Our Business

Hudbay is a diversified mining company with a focus on copper. We operate long-life assets in North and South America and are noted for our proven ability to create value for our stakeholders through every stage of the mining lifecycle. Our operating assets are complemented by a robust resource pipeline, making us very well positioned to meet the world’s growing need for copper.

CEO Message

Keeping our Commitments

In 2022, Hudbay kept its commitment to delivering production growth in both Manitoba and Peru. Across our operations, we achieved 5% year-over-year growth in copper production and a 13% increase in gold production. Increasingly, we are seeing the benefits from our recent $250 million brownfield investment program at our Pampacancha project in Peru and New Britannia mill in Snow Lake, Manitoba. This opens the door to meaningful cash flow growth over the next several years.

As the world moves to address climate change, copper will become an indispensable metal. It is essential for building electric vehicles and high-efficiency energy infrastructure. The low-carbon future the world is working towards depends on copper.”

Peter Kukielski

Clearly, this is a positive development, but we remain prudent. In the face of inflationary pressures, we adopted various measures to manage costs and capital, including our 3-P plan for sanctioning mine development at Copper World, which I’ll touch on later.

Sustainability is another organization-wide commitment that defines Hudbay, and we demonstrate it in every aspect of our operations. Notably, this year, we released our 2030 greenhouse gas (GHG) reduction targets and our roadmap for achieving net zero GHG emissions by 2050. Also, during the year, Andre Lauzon became the Company’s Chief Operating Officer (COO), Eugene Lei was named Chief Financial Officer (CFO), and Mark Gupta moved into the role of Vice President, Corporate Development, as parts of our effective succession planning process. Hudbay’s ability to fill three leadership roles through internal promotions speaks to our extraordinary bench strength and our commitment to supporting our people.

Peru

Our most significant operational achievement in Peru was fully integrating the Pampacancha deposit into Constancia’s operations. High-grade copper and gold ore from Pampacancha is contributing to lower cash costs at Constancia while increasing operating cash flows. We also completed successful negotiations with the community of Uchucarcco, which formally approved an agreement granting us surface rights to explore the Maria Reyna and Caballito satellite properties. Both highly prospective, with large-scale potential and located within trucking distance of Constancia’s infrastructure, Maria Reyna and Caballito are notable additions to Hudbay’s exceptional growth pipeline. The agreement also highlights the value of Hudbay’s efforts to establish and maintain mutually beneficial relationships with local communities.

In late 2022 and early 2023, we navigated a period of social unrest in Peru related to recent political changes, and we successfully operated without interruptions during this period. This was due to our efforts in establishing strong relationships with local communities. Over the year, our team in Peru attended over 1,178 community meetings, negotiations and roundtable discussions. And during a period characterized by political and economic uncertainty, Constancia continued operating effectively.

We invest considerable effort and resources into outreach and building local relationships based on trust and respect. We make sure that community members living near our operations benefit from our presence through programs like the Hatun Warmi (“Great Woman”) training initiative, aimed at increasing the number of women in high-skill mining jobs, and the community co-op concentrate transport program that resulted in approximately 30% of our concentrate production being transported by the local communities. Moving beyond Constancia and its related mines and deposits, in 2022 we announced an initial mineral resource for Llaguen, our wholly owned property in northwestern Peru, that confirmed the presence of a significant copper–molybdenum porphyry deposit.

Manitoba

After a time – it may be months, years or decades – every mine ends operations with the depletion of its reserves. This is an inevitable truth of our business. In 2022, after 18 years of dependable production, the final reserves of the 777 mine were depleted, and the mine was closed in August. As a result, 2023 will be the first year in Hudbay’s history without a mine in development or operation in Flin Flon, Manitoba. Still, we remain committed to the community and have renegotiated and renewed our five-year grant-in-lieu agreement to contribute funding to city services. While we shut down the mine and most related operations, we placed the Flin Flon mill on care and maintenance. As our successful recommissioning of the New Britannia mill in Snow Lake demonstrates, this is not a gesture. Rather, it is a prudent, long-term decision that we hope will bring future benefits to the region. As part of the closure process, we successfully transitioned our people and equipment from Flin Flon to Snow Lake, now the focus of our Manitoba operations.

