stories • 100% ownership • 100% ownership • 70% ownership Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance • Long-life, underground zinc/gold/silver/copper mine • Stall and Flin Flon concentrators process Lalor base metal ore • New Britannia concentrator to be refurbished to process Lalor gold-rich ore ARIZONA, USA Rosemont • 100% ownership* • Open pit copper project • Underground copper/ zinc/gold/silver mine • Flin Flon concentrator • Hydrometallurgical zinc plant • Underground copper mine (ceased operations on July 25, 2018) CHUMBIVILCAS, PERU Constancia • 100% ownership • Open pit copper/ molybdenum mine and concentrator EXPLORATION PROPERTIES • Peru • Chile • Nevada, USA • Manitoba, Canada • British Columbia, Canada GRI 102-4 BRITISH COLUMBIA Exploration MANITOBA 777 Lalor Reed ARIZONA Rosemont Operations Development Exploration NEVADA Ann Mason PERU Constancia CHILE Exploration * 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. We announced an agreement to purchase UCM’s Rosemont interest in our March 13, 2019 news release. Hudbay 2018 Annual and CSR Report | Our Company 13 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance VISION, MISSION, VALUES VISION We will be a responsible top-tier operator of long-life, low-cost mines in the Americas. MISSION Our mission is to create sustainable value through acquisition, development and operation of high-quality, long-life deposits with exploration potential in jurisdictions that support responsible mining, and to see the regions and communities in which we operate benefit from our presence. VALUES Dignity & Respect We treat each other in ways that bring out the very best in each of us. Caring We sustain and contribute to the well-being of people and the environment in which we operate. Openness We speak freely and listen with care about opportunities, issues and concerns. Trustworthiness We can count on each other to do the right thing, and we follow through on our commitments. GRI 102-16 Hudbay 2018 Annual and CSR Report | Our Company 14 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance CORPORATE GOVERNANCE Strong corporate governance – built on openness, accountability and trust – is an expectation of shareholders and stakeholders and is crucial for operating and growing the business. Hudbay’s Board of Directors is committed to strong corporate governance practices and the highest standards of ethical conduct. In late 2018, a shareholder, Waterton Global Resource Management, initiated a proxy contest seeking change to Hudbay’s Board. As is typical of these contests, there was vigorous debate on both sides, as was reflected in our 2019 Management Information Circular. Following the achievement of a number of business milestones and based on the input of many of our shareholders, we reached a settlement agreement with the shareholder that provided for a continuation of our ongoing board refreshment process. Our Board has been consistently recognized for strong corporate governance practices. At our 2018 annual shareholders’ meeting, proxy advisor Institutional Shareholder Services (ISS) recommended that shareholders vote to re-elect all Hudbay board members, as it has done over the last nine years, and it ranked Hudbay in its top 20% for overall governance quality. We were also among the top 50 – and the only base metal miner in the top 100 – in The Globe and Mail’s 2018 Board Games Corporate Governance Ranking. Members of our Board are highly qualified individuals who were selected based on qualifications that include judgment, character, expertise, skills and knowledge useful to the oversight of the Company’s business; diversity of viewpoints, backgrounds, experiences and other demographics including gender; and business or other relevant experience. Among our board members: • 100% have a strong track record of leadership • 100% have served as a CEO or senior officer • 100% have international business experience – an important qualification for our business • 80% have finance and merger and acquisition (M&A) experience • 80% have experience in the mining or natural resource industries The Board fulfills its responsibilities directly and through five committees: Audit; Compensation and Human Resources; Corporate Governance and Nominating; Environmental, Health, Safety and Sustainability; and Technical. See our Management Information Circular to learn more. GRI 102-20 | 102-22 | 102-23 | 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our Company BOARD OF DIRECTORS 15 ALAN R. HIBBEN* SARAH B. KAVANAGH* IGOR GONZALES* CHAIR CORPORATE GOVERNANCE AND NOMINATING COMMITTEE (CHAIR) ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY COMMITTE (CHAIR) CORPORATE GOVERNANCE AND NOMINATING COMMITTEE ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY COMMITTEE TECHNICAL COMMITTEE CARIN S. KNICKEL* ALAN HAIR PRESIDENT AND CHIEF EXECUTIVE OFFICER RICHARD HOWES* COMPENSATION AND HUMAN RESOURCES COMMITTEE TECHNICAL COMMITTEE CAROL T. BANDUCCI* AUDIT COMMITTEE (CHAIR) ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY COMMITTEE DAVID SMITH* CORPORATE GOVERNANCE AND NOMINATING COMMITTEE COMPENSATION AND HUMAN RESOURCES COMMITTEE * Independent PETER KUKIELSKI* More information on our Board of Directors ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY COMMITTEE TECHNICAL COMMITTEE Learn more: • Governance policies, standards, guidelines and committee charters • Management Information Circular COMPENSATION AND HUMAN RESOURCES COMMITTEE (CHAIR) CORPORATE GOVERNANCE AND NOMINATING COMMITTEE COLIN OSBORNE* TECHNICAL COMMITTEE (CHAIR) AUDIT COMMITTEE DANIEL MUÑIZ QUINTANILLA* AUDIT COMMITTEE GRI 102-18 | 102-22 | 102-23 Hudbay 2018 Annual and CSR Report | Our Company BUSINESS CONDUCT How we do our work is as important as what we do. Companies that establish high-trust environments consistently deliver greater value. assets, systems and property; and fostering a work environment of respect and dignity. In 2018, we created alignment around the principles that reflect how we will work together. The outcome was a validation of our values of dignity and respect, caring, openness and trustworthiness. Throughout the year, these values were cascaded throughout the organization via in-person meetings with our CEO, workshops at each business unit, a video featuring our CEO and other internal communications. Our values are also expressed in our Code of Business Conduct and Ethics (Code of Business Conduct), which states the principles of ethical conduct expected of everyone working on behalf of Hudbay and its subsidiaries and affiliates. These principles include avoiding conflicts of interest; complying in good faith with all applicable laws, rules and regulations; protecting Hudbay’s confidential and proprietary information, 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 believe is in violation of our Code of Business Conduct or any laws. Hudbay personnel may participate in the political process as private citizens; however, our Code of Business Conduct prohibits political contributions made on Hudbay’s behalf. The standards of conduct that we expect of suppliers who wish to do business with Hudbay are stated in our Supplier Code of Conduct and Ethics (Supplier Code of Conduct). All suppliers must read, accept and comply with the Supplier Code of Conduct and all applicable compliance policies – including our Statement on CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 16 Anti-Corruption, our Human Rights Policy and our Environmental Health and Safety Policy – as a condition to doing business with Hudbay. Suppliers are expected to promptly investigate any allegation that their personnel violated our Supplier Code of Conduct. COMPLIANCE TRAINING Our legal department provides compliance training on our Code of Business Conduct and related policies to all employees with a Hudbay email address as well as to the Board. This includes training on the Canadian Corruption of Foreign Public Officials Act (CFPOA) and the US Foreign Corrupt Practices Act (FCPA) to specific groups or across the organization as the Company deems appropriate. Board members and employees must confirm that they understand and will comply with the Code of Business Conduct upon joining the Company. Every director and executive officer must disclose any direct or indirect conflict of interest to the Board, and all directors, officers, and employees with a Hudbay email address are required to annually confirm compliance with the Code of Business Conduct, the Confidentiality and Insider Trading Policy and our Statement on Anti-Corruption. In 2018, we required all employees with a Hudbay email address to complete an online anti-harassment and discrimination course. Of the individuals required to participate in the training, 100% (representing 50% of our workforce) completed the course. For individuals who initially failed to comply, the Company suspended their email access until they completed the training. GRI 102-16 | 102-17 | 102-25 | 102-33 | 102-34 | 102-44 | 103-1 | 103-2 | 205-1 | 205-2 | 205-3 Hudbay 2018 Annual and CSR Report | Our Company 17 Primary risk ownership is assigned to the business unit or function where the risk originates. On a quarterly basis, risk information is consolidated and reported to our executive management team and the Board. The Vice President, Risk Management, and the Director, Risk Management, lead the ERM program, and the Board’s Audit Committee provides oversight of the risk management function. We discuss long-term and emerging risks and their potential business impacts in the Risk Factors section of our Annual Information Form. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance RISKS, ISSUES OR COMPLAINTS An assessment of corruption risks at our three business units and our corporate office identified that potential for the violation of the CFPOA and the FCPA constitutes a significant risk in Peru due to difficulties in monitoring the compliance of contractors and agents (and potentially employees as the Company grows), as well as the increased enforcement of anti-corruption legislation. There were no incidents of corruption reported in 2018, and no accusations of corruption involving employees, business partners or legal cases were brought against the Company. Through our third-party whistleblower reporting service, 16 incidents were reported in 2018, all of which were investigated and resolved with corrective action where necessary. While none of these incidents involved significant allegations of fraud or violations of our Code of Business Conduct, some allegations were brought forward related to business, health, safety and environmental practices, inappropriate behaviour, and violations of company policies or procedures. Stakeholders may report an issue in one or more of the following ways: • Contact our Board of Directors by mail or by email at chair@hudbay.com. • Submit a confidential report to the Chair of Hudbay’s Audit Committee about auditing matters or perceived violations of the Company’s internal and accounting controls, Code of Business Conduct or Supplier Code of Conduct by calling +1 877 457-7318 or by visiting clearviewconnects.com. Reports are handled under our Whistleblower Policy, and the Chair of the Audit Committee is responsible for ensuring that they are appropriately investigated. • Canada’s National Contact Point (NCP) for the Organisation for Economic Co-operation and Development (OECD) provides a forum where GRI 102-30 | 103-2 | 205-1 | 205-2 | 205-3 multinational enterprises, Canadian businesses, non-governmental organizations and labour organizations can voice their views and concerns. Canada’s NCP can be reached by email at ncp.pcn@international.gc.ca or by telephone at +1 343 203-2341. • In January 2018, the independent Canadian Ombudsperson for Responsible Enterprise (CORE) replaced the office of the CSR Councillor in addressing human rights complaints related to Canadian companies operating overseas. More information about the development of the CORE’s roles and responsibilities is available on the Government of Canada’s website. • Community concerns are addressed through our grievance process at each project and operating site. For details, see Community Relations. RISK MANAGEMENT As a mining company operating and exploring in multiple jurisdictions, Hudbay’s risk profile is broad, so an effective approach to risk management is essential to achieving our business objectives. Our enterprise risk management (ERM) program helps us identify existing and emerging risks to our business, promotes alignment across the organization, and embeds 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 and treatment. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our Company MANAGEMENT TEAM 18 Our management team provides strategic leadership, sets the tone for a culture of integrity and compliance, and establishes, implements and oversees the Company’s long-range goals, strategies, plans and policies, subject to the Board’s direction and oversight. Learn more • Management team biographies ALAN HAIR PRESIDENT AND CHIEF EXECUTIVE OFFICER EUGENE LEI SENIOR VICE PRESIDENT, CORPORATE DEVELOPMENT AND STRATEGY JON DOUGLAS VICE PRESIDENT AND TREASURER ROBERT ASSABGUI VICE PRESIDENT, MANITOBA BUSINESS UNIT DAVID BRYSON SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER DAVID CLARRY VICE PRESIDENT, CORPORATE SOCIAL RESPONSIBILITY ELIZABETH GITAJN VICE PRESIDENT, RISK MANAGEMENT JAVIER DEL RIO VICE PRESIDENT, SOUTH AMERICA BUSINESS UNIT CASHEL MEAGHER SENIOR VICE PRESIDENT AND CHIEF OPERATING OFFICER PATRICK DONNELLY VICE PRESIDENT AND GENERAL COUNSEL ANDRÉ LAUZON VICE PRESIDENT, ARIZONA BUSINESS UNIT OLIVIER TAVCHANDJIAN VICE PRESIDENT, EXPLORATION AND GEOLOGY ADRIENNE BLAZO PETER AMELUNXEN VICE PRESIDENT, ORGANIZATIONAL EFFECTIVENESS VICE PRESIDENT, TECHNICAL SERVICES PETER ADAMEK (EFFECTIVE MAY 1, 2019) VICE PRESIDENT, FINANCE Hudbay 2018 Annual and CSR Report | Business and Financial Review 19 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance BUSINESS AND FINANCIAL REVIEW In 2018, Hudbay acquired the Ann Mason project and consolidated the mineral rights around our Constancia property. Over the long term, we expect these acquisitions will make a positive contribution to our development pipeline and be accretive to long-term value. More significantly, in 2018 we were able to leverage our skills as mine operators to enhance the value and potential of our existing assets. At Constancia, we were able to use metallurgical techniques and implement process improvements that resulted in record performances for copper recoveries, mill throughput and molybdenum production. At Lalor, actions taken over the year have put the mine on track for delivering 4,500 tonnes per day in early 2019, and we were able to update our reserve and resource estimates to include a 65% increase in contained gold (Technical Report). To further increase the value and extend the mine life of existing operations, while expanding our potential development pipeline, we have committed $40 million to exploration activities in 2019. GRI 102-2 | 102-7 Hudbay 2018 Annual and CSR Report | Business and Financial Review 20 KEY ACCOMPLISHMENTS 2018 SUMMARY CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment • On a consolidated basis, Hudbay’s copper production exceeded the midpoint of 2018 guidance by 14% and production of zinc and precious metals was within 2018 guidance ranges; copper production at Constancia exceeded the top end of 2018 guidance and Manitoba copper production was at the top end of the guidance range • At Constancia, achieved record mill throughput, record copper recoveries and record molybdenum production in 2018 • Generated cash from operating activities of $479.6 million in 2018 • Decreased net debt to $465.5 million as at December 31, 2018, including cash and cash equivalents of $515.5 million • Updated reserve and resource estimates at Lalor, including a 65% increase in gold reserves CSR Performance • New Lalor mine plan more than doubled expected annual gold production to approximately 140,000 ounces over the first five years following the refurbishment of New Britannia at a sustaining cash cost, net of byproduct credits of $450 per ounce, positioning Lalor as one of the lowest cost gold mines in Canada (Technical Report) Operations Summary For the years ended December 31 Production (contained metal in concentrate)1 Copper (000 tonnes) Zinc (000 tonnes) Gold (000 ounces) Silver (000 ounces) 1 Metal reported in concentrate is prior to refining losses or deductions associated with smelter contract terms. 2018 154.5 115.6 119.9 2017 159.2 135.2 108.6 3,954.4 3,487.3 Financial Summary Financial Condition (in $000s) Cash and cash equivalents Working capital Total assets Total long-term debt Equity Dec. 31, 2018 Dec. 31, 2017 (Restated) $ 515,497 $ 356,499 445,228 251,388 4,685,635 4,728,016 981,030 979,575 2,178,856 2,112,345 GRI 102-7 Hudbay 2018 Annual and CSR Report | Business and Financial Review 21 Financial Performance (in $000s, except per share and cash cost amounts) Revenue Profit before tax Basic and diluted earnings (loss) per share1 Profit (loss) Operating cash flows before change in non-cash working capital Production Contained metal in concentrate2 Copper (tonnes) Gold (ounces) Silver (ounces) Zinc (tonnes) Metal sold Payable in metal in concentrate2 Copper (tonnes) Gold (ounces) Silver (ounces) Refined zinc (tonnes) 1 Attributable to owners of the Company. 2 Metal reported in concentrate is prior to deductions associated with smelter contract terms. Dec. 31, 2018 Dec. 31, 2017 (Restated) $ 1,472,366 $ 1,402,339 170,837 172,911 0.33 0.57 85,416 139,692 493,471 530,561 154,550 159,192 119,882 108,593 3,954,469 3,487,258 115,588 135,156 147,923 148,655 113,097 109,770 3,372,353 3,060,269 115,723 116,377 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance GRI 102-7 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Business and Financial Review 22 STRATEGY • Our focus is on adding long-life, low-cost assets to our portfolio. Long-life assets can capture peak pricing in multiple commodity price cycles, while being low cost enables these assets to generate free cash flow even during price downturns. • Real value is created by leading efficient project development and operations; we also feel that large, transformational mergers are risky and potentially value destructive. • Acquisitions should be accretive to Hudbay on a per share basis. FINANCIAL AND BUSINESS OBJECTIVES FOR 2019 Looking ahead, in 2019 we intend to advance our new Lalor gold strategy, actively move forward on project development for Rosemont, develop the high-grade Pampacancha satellite deposit, establish exploration access agreements with communities in the newly consolidated mineral rights around Constancia, and pursue near-mine and greenfield exploration activities. We aim to: • Maintain our industry-leading low-cost business to continue to generate positive cash flow • Complete a new reserve and resource estimate for the Snow Lake operations, including our 100% owned Lalor, Pen, Wim and New Britannia properties, and advance plans for the refurbishment of the New Britannia mill • Maintain targeted recoveries and throughput at Constancia, while identifying areas of upside through continuous improvement initiatives • Begin development of the Pampacancha satellite deposit Hudbay works to create sustainable value by acquiring, developing and operating high-quality, long-life deposits with exploration potential in jurisdictions that support responsible mining. We also take care to ensure that the regions and communities in which we operate benefit from our presence. Our goal is to grow Hudbay by exploring and developing properties we already control, such as our Rosemont project in Arizona, and by acquiring other properties that fit our strategic criteria. Moreover, we work continuously to optimize the value of our producing assets through efficient and safe operations. We believe that the best way to create shareholder value in the mining industry is by discovering new mineral deposits and developing new facilities to profitably extract ore from those deposits. We believe that our successful development, ramp-up and operation of the Constancia mine in Peru, added to our long experience of mining in northern Manitoba, give us a competitive advantage in these respects, when compared to other mining companies of a similar size. To make sure our acquisitions create sustainable value for stakeholders, we have clear criteria for evaluation of mineral property opportunities. These include: • Potential acquisitions should be in jurisdictions that support responsible mining and have acceptable levels of political risk. • We should be able to take advantage of our expertise in exploring and developing porphyry and volcanogenic massive sulphide mineral deposits. GRI 102-2 | 102-10 | 103-2 Hudbay 2018 Annual and CSR Report | Business and Financial Review 23 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance • Advance Rosemont through the final stage of permitting and initiate early works activities • Test promising exploration targets near Lalor and plan near-term exploration programs in Peru, Chile, British Columbia and Nevada • Continue to evaluate exploration and acquisition opportunities that meet our criteria described above and pursue those opportunities that we determine to be in the best interest of the Company and our stakeholders BUSINESS ACTIVITIES In 2018, we continued to drive efficiencies at our operations; this enabled us to exceed the midpoint of our copper production guidance while delivering zinc and precious metals production within our guidance ranges. Despite a downward trend in prices over the year, we were still able to generate positive free cash flow. At our Constancia operation, we enjoyed record performance in mill throughput, copper recovery and molybdenum production. We were also able to consolidate the land package around Constancia. We are very pleased to report that work done at Lalor throughout 2018 will help us fully understand the Lalor gold zone and find the optimal gold processing solution for maximizing its long-term value. GRI 102-2 | 102-7 Hudbay 2018 Annual and CSR Report | Business and Financial Review 24 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 2018 PERFORMANCE HIGHLIGHTS • Across the Company, produced 154,550 tonnes of copper in concentrate, 115,588 tonnes of zinc in concentrate and 176,375 ounces of precious metal in concentrate • Focused on cost efficiency, with a consolidated cash cost of $0.94 per pound copper and an all-in sustaining cash cost of $1.52 per pound • Generated significant free cash flow and reduced net debt to $466 million • Completed the closure and reclamation of the Reed mine • Determined that the optimal way to maximize value from Lalor’s gold-rich ore is to refurbish the New Britannia gold mill • Announced increased reserves and resources at our • Increased mill throughput by 9% compared to 2017, as a result of mine blasting optimization and increased plant availability • Continued community negotiations at Pampacancha; once operational, the high-grade Pampacancha deposit will enhance the grade of Constancia feed Lalor mine and nearby satellite deposits • Consolidated the highly prospective mineral rights • Released an updated mine plan for Lalor incorporating the refurbishment of the New Britannia mill for processing gold and copper-gold ore around our Constancia property Corporate Exploration • Completed our acquisition of Mason Resource Corp. Peru Business Unit and its wholly owned Ann Mason project • Expanded our portfolio of owned or optioned mineral properties to comprise more than 885,000 hectares Manitoba Business Unit • Set a closure date in 2022 for the 777 mine and mill and Flin Flon zinc plant • Based on 2018 operating costs1, Constancia recognized as the lowest cost open pit copper mine in South America • Conducted infill drilling at Lalor that supported a substantial increase in Lalor’s mineral reserve • Acquired the Ann Mason copper deposit in Nevada • Achieved record mill throughput, copper recoveries and molybdenum production 1 Source: Wood Mackenzie (Q4 2018 dataset; primary copper, open pit sulphide mines in South America). Wood Mackenzie’s costing methodology may be different than the methodology reported by Hudbay or its peers in their public disclosure. For details regarding Hudbay’s costs, refer to Hudbay’s Management’s Discussion and Analysis for the three and 12 months ended December 31, 2018. FINANCIALS In 2018, as in recent years, Hudbay again met or exceeded our production guidance ranges for metal production for the year on a consolidated basis, while continuing to generate free cash flow. Combined unit costs at Manitoba were within our revised guidance ranges for the year. In Peru, combined unit costs aligned with 2018 guidance ranges after taking into account the cost of higher than anticipated molybdenum production, and total capital expenditures were within expectations. Hudbay’s full year revenue was $1,472.4 million, $70.1 million higher than 2017. This increase was driven by significantly higher realized sales prices for all commodities and higher sales volumes for precious metals. Through maintaining consistent cost discipline, we delivered an all-in sustaining cash cost for copper produced, net of byproduct credits, of $1.52 per pound.2 Consolidated Financial Statements Management’s Discussion and Analysis 2 Operating cash flow per share and cash cost per pound of copper produced, net of byproduct credits, are non-IFRS financial performance measures 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 45 of Hudbay’s Management’s Discussion and Analysis filed February 19, 2019. GRI 102-2 | 102-7 Hudbay 2018 Annual and CSR Report | CSR Approach 25 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance CSR APPROACH Hudbay’s corporate social responsibility (CSR) efforts are led by a team of dedicated, experienced professionals, and guided by our values and by policies, systems and practices that uphold our commitment to responsible, sustainable development. 