CSR ApproachSupply Chain Stewardship

Mining is the first stage of a vast supply chain that transforms the Earth’s mineral resources into products that meet vital needs in every aspect of life. We focus our supply chain stewardship efforts on the activities where we can have the greatest influence – namely, our own operations, contractors working at our sites, local suppliers and Hudbay products up to the point at which they have been delivered to customers.

OPERATIONS

All employees and contractors working at our sites are expected to meet the Company’s environmental, health and safety, and human rights standards, as described throughout this report.

SUPPLIERS

The direct supply chain for our copper concentrate and zinc metal products originates in Hudbay’s own mines in northern Manitoba and Peru, with the exception of some purchased zinc concentrate that augments Hudbay’s production as feed to our zinc metallurgical facility.¹

The indirect supply chain for energy, goods and services used in transforming ore and concentrate into products includes thousands of suppliers. This supply chain includes operating supplies, maintenance supplies, energy and fuels as well as capital goods:

• In Peru, our supply chain in 2015 was related to the capital investment and operation of our Constancia project, ranging from engineering and construction services to mine haulage equipment and the grinding mills installed in the process plant. Our top 50 suppliers accounted for 91% of our spending, and 93% of our spending in 2015 was with suppliers based in Peru.
• In Manitoba, our supplier base relates to production operations and capital projects. Our top 50 suppliers represented 75% of our spending in 2015, and 92% of spending was with suppliers in Canada, with another 7% of spending with suppliers based in other Organisation for Economic Co-operation and Development (OECD) countries. These suppliers provided goods and services including engineering services, electricity, spare parts for equipment, and capital equipment such as new underground haul trucks.

The top 10 suppliers and service providers to Hudbay in 2014 were:

Caterpillar Leasing Chile S.A.	Cementation Canada Inc.
CN (Cad)	Corporacion Primax S.A.
Cosapi S.A.	Edegel S.A.A.
Glencore Canada Corporation	Manitoba Hydro
Moly-Cop Adesur S.A.	Stracon GyM S.A.

We believe that our greater stewardship responsibility is at the local supply level, because our influence is much greater with small local suppliers. Our major international suppliers have their own internal requirements and government regulations to comply with, and much of our procurement is in countries with robust environmental, health and safety, and human rights regulation.

We therefore focus our supply chain sustainability efforts on encouraging and supporting local suppliers in fulfilling their social responsibilities, often working with them to establish appropriate health and safety, environmental or quality systems and processes.

PRODUCTS

Our two main products, copper concentrate and zinc metal, come from our own mines in Canada and Peru, and from purchased zinc concentrate:

• 34% of copper concentrate was sold to smelters in the Americas and Europe, and 66% to smelters in Asia. From there, several stages of melting and purifying the copper content ultimately result in 99.99% pure copper, which provides the building block for many of life’s essentials.
• We ship cast zinc metal produced at our Flin Flon zinc plant by rail and truck to industrial customers (primarily galvanizers who use it to protect steel from corrosion) throughout North America.

Hudbay products are conflict-free minerals under applicable regulatory requirements, meaning that they are not produced in regions of armed conflict or human rights abuses.

Copper and zinc products are accompanied by material safety data sheets that provide details on product composition, toxicology, handling, storage and exposure issues. We also meet our product stewardship commitments by collaborating with governments and industry associations such as the International Zinc Association.

The International Maritime Organization (IMO) has established new hazard classification criteria for bulk cargoes. The International Convention for the Prevention of Pollution from Ships (MARPOL) has imposed restrictions on the disposal of bulk cargo residues which have been 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, and the ECI has concluded it is not HME. Hudbay intends to have its Flin Flon copper concentrates analyzed and classified in 2016.

1. Purchased concentrate represents 10.5% of the feed to the zinc metallurgical plant and is 100% sourced from Canada.