Over the year, we took steps to ramp up production at Lalor while setting the stage for delivering even higher production levels in 2023. With that goal in mind, we moved ahead with enhancements at our Stall mill, which, in combination with our New Britannia gold mill, will improve recoveries of gold and copper. In addition to increasing production from our current operations, we are also undertaking exploration programs at Lalor with an eye to extending viable resources at the mine. We are also exploring the area near Lalor for new mines.

Arizona and Nevada

In Arizona, we transitioned our focus from a stand-alone development plan for the Rosemont deposit (now referred to as the “East” deposit) to advancing Copper World. We published our very encouraging preliminary economic assessment (PEA) in June. Copper World has the potential to almost double the Company’s annual copper production while enabling Hudbay to remain a low-cost mine operator. Once operational, it can also play a role in helping the United States reach its decarbonization goals with “Made in the USA” copper.

The proposed phase one of Copper World anticipates a 16-year life of mine and is located entirely on private land owned by Hudbay. Phase one of the project includes a series of newly discovered deposits and portions of the East deposit, and requires only state-level permits. Copper World’s phase two will bring in the rest of the East deposit and a small amount of the recently discovered additional deposits. The phase two expansion, which entails depositing waste and tailings on federal land, will require federal permits and is expected to increase the mine life to 44 years.

While we are enthusiastic about the potential of Copper World, we are also very aware of the impact of inflation on cash flows from our business, an extended period of rising interest rates and competing demands for capital within our growing company. So we are adopting an approach based on three prerequisites – the receipt of all required state-level permits; the completion of a definitive feasibility study with a robust rate of return; and the implementation of a multi-faceted, prudent financing strategy – for evaluating and sanctioning the development of Copper World. This 3-P plan sets specific targets and milestones that we must achieve before we make an investment decision. We designed the plan to ensure that Hudbay is in the best possible position to move forward with the lowest cost of capital and the highest risk-adjusted return on investment. Based on current estimates, which are subject to change, the earliest expectation for being able to sanction Copper World in line with our criteria is 2025.

A Commitment to Sustainability

Hudbay’s commitment to sustainability is embedded in our operations and our strategy. This was demonstrated in December when we announced our commitment to climate change initiatives and the 2030 GHG reduction targets, which will enable us to achieve net zero GHG emissions by 2050. (See Our Feature Stories > Committed to Net Zero.)

Our approach to using and managing energy currently places Hudbay in the lower half of GHG emissions intensity compared to other global copper companies. In addition, over 50% of our indirect energy consumption already comes from renewable resources. Still, we recognize that Hudbay has a further role to play in the worldwide effort to mitigate climate change.

We set our targets after taking a comprehensive look at our existing operations, in which we identified commercially available reduction opportunities that should be economically implementable by 2030 without compromising the competitiveness of our operations and projects. Our projects must remain profitable and attractive to investors because Hudbay produces metals, most significantly copper, that are essential to the world’s transition to a low-carbon future.

In 2022, we also put our commitment to sustainability into action through initiatives aimed at supporting positive social impacts, including expanding opportunities for women in mining and increasing employment opportunities for Indigenous peoples in Manitoba.

Looking Forward

The events of recent years have taught us all to be careful about predictions. Still, even from a conservative perspective, we believe that Hudbay is well positioned to deliver solid results and performance for all our stakeholders. In the near term, our operations in Manitoba and Peru are poised to increase copper and gold production. Looking further ahead, our exceptional organic pipeline offers strong growth potential in copper in both the medium and long term. In April 2023, we enhanced the potential of our growth profile with the announcement that Hudbay had entered into an agreement with Copper Mountain, which owns 75% of the Copper Mountain Mine in British Columbia, to acquire all of its issued and outstanding shares, forming a premier Americas-focused copper producer. On completion, the combined company will be the third-largest copper company in Canada, a 150,000-tonnes-per-year copper producer with long-life mines and a world-class portfolio of organic copper growth projects.