305 EMPLOYEES Hudbay employees participated in human rights training in 2018 GRI 102-29 | 103-1 | 103-2 Received honourable mention award for sustainability reporting from Finance Montreal’s Finance and Sustainability Initiative (FSI) AAA RATING Constancia received AAA rating in annual TSM self- assessment of Aboriginal and community outreach, safety and health, and biodiversity conservation management Hudbay 2018 Annual and CSR Report | CSR Approach 26 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance STORY ENGAGING TRADITIONAL KNOWLEDGE HOLDERS ON MILL REFURBISHMENT PROJECT At our Lalor mine, we evaluated options for processing the gold and copper-gold zones, and this evaluation included refurbishing the New Britannia mill, which has been on care and maintenance for around 14 years. The mill refurbishment plan includes using as much existing infrastructure as possible. However, we will need to construct some new facilities to store and process ore, and we will need to make some minor adjustments to the tailings pipeline path between the mill, the concentrator and the tailings impoundment area. In assessing the impacts of the project on the environment and the community, we seek to attain the traditional knowledge of the indigenous people near the mine. Because of their in-depth knowledge of the land and their ability to distinguish project impacts from natural changes in the environment, during two terrestrial field programs in the spring and fall, traditional knowledge holders joined biologists to walk the entire length of the proposed pipeline corridor and identify medicinal plants, local wildlife and heritage resources. Along with obtaining valuable insight, the engagement helped strengthen the relationship between Hudbay and the community. Hudbay’s environmental, health and safety (EHS) management systems have been in place for many years, and have been compliant with international standards for 15 years. These systems provide the structure for conducting business in a way that manages our impact on the environment and minimizes and controls our health and safety risks. Our EHS systems are designed to support compliance with standards and reporting frameworks (both internal and external), drive continuous improvement and align with our business strategy. During the year, we conducted a review of our EHS management systems, gathering feedback from operations managers on what is working well, what is not and how we can improve. We also tested how well the managers understood the systems and how they worked. Key findings from the review included: • Managers felt that there is a need for more training on the systems across all levels of their business unit, and that the training needs to highlight why the systems are in place and how they are applied. • The systems and associated audits and certifications added value and were deemed important, but the documentation was onerous and opportunities existed to reduce complexities. • Some system elements need to be better tailored to the specific operation. • The concept of routine – such as the safety calendars in Manitoba that detail tasks, frequency and accountability for safety-related activities – was viewed as an effective tool for making sure teams are focused on the right tasks. Each site is working to address these findings. Providing support to the sites’ efforts is the EHS Management Review Committee (comprising the CEO, COO, operations VPs and corporate CSR group) and the principles of our OneHudbay initiative. GRI 102-21 | 103-2 STORY IMPROVING THE SYSTEMS THAT HELP OPTIMIZE PERFORMANCE Hudbay 2018 Annual and CSR Report | CSR Approach 27 CSR GOVERNANCE To build stakeholders’ trust and ensure we operate in a responsible and sustainable manner, our Board of Directors and senior leaders have a dedicated focus on corporate responsibility issues and ensure social and environmental risk mitigation programs are being integrated throughout the business. The Board of Directors’ 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’s performance and management of key EHSS risks. It also tracks the effectiveness of Hudbay’s management systems through the external ISO 14001 and OHSAS 18001 certification and TSM performance assessment processes. Each of our operations employs personnel dedicated to the day-to-day management of health, safety, environmental, community relations and other social matters. Our Vice President, Corporate Social Responsibility, oversees these efforts. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance CSR MANAGEMENT FRAMEWORK BOARD OF DIRECTORS EHSS COMMITTEE AUDIT COMMITTEE CEO COO CFO VPs OPERATIONS & PROJECTS VP CSR VP RISK MANAGEMENT Allocation of resources and oversight to ensure responsible operations Systems, support, and internal assurance for environment, health & safety and social performance Systems, support, and internal assurance for financial and regulatory compliance VP & GENERAL COUNSEL Systems, support, and internal assurance for Code of Business Conduct Hudbay’s Code of Business Conduct, Human Rights Policy, Environmental Health and Safety Policy and Supplier Code of Conduct state our social, environmental and ethical commitments across our business, including our supply chain. Corporate and site-specific management systems support decision-making and performance. Operating sites are required to maintain certification under the internationally accepted 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 or acquisition by Hudbay. Both our Manitoba and Peru business units maintained ISO 14001 (including the latest version, ISO 14001:2015) and OHSAS 18001 throughout the year. GRI 102-16 | 102-18 | 102-19 | 102-20 | 102-25 | 102-26 | 102-29 |102-31 | 102-32 | 102-56 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Approach 28 We use a company-wide integrated management system to set objectives; identify risks; track health, safety and environmental incidents; capture stakeholder engagement activities and commitments; and document corrective actions at all sites. During the year, we conducted a review of our existing environmental, health and safety management systems to understand issues and discuss opportunities for improvement. As a member of the Mining Association of Canada (MAC), Hudbay participates in the Towards Sustainable Mining (TSM) program. TSM aims to drive performance and to help mining companies evaluate and manage their environmental and social responsibilities. The program supports Hudbay’s accountability, transparency and credibility by evaluating and publicly reporting our performance across the following eight protocols: • Aboriginal and Community Outreach • Safety and Health • Crisis Management and Communications Planning • Preventing Child and Forced Labour • Biodiversity Conservation Management • Tailings Management • Energy Use and Greenhouse Gas (GHG) Emissions Management • Water Stewardship (new reporting starting in 2021) In 2017, the TSM program added the Preventing Child and Forced Labour protocol and enhanced the Tailings Management protocol. In 2018, the Water Stewardship Policy Framework was incorporated into a new Water Stewardship protocol. Verification of our compliance with the Preventing Child and Forced Labour protocol will be reported in our 2018 assessments (published in early 2019). We will report against the updated Tailings Management protocol beginning with our 2019 GRI 102-11 | 102-12 | 102-29 assessment and against the Water Stewardship protocol in 2021. TSM also includes a mine closure framework for working with communities to develop mine closure plans that address the socio-economic impact of closure. These protocols and frameworks are incorporated into our overall management system and company standards. Although we are only required to implement the program at our Canadian operations, we commit to implementing the program at all of our operations. Results of our annual TSM assessment are available on the MAC website. In 2019, MAC will transition from its annual TSM Progress Report – currently published as a single document in the spring – to a new public TSM reporting website, which will present TSM scores and company profiles in a digital format. The new site (scheduled for launch in mid-2019) will publish scores as they are submitted, allowing members to update their results throughout the year. INTERNATIONAL BEST PRACTICE STANDARDS To inform our sustainability programs and improve our performance, we apply the following international best practice standards: • ISO 14001 environmental management standard • OHSAS 18001 health and safety management standard • ISO 9001 quality management standard for the production and supply of cast zinc products • Towards Sustainable Mining – the Mining Association of Canada’s (MAC) set of tools and indicators to drive performance and ensure key mining risks are managed responsibly. While TSM is only a requirement for MAC members at their sites in Canada, Hudbay applies these standards internationally to all of its operations • Voluntary Principles on Security and Human Rights – an operating framework that ensures security practices include respect for human rights • Global Reporting Initiative (GRI) – the generally accepted framework for reporting on an organization’s economic, environmental and social performance • CDP (formerly called the Carbon Disclosure Project) – thousands of organizations globally measure and disclose their greenhouse gas emissions, water use and climate change strategies through CDP and CDP Water • Extractive Industries Transparency Initiative (EITI) – Hudbay is an official supporting company of the EITI. In Peru, we are a member of the Peruvian Mining Society, which is committed to the EITI process in Peru • IFC Performance Standards – the International Finance Corporation (IFC), part of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. Hudbay follows the IFC’s Performance Standards on Environmental and Social Sustainability at our Constancia site in Peru PRECAUTIONARY APPROACH From early exploration through closure, Hudbay operates under the precautionary principle: the duty to prevent harm, when it is within our power to do so and when harm is scientifically plausible but uncertain. We use baseline environmental and social impact studies to evaluate how to avoid, mitigate or control potentially significant impacts; implement appropriate monitoring and management systems; and address the need for mine closure. In all cases, we make provisions for public consultation and input. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Approach 29 INDUSTRY INVOLVEMENT In 2018, Hudbay participated in industry associations and multi-stakeholder groups through membership, funding, sharing of expertise, and participation in committees and working groups. Memberships include the following: • Aboriginal Chamber of Commerce (Manitoba) • AIME – Society of Mining Engineers • Devonshire Initiative (a Canadian forum for leading international development, NGOs and mining companies to engage on mining and community development issues) • EITI – Extractive Industries Transparency Initiative • Empresarios por la Educación (a Peruvian private sector organization to promote and develop educational projects) • Alliance of Construction Trades (Arizona) • Flin Flon Chamber of Commerce • American Exploration and Mining Association • Arizona Mining Association • Arizona Small Business Association • Arizona Tax Research Association • Arizona Trail Association • Asociación 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 to sustainability) • Cámara de Comercio Canadá Perú • Canadian Council for Aboriginal Business • Canadian Institute of Mining, Metallurgy and Petroleum and relevant societies • Several Arizona Chambers of Commerce – Benson San Pedro Valley, Greater Oro Valley, Greater Vail Area, Green Valley/Sahuarita, Marana, Nogales–Santa Cruz, Sierra Vista Area, Tucson Hispanic, Tucson Metro • Confederación Nacional de Instituciones Empresariales Privadas, CONFIEP (National Confederation of Private Business Institutions in Peru) • Cusco Chamber of Commerce • Grupo de Diálogo, Minería y Desarrollo Sostenible (multi-stakeholder group promoting open and transparent dialogue on mining, environmental protection and sustainable development in Peru) • Iniciativa para la Transparencia de las Industrias Extractivas en Perú, EITI–Perú (Extractive Industries Transparency Initiative) • International Zinc Association • Manitoba Employers Council • Metropolitan Pima Alliance • Mining Association of Canada • Mining Association of Manitoba Inc. • Mining Foundation of the Southwest (US) • Mining Safety Round Table (a collaborative group of safety-committed mining companies that share experiences and identify best practices) • National Mining Association (US) • Saskatchewan Mining Association • Snow Lake Chamber of Commerce • Southeast Arizona Economic Development Group • Southeastern Arizona Contractors Association • Southern Arizona Business Coalition • Southern Arizona Leadership Council GRI 102-12 | 102-13 | 102-16 | 102-29 | 102-33 | 102-34 | 102-44 | 103-1 | 103-2 HUMAN RIGHTS AND SECURITY Reflected in our values is respect for the rights of the people who work on our behalf and those who live in the communities near our operations. Our Code of Business Conduct and Human Rights Policy clearly show our support for the principles of the Universal Declaration of Human Rights and affirm our respect for human rights 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 include zero tolerance for forced, compulsory and child labour, and we work to prevent any infringement upon human rights within our sphere of influence. The UN Guiding Principles on Business and Human Rights provides a blueprint for businesses that includes a public commitment, a due diligence process that assesses risks, and a process for providing a remedy to anyone who is impacted. In 2018, we held workshops with the business units and with outside groups to define practical ways to integrate human rights, community and security risk assessments and processes into our enterprise risk management program. Insights from the workshops were used to develop a social risk framework. The business units began testing the practicality and usefulness of the framework at the end of 2018. Feedback will be incorporated into a final framework that we plan to implement in 2019. At our corporate office, our Vice President of Corporate Social Responsibility led an interactive session with employees to discuss the rights each employee has as an individual and the role they play in respecting the rights of others and as representatives of Hudbay. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Approach 30 We conduct high-level corporate risk assessments to rank the security risk level of each operation, and we develop detailed risk assessments at each location to define specific actions. Activities at each risk level include: • Low risk – an annual review of the corporate risk assessment and an annual advisory site visit; a local social risk assessment; training security management on the VPs; and raising awareness of the VPs with contracted private and public security personnel • Medium risk – at least one annual audit of site security practices using the Global Compact Canada VPs framework, and at least one annual advisory visit; a structured program at the site, including training of security personnel, to implement the VPs; a grievance mechanism to record and respond to security complaints; and active participation in forums that promote security and human rights • High risk – an annual audit by an independent Voluntary Principles Organization (VPO)–recognized auditor; a grievance mechanism to record and respond to security complaints; and engagement with national and international organizations on security practices Currently, all of our operating and exploration sites are considered low risk with the exception of Constancia in Peru, which is classified as medium risk. As a member of the Mining Association of Canada (MAC), we annually report on how our risk assessment approach and security-related management systems align with the VPs in MAC’s TSM Progress Report. Concerns about human rights issues within our business can be reported via site grievance mechanisms or directly to our Board of Directors through our corporate website or third-party ethics hotline. In 2018, there were no human rights issues raised or reported through our Board, hotline or site grievance mechanisms. SECURITY PRACTICES Respecting the human rights of neighbouring communities while providing a secure work environment and protecting our employees and contractors defines our security approach. We recently implemented a new Security Policy and Corporate Plan that expands on the commitments in our Human Rights Policy and details how these commitments are consistently put into practice. This policy recognizes the importance of measured and appropriate responses GRI 102-12 | 102-29 | 103-1 | 103-2 to security threats in reducing conflicts and building relationships with communities and other stakeholders. The operations, projects and exploration sites where we employ security personnel apply the Voluntary Principles on Security and Human Rights (the VPs), which prioritize relationship building and provide a framework for maintaining safety and security within an operating context that ensures respect for human rights and fundamental freedoms. All contracts with security services include a requirement to work within the VPs framework as well as the UN Code of Conduct for Law Enforcement Officials and the UN Basic Principles on the Use of Force and Firearms by Law Enforcement Officials. In cases where we use public security personnel, we make every effort to ensure they are aware of and guided by these frameworks. Hudbay 2018 Annual and CSR Report | CSR Approach 31 TAILINGS MANAGEMENT PROTOCOL TAILINGS GOVERNANCE CHARTER As a member of MAC, we are implementing TSM’s updated Tailings Management Protocol, which builds on a continual improvement process for tailings management to achieve the goal of zero catastrophic failures of tailings facilities and no significant adverse effects on human health or the environment. The protocol emphasizes management processes, senior executive oversight, and expert third-party reviews that ensure appropriate technical standards of construction, maintenance and operation. We have begun implementing the requirements in the updated protocol – including expansion of third-party independent peer review boards to all locations – and each of our operating entities will report against it beginning with our 2019 assessment. We also adhere to TSM’s Aboriginal and Community Outreach protocol, which evaluates our engagement with communities of interest on potential risks that our activities may pose, including tailings management. In 2018, we developed a Tailings Governance Charter to further strengthen our internal governance processes related to tailings management. The charter details existing controls, including a Tailings Management System at the site or business unit that supports day-to- day activities – such as planning, monitoring, risk identification and reporting – associated with the management of tailings construction and operation. Our Corporate Tailings Governance System includes a Tailings Governance Team (TGT) composed of individuals from the business units and relevant corporate functions. The mission of the TGT is to serve in a monitoring and advisory role to assure the CEO, COO and Board of Directors that appropriate processes are in place and that all TSFs are constructed and operated in a manner that protects public health and safety. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 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 to address local concerns and issues before they become larger conflicts. Our Constancia security superintendent meets with security managers from neighbouring mines as part of a security group, known as SEMSUR, and discusses best practices, experiences and emerging issues. These meetings provide opportunities to promote the VPs and encourage other operations to implement them. At our Rosemont project in Arizona, we have a security superintendent on-site and procedures in place in preparation for entering the construction and operations phases. Rosemont’s Safety and Security Work Group engages with local law enforcement and emergency response agencies on project developments, safety and security incidents, and establishing processes to use in the event of an emergency. GUATEMALA CIVIL LAWSUITS Hudbay is named in three civil lawsuits relating to alleged events prior to 2010 in Guatemala, where the Company owned a controlling interest in Compañía Guatemalteca de Níquel (CGN). Information about the litigation is posted on our website. TAILINGS STEWARDSHIP Mine tailings are the fine-grained material that remains after the minerals have been extracted from the crushed ore. Tailings can be solid or a slurry of fine particles and water and are contained in engineered tailings storage facilities (TSFs) that are designed to safely contain the waste. GRI 102-29 | 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | CSR Approach 32 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ON-THE-GROUND APPROACH TO TAILINGS STEWARDSHIP Seven current tailings and water retainment structures/ facilities – four in our Manitoba Business Unit and three at our Constancia operation in Peru – are managed in accordance with the requirements of the Charter. Of these, our Flin Flon tailings impoundment system (FFTIS) uses the upstream construction design method. Part of the FFTIS, which has been in service for decades, was constructed using the upstream method, but the dam’s north and west expansions have been constructed using the downstream method. Our Anderson tailings management facility in Snow Lake has historically used subaqueous deposition of tailings in Anderson Lake. In order to accommodate ongoing production from our Lalor mine, we are in the process of raising the dam around Anderson using the downstream method. Our Constancia tailings facility was constructed using modern methods and international standards. In addition to helping identify and address areas for improvement, the reviews and inspections in 2018 found all facilities and structures were in compliance with our standards and best practices. In our Manitoba Business Unit, where some of our tailings storage facilities were built 80 years ago, we worked with our engineer of record to identify opportunities to proactively upgrade facilities and improve dam stability over the next two years, particularly in the areas previously constructed using the upstream method. These include reduced requirements for water consumption and land and the ability to conduct concurrent reclamation. Dry-stack also nearly eliminates the risk of groundwater contamination and catastrophic tailings dam breaches. Rosemont’s state-of-the-art dry-stack tailings facility will be one of the largest in the world, requiring half the water for twice the production, thereby establishing new standards for responsible mining. STAKEHOLDER ENGAGEMENT The perspectives of employees, shareholders, suppliers, government officials, communities, rights holders and other key stakeholders help us make better decisions and continuously improve. All individuals and groups who have an interest in, may be affected by, or believe they may be affected by our activities and business decisions are considered stakeholders. Through transparent, ongoing dialogue with our stakeholders, we work to better understand their needs and expectations. The frequency and channel of engagement varies depending on the stakeholder, topic or concern. Our Stakeholder Engagement Standard and the supporting guidance document detail the requirements and expectations for understanding stakeholder perspectives and addressing concerns. Our Shareholder Engagement Policy promotes open and sustained dialogue between our Board of Directors and shareholders. To collectively work on issues and solutions, we participate in industry associations and multi- stakeholder initiatives that bring together organizations and individuals to share expertise, lessons learned and best practices. The Manitoba and Peru business units maintained their ratings (AA and A, respectively) across all the tailings management indicators in the 2018 TSM Progress Report. Both business units are updating their tailings management processes in preparation for reporting against the new requirements in the updated protocol. At our Rosemont project in Arizona, we plan to use an alternative method of tailings disposal called dry-stack or filtered tailings. This method – which involves dewatering tailings prior to placing them in a storage facility – offers numerous advantages over other tailings storage options, provided climactic conditions support the technology. GRI 102-15 | 102-21 | 102-29 | 102-33 | 102-34 | 102-40 | 102-42 | 102-43 | 102-44 | 103-2 Hudbay 2018 Annual and CSR Report | CSR Approach 33 CEO Message The following table lists key stakeholders and how we engaged with them in 2018: 2018 ENGAGEMENT ACTIVITIES AND TOPICS Our Feature Stories Stakeholder group How we engaged in 2018 Priorities and concerns Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Shareholders, debtholders, investors and analysts • Conferences (12 events) • Investor meetings and conference calls (more than 275 events) • Closure of Reed mine and upcoming closure of the 777 mine, mill and zinc plant in Flin Flon • Rosemont permitting • Annual Meeting of Shareholders • Lalor gold results • Analyst and investor site visit to Constancia operation • Pampacancha land access Employees and contractors • Quarterly CEO email messages • Senior management site visits • Mergers and acquisitions • Health and safety • Work processes • Town hall meetings • Business performance • Orientation and training programs • Understanding of compensation and benefits • Indigenous cultural awareness workshops • Opportunities for personal development • One-on-one and small group manager/staff meetings • Environmental requirements • Video messages • Training for policies, permits or other requirements • Health and wellness committees and activities • Hudbay intranet Unions • Meetings with union leaders on outstanding issues • Mobility • Formal grievance processes • Seniority • Joint health and safety committees • Outstanding grievances • Health and safety • Closure GRI 102-15 | 102-21 | 102-29 | 102-40 | 102-43 Hudbay 2018 Annual and CSR Report | CSR Approach 34 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Stakeholder group How we engaged in 2018 Priorities and concerns Local communities and Native American/ indigenous groups • Community information and consultation meetings/ • Development project updates dialogue tables • Community partnerships • Site tours and open houses • Site grievance/community response processes • Community relations offices • Cultural awareness workshops and other training • Community and area activities and investment • Safety and environmental concerns • Land use • Water use and quality • Local employment and procurement • Training programs for community members • Cultural protection, awareness and dissemination • Educating employees on intercultural competency, conflict resolution, human rights and anti-racism • Future operations plans (operating life) Customers • Direct contact • Achieving agreed terms of delivery for products • Industry and business forums • Provision of information on product safety and product origin • Compliance with environmentally and socially responsible performance and risk management GRI 102-15 | 102-21 | 102-29 | 102-40 | 102-43 Hudbay 2018 Annual and CSR Report | CSR Approach 35 MATERIALITY We define our material CSR issues as those economic, environmental and social issues most important to our stakeholders and to our business. In 2017, we carried out a review of our priorities in relation to what we had been hearing from our key stakeholder groups. The conclusion was that there was no significant change to our current materiality model. The review evaluated the issues related to environment, health, safety and community (EHSC) that are most significant to Hudbay in terms of business impact and degree of stakeholder interest. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance MATERIALITY MATRIX During the 2017 materiality review, 11 priority issues were confirmed. Click on each issue in the diagram below to learn how we are managing it and how we performed in 2018. Human Rights Water Land and Biodiversity Local Market Presence Ethics Health and Safety Stakeholder Engagement Tailings Economic Performance Employee Relations Aboriginal/Indigenous Relations T S E R E T N I R E D L O H E K A T S BUSINESS IMPACT Environment Labour Society Governance Economic GRI 102-46 | 102-47 | 103-1 Hudbay 2018 Annual and CSR Report | CSR Approach 36 The following table indicates how our priority issues align with the GRI Sustainability Reporting Standards reported in the GRI content index: BOUNDARIES CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Priority issue Ethics Human rights Stakeholder engagement Indigenous relations Health and safety Employee relations Economic performance Local market presence Land and biodiversity Water Tailings GRI 102-46 | 103-1 GRI Standards Ethics and integrity Anti-corruption Security practices Human rights assessment Stakeholder engagement Rights of indigenous peoples Occupational health and safety Labour/management relations Freedom of association and collective bargaining Non-discrimination Economic performance Indirect economic impacts Procurement practices Employment Closure planning Resettlement Biodiversity Water Effluents and waste We conducted the materiality review on the initial boundary assumption of activities and facilities within Hudbay’s management control (as described in the Our Company section of this report). Participants in the review process were then asked for cases in which boundary limits should be adjusted for specific aspects. Based on stakeholder expectations 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 are generally tracked, reviewed and reported by Hudbay • Grievances are accepted and investigated with respect to local contractors and security activities related to Hudbay, and are included in grievance numbers and characterization in this report • Scope 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 • Business unit exploration with managerial control over the site is included and embedded in the business unit numbers Hudbay 2018 Annual and CSR Report | CSR Approach 37 RESPONSIBLE SUPPLY CHAIN Mining is the first stage of a long supply chain that converts mineral resources into products that meet the needs of everyday life. We focus our supply chain responsibility efforts on activities where we can have the greatest influence: our own operations, contractors working at our sites, local suppliers, and Hudbay products up to the point from which they are shipped (in Manitoba at the plant gate, and in Peru at the port loading facility). Our legal function is responsible for conducting supplier due diligence to mitigate third-party risk, which is then reviewed by our internal audit function. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance We seek suppliers that share our values and work in partnership with us to continuously improve our performance. Any unethical, unlawful or irresponsible acts and behaviours can reflect poorly on Hudbay and can impact our ability to sustain and grow the business. Our Supplier Code of Conduct addresses these risks, stating the required standards of conduct expected by our 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 • Reporting suspected violations of the Supplier Code of Conduct and applicable compliance policies by any supplier or Hudbay personnel GRI 102-9 | 102-16 | 103-1 | 103-2 | 204-1 Hudbay 2018 Annual and CSR Report | CSR Approach 38 The IMO specifies hazard classification criteria for bulk cargoes, and the International Convention for the Prevention of Pollution from Ships (MARPOL) imposes restrictions on the disposal of bulk cargo residues classified as “harmful to the marine environment” (HME) under the amended Annex V of the MARPOL convention. Hudbay engaged the European Copper Institute (ECI) to determine the MARPOL classification for Constancia’s copper concentrates. From this study and others, all Hudbay copper concentrates have been determined to not be HME. SUPPLY CHAIN PERFORMANCE PRODUCTS CEO Message Our Feature Stories The direct supply chain for our copper concentrate and zinc metal products originates in Hudbay’s mines in northern Manitoba and Peru. Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance The indirect supply chain for energy, goods and services used in transforming ore and concentrate into products includes thousands of suppliers, who provide operating and maintenance supplies, energy and fuels, and capital goods: • In Peru, our top 50 suppliers accounted for 86% of our spending, and 97% of our spending was with suppliers based in Peru. • In Manitoba, our supplier base relates to production operations and capital projects. Our top 50 suppliers represented 74% of our spending in 2018, and 96% of spending was with suppliers in Canada. These suppliers provided goods and services such as engineering services, electricity, spare parts for equipment, underground haul trucks and other capital equipment. Hudbay’s top 10 suppliers in 2018, representing 44% of procured value, were (in alphabetical order): CORPORACION PRIMAX S.A. CN (CAD) DUMAS CONTRACTING LTD. ENEL GENERACION PERU S.A.A. FERREYROS SOCIEDAD ANÓNIMA MANITOBA HYDRO MOLY-COP ADESUR S.A. NEUMA PERU CONTRATISTAS GENERALES S.A.C. NEWREST PERU S.A.C. SERVOSA CARGO S.A.C. GRI 102-6 | 102-9 | 103-1 | 103-3 The two main products we produce are copper and zinc. Copper is essential in today’s society, serving as a vital component in electronics and electrical transmission. In health care, new applications for copper are being identified due to its ability to kill bacteria. Zinc is vital to the endurance of metals in manufacturing. Both metals are important to the renewable energy industry. Our copper concentrate and zinc metal are produced at operations in Canada and Peru: • Hudbay sold 63% of its copper concentrate to traders and smelters that delivered to customers in Asia (including India) and 37% to traders and smelters in the Americas and Europe. From there, several stages of smelting and refining the copper content ultimately result in 99.99% pure copper, the building block for many of life’s essentials. • We ship cast zinc metal produced at our Flin Flon zinc plant by rail and truck to industrial customers throughout North America (primarily to galvanizers who use it to protect steel from corrosion). 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 by collaborating with governments and industry associations, including the International Zinc Association and the European Copper Institute, to guide our compliance with international requirements such as those provided by the International Maritime Organization (IMO). Hudbay 2018 Annual and CSR Report | CSR Approach 39 SUSTAINABLE DEVELOPMENT GOALS Hudbay recognizes the opportunity the mining industry has to positively contribute to the UN Sustainable Development Goals (SDGs), and it strives to be aligned with the goals. There are a number of SDGs for which we consider the industry a natural fit for taking on a leadership role, and others where we feel our company can work alongside government, supporting initiatives. Taking this into consideration, the following table outlines the SDGs most relevant to our business and where the topics are discussed in this report. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Sustainable Development Goals Link to topic Business and Financial Review Our People Social Impact > Our Approach • Local Hiring and Procurement Social Impact > Peru • Building and Diversifying Local Economies CSR Approach > CSR Governance • International Best Practice Standards • Industry Involvement Our People • Hudbay Women’s Network: Fostering Gender Diversity in Mining Key Performance Data Table (Employees) • Workforce Diversity Environment • Water CSR Approach > Responsible Supply Chain • Supply Chain Performance • Products GRI 102-12 Hudbay 2018 Annual and CSR Report | CSR Approach 40 Sustainable Development Goals Link to topic CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance GRI 102-12 Environment > Our Approach • Land and Biodiversity • Closure and Reclamation Environment > Manitoba Environment > Peru • Conserving and Protecting Biodiversity Key Performance Data Table (Environment) • Land Use • Sites Requiring Biodiversity Management Plans • Habitats Protected or Restored • IUCN Red List Species CSR Approach > Human Rights and Security • Security Practices Our People > Our Approach • Health and Safety • Unleashing Potential in a Trust-Enhancing Organization Environment • Total Greenhouse Gas Emissions Chart Environment > Our Approach • Energy Use and Greenhouse Gas Recognizing that the SDGs represent national-level governmental commitments, we will continue to work to design our activities with relevant goals and to help connect national processes to local needs as represented in SDG 17. Hudbay 2018 Annual and CSR Report | Our People 41 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance LOST TIME ACCIDENT FREQUENCY (lost time accidents per 200,000 hours worked) 2015 2016 2017 0.3 0.3 0.3 2018 0.3 LOST TIME ACCIDENT SEVERITY (days lost per 200,000 hours worked) 2015 11.4 2016 2017 9.3 8.4 2018 14.3 OUR PEOPLE We aim to develop a skilled workforce that reflects the communities in which we live and work, and to provide a safe, healthy and rewarding workplace where people can fulfill their potential. 15% indigenous employment in Manitoba 70% of full-time employees represented by trade unions 16% overall female employment GRI 102-8 | 103-1 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Our People 42 When Jodi Brasch joined Hudbay in 2013, she was the Company’s first female underground worker in Snow Lake in more than 40 years. Five years later, Jodi was selected to represent Canada as a member of the first-ever all-female mine rescue team to compete at the International Mine Rescue Competition (IMRC). Overall, the Diamonds in the Rough team placed 15th, ahead of Canada’s other team at the competition – an all-male team that finished in 18th place – and won the people’s choice award and other commemorations recognizing them as the first all-female team to compete at an international level. STORY HUDBAY’S JODI BRASCH COMPETES AS MEMBER OF WORLD’S FIRST ALL-FEMALE MINE RESCUE TEAM The team, called “Diamonds in the Rough”, competed against 24 other teams from 11 countries over five days. Events included a mine rescue simulation, a written exam, first aid and firefighting skills tests and a relay race where competitors had to flip a 265-pound tire and toss a 110-pound sandbag over a 1.5-metre wall. For the mine rescue simulation, which took place underground, the team were the first women to ever go underground in Russia, and they ultimately finished the event among the top five. “One of the best parts was that we had several team members from various teams tell us they were going to go home and tell their daughters they can do anything, which is the best compliment ever,” said Kari Lentowicz, the team’s co-founder and coach. Our Constancia operation in Peru undertook a new initiative during the year to reduce injuries and safety incidents and help create a stronger safety culture. Based on an analysis of safety statistics and trends, the largest contributor to accidents was found to be poor decision-making due to taking shortcuts and spending an inadequate amount of time assessing risks. To address this finding, we implemented the Behaviour-Based Safety (BBS) program – a process management tool aimed at actively engaging employees through peer observations and positive feedback to increase safe habits and behaviours in the workplace. In June, we worked with outside consultants to create a program customized to the environment and the specific needs of our Constancia operation. Workshops were held to design the program, establish the vision and mission of the program, and create a plan for implementation among the mine and plant management teams. The plan included training observers on how to give effective feedback on safety performance. At the end of 2018, more than 350 individuals in mine operations and the processing plant had received BBS observer training. The number of observations in mine operations grew from 64 in the first month of the program to 401 in December, while in the processing plant the number grew from 28 to 62. Efforts to increase participation and improve the BBS process are planned for 2019. STORY CONNECTING BEHAVIOURS TO SAFETY Hudbay 2018 Annual and CSR Report | Our People 43 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance OUR APPROACH HEALTH AND SAFETY Nothing is more important than the safety and health of our people. Throughout our operations and locations, we work to enforce policies and practices that ensure a healthy and safe work environment. Our Environmental Health and Safety Policy states our commitment to control risks, transparently report our performance, and continuously strive for a healthier workforce and safer workplace. Within two years of reaching commercial production, all operations are required to be certified to OHSAS 18001, an internationally accepted standard for occupational health and safety management systems, and this certification must be maintained throughout the life of operations. We apply the Mining Association of Canada’s (MAC) Towards Sustainable Mining (TSM) Safety and Health protocol, which assesses and measures our performance. Regular monitoring, self-assessments and tri-annual third-party verifications ensure operations remain in compliance with these standards and protocols throughout the life of the operation. Building a culture dedicated to zero harm requires that everyone who works at our sites has the knowledge, skills and equipment needed to work safely and that our leaders empower their teams and actively encourage them to speak up, especially when they have concerns. A number of initiatives – such as the supervisor mentor program in Manitoba – aim to support supervisors in effectively engaging with their teams so that everyone understands the risks associated with tasks and the work environment. Our safety programs provide training for the activities undertaken, whether at an operation, exploration site or office location, or for visitors to the mine site. Emergency response teams receive specialized training that prepares them to mobilize quickly and effectively during an event at a mine site. GRI 103-1 | 103-2 Other efforts to continuously improve our safety and health performance include the Visible Felt Leadership program, where leaders engage with employees and take accountability for their teams’ safety, and our occupational health programs, which monitor exposures to health risks such as hearing loss and illnesses caused by airborne agents. As an active member of the Mining Safety Round Table, we engage with other mining companies throughout the year to share lessons learned and best practices, with the aim of raising the safety performance of the entire industry. While no workplace fatalities have occurred at any of our operations, projects or exploration sites in recent years, we continue to drive improvements in our ability to prevent fatalities. Through critical risk and critical control (CRCC) management plans, our operations identify top fatality risks and the controls that are most effective in managing them. We record, investigate and analyze incidents and conformance with our standards using our company- wide integrated information system. Significant incidents, based on criteria set by the Board, are reported to our Board quarterly. High-potential incidents – those that could have resulted in a fatality or serious injury – are registered in our system and investigated in depth to analyze the cause as well as the controls and corrective actions needed to prevent a similar incident from happening again. Hudbay 2018 Annual and CSR Report | Our People 44 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance EMPLOYEE RELATIONS We recognize that to be an employer of choice everywhere we operate, we must offer fair wages and compensation, and provide opportunities for development and career growth. Our Code of Conduct states our commitment to responsible workplace and business practices. This includes a non-discriminatory and harassment-free workplace. We do not tolerate any form of violent behaviour, and personnel are expected to perform their job duties in a professional manner, free from the effects of drugs and/or alcohol. Approximately 1,660 full-time, part-time and Peru contract employees (70% of our workforce) are represented by a union, and we respect the right of our employees to join a union and engage in the collective bargaining process. We work to constructively engage with the eight unions that represent our employees, and to partner with them on solutions that create mutual benefit. We engage employees and keep them informed about important business matters through various channels and tools. These include town hall meetings, workshops, internal emails and videos from senior leaders, and our company intranet, where we post employee-focused news and resources. With a large number of employees eligible for retirement, especially in our Manitoba Business Unit, our retirement readiness programs provide information and tools that prepare employees for success once they leave the workforce. At the corporate office, we conducted three pilots: a performance effectiveness process that involves ongoing conversations between managers and employees with a year-end performance evaluation process that improves effectiveness and fairness; a coaching program where managers learned to ask questions and listen in a way that creates awareness and invites action; and a program that allowed participants to explore their behaviour styles and motivators to increase self-awareness and enhance our abilities to work collaboratively by appreciating and understanding differences. UNLEASHING POTENTIAL IN A TRUST-ENHANCING ORGANIZATION Bringing to life our values and transforming our culture to attract and retain the talent needed to execute our strategy requires us to evaluate and enhance the way we work. Our OneHudbay initiative – “How we work” – is a strategic approach to efficiently grow the business and clearly link the Company’s mission, vision, values and strategic goals. From an organizational perspective, OneHudbay delivers an organization with the appropriate number of levels, and with highly effective lateral working relationships and leadership practices, which results in all employees contributing to their full potential and, ultimately, to the success of the Company. In 2018, we began the foundational work of embedding OneHudbay throughout the business. We held workshops, engaged leaders and employees, and developed processes for sustainment. The ongoing work defines and reinforces how we work and support one another in an accountability-based organization. We also published a series on our intranet called “Speaking from Experience” in which leaders shared their thoughts and experiences from working in organizations of this nature. In 2018, we continued to enhance the manager once removed (MOR) concept, which we expect to formalize in 2019. The purpose of MOR is to link the entire organization through conversations managers have with the people who report to their direct reports. This three-tiered approach is designed to set context, build trust and develop our employees. To support OneHudbay, as well as other human resources efforts, we created a road map for a comprehensive human capital management system. The road map establishes a common, integrated platform and processes across the business during every phase of an employee’s career. The system, which will be based on SAP’s SuccessFactors software, includes a variety of modules (e.g., recruiting, onboarding, performance management, learning and development, succession planning), and integrates the data in a manner that reduces complexities, improves collaboration and helps decision-making in areas such as succession planning. GRI 102-8 | 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | Our People 45 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance DIVERSITY AND INCLUSION We recognize that employing people with different backgrounds, experiences and perspectives makes us stronger and fosters collaboration. Our OneHudbay approach provides a crucial foundation for attracting and retaining a diverse range of top talent. By embedding our values of dignity and respect, caring, openness and trustworthiness throughout the organization and clarifying roles and accountabilities, we aim to further foster trust, which supports a more open and diverse workforce. Through our support of the Catalyst Accord 2022 and the 30% Club, both of which call for the advancement of women in business, we are working to increase opportunities for women. Female representation on our Board of Directors has achieved the 30% or higher target, and we are working to increase the percentage of women in management. In 2019, we will begin developing an umbrella diversity and inclusion policy. Our mission states that we intend for the communities in which we operate to benefit from our presence. To that end, our operations and corporate office aim for a workforce that reflects the communities near our operations. Each site is committed to hiring from the local communities and indigenous groups near our operations and exploration activities. GRI 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | Our People 46 MANITOBA Approximately 60% of our total employee population works in our Manitoba Business Unit, primarily at two centres of operation – Flin Flon and Snow Lake. At year-end, Reed and 777 employed 315 people, and Lalor employed 337, down 9% and up 20%, respectively, compared to the previous year. Of the employees who work at Lalor, 232 (69%) live in Snow Lake. 15% of our employees in Manitoba identify as indigenous and 17% are women. ADDRESSING THE IMPACT OF MINE CLOSURE In Manitoba, we are addressing a challenge that all mines face when they reach the end of their mine life. The Reed mine closed in 2018, and the 777 mine, Flin Flon mill and zinc plant are expected to close in 2022. Meanwhile, in Snow Lake we are increasing production rates at Lalor and planning the refurbishment of the New Britannia mill to process the Lalor gold and copper- gold zones. The OneHudbay principles are being applied to the Manitoba organization to address these changes and to ensure we have the right people in the right roles to efficiently and responsibly execute our plan. Our decisions and actions are further driven by our values. One of our primary focus areas is ensuring we treat people fairly as we wind down operations in Flin Flon. The closure of Reed provided us an opportunity to demonstrate this commitment as we worked to reassign all workers to either Snow Lake or Flin Flon, resulting in no layoffs. At Flin Flon, we continued with the video series launched in 2017 that featured Hudbay’s CEO and other company leaders providing updates on the mine’s future. The videos were supported by face-to-face engagement between site leaders and employees. Senior leadership is working toward finalizing and communicating a detailed path forward for Flin Flon by mid-2019. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance The path forward will reflect feedback from the unions that represent a majority of the workers at Flin Flon. Solutions being discussed and implemented include identifying the future workforce requirements at Snow Lake, shifting contractor roles to employees, and providing training for the skills required for open roles. Our improved relationships with the unions are reflected in part by a reduced number of grievances, the elimination of a grievances backlog, and having no grievances escalate to arbitration during the year. IMPROVING SAFETY PERFORMANCE Across the business unit, our safety performance improved for the year, with our lost time accident (LTA) frequency down by 0.2 and our lost time accident severity also down by 0.2. However, in August we had a fall-of-ground incident at our Lalor mine when a large drift wall failed, falling onto a scoop. While the scoop operator was not injured, the outcome might have been much more serious. We conducted an Incident Cause Analysis Method (ICAM) investigation to identify the corrective actions needed to prevent future incidents of a similar nature from happening. GRI 102-8 | 103-2 Hudbay 2018 Annual and CSR Report | Our People 47 our local hiring efforts that began in 2018 by holding seminars and attending job fairs in some of the more remote communities in Manitoba. We are also developing an awareness campaign to highlight the value of self-declaring one’s indigenous heritage. At the 2018 Manitoba Provincial Mine Rescue Competition, Hudbay’s Snow Lake team came in first place. Four teams of six individuals were evaluated against an underground and first aid mine rescue mission and a written test. The team will represent Hudbay at the Western Mine Rescue Championship in 2019. Lalor’s Jodi Brasch also competed in the International Mine Rescue Competition as part of the world’s first all-female mine rescue team. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance In 2018, our Manitoba Business Unit held two workshops to reinforce our safety values, review safety accountabilities and ensure everyone was taking the time necessary to focus on safety. During the workshops, department managers reviewed all safety procedures (e.g., permits, audits) to determine if the right safety work was being done at the right level. Outcomes from the workshop included three new actions: field risk assessments, a supervisor mentor program and safety calendars. Details on these actions include: • The field risk assessments comprise four parts that are to be conducted by every employee at the beginning of each shift. They include checklists for employees to assess the work environment and task, make sure they meet the conditions to work safely, and, if not, to speak up and ask a supervisor for support. • Through the new supervisor mentor program, members of Hudbay’s health and safety department train frontline supervisors at the mine site, helping them identify and address certain safety issues through more effective and engaging crew meetings that provide employees a greater understanding of the risks. • The safety calendars detail by job role which safety activities need to be done, the frequency of each task, the actions required, and any control documents or compliance requirements associated with the activity. The safety calendars are incorporated into the personal calendars of frontline supervisors and their team members, helping to keep safety top of mind. We updated our internal process for injuries that potentially restrict the ability to work in an effort to improve employee engagement and educate medical professionals and regional health authorities on how best to accommodate injuries in the workplace in a manner that aids in the employee’s recovery. Our wellness committee, which meets monthly, includes representatives from our human resources and health and safety departments, union co-chairs, and external members including medical professionals. In 2018, the committee held a wellness fair for employees and began developing a wellness passport program to encourage healthy behaviours. In 2019, we will develop a robust mental wellness program to support the transitional work related to the closure of the Flin Flon operations. One element of the program is a two-day mental first aid course for supervisors to help them recognize and properly address problems. SUPPORTING A MORE DIVERSE WORKFORCE To support the success of female employees and encourage more women to join the mining workforce, two female employees in our Manitoba Business Unit founded the Hudbay Women’s Network (HBWN), an employee-led voluntary resource group. The HBWN’s founding principle is gender inclusion, and its goal is to support, connect and empower Hudbay employees by providing a vehicle for professional growth and a strong voice. We feature the HBWN in the story “Hudbay Women’s Network: Fostering Gender Diversity in Mining”. Our approach to recruiting includes a strong focus on hiring among the indigenous communities near our operations. In 2018, we developed an indigenous hiring project at Lalor, partnering with the Manitoba government’s Northern Manitoba Sector Council to recruit 12 new employees from the Pimicikamak Cree Nation near Cross Lake. The project includes training, an evaluation of soft skills (e.g., managing personal finances and work requirements) and engagement with the employees’ families to make sure they are supportive of the work and work schedules. In 2019, we will continue GRI 103-2 Hudbay 2018 Annual and CSR Report | Our People 48 STORY HUDBAY WOMEN’S NETWORK: FOSTERING GENDER DIVERSITY IN MINING event to promote the empowerment of women in the industry. The group is also starting a larger conversation on workforce matters that are of particular interest to women, such as flex hours and other small changes to the workplace environment that better support women. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Women make up around half of the workforce throughout Canada (Statistics Canada), but female representation at Hudbay is only 16% (a percentage that is consistent across the mining industry). Mining careers, especially those at the operating sites, are often not actively pursued by women, and Hudbay has long recognized the challenges of attracting and retaining top female talent. Although the Company has initiatives in place to address this challenge and increase female representation throughout the business, two female employees in our Manitoba Business Unit aimed to accelerate these efforts by launching the Hudbay Women’s Network (HBWN) in 2018. Landice Yestrau, an environmental scientist, and another female colleague began discussing in 2017 how to address the systemic barriers women face when pursuing a career in mining. In their free time, they conducted a study and submitted a proposal to company leaders to increase networking opportunities for women through the formation of the HBWN. “Our expectations were low when we submitted our proposal, so it was a bit surprising when management was genuinely very supportive,” said Yestrau. “We thought we would face more hurdles than we did. Both the leadership in the business unit and the corporate office consistently support us and make sure we have the resources we need to distribute information, gather statistics and provide resources. It was really great and still continues to be so.” Today, the HBWN provides a forum for women to share insights and experiences, participate in educational and career development events, and support both each other and opportunities for women at all levels at Hudbay. Since the launch of the HBWN in April 2018, its membership has grown from 10 to 100. The HBWN held several events during the year, including a speaker series called “Learning the Business”, and it hosted a public GRI 103-2 Hudbay 2018 Annual and CSR Report | Our People 49 PERU Our workforce in the Peru Business Unit includes staff members at our office in Lima and those who work at the Constancia operation. Because the mine is located in a remote part of southern Peru, many of the operating and support personnel live some distance away and work multi-day shifts, staying at Constancia’s accommodation camp during their rotation. The camp amenities include a dining hall, a medical centre and recreational facilities. At the end of 2018, the Peru Business Unit had 855 employees, including 165 term employees (defined as those with contracts that end on a specific date). Of our full-time employees, 100% are from Peru, 11% are from the local communities and 10% are women. Around 22% of the term employees are from the local communities of Uchucarco and Chilloroya. During the year, we hired 201 employees from the local communities. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance CREATING A CULTURE OF SAFETY Our Peru Business Unit’s safety performance continued to be strong, with only two lost time accidents (LTA) at the mine site, related to hand injuries sustained by contractors. To address the causes behind the LTAs, the site developed a course that focused on the importance of identifying hazards and assessing risks before starting any activity, and created communications to support the “Taking Care of Your Hands” campaign that raised awareness about the risks associated with work involving manual handling and the importance of wearing protective equipment. We also launched the Behaviour- Based Safety program – a process management tool created to reinforce positive behaviours and improve our performance. In 2019, Constancia plans to introduce anti-collision and anti-fatigue technologies that alert an operator and help avoid potential accidents. This technology also provides real-time data on events related to driver fatigue that management can review and bring to the attention of the driver, which in turn helps the driver better recognize signs of fatigue or distraction. To further strengthen the business unit’s safety culture, on the first and last Saturday of every month the site held “Creating Culture” events that are designed to engage employees, contractors, superintendents and area managers on safety-related issues. All Hudbay Peru personnel and contractors received safety newsletters that address safety topics and high-risk tasks as well as monthly health newsletters that discuss seasonal health issues (e.g., flu prevention), public health alerts (e.g., tuberculosis) and key occupational health issues (e.g., fatigue). GRI 103-2 Employees and contractors completed more than 30,000 hours of health and safety induction training and over 52,000 hours toward the annual occupational health and safety training requirement. Hudbay and contractor supervisors also received training on using the Incident Cause Analysis Method (ICAM) process for conducting investigations of accidents and serious safety events. Hudbay 2018 Annual and CSR Report | Our People 50 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ENHANCING EMPLOYEE ENGAGEMENT As production at Constancia increases and the Company prepares to commence mining at the Pampacancha satellite deposit, the team in Peru focused on retention opportunities. The business unit conducted its first employee engagement survey to gather insights into what factors contribute to an employee feeling engaged. Around 77% of those who completed the survey were generally satisfied, believing their work was meaningful and that they trusted in the leadership and the direction of the Company. The results highlighted further opportunities to improve engagement among our employees. Insights from the survey were used to develop an action plan and retention strategy, which will be used to develop metrics that measure progress in engaging personnel throughout the operation. As part of the OneHudbay effort, the business unit held workshops, initiated work to define role accountabilities and cascaded manager once removed (MOR) discussions, beginning with the Vice President of our South America Business Unit. COLLABORATING WITH OUR UNIONS At the beginning of 2018, a new three-year collective bargaining agreement with the Unified Workers Union of Constancia Hudbay (SUTRAMICOH) was ratified by its members, establishing the working rules and other terms and conditions of employment that apply to approximately 35% of the employees in our Peru Business Unit. In November, we held a workshop with union management to provide an update on the business and identify further opportunities for strengthening the relationship between management and union leadership. GRI 103-2 Hudbay 2018 Annual and CSR Report | Our People 51 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ARIZONA At the end of 2018, we had 33 employees in our Arizona Business Unit, representing the core team preparing for operational readiness. Prior to receiving the Section 404 Water Permit from the US Army Corps of Engineers and approval of the Mine Plan of Operations from the US Forest Service in March 2019, our Arizona human resources team focused on employee retention and engagement. Since receiving the approvals required to begin project development, our priority has shifted to hiring for the project’s early works program, which involves engineering and geotechnical work and the construction of the site’s water and power infrastructure. Once construction commences, we plan to hire from within the local communities and will need to fill up to 2,500 jobs during the peak of construction. We continue to engage with local businesses, organizations and universities to identify resources, local talent pools and opportunities to build a pipeline of potential future employees. Once construction is completed, Rosemont is expected to have a 19-year mine life and to directly employ over 500 full-time employees during operations. To prepare for project delivery, we developed a handbook that consolidates various human resources policies and procedures, as well as policies specific to the business unit. The handbook is provided to all new employees during orientation, and each individual must indicate in writing that they agree to comply with the requirements. GRI 103-2 No lost time accidents occurred during 2018. Under the US Mine Safety and Health Act (MSHA), personnel that work at a mine site in the US must complete a three-day training program upon being hired and an eight-hour refresher course every year thereafter. During the year, all personnel maintained compliance with this training requirement. We developed a site- specific training program that addresses both safety and environmental risks and considerations. The training, which was provided to all contractors and personnel conducting work at the project site, will be scaled once construction commences. Hudbay 2018 Annual and CSR Report | Social Impact 52 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance COMMUNITY INVESTMENTS AND CHARITABLE DONATIONS ($ millions) 2015 $2.8 2016 $4.2 2017 $6.4 2018 $5.1 SOCIAL IMPACT Hudbay’s history of successfully developing and operating mines includes making a positive impact on society through strong community relations and investments to advance sustainable communities. $214.8 MILLION paid in employee wages and benefits $4.5 MILLION in community investments and charitable donations Expomina recognized Hudbay Peru’s support of dairy processing plant GRI 102-15 | 203-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Social Impact 53 The reserve communities within the northern Manitoba region where Hudbay operates struggle with high unemployment. Helping stimulate business start-ups and small businesses and developing job skills within the indigenous communities near our operations not only helps the communities; it also benefits Hudbay by growing the base from which we hire and increasing the number of qualified suppliers from which we procure services and goods. To help achieve this mutual benefit, in 2018 we held an economic development workshop in which individuals from three nearby communities participated in an interactive discussion on needs, challenges and ways to increase both access to bidding opportunities and the awarding of contracts. With younger generations being the fastest growing segment of the population in the region, we also increased efforts to engage youth and students and to raise awareness about the economic, employment and training opportunities our mining operations offer. In 2018, we held mine tours with students that showcased the various careers available at our operations. In early 2019, we held a mechanics course for students that included job shadowing our heavy-duty underground mechanics. Other events and activities are planned for 2019 to not only help develop potential future talent for Hudbay, but also support broader efforts to improve the well-being of the communities near our operations. STORY ECONOMIC ENGAGEMENT WITH INDIGENOUS COMMUNITIES At our Rosemont project in Arizona, we have contributed around $2 million to local organizations and charities since inception of the permitting process. In particular, we focus on supporting STEEAM – science, technology, engineering, environment, agriculture and math – educational initiatives. A committee of our employees evaluates all funding requests, which include a description of the initiative and how it supports STEEAM. In March 2018, we approved a proposal from the Catalina Foothills High School’s astronomy department that requested financial support for the hardware, tools and raw materials needed for the school’s project to conduct a near-space mission. The students used the materials to design and build a spacecraft that they launched into earth’s upper atmosphere (known as “near space”) using a large helium balloon. The spacecraft was equipped with electronics that gathered data such as air temperature, air pressure, altitude, latitude, longitude, and high-definition video and photos. The students retrieved the spacecraft via GPS technology, and plan to use it for future flights. STORY HELPING STUDENTS LAUNCH EXPERIMENTS INTO SPACE GRI 102-21 Hudbay 2018 Annual and CSR Report | Social Impact 54 OUR APPROACH ECONOMIC CONTRIBUTIONS Through jobs, business opportunities, taxes and royalties, community development programs and investments in infrastructure, we aim to support and help advance socio-economic development in the regions and communities where we operate. EITI requirements and is fulfilling its broader objectives. In Canada, the government’s Extractive Sector Transparency Measures Act (ESTMA) aims to support the international fight against corruption and increase revenue transparency in the resource exploration and extractive sector. In accordance with the Act, we filed our annual ESTMA report, which details our government payments for the 2017 fiscal year, in May 2018. As required by our Code of Business Conduct and our Statement on Anti-Corruption, all government payments must comply with the laws of the jurisdictions where we operate, including the Corruption of Foreign Public Officials Act in Canada and the Foreign Corrupt Practices Act in the US. We support the Extractive Industries Transparency Initiative (EITI), a global standard that enhances revenue transparency and accountability in the extractive sector. As a member of the Peruvian Mining Society, we support the EITI process in Peru, where the government has implemented significant aspects of the COMMUNITY RELATIONS Fostering relationships based on trust with the communities near our operations and exploration activities is at the heart of our approach to earning our social licence to operate. Our reputation in Peru as a leader in community relations demonstrates that we are on the right path, while serving as a reminder that relationship building requires an unwavering commitment. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance The processes and requirements for strengthening relationships throughout the life of a mine are described in our Stakeholder Engagement Standard. Each exploration site, development project and operation is required to identify relevant stakeholders, conduct an analysis and create a stakeholder engagement plan that establishes mutually acceptable processes with key stakeholders. Site-based community response mechanisms are accessible to all local stakeholders to record complaints and grievances. We investigate all such matters with a goal of providing timely resolutions and remedies, as appropriate. Our integrated software system records and monitors engagement activities, stakeholder commitments, community investments and action plans. INDIGENOUS ENGAGEMENT Our community relations and stakeholder engagement approach includes respecting the cultures and heritage of all communities near our locations of operation, and ensuring we recognize the specific rights, culture and history of indigenous peoples. At our operations and exploration sites, we develop archaeological monitoring and cultural resource plans, in consultation with relevant community members and groups as appropriate, to identify and protect any cultural artifacts discovered at our sites. As part of our membership in the Mining Association of Canada (MAC), we apply the Towards Sustainable Mining (TSM) Aboriginal and Community Outreach protocol to assess and measure our performance in the areas of engaging communities of interest, including indigenous groups, in meaningful dialogue and decision-making. GRI 102-15 | 102-21 | 103-1 | 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Social Impact 55 In 2018, we supported the Global Indigenous Development Trust and its efforts to improve socio- economic conditions for indigenous communities and to build cross-country relationships such as learning exchanges between indigenous leaders in Canada and Peru. During the year, the Trust led a workshop in which company leaders, including CEO Alan Hair, participated in a discussion on understanding the perspectives, expectations and aspirations of indigenous communities, and the issues we face when working together. LOCAL HIRING AND PROCUREMENT We recognize that local employment and business opportunities are high priorities for community and government stakeholders, and meeting these expectations can generate significant economic benefits and create stronger relationships. Under our Local Procurement and Employment (LP&E) Standard, each site identifies opportunities for hiring and sourcing goods and services from the local communities. We engage local stakeholders to maximize local job and procurement opportunities and often incorporate these commitments into the community agreements that are developed in collaboration with the local communities. We also support government programs and efforts that the communities have identified as a priority to develop local capacity for both mining jobs and other livelihoods suitable for the community. This includes investments in agricultural industries, training and skills development programs conducted by Hudbay and through partnerships with universities, technical institutes and other organizations. COMMUNITY DEVELOPMENT During mine development and operations, our presence in a community can stimulate social and economic development and can also serve as a catalyst for diversifying the local economy to minimize the impacts when mining operations cease. As soon as we enter a region, we collaborate with the communities to understand the social and economic priorities of each community and support development programs that address these needs. In some jurisdictions where we operate, we have formal community agreements that detail our commitments. For example, in Peru the land use agreements with communities state our commitment to invest in health, education and social development. Multi-stakeholder committees, which include Hudbay and local representatives, approve and oversee the projects specified in the agreements. We engage government agencies, community development organizations and other partners to contribute expertise and knowledge and strengthen the effectiveness of these programs. Our Community Giving and Investment Standard outlines the requirements and process for contributions and investments in local communities. It emphasizes community involvement, mutual benefit and partnerships. At our operations, community investments are largely focused on programs, infrastructure and socio-economic development initiatives that build resiliency, advance sustainable livelihoods, and help communities avoid dependency on the mine during operations and after closure. In 2018, we developed a corporate office giving plan to more clearly articulate our approach to implementing the Community Giving and Investment Standard at the corporate level and increase the impact of these efforts. The plan incorporates our values and includes guidelines and requirements related to employee volunteering and matching donations. It also formalizes our support of Youth Without Shelter (YWS), a Toronto-based charitable organization that provides shelter, education and training to homeless youth. YWS was selected due to its alignment with Hudbay’s values, the broad support of employees, and our ability to make a positive impact on the organization’s goals. RESETTLEMENT AND LAND USE We seek to avoid resettlement whenever possible. However, when the location of an orebody determines that resettlement is unavoidable, we follow a process that adheres to international standards, including IFC Performance Standard 5, which advises companies to minimize the impact on those displaced through measures such as fair compensation, improvements to living conditions and support for livelihoods. Active community engagement is essential throughout the resettlement process. No resettlement activities took place in 2018. GRI 102-15 | 102-21 | 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | Social Impact 56 MANITOBA We recognize that mining activities can be a positive socio-economic catalyst for the communities in northern Manitoba. At the same time, when mining operations cease, it can have a negative impact. We are committed to building long-term relationships, creating partnerships and developing programs to ensure a lasting, positive impact. CLOSING MINES RESPONSIBLY Around 5,000 people live in Flin Flon, Manitoba, a mining town that began to form a hundred years ago with the discovery of the Flin Flon orebody. Hudbay’s operations in the Flin Flon area – most recently the Reed and 777 mines – have been the primary contributors to the Flin Flon economy. In mid-2018, Reed closed, and after exploring all options to maximize the existing assets in Flin Flon, the Company determined that, based on the depletion of available ore, the 777 mine would close by the end of 2022. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance GRI 102-15 | 102-34 | 102-44 | 103-2 With more clarity on the future of the 777 mine, the Flin Flon mill and the zinc plant, we have begun to engage with the community to develop a plan that assists with the social and economic transition. In 2018, we met with the Flin Flon, Creighton and Denare Beach mayors and other local officials to present our initial closure plans and discuss opportunities to diversify the local economy and minimize the impacts of closure to the greatest extent possible. We discuss these efforts in more detail in the story “Flin Flon Closure: Transparency and Respect”. Hudbay has a dedicated Indigenous Liaison Officer (ILO) who works to build mutual understanding and positive relationships between the Company and the indigenous communities. The ILO works to bridge cultural gaps through meetings and job fairs; support for indigenous community activities, mine tours and events; cultural awareness training for employees; and conflict resolution. All Manitoba operations have stakeholder engagement plans, and the ILO supports the completion of the indigenous-specific plans. BUILDING RELATIONSHIPS WITH INDIGENOUS COMMUNITIES Our Manitoba Business Unit engages with local indigenous communities near our mining operations and exploration activities. We maintained our bronze certification level for the Canadian Council of Aboriginal Business’s (CCAB) Progressive Aboriginal Relations (PAR) program. The PAR program verifies and benchmarks corporate performance in indigenous relations in Canada in four key areas: employment, business development, community investment and community engagement. However, in the 2018 TSM Progress Report, our Manitoba Business Unit did not meet some of the requirements within the Aboriginal and Community Outreach protocol due to gaps in stakeholder engagement recordkeeping, resulting in our ratings falling below the minimum level that we expect to achieve. To raise our performance, corporate and site senior leaders, as well as representatives from our environment, exploration and community relations functions, held an internal strategy session at the beginning of the year to identify ways to strengthen relationships, build capacity and provide more economic opportunities through jobs and procurement. One outcome from the review was an improved engagement approach during exploration work. Our exploration team reviewed their drilling campaigns for the next three years, identified the communities near the exploration sites, and conducted routine visits during which Hudbay team members held informational sessions and performed outreach with elders and members of each community. The approach has helped the Company obtain the permits needed for its 2019 Hudbay 2018 Annual and CSR Report | Social Impact 57 and contributions of indigenous peoples in Canada. Our ILO led five workshops with nearly 340 employees and external resource personnel throughout the year that combined in-class learning with on-the-ground experience and raised awareness of the residential school experience and treaties. Indigenous elders were invited to speak to employees, a growing number of whom participated, along with their families and friends, in four sweat lodge ceremonies over the summer months that expanded their knowledge about seeking Mino-Pimatisiwin (the good life) – an indigenous approach to wellness. ADVOCATING FOR RESPONSIBLE MINING The Mining Association of Manitoba (MAMI) comprises 25 member companies and builds support for Manitoba’s mining industry through education and collaboration. In 2018, a Hudbay representative was elected to chair MAMI for a two-year term, leading the association’s efforts to promote a transparent and predictable regulatory climate, safe and secure operations, environmentally and socially sustainable industry practices, and trusting stakeholder partnerships that provide mutual benefits for all. During the year, we also met with members of the Manitoba government to discuss Hudbay’s plans, opportunities for growth and trade, and concerns related to permitting. 2018 PERFORMANCE We invested $275,000 to support a wide range of community programs. Major contributions during the year included: • Flin Flon Bombers – $40,910 (local junior hockey team) • Flin Flon and District Assessment and Referral – $144,926 • Rotary – $13,250 (sponsorship of local events – air show, fishing derby) • Snow Lake Family Resource Centre – $10,000 • $50,000 toward Indspire, an indigenous-led charitable organization that invests in education for indigenous people, including scholarships to indigenous students from Ontario and Manitoba A total of 94 complaints were registered in 2018, of which 93 were union labour grievances and one was a community grievance about rowdy contractor behaviour. Labour grievances related to collective agreements are managed through a different process than that used to address community grievances. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance exploration program. It has also improved Hudbay’s understanding of the communities’ interests, concerns, and capacity and the areas where the Company can collaborate with each community. Fostering economic opportunities is a key element of our indigenous strategy. At one of the exploration sites, we hired a junior prospector who is a member of the Opaskwayak Cree Nation. We met with the Pimicikamak Cree Nation Sector Council to kick off a project to recruit 12 new employees from the community to work at our Lalor mine. We also engaged traditional knowledge holders at Lalor to participate in an environmental assessment of planned modifications. Along with providing employment opportunities, we work to support indigenous businesses. Recognizing that our procurement spend with indigenous suppliers is still modest and that we can play a role in improving business opportunities, we hosted an economic development workshop with indigenous communities to provide information to community participants about our local procurement standards and processes. We also developed a questionnaire for existing contractors to determine how many use indigenous suppliers. In 2018, payments to suppliers in northern Manitoba and northwest Saskatchewan totalled $45.4 million, of which approximately $1,126,857 was awarded to indigenous businesses. We continued to address Canada’s Truth and Reconciliation Commission’s Call to Action No. 92, which directs corporations to play a role in reconciliation through actions and participation in events that build cultural awareness and mutual understanding. We participated in National Indigenous Peoples Day, recognizing and celebrating the unique heritage, culture GRI 102-15 | 102-34 | 102-44 | 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Social Impact 58 STORY FLIN FLON CLOSURE: TRANSPARENCY AND RESPECT Hudbay and the town of Flin Flon in northern Manitoba have a shared history that goes back to Hudbay’s founding over 90 years ago. organization and to encourage employees to ask questions and contribute to solutions. In November 2018, Robert Assabgui, Hudbay’s Vice President of the Manitoba Business Unit, sent a memo to employees at the Flin Flon operation announcing that the Company would be closing its 777 mine, mill and, most likely, the Flin Flon zinc plant in 2022. There being no anchor mine to replace 777 and sustain operations, the closure will effectively cease mining operations in the town of Flin Flon for the first time since mining began in 1927. After making the announcement, Hudbay’s business leaders engaged with employees and union leaders throughout the year to explore options to sustain the Company’s presence in Flin Flon. A series of videos featuring updates from Hudbay’s leaders, including the CEO and the Manitoba Business Unit leader, aimed to keep everyone informed about changes in the Hudbay’s focus then moved to planning ahead and minimizing the impacts to the 900 employees working in Flin Flon. “We will continue to exhaust all possible options to extend operations in Flin Flon, which we have been able to achieve in the past,” said Alan Hair. “Unfortunately, to date we have not been successful. We know this creates uncertainty for our employees and their families, and we are determined to be transparent in our plans and communicate often – and with as much advance notice as possible – to reduce impacts on our people and the community.” The Company is working on a plan that includes offering Flin Flon workers employment opportunities in Snow Lake and helping the community of Flin Flon successfully manage the transition. In a January 2019 followup video GRI 103-2 to employees, Hudbay leaders committed to work collaboratively with the unions on putting a plan in place by mid-2019 so that employees and their families would have greater clarity on what it means for them. The Flin Flon community helped shape Hudbay’s values of dignity and respect, caring, openness and trustworthiness, and this will be reflected in the way we manage the closure and continue to support Flin Flon. • CEO Message • Business and Financial Review • CSR Approach CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Social Impact 59 PERU We have a multi-stakeholder approach in place for supporting sustainable development in Chumbivilcas, where Hudbay collaborates with other relevant entities (e.g., governments, civil society organizations, communities), creating shared responsibility for development, generating further opportunities and empowering communities through their own growth and improvement. Ongoing efforts to support economic diversification include the Cullahuata Dairy Processing Plant, which is located in the province of Chumbivilcas. In collaboration with the local government, Hudbay built the dairy plant, provided community members the technical training required to efficiently run it, and worked with the national government to co-fund the plant’s machinery and equipment. The plant, which processes milk and produces cheeses, yogurts and butters, provides community members with skills development and employment opportunities. At the 2018 Expomina Peru conference – a mining trade show held in Lima that was attended by more than 100,000 people – Hudbay was recognized for its role in constructing and managing the plant. Through an alliance with Canada’s Harmony Organic (a company that produces organic milk and dairy products), we are supporting community leaders around Constancia on an internship program for the communities’ agricultural facilities. In 2018, we launched an Agricultural Development Program (PDA) with Wheaton Precious Metals, to promote agricultural entrepreneurships in Chumbivilcas. Since acquiring Constancia in Peru in 2011, we have entered into more than 90 agreements with different local communities and governments, demonstrating the effectiveness of our approach to ongoing, transparent, responsive and frequent engagement. REACHING LONG-TERM, MUTUALLY BENEFICIAL AGREEMENTS As we grow our land position in Peru, we are applying this proven, successful community engagement approach beyond the communities around Constancia. In 2017, we initiated negotiations to acquire the surface rights related to the Pampacancha satellite deposit, which is within trucking distance to Constancia, with the communities of interest. While a resolution to the negotiations is taking longer than expected, we are willing to take the time to do the right thing and to ensure that any agreement GRI 102-15 | 102-34 | 102-44 | 103-2 | 203-1 continues to strengthen our relationships with local stakeholders and supports our longer-term exploration plans. This is the same approach we used to reach an agreement with one of the four communities of interest to allow us to conduct exploration on the highly prospective Kusiorcco and Quehuincha Norte targets that we acquired in early 2018. BUILDING AND DIVERSIFYING LOCAL ECONOMIES One of the goals of Hudbay’s social programs is to work as a valued partner with members of Constancia’s neighbouring communities to help them improve and develop their communities in areas that they themselves prioritize. Hudbay 2018 Annual and CSR Report | Social Impact 60 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance In partnership with Global Indigenous Development Trust, we developed the North-South Exchange Program. Each year, people from the communities and districts surrounding Constancia travel to Canada to seek partnerships for economic empowerment and to learn from community, municipality and business leaders about how mining, sustainable development and thriving communities can coexist. Through a memorandum of understanding between Northern College Institute (in Northern Ontario) and technical institutes from Chumbivilcas to provide training, in 2018 eight members from the communities near Constancia travelled to Northern College and participated in classes, attended presentations from guest speakers and toured local businesses. Our Technical Assistance Office (TAO) engages with different levels of government and seeks out development projects that can be implemented as public-private partnerships in Chumbivilcas. Our TAO acts as an advocate for local municipalities, helping them complete legal and technical requirements to qualify for public and/or private funding of public investment projects. 2018 PERFORMANCE Our total payments to local suppliers amounted to $8.9 million, and we invested more than $7.9 million to support a wide range of community programs. Notable contributions and efforts during the year included: • In response to a massive landslide in March that impacted more than 100 families as well as health and water resources in the community of Lut’o Kututo near Constancia, we worked with authorities to establish a mobile health clinic for the community. We also provided food, water, blankets and medical supplies in protected waterproof tents, and our employees helped distribute aid to those in need. GRI 102-15 | 102-34 | 102-44 | 103-2 | 203-1 the complaints, and has also reinforced to personnel the importance of ensuring all commitments are in writing. In 2018, residents of the Livitaca district threatened to block a main road to bring attention to their social and environmental concerns, including a request for the district to be included in Constancia’s direct area of influence. Hudbay established a dialogue table with representatives of the district and government entities, and the parties successfully reached an agreement. During the process, Hudbay applied the Voluntary Principles on Security and Human Rights. • Infrastructure improvements in the Chilloroya community included construction and repairs for the municipality palace, roads, pathways and school fences. • Under our Agricultural Development Program with Wheaton Precious Metals, we provided nine agricultural tractors to the community. • We directed contributions toward community programs to reduce the youth labour gap through activities such as pre-university schools. There were a total of 14 grievances registered in 2018. Of the total, 11 were categorized as commercial matters related to the operation’s rental of vehicles from the communities, and the complaints were associated with vehicle damage and non-payment from a contractor. Hudbay is reviewing legal options to support the complaints against the contractor. The other three complaints were related to a claim of non-compliance with a verbal social commitment. The site is investigating CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Social Impact 61 ARIZONA Our Rosemont copper project is expected to be the third-largest copper producer in the US, contributing significantly to the local economy through hundreds of jobs, tax payments and support for community programs. With the final permit still outstanding during 2018, we focused on keeping stakeholders informed of where we were in the process and being accessible to them and the entire community. Located near Tucson, a large metropolitan city of more than 1 million people and an area that has experienced strong population and economic growth in recent years, the project’s close proximity to a large pool of skilled workers, leading universities and research institutions provides benefits as well as challenges, such as numerous stakeholder groups with diverse, and at times conflicting, interests. CONTINUING APPROACH TO STAKEHOLDER ENGAGEMENT In 2017, we received the US Forest Service’s Final Record of Decision (ROD), and on March 8, 2019, we received the Section 404 Water Permit from the US Army Corps of  Engineers (USACE). While the environmental impact statement process closed in 2013 and the last steps took longer than expected, we respect the permitting agencies’ diligence in ensuring the process is thorough and fair. During 2018, we continued to engage with stakeholders, including the permitting agencies, to address any concerns and questions about our plans to build a state-of-the-art mine. We also engaged with the relevant permitting agencies, providing them with the information needed to successfully defend lawsuits related to the project’s permits. GRI 102-15 | 102-21 | 102-34 | 102-44 | 103-2 Hudbay 2018 Annual and CSR Report | Social Impact 62 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Our stakeholder engagement plan considers the wide range of stakeholders and their interests, including the Native American tribes nearest to the planned operation. Although the Rosemont project would not directly or indirectly impact tribal lands, the Tohono O’odham Nation maintains cultural, spiritual, social and physical ties to the area and is considered the lead tribal entity with regard to activities and projects associated with the Santa Rita Mountains. We also recognize other tribes with interest in and association with the Santa Rita Mountains. Through the permitting process that included consultation with the tribes, the Santa Rita Mountains have been designated as a Traditional Cultural Property. A signed memorandum of understanding states our commitments related to the treatment of artifacts and other historic articles, as well as training and reporting. Other social commitments that we will begin to execute against once operations commence: • $650,000 to relocate approximately 10 miles of the Arizona Trail • Between $6.5 million and $7.5 million for road infrastructure improvements on a 12-mile stretch of the state highway leading to the project’s entrance road • $25 million endowment trust fund, managed by a Board of Trustees, to fund priority community projects including recreation, cultural, and environmental conservation projects • $500,000 in annual community donations per year (following the start of operations) to support community giving programs GRI 102-15 | 102-34 | 102-44 | 103-2 2018 PERFORMANCE We continued to procure project engineering and design services from local suppliers, spending $9.1 million with local businesses and $4.6 million to suppliers throughout Arizona during the year. We invested $204,000 in 2018 to support a wide range of community programs, with an average donation of around $2,000. Notable programs supported during the year included: • We were a bronze sponsor of United Way of Tucson’s Annual Days of Caring event, which brings together thousands of volunteers – many of whom were Hudbay employees – to participate in one of more than 100 community improvement projects. • Through our school grants program, which awards between $500 and $5,000 to local public schools, we awarded 12 grants totalling nearly $25,000, including a $1,790 grant to the Catalina Foothills High School’s astronomy department. • We contributed $5,000 to El Tour de Tucson, one of the community’s signature events, which attracts nearly 10,000 cyclists, of all ages and abilities, from across the country. The event is a fundraiser that benefits various charities and causes. Hudbay employees also volunteered to manage an aid station that supported riders with refreshments and snacks. • We contributed $8,500 to the Santa Cruz County Fair and Rodeo Association in Sonoita, Arizona, a small community near Rosemont. The county fair, rodeo and related events are significant to the community and to that part of Southern Arizona. Our support includes being the exclusive “Junior Rodeo Sponsor” of the Memorial Day Rodeo, which is in its 103rd year. No complaints were formally registered through our grievance system in 2018. However, three tribes filed a lawsuit to challenge the Final Record of Decision from the US Forest Service. That litigation is still in the courts. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Environment 63 TOTAL GREENHOUSE GAS EMISSIONS (kilotonnes of CO2-equivalent and intensity) Indirect Direct Intensity MBU PBU ABU MBU PBU ABU MBU PBU ABU MBU PBU ABU MBU PBU ABU MBU PBU ABU MBU PBU ABU 2015 2016 2017 2018 DIRECT ENERGY CONSUMPTION BY PRIMARY ENERGY SOURCE (terajoules) Propane: 31% (793 TJ) Diesel: 69% (1,778 TJ) ENVIRONMENT Valuing the dignity of people, showing respect and care, being open and earning trust mean we must develop the mineral resources our society needs in a manner that protects the environment, responsibly managing and mitigating environmental risks. Zero significant spills Received Environment Canada’s Award of Merit for Flin Flon weather station Hudbay 2018 Annual and CSR Report | Environment 64 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance STORY LANDSCAPE-SCALE PROJECT RESTORES HISTORICAL FLOODPLAIN The Sonoita Creek Ranch (SCR) restoration project – the cornerstone of the water mitigation package for Hudbay’s Rosemont copper project in Arizona – provides a rare opportunity for landscape-scale restoration of a large ephemeral stream system. The nearly 1,600-acre Sonoita Creek Ranch in the Santa Rita Mountains was used decades ago for farming and ranching. Under the project, we are working to completely restore the Sonoita Creek and its historic floodplain. Significant parts of the creek had been artificially channelized since before 1880 for agricultural purposes, cutting off tributary drainages from the Sonoita Creek mainstem. The restoration project involves re-establishing a channel of Sonoita Creek to the historic floodplain, revegetating within the floodplain, rehabilitating the existing channel, and restoring naturally tributary drainages to the creek’s mainstem. The project is expected to return the Sonoita Creek floodplain to a better functioning ephemeral riparian system. In addition, the two existing ponds on the ranch will be renovated to support the recovery of federally listed aquatic species. We will construct channels to carry overflows from the ponds to the Sonoita Creek floodplain. To prevent impacts from domestic livestock, cattle grazing will not be permitted on the ranch. A wildlife- friendly barrier will be installed that provides access to the ranch and will direct wildlife to a culvert crossing to reduce the risk of collisions with vehicles. In 2018, our Constancia operation in Peru recycled 2,815 kilograms of plastic bottles and donated them to the award-winning “Ponchila” project. The project, which was developed by Agua San Luis (owned by Coca-Cola), Pacifico Seguros and Cencosud in 2016, turns used plastic bottles into ponchilas – a combination backpack and built-in poncho. The ponchilas are given to children who live in the rural Andes, where the school dropout rate is exacerbated by extreme temperatures and the long distances children travel to get to school. Each ponchila is made out of 80 recycled plastic bottles, and Hudbay’s donation was used to make 1,161 ponchilas. In addition to Hudbay’s involvement, Peru’s Ministry of Environment joined the campaign in 2018 to promote innovative ways to turn waste into added value. Cencosud, a supermarket chain and one of the founding project partners, also found that 40% of its customers began recycling plastic for the first time because of the campaign. STORY TURNING PLASTIC WASTE INTO PONCHILAS Hudbay 2018 Annual and CSR Report | Environment 65 OUR APPROACH Our Environmental Health and Safety Policy states our commitment to effectively manage our environmental risks, apply best practices to reduce our environmental footprint, and contribute to sustainability and biodiversity. At our operations and exploration sites, we comply with all the laws and regulations in each jurisdiction where we operate, and our operating sites are required to maintain (or achieve within two years of commencing production) an environmental management system that is certified to the ISO 14001 international standard. As members of the Mining Association of Canada (MAC), we apply the Towards Sustainable Mining (TSM) environmental protocols and frameworks at our operations in Canada and voluntarily do so at operations outside of Canada. We annually assess our operations’ performance against the protocols. New or CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 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 beginning operations under Hudbay’s control. services. Site-specific biodiversity and ecosystem services management plans must apply the following four sequential key steps of the mitigation hierarchy: 1. Avoid impacts by locating facilities and infrastructure away from natural and critical habitats. LAND AND BIODIVERSITY We recognize that mining activities can impact biological diversity, and that our ability to operate and gain trust with stakeholders requires that we develop and execute plans that maintain healthy ecosystems. Our Biodiversity Conservation Standard requires each site to identify environmental conditions – such as threatened and endangered species, protected areas and critical habitat – and the potential impacts Hudbay’s activities may have on biodiversity and ecosystem 2. Minimize impacts through the use of appropriate management systems, mine designs and operating plans that limit land disturbance throughout the mine life. 3. Restore ecosystems by progressively rehabilitating affected areas during operations and at closure with a goal of mitigating the impact over time through preservation or maintenance. 