We believe copper has the best long-term fundamentals of any base metal because the global copper supply will be unable to meet growing demand. As the world moves to address climate change and governments and industry strive to meet their Paris Agreement targets, copper will become an indispensable metal. (It is essential for building electric vehicles and high-efficiency energy infrastructure, for example.) The low-carbon future the world is working towards depends on copper.

The evidence, which includes the global decline in copper grades, the scarcity of new copper discoveries and the increasingly long lead time for developing viable projects, shows that copper demand will significantly exceed supply. Against this background, Hudbay stands out. Our people, our experience, our existing assets and infrastructure, and our unsurpassed organic pipeline will support us in helping to meet the world’s need for copper.

Sincerely,

Peter Kukielski’s signature

Peter Kukielski
President and Chief Executive Officer

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Key Accomplishments

Full-year consolidated copper production of 104,173 tonnes, consolidated gold production of 219,700 ounces and consolidated silver production of 3,161,294 ounces (increased by 5%, 13% and 4%, respectively, in 2022 compared to 2021).
Successful completion of recent brownfield investment program in 2022 with the Pampacancha satellite deposit contributing higher-grade feed to Constancia and the New Britannia mill operating at targeted capacity.
Invested approximately $80 million in 2022 to successfully execute a new strategy at Copper World focused on project de-risking; delivered PEA for Copper World.

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Business Activities

Manitoba

Increased Snow Lake gold production by 46% in the first full operating year of the New Britannia mill.

Progressed steadily toward expanding production at Lalor, and expect to exceed 4,650 tonnes per day in 2023.

New Britannia mill consistently delivered above its nameplate capacity throughout 2022.

Stall mill recovery improvement program made significant progress and is on track for completion in early 2023.

USA

Released a positive PEA at Copper World and outlined a private land plan to streamline development and permitting to construction.

Introduced a three-prerequisites plan for Copper World, including specific leverage targets that would need to be achieved prior to making an investment decision in the project.

Initiated Arizona state-level permitting on private land.

Peru

Increased copper and gold production by approximately 15% with first full year of production from Pampacancha.

Signed an exploration agreement with the Uchucarcco community, providing access to the Maria Reyna and Caballito satellite properties.

Completed a positive internal scoping study and an inferred mineral resource estimate on underground mining potential at Constancia Norte.

Sustainability Approach

Hudbay is committed to conducting our activities in a way that protects shared resources and creates sustainable, long-term value. Our values guide the actions we take to help meet stakeholder expectations, build stronger relationships with stakeholders, and manage the social, environmental and economic risks associated with mining.

$87.6M

spent with local suppliers

AAA

level rating in Manitoba and AA-level rating in Peru across all TSM Tailings Management Protocol indicators

Tailings Management Protocol’s Integrated Approach Supports Best Practices

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Applying Lessons Learned to Improve Stakeholder Engagement and Earn Social Acceptance

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Purpose Statement

We care about our people, our communities and our planet.

Hudbay provides the metals the world needs. We work sustainably, transform lives and create better futures for communities.

We transform lives

We invest in our employees, their families and local communities through long-term employment, local procurement and economic development to improve their quality of life and ensure the communities benefit from our presence.

We operate responsibly

From exploration to closure, we operate safely and responsibly, we welcome innovation and we strive to minimize our environmental footprint while following leading operating practices in all facets of mining.

We provide critical metals

We produce copper and other metals needed for everyday products and essential for applications to support the energy transition towards a more sustainable future.

Our Values

Our values of dignity and respect, caring, openness and trustworthiness guide our efforts to promote an inclusive workplace that embraces the diverse backgrounds, experiences and perspectives that make us a stronger business. Our OneHudbay approach provides a crucial foundation for attracting and retaining diverse talent.