4. Offset unavoidable residual impacts through programs to compensate for biodiversity losses and by enhancing ecosystems in nearby areas. Our standard aligns with, and supports our implementation of, the TSM Biodiversity Conservation Management Framework and protocol, and the IFC Ecosystem Service Performance Standard. Included in the framework are commitments to contribute positively to biodiversity conservation throughout the mine lifecycle, to engage with communities of interest about biodiversity policies and practices, and to not explore or mine in World Heritage sites. Through monitoring programs, we track the effectiveness of our management plans and continuously improve our performance. GRI 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | Environment 66 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ENERGY USE AND GREENHOUSE GAS In alignment with the TSM Energy Use and GHG Emissions Management protocol, we have processes and management systems in place to manage our energy use and GHG emissions. We annually report our performance in the TSM Progress Report and in this report. We also report our global GHG emissions data and performance to CDP (formerly the Carbon Disclosure Project). Because we have variability in our operational inputs (such as mining deeper or further and changes in ore composition), it is very difficult to establish a “baseline” of energy efficiency. In 2018, we set a target to establish guidance and a process for tracking our eco-efficiency performance that take these complexities into consideration. As part of the annual budgeting process, we asked each business unit to analyze areas of eco- efficiency – energy use, GHG intensity of our energy supply, water, mineral waste and land disturbed. The business units identified key drivers of consumption as well as initiatives to improve the performance across the areas. These analyses will be used to identify opportunities to incorporate eco-efficiency considerations into our capital approval process. Compared to the prior year, our direct energy consumption decreased 2.9%, and indirect energy consumption increased by the same amount. Our energy intensity increased 9.0%. Our total GHG emissions increased 5.7%, and GHG intensity increased 13.3%, the latter largely due to lower production. GRI 103-1 | 103-2 AIR WATER We do not have any major point source air emissions (i.e., stack emissions or releases through a confined air stream). Our primary air emissions are forms of particulate matter (such as dust and fuel emissions), generated by activities including blasting, 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 dust management plans, conduct monitoring, and report our air emissions to ensure full compliance with air quality laws and regulations in the countries where we operate. Our total particulate emissions decreased 12.0% compared to 2017, largely due to the average trips per day of trucks hauling ore declining in Manitoba after the closure of Reed in mid-2018. Water is fundamental for healthy communities and ecosystems. It is also essential to our operations. Mindful of both imperatives, we strive to continuously improve our water management approach, apply best practices and reduce our impact on water resources. Our site-specific water management plans address the unique water needs and challenges at each operation and assess water quality, quantity and availability as well as the needs of local communities. These plans are developed during the feasibility stage as part of a site’s environmental impact studies and are constantly reviewed and updated to ensure water risks and considerations are assessed throughout the mine lifecycle. Because our current operations are not located in any water-stressed areas, our operating sites focus their water management approach on water discharge quality. Hudbay 2018 Annual and CSR Report | Environment 67 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance In 2018, MAC enhanced the TSM Water Stewardship Policy Framework by incorporating the framework into a new Water Stewardship protocol that includes four performance indicators – water governance, operational water management, watershed-scale planning, and water reporting and performance indicators. As a member of MAC, we will implement the updated protocol over the next several years and publicly report against the protocol beginning in 2021. Since 2010, we have disclosed our water management performance in CDP’s annual Global Water Report. In 2018, the total amount of water withdrawn remained flat (increasing only 0.29%) and water discharged decreased 10% compared to 2017. The amount of water our operations discharge can be impacted by precipitation. Total water recycled or reused was approximately 270% of our total water use. WASTE AND TAILINGS CLOSURE AND RECLAMATION We believe successful mine closure begins during the design phase of a project’s development and continues throughout the mine’s lifecycle. In alignment with TSM’s Mine Closure Framework, our closure plans include consultation and engagement with stakeholders – in particular, the communities closest to our mines – to collaborate on closure and reclamation objectives and work together on long-term economic development strategies and plans that mitigate the environmental, social and economic impacts of closure. We rehabilitate the former mine site to an agreed-upon beneficial post-mining use that is as close as possible to its pre-use condition. Our closure plans include identifying opportunities to conduct progressive rehabilitation once the areas are no longer needed for mining. Post-closure activities include maintenance and monitoring to ensure closure objectives are progressing successfully as intended. Mining and ore processing activities produce waste byproducts including waste rock (overburden that has no economic value) and tailings (the material that remains after the minerals have been extracted from the crushed ore). 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 (a more detailed discussion on the latter is included in the Tailings Stewardship section of this report). Sites must manage waste rock in accordance with environmental regulations and industry standards and in a manner that minimizes the potential for acid rock drainage (ARD), which is caused by a chemical reaction when certain minerals in some rock are exposed to air and water. Waste rock and tailings may be classified as potentially acid generating (PAG). To minimize and mitigate the potential impact of PAG-classified material, wherever possible we reuse or dispose of PAG material in contained areas that are engineered to prevent acidic runoff. During the year, we generated 20% less overburden waste, 12% more waste rock and 6% more tailings compared to the previous year. The amount of waste produced varies depending on the stage of the mine lifecycle (i.e., more overburden when developing mines or near the end of the mine life). GRI 103-1 | 103-2 Hudbay 2018 Annual and CSR Report | Environment 68 MANITOBA WORKING TO MINIMIZE ENVIRONMENTAL IMPACTS The Manitoba Business Unit’s total water consumption increased by 18.9% compared to 2017. Water consumption intensity increased by 24.5%. The electricity used to run our processing plants is primarily renewable hydroelectricity sourced from Manitoba Hydro, which keeps our greenhouse gas (GHG) emissions and intensity relatively low. We do use propane for heating and diesel to run the equipment that extracts and transports ore. Lower grades at Lalor and the 777 mines impact our energy consumption due to the need to mine deeper, haul material farther, and mill more material. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance While we are evaluating opportunities to offset these higher energy requirements – such as working to eliminate the use of some or all of the concentrate thaw sheds – our overall energy usage and energy intensity increased by 1.4% and 9.7%, respectively, compared to 2017. consumption, reduce handling costs and costs to produce dam construction materials, and reduce risks associated with waste. The business unit also plans to update its closure plan in 2019 and will identify initiatives to improve the quality of restored land and habitats. IDENTIFYING OPPORTUNITIES FOR ECO-EFFICIENCIES RETURNING TO PRE-MINING CONDITIONS Given the expected lower grades at 777 and Lalor, the business unit analyzed areas that relate to eco-efficiency – energy and ensuing GHG emissions, water, mineral waste and land disturbed – and identified opportunities to improve its performance. These efforts include maximizing production throughput efficiencies, optimizing heating and ventilation during winter months, and improving haul routes to reduce energy Even before the last ore was mined in mid-2018 at our Reed operation, work had begun to close and restore the site to a state where it is indistinguishable from other public-use areas in the park. By the end of the year, all the buildings had been removed and any voids and entrances – including the mine portal – had been filled and secured with waste rock taken out during operations. Soil containing existing organic matter that had been set aside during construction was used to contour and replicate the original topography. In 2019, we will conduct environmental monitoring in consultation with Manitoba Sustainable Development to ensure all environmental indicators have been met. The best practices employed to achieve the successful closure of Reed are featured in the story “Reed Mine: A Culture of Stewardship from Construction to Closure”. GRI 103-2 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | Environment 69 PERU MAINTAINING STRONG ENVIRONMENTAL PERFORMANCE CONSERVING AND PROTECTING BIODIVERSITY • We continued a breeding and relocation program for two threatened animal species: an endemic reptile and an aquatic frog. The biodiversity management plan for Constancia aims for no net loss of biodiversity as a result of mining activities. We achieved all plan objectives in 2018, most notably: • The closure and reclamation of a tunnel that was near an area disturbed during construction, called DM7, included revegetation using native grasses and trees. • We progressed the management plan for the • Wildlife-crossing warning signs were erected across Cochapampa bog, a wetland that serves as a source of water and cattle feed for the communities of Chilloroya and Uchucarco. Actions carried out during the year to support the goal of maximizing the benefits of the land through sustainable management practices include conducting studies on animal load capacity, soil conditions and water sources; holding workshops on animal health and good livestock management practices; and completing a topographic survey and plotting of users inside and outside the bog. the mine site. • A commission of biologists, environmental engineering professors and students from Universidad Andina del Cusco, and high school teachers and students from Chilloroya were given guided tours of the mine. • To support our biodiversity management efforts, we implemented an on-demand satellite imagery service and remote sensing drone technology with multispectral sensors. These will be used to enhance our land management plan. The Peru Business Unit set a 2018 target to maintain its current energy- and water-consumption-to-occupancy ratio at the accommodation camp. While the target was not met, this was largely due to the fact that there were fewer people at the camp during the year, while the number and size of the facilities remained unchanged. With an additional 400 workers expected in 2019, the site will monitor opportunities to improve energy use and water consumption at the camp. The site also plans to install LED lights throughout the processing plant in 2019. Total water consumption decreased by 13.3%, and water consumption intensity decreased by 12.6% compared to the prior year. The Constancia operation’s surface and groundwater consumption was 30% and 72% less, respectively, than the amount authorized by the licences that govern the site’s water use. Through our water quality monitoring program, which assesses impacts our activities may have on water sources, we implemented additional treatment in the accommodation camp’s collection system to address exceedances of sulphates. During the year, no air quality parameters were exceeded. As part of a plan to control particulate matter air emissions, the site began using a dust suppressant on a 10-kilometre stretch of road. Hudbay was the first mining company in southern Peru to use the dust suppressant, and due to its success, many other mining companies in the area have begun to use it as well. As part of its solid waste management plan, Constancia donated wood and used pipes and geomembrane materials to the communities for their reuse; donated plastic bottles to a campaign that creates “ponchilas” (a backpack and poncho combination) for children; and held a “Hudbay Recycles” contest to encourage employees and contractors to properly segregate solid waste. GRI 103-2 Hudbay 2018 Annual and CSR Report | Environment 70 IDENTIFYING OPPORTUNITIES FOR ECO-EFFICIENCIES As part of an exercise in 2018 to analyze opportunities to improve eco-efficiency, the business unit identified initiatives across all related areas – energy and ensuing GHG emissions, water, mineral waste and land disturbed. These efforts include adjusting the primary crusher and implementing improvements to the blasting process to improve energy efficiency; including thresholds in the water balance related to precipitation and withdrawals; conducting geochemical studies and improving seepage water control to improve recycling and reduce risks related to waste; and enhancing land and habitat restoration through a forestation program. Our overall energy usage in Peru increased by 9.9%, and our energy intensity increased by 0.05% compared to the previous year. Constancia maintained its level A rating across all indicators in TSM’s Energy Use and GHG Emissions Management protocol. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance GRI 103-2 Hudbay 2018 Annual and CSR Report | Environment 71 COMPREHENSIVE MITIGATION AND MONITORING for the western yellow-billed cuckoo and the southwestern willow flycatcher, and ground-based sky brightness monitoring. The story “Rosemont Project: Planning for the Future” details the project’s approach to developing and operating a mine using best practices and new approaches that will raise the standard of mining in Arizona and other jurisdictions around the world. We will implement more than 100 monitoring and mitigation measures to address potential impacts. Standard mitigation measures include managing potential impacts to water, soil, air and biodiversity. The landscape-scale restoration project of a large ephemeral stream system featured in the story “Landscape-Scale Project Restores Historical Floodplain” is an example of a program included in our comprehensive mitigation package. We will also fund specialized programs, including camera studies for large predatory species, management and removal of harmful non-native aquatic species, habitat improvement CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ARIZONA Our Rosemont project in Arizona will be a modern mine that showcases state-of-the-art techniques and sustainable environmental practices. In March 2019, we received from the US Army Corps of Engineers the last key permit needed to start developing the project. DOING OUR PART TO MANAGE WATER IN THE DESERT Under Rosemont’s mine plan, we will employ technologies and practices that will allow us to use half as much water as similar copper operations in Arizona. In addition to using an alternative method for managing our tailings, called dry-stack or filtered tailings, which requires half the water for twice the production, we plan to replace all groundwater used for mining activities by replenishing the Green Valley community’s groundwater aquifer with water from the Colorado River. In 2018, we began construction on the project, which includes an eight-mile-long pipeline that will 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 its CAP allocation and offset its groundwater withdrawals. It will also allow Rosemont to recharge water near its production wells. While operations have not yet commenced, as of the end of 2018 we had stored the equivalent of our water requirements for approximately nine years in the aquifer. GRI 103-2 Hudbay 2018 Annual and CSR Report | CSR Performance 72 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance BASIS OF REPORTING All financial information is presented in US dollars except where otherwise indicated. All operating data is reported using the metric system. Some metrics are reported on both an absolute basis and an intensity basis against kilotonnes of metal processed. Safety data frequency rates are measured per 200,000 hours worked. CSR PERFORMANCE DATA MEASUREMENT TECHNIQUES Data 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 the site 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. We calculate greenhouse gas (GHG) emissions using published factors for emissions. GHG numbers related to purchased electricity. We generated electricity at one of our sites (Reed), and this energy is reflected in fuel consumption, while GHG numbers are 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 GHG emissions worksheet developed by the Mining Association of Canada (MAC). Most of the performance data for water and energy is metered. We purchase most of our electricity from local grids. Utility grid statistics are therefore used to compile Hudbay 2018 Annual and CSR Report | CSR Performance 73 KEY PERFORMANCE DATA CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Economic (in $000s, unless otherwise stated) Direct economic value generated and distributed Profit (loss) before tax Revenues Operating costs Canada US Peru Chile Colombia Total Employee wages and benefits Canada US Peru Chile Colombia Total Payments to government Taxes paid Canada US Peru Chile Colombia Total GRI 201-1 | 102-8 2018 2017 2016 2015 2018 2017 2016 2015 $ $ 170.8 1,472.3 $ $ 198.7 1,362.6 $ $ 5.6 1,128.7 $ $ 331.4 923.1 458.5 439.0 358.9 1.8 0.5 0.6 374.7 297.7 298.5 5.8 0.0 3.9 0.0 2.2 0.0 408.5 5.7 186.0 0.5 0.4 $ 840.8 $ 741.1 $ 660.2 $ 601.1 161.3 174.0 147.2 157.1 6.2 47.3 0.0 0.0 5.7 41.8 0.0 0.0 7.8 27.5 2.2 0.0 9.3 22.4 0.0 0.2 Municipal taxes and grants Canada US Peru Chile Colombia Total Penalties and interest paid Canada US Peru Chile Colombia Total Payments to providers of capital Dividends paid Interest payments made to $ 214.8 $ 221.5 $ 177.5 $ 189.0 providers of loans $ $ $ 5.7 0.0 2.9 0.0 0.0 6.9 0.1 3.5 0.0 0.0 6.8 0.0 0.0 0.0 0.0 $ 8.6 $ 10.5 $ 6.8 $ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 $ 0.4 $ 0.3 $ 4.0 $ 3.7 $ 3.6 $ 3.6 74.8 $ 52.7 $ 126.5 $ 108.6 9.6 0.2 47.6 0.0 0.0 9.1 0.2 23.5 0.0 0.0 6.6 0.0 38.9 0.0 0.0 $ 57.4 $ 32.8 $ 45.5 $ 34.1 Financing fees paid Canada Peru Total 6.1 0.0 28.0 Other interest paid 3.6 17.0 6.6 20.0 49.4 20.1 $ 20.6 $ 26.6 $ 69.5 $ 0.0 0.0 Canada Peru Total 0.0 0.0 0.0 0.0 0.0 0.0 $ 0.0 $ 0.0 $ 0.0 $ 6.7 0.1 0.0 0.0 0.0 6.8 0.1 0.0 0.0 0.0 0.0 0.1 1.3 1.2 2.5 0.0 0.0 0.0 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Performance 74 Total full-time employees 2,179 Economic (cont’d) (in $000s, unless otherwise stated) Capital expenditures – 2018 2017 2016 2015 cash flow basis $ 190.9 $ 249.8 $ 192.8 $ 490.6 Payments – local communities for land use Canada US Peru 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1,062.0 2,149.0 1,829.3 579.5 Employees Total workforce Full-time employees MBU Corporate Arizona Peru Chile Total land use payments $ 1,062.0 $ 2,149.0 $ 1,829.3 $ 579.5 British Columbia Public benefit Community investment and charitable donations1 Canada US Peru Chile Colombia Total community investments and donations Resettlement investment (Peru) Production (contained metal in concentrate) Copper (000 tonnes) Zinc (000 tonnes) Gold (000 ounces) Silver (000 ounces) Metal production Zinc (000 tonnes) 395.6 204.5 287.5 178.7 345.1 147.1 307.1 63.5 4,499.7 5,941.2 3,738.3 2,435.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Employment Part-time employees MBU Corporate Arizona Peru Chile $ $ 5,099.8 130.0 $ $ 6,407.4 98.0 $ $ 4,230.5 1,081.5 $ $ 2,806.3 British Columbia 957.5 Total part-time employees 154.6 115.6 119.9 159.2 135.2 108.6 174.5 110.6 114.3 147.3 102.9 100.2 3,954.5 3,487.3 3,755.9 2,791.5 102.1 107.9 102.6 101.9 Contract (term) employees MBU Corporate Arizona Peru Chile British Columbia Total contract employees 1 Political donations are included in this total; however, in accordance with Hudbay policy, political donations were $0. GRI 102-8 2018 2017 2016 2015 1,382 1,332 1,319 1,399 74 33 6902 0 0 70 35 304 0 N/ap 1,741 67 40 230 0 N/ap 1,656 13 20 10 0 2 0 0 0 15 34 4 1 1651 1 6 211 0 4 0 0 N/ap 24 19 2 1 444 50 N/ap 516 0 2 0 0 N/ap 12 13 1 0 363 8 N/ap 385 68 50 183 0 N/ap 1,700 2 0 2 0 0 N/ap 4 7 5 0 187 1 N/ap 200 2 The significant increase in full-time employment and decrease in contract employees in Peru is in large part due to hiring our contract employees full time. Hudbay 2018 Annual and CSR Report | CSR Performance 75 2018 2017 2016 2015 2018 2017 2016 2015 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Employees (cont’d) Co-op and summer students hired MBU Corporate Arizona Peru Chile British Columbia Total co-op/summer students Employees represented by collective bargaining agreements Percentage of employees represented by trade unions (includes all full-time, part-time 27 3 3 12 0 0 45 26 3 1 12 0 N/ap 42 21 2 0 8 0 N/ap 31 40 3 2 12 0 N/ap 57 Employee turnover (includes all full-time employees and Peru contract employees) MBU Corporate Arizona Peru Chile British Columbia Total 1,658 1,583 1,121 1,053 Age distribution <30 30–50 and Peru contract employees) 70.3% 71.7% 67.7% 61.9% >50 Operational changes Minimum number of weeks provided before operational changes (MBU only) Negotiated into collective agreements (MBU only) Number of strikes or lockouts exceeding one week MBU Corporate Arizona Peru Chile British Columbia Total GRI 102-8 | 102-41 | 401-1 | 401-2 2 Yes 0 N/ap N/ap 0 N/ap N/ap 0 2 Yes 0 N/ap N/ap 0 N/ap N/av 0 2 Yes 0 N/ap N/ap 0 N/ap N/av 0 Gender Male Female Voluntary turnover rate (Hudbay total) Involuntary turnover rate (Hudbay total) New employee hires MBU Corporate Arizona Peru Chile British Columbia Total 2 Yes 1 N/ap N/ap N/ap N/ap N/av 1 189 7 10 108 0 0 314 25.2% 43.6% 31.2% 76.1% 23.9% 192 8 8 128 0 N/ap 336 20.2% 44.9% 34.8% 79.2% 20.8% 201 206 11 16 64 0 N/ap 292 20.2% 39.0% 40.8% 80.1% 19.9% 5 9 32 0 N/ap 252 23.4% 40.5% 36.1% 75.4% 24.6% 10.1% 12.8% 13.0% 11.4% 4.4% 6.5% 4.6% 3.6% 222 15 3 227 0 0 467 220 13 6 238 0 N/ap 477 141 3 3 280 0 N/ap 427 221 12 23 160 0 N/ap 416 Hudbay 2018 Annual and CSR Report | CSR Performance 76 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Employees (cont’d) Age distribution <30 30–50 >50 Gender Male Female Net number of full-time employees added (decreased) Canada US Peru Colombia Chile British Columbia Total Senior management from local community Number of contractor full-time equivalent staff Manitoba Peru Arizona Chile British Columbia GRI 102-8 | 404-3 | 405-1 2018 2017 2016 2015 2018 2017 2016 2015 35.1% 59.1% 11.6% 81.2% 18.8% 54 (2) 386 N/ap N/ap N/ap 438 38.8% 52.4% 8.8% 80.7% 19.3% 16 (5) 74 N/ap 74 N/ap 159 32.8% 54.6% 12.6% 83.4% 16.6% (81) (10) 47 0 0 N/ap (44) 40.6% 47.4% 12.0% 79.3% 20.7% 15 8 9 0 0 N/ap 32 6 5 9 2 Person-hours of work (including contractors) North America South America 3,701,855 3,232,379 3,073,646 3,245,882 5,992,125 7,867,939 7,589,501 9,907,705 Total person-hours 9,693,980 11,100,318 10,663,147 13,153,587 Employees receiving regular performance and career development reviews (includes all full-time employees) Percentage reviewed 46% 40% 20% 41% Hudbay total workforce age distribution (includes all full-time employees) <30 30–50 >50 Composition of governance bodies and breakdown of employees Workforce diversity (includes all full-time employees) Female (Hudbay) 16.7% 62.0% 30.9% 14.6% 52.6% 33.1% 14.2% 53.0% 32.2% 13.0% 47.9% 39.6% 429 1,737 13 38 3 284 2,780 9 22 175 2,974 15 13 274 4,337 55 4 N/ap N/ap N/ap MBU Corporate Arizona Peru Chile British Columbia 213 32 15 83 N/ap N/ap 195 33 17 76 N/ap N/ap 189 32 17 60 N/ap N/ap 187 32 24 28 N/ap N/ap CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Performance 77 Employees (cont’d) Percentage of total workforce that is female Indigenous (MBU only) Disabled (MBU only) Visible minorities (MBU only) Composition of executive management and corporate governance bodies Board of Directors (ratio male to female) Age distribution <30 30–50 >50 Executive management (ratio male to female)1 Age distribution <30 30–50 >50 Ratio of annual compensation of highest paid individual to mean total compensation (includes all full-time employees and Peru contract employees) Canada (MBU, excluding Corporate office) Canada (including Corporate office) Peru United Sates (ABU) 2018 2017 2016 2015 2018 2017 2016 2015 16% 15% 4% 6% 18% 14% 5% 6% 2.5:1 2.3:1 0% 0% 0% 0% 18% 13% 5% 6% 4:1 0% 0% 16% 13% 5% 6% 4:1 0% 0% 100% 100% 100% 100% Workforce represented in formal joint management– worker Health and Safety Committees Percentage represented Health and safety performance (per 200,000 hours worked, except where noted) Lost time accident (LTA) frequency Manitoba Manitoba contractors Peru Peru contractors Arizona Arizona contractors 7:1 5:1 6.5:1 7:1 Chile 0% 30% 70% 0% 29% 71% 0% 53% 46% 0% 64% 36% Chile contractors Other North America (not including MBU and ABU) Other North America contractors (not including MBU and ABU) Other South America (not including Peru and Chile) Other South America contractors (not including Peru and Chile) 5.8:1 6.8:1 4.9:1 6.5:1 Total 28.3:1 19.1:1 5.5:1 23.4:1 19.5:1 4.8:1 24.1:1 9.2:1 4.3:1 16.4:1 10.0:1 4.2:1 100% 100% 100% 100% 0.8 0.0 0.1 0.1 0.0 0.0 0.0 2.6 0.0 0.0 0.0 0.0 0.3 1.0 0.7 0.1 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.3 1.1 0.0 0.1 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.3 1.0 0.7 0.7 0.1 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.3 1 In previous years, business unit Vice Presidents had been left out of this executive management statistic. We have corrected the data to include them in order to better align with our executive management definition. GRI 102-8 | 102-38 | 402-1 | 403-1 | MM4 Hudbay 2018 Annual and CSR Report | CSR Performance 78 2018 2017 2016 2015 2018 2017 2016 2015 34.2 0.0 4.3 7.5 0.0 0.0 0.0 178.7 0.0 0.0 0.0 0.0 14.3 34.4 13.9 0.5 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 8.4 37.3 0.0 2.0 0.6 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 9.3 Restricted work case (RWC) frequency Manitoba Manitoba contractors Peru Peru contractors Arizona Arizona contractors Chile Chile contractors 35.2 14.8 22.0 3.6 0.0 0.0 N/av N/av North America (not including 0.0 MBU and ABU) North America contractors (not including MBU and ABU) South America (not including Peru) South America contractors (not including Peru) Total 0.0 0.0 0.0 11.4 0.4 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.7 0.7 0.0 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.2 1.1 0.5 0.0 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.3 1.8 0.0 0.2 0.0 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 0.4 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Employees (cont’d) Lost time accident severity (SEV) Manitoba Manitoba contractors Peru Peru contractors Arizona Arizona contractors Chile Chile contractors North America (not including MBU and ABU) North America contractors (not including MBU and ABU) South America (not including Peru) South America contractors (not including Peru) Total GRI 102-8 | 403-2 Hudbay 2018 Annual and CSR Report | CSR Performance 79 Employees (cont’d) CEO Message Medical aid (MA) frequency First aid (FA) frequency 2018 2017 2016 2015 2018 2017 2016 2015 Manitoba 16.9 16.8 22.6 Our Feature Stories Manitoba 11.4 10.9 11.8 Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Manitoba contractors Peru Peru contractors Arizona Arizona contractors Chile Chile contractors North America (not including MBU and ABU) North America contractors (not including MBU and ABU) South America (not including Peru) South America contractors (not including Peru) Total 8.3 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.8 5.4 0.3 0.1 3.4 0.0 N/av N/av 0.0 0.0 0.0 0.0 2.8 5.5 0.0 0.2 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 3.0 11.0 12.3 2.3 0.2 4.9 5.3 N/av N/av Manitoba contractors Peru Peru contractors Arizona Arizona contractors Chile Chile contractors North America (not including 0.0 MBU and ABU) 0.0 0.0 0.0 3.0 North America contractors (not including MBU and ABU) South America (not including Peru) South America contractors (not including Peru) Total Fatality (number) Absentee rate (as a % of hours 4.7 0.9 1.0 0.0 0.0 0.0 0.0 1.4 0.0 0.0 0.0 5.5 0 2.4 0.9 0.7 0.0 10.5 N/av N/av 0.0 0.0 0.0 0.0 4.3 0 4.4 0.9 0.4 0.0 0.0 N/av N/av 0.0 0.0 0.0 0.0 5.7 0 22.1 6.0 4.8 0.6 17.2 5.3 N/av N/av 0.0 0.0 0.0 0.0 5.2 0 scheduled to be worked) N/av N/av N/av N/av Reportable occurrences (defined as EHS incidents required by Hudbay policy to be reported to our Board of Directors) 79 56 79 141 Hudbay 2018 Annual and CSR Report | CSR Performance 80 Employees (cont’d) Risks to the right to collective bargaining Corporate Manitoba Arizona Peru Chile British Columbia CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 2018 2017 2016 2015 Corporate MBU Benefits No No No No No No No No No No No N/av No No No No N/av N/av No No No No N/av N/av Life insurance Health care Disability and invalidity coverage Parental leave Retirement provision Stock ownership Other – Critical illness insurance Other – Accidental death and dismemberment insurance Life insurance Health care Disability and invalidity coverage Parental leave Retirement provision Stock ownership Other – Critical illness insurance Other – Accidental death and dismemberment insurance Full time Full time Part time Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Management only Yes Yes Yes No No No No No No Peru ABU Full time Part time Full time Part time Yes Yes Yes Yes Yes Yes Yes Yes N/ap N/ap N/ap N/ap N/ap N/ap N/ap N/ap Yes Yes Yes Yes Yes (401k) Yes No Yes No No No No No No No No GRI 401-2 | 403-2 | 407-1 Hudbay 2018 Annual and CSR Report | CSR Performance 81 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Society Total number of incidents of discrimination (and actions taken) Land use disputes Resettlements Number of households (Peru only) Number of individuals (Peru only) Employees trained in anti-corruption policies Number – employees Percentage of workforce Percentage of Board and management given training Employees that anti-corruption policies have been communicated to Number – management Percentage Number – non-management Percentage Governance body members that anti-corruption policies have been communicated to Number Percentage 2018 2017 2016 2015 2018 2017 2016 2015 11 12 0 0 1,064 49% 100% 564 100% 1,840 100% 10 100% 0 2 0 0 952 55% 1 3 0 0 66 4% 100% 100% 580 100% 1,649 100% 10 100% 534 100% 418 27% 10 100% 0 0 36 150 360 21% 91% 229 98% 560 100% Governance body members that received training on anti-corruption Number Percentage Average hours of training (Peru and Arizona business units only) Males in management Females in management Males in non-management Females in non-management 10 100% 10 100% 65.69 75.73 118.09 113.48 60.70 65.98 100.09 85.82 Average spend (DJSI) $207.91 $362.28 Security practices (security personnel training) Hudbay security personnel trained in human rights policies and procedures Number Percentage Contractor security personnel trained in human rights policies and procedures 10 100% Number Percentage 15 100% 135 98% 15 100% 124 98% 10 100% 6.86 9.36 9.59 14.11 N/av 14 100% 7 100% 10 100% 19.65 50.17 51.86 36.71 N/av 15 98% 175 99% 1 There was a Human Rights Commission Complaint filed alleging harassment based on gender in June 2018 that was resolved through mediation in October 2018. 2 We did not have any specific disputes related to land use of communities or indigenous people in 2018. However, in Arizona, three tribes filed a lawsuit to challenge the Final Record of Decision from the US Forest Service. That litigation is still in the courts. Value of fines or sanctions for non-compliance with laws and regulations $0 $0 $0 $5,000 GRI 205-2 | 406-1 | 410-1 | 412-2 | MM6 | MM7 | MM9 Hudbay 2018 Annual and CSR Report | CSR Performance 82 2018 2017 2016 2015 2018 2017 2016 2015 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Society (cont’d) Grievances about impacts on society Number filed through formal grievance mechanisms Number addressed during reporting period Number resolved during reporting period Number filed prior to the reporting period that were resolved during the reporting period Number of other concerns Environment Labour and commercial practices Resettlement/livelihood Human rights Other 15 15 1 8 0 20 20 12 8 4 1041 113 0 0 42 2 1 1 32 32 12 3 1 24 1 1 4 1 Previously, we did not record union labour grievances in Manitoba; we started to in 2017. 2 More information GRI 102-34 | 102-44 | MM6 | MM7 | MM10 67 67 65 6 4 54 2 1 6 Closure plans Identify total number of operations Number of company operations that have closure plans Percentage of total operations with closure plans Number of advanced exploration projects that have closure plans Percentage of advanced exploration projects that have closure plans Overall financial provision representing the present value of future cash flows relating to estimated closure costs per Canadian Generally accepted accounting principles (in $000s) Operation has implemented local community engagement, impact assessments and development programs in line with the Stakeholder Engagement Standard Manitoba Arizona Peru Chile British Columbia 4 4 5 5 5 8 7 10 100% 100% 160% 125% 2 1 1 0 100% 100% 100% N/ap $202,024 $200,000 $177,296 $147,027 Yes Yes Yes Yes Yes Partially Yes Yes Yes Yes Yes Yes Yes Partially Yes Yes No N/ap N/ap N/ap Hudbay 2018 Annual and CSR Report | CSR Performance 83 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Society (cont’d) Operation is taking place in or adjacent to indigenous peoples’ territories Manitoba Arizona Peru Chile British Columbia Artisanal mining Corporate Manitoba Arizona Peru Chile British Columbia 2018 2017 2016 2015 2018 2017 2016 2015 Environment Direct energy consumption by primary energy source (terajoules) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Propane Diesel Light oil Gasoline N/ap N/ap N/ap Other 793 1,778 0 15 0 629 2,019 0 16 0 579 1,941 0 14 0 629 2,034 0 11 1 Total 2,586 2,664 2,533 2,675 N/ap N/ap No artisanal mining No artisanal mining No artisanal mining No artisanal mining Yes1 Yes2 N/ap Yes1 Yes3 N/ap N/ap N/ap N/av Yes No N/ap N/ap N/ap N/av N/av N/av N/ap 1 In 2010, the Chilloroya community and Norsemont Peru (now Hudbay Peru SAC) signed an exploration and artisanal mining formalization contract which functioned as an agreement to help the community in the formalization process for its artisanal mining activity. This contract ended on June 19, 2015. 2 There is artisanal mining currently taking place adjacent to both our Trilco property and our Llahuin property. The mining site near our Llahuin property is a larger, more industrial operation than the one near Trilco. We have good relationships with the owners of both sites. 3 Artisanal mining is currently taking place on both our Farellon Sanchez and Fiel Rosita properties. At Farellon Sanchez, there are at least five operations mining copper and gold veins underground, and selling ore to a government agency. At Fiel Rosita, the La Estrella mine is operated by a local family, and sells approximately 250 tonnes of ore a month to the same government agency (Enami). Indirect energy consumption by primary energy source (terajoules) Total electricity consumed 5,820 5,652 5,262.6 4,932.0 Indirect energy sold/credits (terajoules) Electricity Total indirect energy consumed by organization 0.4 0.5 0.5 0.4 (terajoules) 5,819 5,652 5,262.1 4,936.0 Energy intensity (terajoules per kilotonne of metal in concentrate) 31.1 28.3 27.3 30.9 Total direct and indirect greenhouse gas emissions (kilotonnes of CO2- equivalent) Direct carbon dioxide emissions Indirect carbon dioxide emissions Total GHG intensity NOX, SOX and other significant air emissions (in kilotonnes) 170.19 403.10 573.29 2.1 177.17 363.48 540.65 1.84 170.96 322.31 493.27 1.73 188.08 277.80 455.30 1.82 GRI MM5 | MM8 Particulate 0.54 0.62 0.44 0.16 Hudbay 2018 Annual and CSR Report | CSR Performance 84 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Environment (cont’d) Total water withdrawal (000 cubic metres) Surface water Groundwater Rainwater collected directly and Waste water from another organization Municipal water supplies 2018 2017 2016 2015 2018 2017 2016 2015 13,770 4,155 11,058 2,747 10,632 3,582 11,549 Total waste (tonnes) 2,698 Overburden 258,288.0 1,302,405.2 2,053,659.9 N/av Hazardous waste disposed of at external facility (tonnes) 1,165.6 1,943.5 1,520.3 1,508.5 stored by the organization 6,193 10,242 7,143 7,168 Waste rock Tailings 37,055,344.0 32,432,668.5 51,426,208.8 42,764,760.0 32,457,474.0 30,545,163.0 28,968,944.0 24,780,081.6 0 0 0 0 0 0 0 0 Number of fines or sanctions for non-compliance with environmental laws Total water withdrawal 24,118 24,047 21,306 21,415 and regulations 0 0 0 0 Percentage and total volume of water recycled and reused Land use (hectares) – mineral tenure (controlled) Total volume (000 cubic metres) 65,698.20 53,474.40 56,291.74 16,944.37 Manitoba and Saskatchewan 241,809.9 121,241.4 122,639.4 137,832.4 Percentage 272.41% 222.37% 264.20% 79.12% Yukon 0.0 21.0 583.4 21.0 5,823.4 5,823.4 21.0 21.0 241,830.9 121,845.7 261,822.9 279,028.9 7,284.0 7,284.0 7,284.0 7,284.0 7,284.0 7,284.0 263,900.0 263,900.0 68,826.0 7,284.0 7,284.0 1,531.0 99,735.7 99,735.7 5,187.0 43,669.5 Total South/Central America 363,635.7 363,635.7 74,013.0 45,200.5 Total 612,750.5 492,765.4 343,119.8 331,513.4 217 2,623 Total water discharged (000 cubic metres) To Flin Flon Creek/Ross Lake/ Schist Lake To Anderson Creek/ Wekusko Lake To Woosey Creek/Morgan Lake Namew Lake Herblet Lake To ground To Chilloroya River (Peru) Water treated (000 cubic metres) Total number of significant spills Volume (liquid) (m3) Volume (solid) (tonnes) 15,897 13,941 14,353 10,546 Nunavut Total Canada Arizona Total USA 4,594 1,106 Chile Peru 4,384 1,670 30 5 181 1,358 9,067 1,788 30 784 297 294 8,025 2,142 30 926 247 188 23,526 26,201 25,911 19,086 0 0.0 0.0 3 286.0 120.0 9 516.5 N/av 9 382.0 N/av GRI 303-1 | 303-3 | 306-1 | 306-3 | 306-4 | 306-5 | MM3 Hudbay 2018 Annual and CSR Report | CSR Performance 85 Environment (cont’d) Land use (hectares) – surface tenure (disturbed)1 2018 2017 2016 2015 2018 2017 2016 2015 Habitats protected or restored (hectares) Manitoba and Saskatchewan 7,647.4 7,314.1 7,314.1 7,314.1 Protected 0.0 0.0 120.0 0.0 120.7 0.0 120.7 Restored 0.0 Partnerships exist 0 0.61 Yes 0 0 Yes 0 51.93 Yes 0 0.62 Yes 7,647.4 7,434.1 7,966.2 7,969.9 Status at close of reporting period Monitoring Monitoring Monitoring Monitoring 0.0 0.0 0.0 1,524.2 1,524.2 9,171.6 0.0 0.0 0.0 1,518.0 1,518.0 8,952.1 0.0 0.0 0.3 1,568.4 1,568.7 0.0 0.0 0.0 5,187.0 5,187.0 9,534.8 13,156.9 IUCN Red List species and National Conservation List species Critically endangered Endangered Vulnerable Near threatened Least concern 2 2 1 1 3 5 25 22 89 2 2 19 12 4 3 8 12 11 6 3 8 14 9 6 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment Yukon Nunavut Total Canada Arizona Total USA Chile Peru Total South/Central America Total CSR Performance Sites requiring biodiversity management plans Number of sites legally requiring plans Percentage of sites with legally required plans in place 100% 100% 100% 100% Number of sites with voluntary plans in place 1 1 1 1 1 We are reassessing how we report on this topic and will be providing a fuller analysis in future years. GRI 102-34 | 304-1 | 304-3 | 304-4 | MM1 | MM2 Hudbay 2018 Annual and CSR Report | CSR Performance 86 2018 TARGETS AND ACHIEVEMENTS Target Health and safety Achievement Details Improve on our current three-year average lost time accident severity of 9.71 Partially achieved Improve on our three-year total recordable injury frequency average of 2.8 Partially achieved As of December 31, 2018, our three-year average lost time accident severity was 10.5. However, our three-year average performance at each of our Manitoba and Peru business units actually improved (from 31.4 to 29.2 in Manitoba, and from 2.3 to 2.1 in Peru). Despite improved performance in each location, our average corporate performance dropped because of reduced hours worked in Peru, which reduced weighting of our high-performing Peru operation. As of December 31, 2018, our three-year average total recordable injury frequency was 3.7. However, our three-year average performance at each of our Manitoba and Peru business units actually improved (from 16.0 to 12.0 in Manitoba, and from 0.3 to 0.2 in Peru). This discrepancy between improvement at each business unit and lower overall company performance is for the same reason noted above. Community Finalize human rights risk assessment framework and carry out trial for at least one location Achieved Human rights and social risk assessment framework has been created and tested to some degree in Arizona and Peru. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Environment Establish improved corporate guidance and process for eco-efficiency performance tracking and site-level target setting that accounts for the complexity and variability of mining operations and integrates consideration of business and environmental priorities Achieved Eco-efficiency considerations were formally implemented within the budgeting process. Maintain scores in the MAC TSM Tailings Management protocol for Manitoba and Peru Partially achieved Pending third-party verification. Peru dropped one grade level on the Energy Use and GHG Emissions Management protocol due to missing its target this year. Maintain current energy and water consumption to occupancy ratio at the accommodation camp in Peru Not achieved The target was 254 kWh/per capita per month. We reached an average 266 per capita; this is due to the fact that in 2018 there were fewer personnel using the same facilities. 1 We incorrectly stated our 2018 target value in our 2017 report as 7.5, which was in fact our 2017 target. We noted that our end of 2017 3 year average performance was 9.7, not having achieved the 2017 target. Hudbay 2018 Annual and CSR Report | CSR Performance 87 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Target Governance Achievement Details Cascade updated values through the organization via workshops at each Hudbay business unit, the production of a values video by the CEO, and a face-to-face meeting at each location with the CEO to discuss company values Partially achieved Financial excellence/growth This was executed primarily within the operating business units. An example of cascading values could be seen with the CEO site visit celebrating the Reed closure. In addition, two videos were produced with engagement from Arizona, Peru, MBU and corporate. Generate operating cash flow at or above budget targets Achieved Operating cash flow in 2018 was $493 million, compared to the target of $485 million. Improve access to/cost of capital Partially achieved Grow net asset value per share by 8% Not achieved Rosemont stream agreement amended to de-risk provisions. Completed amendment and extension of revolving credit facility to 2022. Rosemont financing plan advanced. The target of growing NAV/share by 8% was not achieved, but the 2018 results do not account for accretion as a result of the new Lalor mine plan and Rosemont permits in early 2019. Advance the development of the high-grade Pampacancha deposit so that it can start to be mined in 2019 Not achieved Although we made progress with several important exploration initiatives, we were not able to complete the necessary land access agreement to start mining the Pampacancha deposit. Advance permitting and technical work at the Rosemont project Achieved We significantly advanced the permitting with receipt of the Record of Decision from the US Forest Service. Subsequently, in March 2019, we received our key outstanding water permit. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | CSR Performance 88 2019 TARGETS HEALTH AND SAFETY ENVIRONMENT FINANCIAL EXCELLENCE/GROWTH • Improve on our current three-year average lost time • Maintain a score of A or higher in the new MAC TSM • Maintain our industry-leading low-cost business to accident severity of 10.5 • Improve on our three-year total recordable injury Tailings Management protocol guidelines for Manitoba and Peru frequency average of 3.7 • Establish eco-efficiency measures in AFE process • Fatality prevention – carry out a review of 2018 high- potential incident investigations in order to identify and propose investigation process improvement COMMUNITY • Define a framework for tracking well-being of communities near Hudbay mines • Perform gap assessments and create improvement plans at each main location in order to finalize social risk framework GOVERNANCE • Implement a company-wide Human Resources Information System to support improved human capital management. The 2019 project will establish globally integrated employee information, which is the foundation for developing and assessing our workforce relative to our priority on people, inclusion and talent development. • Implement a revised Performance Effectiveness Process to the manager level in Manitoba and to the superintendent level in Peru. This is the next phase of implementation of this process, emphasizing ongoing coaching, feedback and development in role conversations, which was piloted in the corporate office in 2018. continue to generate positive cash flow • Complete a new reserve and resource estimate for the Snow Lake operations, including our 100% owned Lalor, Pen, Wim and New Britannia properties, and advance plans for the refurbishment of the New Britannia mill • Begin development of the Pampacancha satellite deposit • Advance Rosemont through the final stage of permitting and initiate early works activities • Test promising exploration targets near Lalor and plan near-term exploration programs in Peru, Chile, British Columbia and Nevada Hudbay 2018 Annual and CSR Report | GRI Content Index 89 GRI CONTENT INDEX GRI Standard Disclosure Response, Page Number(s) and/or URL(s) GRI Standard Disclosure Response, Page Number(s) and/or URL(s) GRI 101: Foundation 2016 General Disclosures Organizational Profile 102-1 102-2 Name of the organization Our Company Activities, brands, products and services Our Company 102-11 Precautionary principle or approach 102-12 External initiatives Business and Financial Review Business and Financial Review > Strategy 102-13 Membership of associations CSR Approach > CSR Governance > Precautionary Approach CSR Approach > CSR Governance > International Best Practice Standards CSR Approach > CSR Governance > Human Rights and Security CSR Approach > CSR Governance > Sustainable Development Goals CSR Approach > CSR Governance > Industry Involvement Strategy 102-14 102-15 Statement from senior decision-maker CEO Message Key impacts, risks and opportunities CEO Message 102-3 Location of headquarters 102-4 102-5 102-6 Location of operations Ownership and legal form Markets served Our Company Contact Us Our Company Our Company CSR Approach > Responsible Supply Chain > Products 102-7 Scale of the organization Business and Financial Review Business and Financial Review > 2018 Summary Business and Financial Review > Business Activities CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance 102-8 Information on employees and other workers Business and Financial Review > Financials Our People Ethics and Integrity Our People > Our Approach > Employee Relations 102-16 Values, principles, standards, and norms of behaviour 102-9 102-10 Supply chain CSR Approach > Responsible Supply Chain Our People > Manitoba CSR Performance > Key Performance Data Significant changes to the organization and its supply chain CEO Message Story > Rosemont Project: Planning for the Future Business and Financial Review > Strategy > Financial and Business Objectives for 2019 102-17 Mechanisms for advice and concerns about ethics GRI 102-55 | 102-56 CSR Approach > Stakeholder Engagement Social Impact Social Impact > Our Approach Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona Management’s Discussion and Analysis Our Company > Vision, Mission, Values Our Company > Business Conduct CSR Approach > CSR Governance > CSR Management Framework CSR Approach > Human Rights and Security CSR Approach > Responsible Supply Chain Website > Policies Our Company > Business Conduct CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | GRI Content Index 90 GRI Standard Disclosure Response, Page Number(s) and/or URL(s) GRI Standard Disclosure Response, Page Number(s) and/or URL(s) Governance 102-18 Governance structure Our Company > Board of Directors 102-26 Role of highest governance body in setting purpose values, and strategy CSR Approach > CSR Governance Management Information Circular Website > About Us > Management Team/ Board of Directors 102-19 102-20 102-21 Delegating authority CSR Approach > CSR Governance Executive-level responsibility for economic, environmental and social topics Our Company > Corporate Governance CSR Approach > CSR Governancee Consulting stakeholders on economic, environmental and social topics Story > Engaging Traditional Knowledge Holders on Mill Refurbishment Project 102-22 Composition of the highest governance body and its committees CSR Approach > Stakeholder Engagement Story > Economic Engagement with Indigenous Communities Story > Helping Students Launch Experiments into Space Social Impact > Our Approach Social Impact > Arizona Our Company > Corporate Governance Our Company > Board of Directors Management Information Circular Website > About Us > Board of Directors 102-27 102-28 102-29 102-30 102-31 102-32 Collective knowledge of highest governance body Evaluating the highest governance body’s performance Identifying and managing economic, environmental and social impacts Effectiveness of risk management processes Review of economic, environmental and social topics Highest governance body's role in sustainability reporting 102-23 Chair of the highest governance body Our Company > Corporate Governance Our Company > Board of Directors 102-34 Management Information Circular Website > About Us > Board of Directors Nature and total number of critical concerns GRI 102: General Disclosures 2016 102-24 Nominating and selecting the highest governance body Management Information Circular 102-25 Conflicts of interest Our Company > Business Conduct CSR Approach > CSR Governance Annual Information Form GRI 102-55 | 102-34 | 102-56 CSR Approach > CSR Governance Website > About Us > Governance > Corporate Governance Guidelines and Board Charter Annual Information Form Website > About Us > Board of Directors Website > About Us > Governance > Corporate Governance Guidelines and Board Charter CSR Approach CSR Approach > CSR Governance CSR Approach > Human Rights and Security CSR Approach > Tailings Stewardship CSR Approach > Stakeholder Engagement Our Company > Risk Management CSR Approach > CSR Governance CSR Approach > CSR Governance CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement Our Company > Business Conduct CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona CSR Performance > Key Performance Data 102-33 Communicating critical concerns Our Company > Business Conduct CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | GRI Content Index 91 GRI Standard Disclosure Response, Page Number(s) and/or URL(s) GRI Standard Disclosure Response, Page Number(s) and/or URL(s) 102-35 Remuneration policies Management Information Circular Reporting Practice 102-45 102-46 102-47 102-48 Entities included in the consolidated financial statements Defining report content and topic Boundaries About This Report Annual Information Form CSR Approach > Materiality List of material topics CSR Approach > Materiality Restatements of information 102-49 Changes in reporting There are no restatements of information from previous reports. There are no significant changes from previous reporting in scope of priorities. 102-50 102-51 102-52 102-53 102-54 102-55 102-56 Reporting period About This Report Date of most recent report About This Report Reporting cycle About This Report Contact point for questions regarding the report Contact Us Claims of reporting in accordance with the GRI Standards About This Report GRI content index External assurance GRI Content Index CSR Approach > CSR Governance GRI Content Index Website > About Us > Governance > Corporate Governance Guidelines and Board Charter 102-36 102-37 102-38 102-39 Process for determining remuneration Management Information Circular Stakeholders’ involvement in remuneration Management Information Circular Annual total compensation ratio CSR Performance > Key Performance Data Percentage increase in annual total compensation ratio Management Information Circular Stakeholder Engagement 102-40 102-41 102-42 102-43 102-44 List of stakeholder groups CSR Approach > Stakeholder Engagement Collective bargaining agreements CSR Performance > Key Performance Data Identifying and selecting stakeholders CSR Approach > Stakeholder Engagement Approach to stakeholder engagement CSR Approach > Stakeholder Engagement Key topics and concerns raised Our Company > Business Conduct CSR Approach > Human Rights and Security CSR Approach > Stakeholder Engagement Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona CSR Performance > Key Performance Data GRI 102-55 | 102-56 Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance CEO Message Material Topics GRI 200: Economic Standard Series Our Feature Stories Economic Performance GRI 203: Indirect Economic Impacts 2016 203-1 Infrastructure investments and services supported Hudbay 2018 Annual and CSR Report | GRI Content Index 92 GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) Social Impact > Peru We contribute to the development and maintenance of local infrastructure and services in the regions where we operate. However, we have not calculated the indirect economic benefits that flow to local and regional communities from our activities. GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary CSR Approach > Materiality The management approach and its components CEO Message Our Company > Corporate Governance 203-2 Significant indirect economic impacts Social Impact 103-3 Evaluation of the management approach Our Company > Risk Management Procurement Practices Business and Financial Review > Strategy GRI 103: Management Approach 2016 Social Impact > Our Approach Annual Information Form Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. 103-1 103-2 Explanation of the material topic and its Boundary The management approach and its components CSR Approach > Responsible Supply Chain CSR Approach > Responsible Supply Chain 103-3 Evaluation of the management approach CSR Approach > Responsible Supply Chain > Products GRI 201: Economic Performance 2016 GRI 204: Procurement Practices 2016 Direct economic value generated and distributed CSR Performance > Key Performance Data 204-1 Proportion of spending on local suppliers CSR Approach > Responsible Supply Chain 201-1 201-2 201-3 Indirect Economic Impacts GRI 103: Management Approach 2016 Financial implications and other risks and opportunities due to climate change CDP Website Defined benefit plan obligations and other retirement plans Management’s Discussion and Analysis Anti-corruption GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary Our Company > Business Conduct The management approach and its components Our Company > Business Conduct > Compliance Training 103-1 103-2 Explanation of the material topic and its Boundary CSR Approach > Materiality 103-3 Evaluation of the management approach The management approach and its components CSR Approach > Responsible Supply Chain Social Impact > Our Approach GRI 205: Anti-corruption 2016 Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. 103-3 Evaluation of the management approach GRI 102-55 | 102-56 Social Impact > Manitoba Social Impact > Peru Social Impact > Arizona Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. 205-1 205-2 205-3 Operations assessed for risks related to corruption Communication and training about anti-corruption policies and procedures Our Company > Business Conduct Our Company > Business Conduct CSR Performance > Key Performance Data Confirmed incidents of corruption and actions taken Our Company > Business Conduct CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | GRI Content Index 93 GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) GRI 300: Environmental Standards Series Biodiversity Water GRI 103: Management Approach 2016 Explanation of the material topic and its Boundary Environment > Our Approach 103-1 103-2 The management approach and its components Environment > Our Approach Environment > Manitoba Environment > Peru Environment > Arizona Story > Rosemont Project: Planning for the Future Story > Reed Mine: A Culture of Stewardship from Construction to Closure Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. 103-3 Evaluation of the management approach GRI 303: Water 2016 303-1 303-3 Water withdrawal by source CSR Performance > Key Performance Data Water recycled and reused CSR Performance > Key Performance Data 304-1 304-3 304-4 GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary The management approach and its components 103-3 Evaluation of the management approach GRI 304: Biodiversity 2016 Operational sites owned, leased, managed in, or adjacent to protected areas and areas of high biodiversity value outside protected areas Environment > Our Approach Environment > Our Approach Environment > Manitoba Environment > Peru Environment > Arizona Story > Rosemont Project: Planning for the Future Story > Reed Mine: A Culture of Stewardship from Construction to Closure Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. CSR Performance > Key Performance Data Habitats protected or restored CSR Performance > Key Performance Data IUCN Red List species and national conservation list species with habitats in areas affected by operations CSR Performance > Key Performance Data MM1: Biodiversity MM1 Amount of land disturbed or rehabilitated CSR Performance > Key Performance Data MM2: Biodiversity MM2 The number and percentage of total sites identified as requiring biodiversity management plans according to stated criteria, and the number and percentage of those sites with a plan in place CSR Performance > Key Performance Data GRI 102-55 | 102-56 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | GRI Content Index 94 GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) CSR Approach > Tailings Stewardship GRI 103: Management Approach 2016 GRI 400: Social Standards Series Employment Effluents and Waste GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary The management approach and its components 103-3 Evaluation of the management approach GRI 306: Effluents and Waste 2016 Environment > Our Approach CSR Approach > Tailings Stewardship Environment > Our Approach Environment > Manitoba Environment > Peru Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. Water discharge by quality and destination CSR Performance > Key Performance Data GRI 401: Employment 2016 306-1 306-3 306-4 306-5 MM3: Effluents and Waste Significant spills CSR Performance > Key Performance Data Transport of hazardous waste CSR Performance > Key Performance Data Water bodies affected by water discharges and/or runoff CSR Performance > Key Performance Data 401-1 401-2 New employee hires and employee turnover Benefits provided to full-time employees that are not provided to temporary or part-time employees Labour/Management Relations 103-1 103-2 Explanation of the material topic and its Boundary Our People > Our Approach The management approach and its components Our People > Our Approach Our People > Manitoba 103-3 Evaluation of the management approach Story > Hudbay Women’s Network: Fostering Gender Diversity in Mining Our People > Arizona Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. CSR Performance > Key Performance Data CSR Performance > Key Performance Data MM3 Total amount of overburden, rock, tailings and sludges and their associated risks CSR Performance > Key Performance Data GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary Our People > Our Approach The management approach and its components Our People > Our Approach Our People > Manitoba 103-3 Evaluation of the management approach GRI 402: Labour/Management Relations 2016 402-1 Minimum notice periods regarding operational changes MM4: Labour/Management Relations Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. CSR Performance > Key Performance Data MM4 Number of strikes and lockouts exceeding one week’s duration, by country CSR Performance > Key Performance Data GRI 102-55 | 102-56 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report | GRI Content Index 95 GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) Freedom of Association and Collective Bargaining GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary Our People > Our Approach The management approach and its components Our People > Our Approach 103-3 Evaluation of the management approach Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. GRI 407: Freedom of Association and Collective Bargaining 2016 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk CSR Performance > Key Performance Data 103-1 103-2 Explanation of the material topic and its Boundary CSR Approach > Human Rights and Security The management approach and its components CSR Approach > Human Rights and Security 103-3 Evaluation of the management approach Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. GRI 410: Security Practices 2016 410-1 Security personnel trained in human rights policies or procedures CSR Performance > Key Performance Data CSR Performance > Key Performance Data Security Practices GRI 103: Management Approach 2016 CSR Performance > Key Performance Data Occupational Health and Safety GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary Our People > Our Approach The management approach and its components Our People > Our Approach Our People > Manitoba Our People > Peru Our People > Arizona Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. 103-3 Evaluation of the management approach GRI 403: Occupational Health and Safety 2016 403-1 403-2 Workers’ representation in formal joint management–worker health and safety committees Types of injury and rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities Non-discrimination GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary CSR Approach > Human Rights and Security Our People The management approach and its components CSR Approach > Human Rights and Security 103-3 Evaluation of the management approach Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. GRI 406: Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken CSR Performance > Key Performance Data GRI 102-55 | 102-56 Hudbay 2018 Annual and CSR Report | GRI Content Index 96 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) Rights of Indigenous Peoples GRI 103: Management Approach 2016 Human Rights Assessment GRI 103: Management Approach 2016 103-1 103-2 Explanation of the material topic and its Boundary Our People > Our Approach The management approach and its components Our People > Our Approach > Diversity and Inclusion 103-1 103-2 Explanation of the material topic and its Boundary CSR Approach > Human Rights and Security The management approach and its components CSR Approach > Human Rights and Security > Security Practices Social Impact > Our Approach 103-3 Evaluation of the management approach 103-3 Evaluation of the management approach Story > Engaging Traditional Knowledge Holders on Mill Refurbishment Project Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. GRI 411: Rights of Indigenous Peoples 2016 411-1 Incidents of violations involving rights of indigenous peoples Note: There were zero violations in 2018. GRI 412: Human Rights Assessment 2016 412-2 412-3 Employee training on human rights policies or procedures Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. CSR Performance > Key Performance Data Website > About Us > Governance > Supplier Code of Conduct and Ethics CSR Performance MM5: Indigenous Rights MM5 Total number of operations taking place in or adjacent to indigenous peoples’ territories, and number and percentage of operations or sites where there are formal agreements with indigenous peoples’ communities CSR Performance > Key Performance Data Local Communities MM6: Local Communities MM6 Number and description of significant disputes relating to land use, customary rights of local communities and indigenous peoples MM7: Local Communities MM7 The extent to which grievance mechanisms were used to resolve disputes relating to land use, customary rights of local communities and indigenous peoples, and the outcomes CSR Performance > Key Performance Data CSR Performance > Key Performance Data GRI 102-55 | 102-56 Hudbay 2018 Annual and CSR Report | GRI Content Index 97 CEO Message Artisanal and Small-Scale Mining MM8: Artisanal and Small-Scale Mining Closure Planning GRI 103: Management Approach GRI Standard Disclosure Page Number(s) and/or URL(s) GRI Standard Disclosure Page Number(s) and/or URL(s) Our Feature Stories MM8 Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Number and percentage of company operating sites where artisanal and small-scale mining (ASM) takes place on, or adjacent to, the site; the associated risks and the actions taken to manage and mitigate these risks CSR Performance > Key Performance Data 103-1 Explanation of the material topic and its Boundary 103-2 The management approach and its components Resettlement GRI 103: Management Approach 103-1 103-2 Explanation of the material topic and its Boundary Social Impact > Our Approach The management approach and its components Social Impact > Our Approach 103-3 Evaluation of the management approach 103-3 Evaluation of the management approach Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. MM10: Closure Planning Social Impact > Our Approach CSR Approach CSR Approach Social Impact > Our Approach Social Impact > Manitoba Story > Reed Mine: A Culture of Stewardship from Construction to Closure Story > Flin Flon Closure: Transparency and Respect Note: We re-evaluate our management approach every three years as part of our materiality review process; an evaluation was last conducted in 2017. MM9: Resettlement MM9 Sites where resettlements took place, the number of households resettled in each, and how their livelihoods were affected in the process CSR Performance > Key Performance Data MM10 Number and percentage of operations with closure plans CSR Performance > Key Performance Data GRI 102-55 | 102-56 Hudbay 2018 Annual and CSR Report 98 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance ABOUT THIS REPORT Since 2014, we have combined our annual report and our corporate social responsibility (CSR) report. We believe social performance is as important as financial and operating performance, and that combining the reports presents a representative account of the Company’s activities in 2018. Our report covers all operating and project locations reported in Our Company, as well as exploration activities managed by Hudbay in Chile and British Columbia during the 2018 calendar year. CSR report content has been defined based on our materiality analysis and aspects identification process, which applied to all of Hudbay’s operating assets. We published our Management’s Discussion and Analysis of Results of Operations and Financial Condition and the consolidated financial statements for the year ended December 31, 2018, on February 19, 2019. Copies are posted on our website. The Business and Financial Review section of this report covers the content usually included in our annual report. More information on the scope of our reporting is available in the CSR Performance Data section of this report. QUALIFIED PERSON We have produced an annual CSR report every year since our 2003 report, and this is our 11th report based on the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. Our most recent previous report was released in June 2018. This report contains standard disclosures from the GRI Sustainability Reporting Standards, prepared largely in accordance with the Core option. The technical and scientific information in this annual report related to the Constancia mine and Rosemont project has been approved by Cashel Meagher, P. Geo., Hudbay’s Senior Vice President and Chief Operating Officer. The technical and scientific information related to our other material projects contained in this annual report has been approved by Olivier Tavchandjian, P. Eng., GRI 102-45 | 102-50 | 102-51 | 102-52 | 102-54 Hudbay’s Vice President of Exploration and Geology. Messrs. Meagher and Tavchandjian are qualified persons pursuant to NI 43-101. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which 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 Reports for the Company’s material properties as filed by Hudbay on SEDAR at sedar.com. CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report 99 CAUTION REGARDING FORWARD-LOOKING INFORMATION This annual report contains “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. We refer to such forward- looking statements and forward-looking information together in the annual report as forward-looking information. All information contained in this annual report, other than statements of current and historical fact, is forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “budget”, “guidance”, “scheduled”, “estimates”, “forecasts”, “strategy”, “target”, “intends”, “objective”, “goal”, “understands”, “anticipates” and “believes” (and variations of these or similar words) and statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” “occur” or “be achieved” or “will be taken” (and variations of these or similar expressions). All of the forward-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 exploration expenditure guidance, anticipated production at our mines and processing facilities, anticipated environmental, health and safety performance, anticipated social development programs, expectations regarding the Company’s social licence to operate and stakeholder relations, the expected benefits of implementing the metallurgical recovery and optimization initiatives at the Constancia processing plant and expectations regarding the schedule for acquiring the Pampacancha surface rights and mining the Pampacancha deposit, the anticipated timing, cost and benefits of developing the Rosemont project and any litigation challenging Rosemont’s permits, anticipated exploration plans, anticipated metals prices and the anticipated sensitivity of our financial performance to metals prices, events that may affect our operations and development projects, expectations regarding the financing, sanctioning and schedule for developing the Rosemont project, expectations regarding the Lalor gold strategy, including the refurbishment of the New Britannia mill, the low costs of the operation and the possibility of optimizing the value of our gold resources in Manitoba, the possibility of converting inferred mineral resource estimates to higher confidence categories, the potential and our anticipated plans for advancing our mining properties surrounding Constancia and the Ann Mason project, anticipated mine plans, anticipated cash flows from operations and related liquidity requirements, the anticipated effect of external factors on revenue, such as commodity prices, estimation of mineral reserves and resources, mine life projections, reclamation costs, economic outlook, environmental regulation and legislation and other government regulation of mining operations, and business and acquisition strategies. Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, are inherently subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information. The material factors or assumptions that we identified and were applied by us in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to: • the schedule for the refurbishment of the New Britannia mill and the success of our Lalor gold strategy; • the ability to secure required land rights to develop and commence mining the Pampacancha deposit; • 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 and initiatives; • the availability of additional financing, if needed; • the ability to complete project targets on time and on budget and other events that may affect our ability to develop our projects; • the timing and receipt of various regulatory and governmental approvals; • the availability of personnel for our exploration, development and operational projects; • maintaining good relations with the labour unions that represent certain of our employees in Manitoba and Peru; • maintaining good relations with the communities in which we operate, including the communities surrounding our Constancia mine and Rosemont project and indigenous communities surrounding the Lalor mine; • no significant unanticipated challenges with stakeholders at our various projects; CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report 100 • no significant unanticipated events or changes relating to regulatory, environmental or health and safety matters; • 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 or plan to explore or operate; • the ability to contemplate the effects of climate change at our sites, on our operations and on the extractive industry in general; • no contests over title to our properties, including as a result of rights or claimed rights of indigenous 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 certain value-added taxes from the Canadian and Peruvian governments; and • no significant and continuing adverse changes in general economic conditions or conditions in the financial markets (including commodity prices and foreign exchange rates). The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information may include, but are not limited to, risks generally associated with the mining industry, such as economic factors (including future commodity prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the development and operation of our projects (including risks associated with the permitting, financing, development and economics of the Rosemont project and related legal GRI 102-3 | 102-53 challenges), risks related to the new Lalor mine plan, including the schedule for the refurbishment of the New Britannia mill and the ability to convert inferred mineral resource estimates to higher confidence categories, risks related to the schedule for mining the Pampacancha deposit (including the timing and cost of acquiring the required surface rights and the impact of any schedule delays), risks related to the maturing nature of our 777 mine and its impact on the related Flin Flon metallurgical complex, dependence on key personnel and employee and union relations, risks related to political or social unrest or change, risks in respect of indigenous and community relations, rights and title claims, operational risks and hazards, including unanticipated environmental, industrial and geological 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 and environmental regulations, including permitting requirements and anti-bribery legislation, depletion of our reserves, 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, uncertainties related to the geology, continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade and recovery rates, uncertain costs of reclamation activities, our ability to comply with our pension and other post-retirement obligations, our ability to abide by the covenants in our debt instruments and other material contracts, tax refunds, hedging transactions, as well as the risks discussed under the heading “Risk Factors” in our 2018 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 assumption prove incorrect, actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, you should not place undue reliance on forward-looking information. We do not assume any obligation to update or revise any forward-looking information after the date of this annual report or to explain any material difference between subsequent actual events and any forward-looking information, except as required by applicable law. NOTE TO UNITED STATES INVESTORS This annual report has been prepared in accordance with the requirements of the securities laws in effect in Canada, which may differ materially from the requirements of United States securities laws applicable to US issuers. CONTACT US We invite your comments and questions about this report. For investor relations matters, please contact Candace Brûlé, Director, Investor Relations, 416 814-4387, 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 7, 2019, 10 a.m. ET Toronto, Ontario 101 CEO Message Our Feature Stories Our Company Business and Financial Review CSR Approach Our People Social Impact Environment CSR Performance Hudbay 2018 Annual and CSR Report GLOSSARY Accident frequency – number of injuries (recordable or lost time) multiplied by 200,000, divided by total hours worked Biodiversity – short for “biological diversity”; the variety of living organisms, genetic diversity and habitat diversity that creates and sustains variation in the environment Community investment – voluntary investment of funds in the broader community, including for physical infrastructure and social programs Conflict-free minerals – mineral production that does not contribute to serious human rights abuses in regions of armed conflict (drawing on the definitions provided in the Dodd–Frank Act) Contractor – one who agrees to perform work or supply items at a certain price or rate Donations – contributions to charities Employee – a person directly employed by Hudbay and/ or its subsidiaries GHG emissions – greenhouse gas emissions Global Reporting Initiative (GRI) – an independent institution whose mission is to develop and disseminate globally applicable sustainability reporting guidelines. For more information, visit globalreporting.org GRI Standards – performance indicators contained in the GRI Sustainability Reporting Standards Grant in lieu – an amount paid instead of property taxes Lost time accident (LTA) – a work-related injury that prevents the injured person from returning to work on his/her next scheduled workday after the day the injury occurred, because he/she is unfit to perform any duties MAC – Mining Association of Canada Material information – a fact or a change to the Company that could reasonably be expected to have a significant effect on the market price or value of the securities of the Company N/ap – not applicable N/av – not available Restricted work – a work-related injury where a licensed health care provider or the employer recommends that the employee not perform one or more routine job functions or not work the usual full workday Tailings – the fine waste rock that remains after separating the valuable minerals from the ore during mining and processing of mineral resources. Tailings may contain trace quantities of metals found in the host ore, as well as added compounds used to extract the minerals TSM – Towards Sustainable Mining, an initiative of the Mining Association of Canada 

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